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Print media: A look at advertisement revenues - Views on News from Equitymaster
 
 
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  • Sep 28, 2007

    Print media: A look at advertisement revenues

    In the last article, we gave an insight into the subscription side of the revenues. In this article we shall focus on the advertisement revenues of the print media companies.

    Advertising revenues are a function of the ad/edit ratio, readership size, demographic factors, geographical reach and advertising mix. Ad yields and volumes drive the ad revenues. While market share and circulation determine the ad yield, pages per copy and ad/edit ratio determine volumes. Print ads have the highest share of the ad pie in the media industry. Dailies and magazines combined had a share of 48% of the total Rs 131 bn advertising revenues in 2005. Going ahead, print media would continue to dominate other media in terms of revenues from advertising, with a market share of 46% of the total ad spend (Rs 293 bn) by 2010.

    Advertising revenues formed 61% of the total print media revenues in 2006 and is expected to touch 66% of the total Rs 206 bn revenues in 2010.

    What is driving growth?
    Low ad spend: Ad spend in India is just 0.47% of GDP, which is much lower than the world average of 0.98%. It is also lower than the spend in other developing countries like China, Philippines and Thailand. Advertising spend is directly proportional to GDP growth. With economy expected to grow at 8% over the next few years, we expect the advertising revenues to rise on the back of a buoyant economy. The Indian advertising spends showed exponential growth in 2006 growing over 23% to Rs 163 billion as compared to a growth of 14% in 2005.

    Increasing circulation: Rising circulation means higher market share and hence higher penetration. This helps in the increase of ad rates. With increasing literacy levels and companies venturing in newer regions, circulation is bound to increase. This will lead to higher ad revenues. Newspaper also has higher penetration as compared to radio, satellite television and internet.

    Natural benefit: Detailed information, forms, coupons can be communicated via newspaper advertisements which is not possible in case of television. Further, newspapers can reach the entire household, whereas in case of television fragmentation is present.

    Geographical benefit: The retail advertisers find it beneficial to advertise in the local newspaper rather than TV, which has a national reach. In case of localized business, the retail advertisers do not find it feasible to advertise to the whole country. Print gives advertisers the geographical flexibility to choose relevant markets, which is difficult in case of a TV channel. Further strong demand for real estate, malls, education has led to the strong growth in the print media. Further the clutter and the fragmentation on the television channels (led by new channels) has led to advertising in print growing at a faster rate than that in television.

    On basis of language: In case of advertising, the English papers dominate with 53% of the total ad revenues in print media. Inspite of the low readership of the English paper, it commands the higher share due to the better demographics and higher income group penetration.

    Going forward...
    The share of the print media in the total ad pie is expected to go down due to increasing competition from other forms of media like the Internet. The Internet has emerged as the most actively used medium for news, as it offers fresh news like television and a long shelf life like newspapers. However the threat is not major, as the penetration of Internet in India is very low currently. As per Ficci PWC, the ad revenues are expected to grow at 14.6% CAGR over the next three years. With the economy expected to be robust and increasing penetration of newspapers, the advertisement revenues are expected to remain strong going forward.

     

     

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