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Advertising loses momentum over US turmoil

What’s the first expense that takes a beating when companies are looking at cutting corners? In most cases it’s the advertising budgets.

business Updated: Oct 06, 2008 21:23 IST
Saurabh Turakhia

What’s the first expense that takes a beating when companies are looking at cutting corners? In most cases it’s the advertising budgets. And it is a cut in these budgets that is affecting the momentum of the Indian advertising industry.

A major chunk of advertising revenue in recent years came from companies in the banking, financial services and insurance products segments—all of which are reeling under the aftershock of the financial crisis in the US.

“Banking, consumer finance, credit cards, general insurance, life insurance, mutual funds and corporate advertising by financial companies amounted to Rs 2,500 crore last year.” said Chandradeep Mitra, president, Mudra MAX, Mudra’s media, analytics and convergence arm. “This year, the number may be easily come down to Rs 1,500 crore.

Another industry expert pointed out that real estate and infrastructure companies are going very slow on advertising. If they advertise at all, it would be only promotional campaigns for quickly monetising their investments by way of sale of properties.

“The categories-driving growth, including realty, infrastructure, banking, finance, infotech, telecom and new media, together contributed over 50 per cent to the growth in advertising.” Ashish Mishra, chief strategist and head, Water consulting, a strategy and design outfit of Mudra, said. “Except for telecom and new media, all have been jolted and are rationing their ad-budgets accordingly.”

“Although there is a general scaling down across sectors with financial sector being hit the most, India is still in a stage of fairly reasonable development,” Mahesh Chauhan, group CEO, Rediffusion | DYR, said.

However, some companies are sensing an opportunity in the slowdown. “Not all companies are responding to a slowdown in the same way,” Ravi Kiran, CEO, South Asia, Starcom MediaVest Group, a media agency, said. “Companies, which are conservative in their approach to marketing, are not reducing investments.”

While the advertising industry grew in double digits last year (about 15 per cent), the conservative estimate for this year is single digit growth.