India’s digital ad spend estimated to surge to $21 billion in the next five years, rising 2.5x over FY22 levels, says Redseer

• India’s digital advertising spending is estimated to surge to $21 billion in the next five years, growing at a compounded annual growth rate (CAGR) of 19-21%.
  
• Key amongst the drivers of the growth in digital ad spends is the growing use of smartphones and internet.
  
• Ad spends on digital platforms – which also have 2.5-3 million content creators in India – are expected to increase to $3.5 billion by 2028.
  

India’s digital advertising spending growth in FY23 will be muted largely due to macro factors, increasing from $8 billion in FY22 to $9 billion this year. However, it is expected to pick up speed in the next five years to hit $21 billion on the back of a surge in smartphone and internet usage, according to Redseer Strategy Consultants.

The agency says that after FY23, spendings on digital advertisements would account for 65-70% of the total ad spends in India.

“Upon mapping market sizing across media agencies, we observe a significant under-reporting of digital ad spend in India. However, Redseer projection has considered enterprise spends, small and medium business (SMB) spends, influencer marketing, affiliate marketing and gaming,” said Mukesh Kumar, engagement manager, Redseer Strategy Consultants.

Over the next five years, the firm estimates total ad spends will be $21 billion, growing at a compounded annual growth rate (CAGR) of 19-21%.

The disruption caused by Covid-19 also helped in accelerating the digital push – the total spends on digital advertising grew from $5 billion in FY21 to $8 billion in FY22, registering a 60% growth in just one year.

Here’s what will drive the growth in ad spends

Key amongst the drivers of the growth in digital ad spends is the growing use of smartphones and internet – according to the report, users spend nearly 7 hours per day on their smartphones.

This provides marketers with a lucrative target audience that has a higher engagement rate. In addition to this, the content creator ecosystem also allows marketers to precisely target their advertisements.

“The user-generated content and influencer ecosystems have the capacity to drive highly-targeted advertising. Since the UGC (user-generated content) platforms already possess content creating communities, they are better positioned for setting up the creator marketplace,” the report said.

India’s advertising spends as a percentage of the country’s gross domestic product (GDP) is also on the lower side, at 0.5%. In contrast, the US and UK spend 1.4% and 1.3% of their respective GDPs on advertisements, the Redseer report noted, adding that India’s advertising spends will increase going forward.

Bright days ahead for influencer economy

The influencer economy – or the content creators on platforms like Instagram, Facebook, YouTube and others – driven by UGC, have bright days ahead, according to the Redseer report.

Ad spends on digital platforms – which also have 2.5-3 million content creators in India – are expected to increase to $3.5 billion by 2028, while influencer-led live commerce is expected to grow to $8 billion by 2030.

The report says there are four types of content creators – micro, macro, mega, and elite. Interestingly, it notes that it’s the micro and macro content creators who have delivered better returns on investment for brands, and not the mega and elite ones.

SMBs embrace digital ads

Small and medium businesses (SMB) are embracing digital ads, according to Redseer. In FY22 alone, SMBs accounted for 30-35% of the $8 billion spent on digital ads.

This is expected to increase to 40% by FY28, or about $8.4 billion of India’s total digital ad spends. If it comes to pass, then SMBs will spend more on digital ads by FY28 than India’s current digital ad spends.

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