The future of doing business
Overall, the brands’ budgets are shifting towards digital media at a fast pace and according to Magna Global, an affiliate of the global conglomerate IPG group, it is expected that the digital media spending will surpass TV media spending by 2018
The history of advertising can be traced back to the lost city of Pompeii in 79 AD wherein the advertising messages were found in its ruins. The history of modern advertising starts with the advent of the mediums of mass communication and the first one among them was the printing press. Printing press is said to be the beginning of the European renaissance and enlightenment period due to which people were exposed to the thoughts of the new age philosophers e.g. John Locke, Voltaire, etc. Along with bringing new ideas to the public for enlightenment, it also paved the way for capitalism. In 1472, the first paper bill ads was published by William Caxton for a book and he tacked them to church dooRsSince then, advertising grew with the invention of every new medium of mass communication i.e. Newspaper, TV, Out of Home and Digital.
In 1704, first newspaper ad was published in USA while in 1941 the first TV ad was broadcasted, again in USA. With the advent of cars, out of home advertising became an important medium of advertising. People with a high entrepreneurial spirit found a great opportunity in out of home advertising and even when the government stopped their way, they found creative ways to expand their business. In 1963, the French government put a ban on bill boards, so Jeans Claude Decaux, then a budding entrepreneur, made a deal with the city of Lyons, proposing that he would build bus shelters and keep them clean in exchange for advertising space there. This lead him to create one of the biggest companies in the world in out of home advertising sector having a revenue of more than $6 billion in 2016 and making him a billionaire worth more than $6 billion.
Nowadays, advertising is a huge business because of the rise of transcontinental capitalism. The global spending on advertising for the year 2016 was worth $500 billion, which is more than Pakistan’s total GDP. And if marketing expense is added i.e. market research, public relations, direct marketing, etc, then it makes a total industry of worth $965 billion. Among them, $214 billion were spent on TV and $160.2 billionwere spent on digital, being the two largest mediums. The annual revenue of the Facebook in 2016, which started in 2004 and for the google, the search engine giant, was $27 billion and $89.5 billion respectively. And the revenue model of both of these digital giants only consists of advertising. Among the world’s biggest advertisers are Procter and Gamble, Unilever, L’oreal, Toyota Motor Corporation and Volkswagen.
The world’s biggest advertising markets are US, China and Japan. In US, the multinational companies spend a whopping $180 billion on advertising. The closest market, China is not even half of that. In China, the companies spend 85 billion on Advertising while the next biggest advertising market Japan is again not even half of that with a combined spending of only $38 billion. The other big markets are UK, Brazil, Germany, France, Italy, Australia and South Korea with a combined spending of $140 billion. Interestingly, US spending in advertising is more than the combined spending of the eight countries among the world’s top 10 largest spenders, excluding China. This also represents the strength of the US economy and its high per capita spending as advertising is directly a function of the economy. Whenever the economy performs better, the advertising spending of the companies increases and whenever there is a slump, the advertising sector also faces a downturn.
Compared to these countries Pakistan’s advertising industry is a tiny one, worth only $650 million while another country with almost the same population, Indonesia, has an advertising market of $10 billion. Brazil, also having almost the same population as us has an advertising industry worth $20 billion. But, encouragingly, Pakistan’s advertising is also growing at an annual rate of 10–12pc due to a rapidly emerging urban middle class, rising consumerism, growing purchasing power, and an expanding economy. The highlights of latest economic survey of Pakistan reveal that the services sector is the highest growing sector of the economy which again reflects power of the emerging urban middle class. According to Anwar Kabir, an advertising industry executive, Pakistan is right now a hot market for multinationals as it is growing at a very rapid pace due to which they are increasing their advertising spend as well. Along with that we can also see the growth in the local market in the form of new malls, local FMCG brands and emerging retail brands.
In Pakistan, TV remains the biggest medium for media spend with Rs30 billion spending while interestingly outdoor, instead of print, comes at the second with a spend of Rs9 billion. It was Rs11 billion in 2015 but due to removal of 3,000 billboards in Karachi, the media ad spend was reduced to Rs9 billion. In Pakistan, the top spenders are Procter and Gamble, Unilever, Nestle, Pepsi Cola, Coca cola, Reckitt Benkister and telecom companies. In OOH advertising, Pepsi remains at the top with a spending of Rs71 crore while Nestle comes at second with a spending of Rs63 crore. In retail clothing brands, Khaadi spent a whopping amount of Rs27 crore only on OOH advertising.In the TV sector in Pakistan, the top five advertisers wereUnilever (20pc), P&G (7pc), Reckitt Benckiser (6pc), Pepsi Cola (6pc), Coca Cola (5pc) and Nestle (4pc).
In the OOH (out of home) domain, budgets are being shifted towards digital out of home media. It is interesting to note that brands are paying much more in the domain of bill boards than an average consumer can think of. If you have even been to Lahore, you will see a huge digital bill board of Coke while entering or exiting DHA. This bill board has been purchased by Coca Cola for one whole year at a whopping cost of Rs6–7 million per month. Similarly, the digital streamers installed at the Lahore’s famous MM Alam Road, cost a brand, Rs5 million per month just for a 15 seconds slot in a 90 seconds loop. And any large bill board in any good location in Lahore does not cost a brand less than a million rupees.
Overall, the brands’ budgets are shifting towards digital media at a fast pace and according to Magna Global, an affiliate of the global conglomerate IPG group, it is expected that the digital media spending will surpass TV media spending by 2018. Among digital, mobile advertising is the fastest growing medium and is expected to have 72pc of the sales of the digital ad spend. The reasons for this great shift to digital are manifold. One is that consumers now spend more time on digital media, particularly on mobiles, compared to TVs. This is particularly true for the Generation Z, those who were born in or after 1990s.
The second reason is better and efficient targeting. A senior executive of Procter and Gamble USA said that they have increased their Brand’s digital spend to more than 30pc because it gives you much better targeting options. Third reason is most accurate data and result measurement in real time and a better attribution modelling for the consumer journey. Fourth is the power of brand engagement instead of just brand awareness. Fifth reason is its low cost. And the sixth and the most important reason is the two way relationship between brand and the consumer, which is not possible in any other media form. At digital and social media, you can gave ratings, comments on your brand’s products and consumers can become active advocates of a brand giving it an organic reach unlike any medium. Ironically, in Pakistan the digital ad spend is still hovering in between 2–3pc. One of the primary reasons is that we are very inflexible. The second reason is our traditional mindset that digital marketing is just about making a Facebook page and then updating it while in reality digital media is much more than that. However, some multinationals in Pakistan have doubled their digital advertising budgets for the year 2015–16 which is indeed a positive sign.
In the coming years, digital will be the winner in any medium and all the mediums will be merged with each other giving rise to a new form of interconnected and omnichannel media with hyper local and dynamic targeting for every consumer.
