Martin Sorrell, founder of the world’s biggest advertising firm, said online promotions are set to boom in India, spurred by investments in retail by billionaires Mukesh Ambani and Sunil Mittal.
Digital advertising at the Indian operations of Sorrell’s WPP Plc (WPP) may account for 20 percent of revenue in the next seven to 10 years, from 10 percent, Sorrell said in an interview in Mumbai. WPP reported $500 million of sales in the nation last year, he said. India, in September, allowed overseas multibrand retailers to own up to 51 percent in store operators in Asia’s third-largest economy.
“People like Mukesh Ambani and Sunil Mittal are making big bets in retail, big investments,” said Sorrell. “The Indian population, particularly youngsters, are quite facile with technology. As mobile phones become more widespread and as the cost comes down, I think you’ll see greater use.”
Ambani’s Reliance Industries Ltd. (RIL) and Mittal, who has a wholesale venture with Wal-Mart Stores Inc. are increasing spending on retail stores to tap a market that Technopak Advisors Pvt. estimates will expand to $725 billion by 2017. Rising use of mobile devices in the nation with the world’s largest population under 30 will spur digital ad sales, according to Sorrell. India has more wireless connections than the combined inhabitants in the U.S., euro area and Japan.
Spending on ads “is going to be driven in a large part by consumer goods, retail companies and the mediums that they are choosing are mobile and social media,” said Neha Gupta, an analyst at Gartner Inc. in New Delhi. “Their interest in spending in these areas has drastically increased.”
Reliance Industries, which operates the world’s largest refining complex, in June announced a joint venture with Brooks Brothers to sell suits, sportswear and accessories in India. That adds to the more than 1,300 Reliance stores offering products from groceries to Apple Inc. iPads.
Ambani, who ranks 21st on the Bloomberg Billionaires Index with a net worth of $21.9 billion, in June pledged to boost revenue from his retail operations at least fivefold from the current 76 billion rupees ($1.4 billion) within four years. Reliance Retail will have some of the company’s highest growth rates and earnings potential, Ambani, 55, told shareholders.
Wal-Mart, the world’s largest retailer, is in talks with partner Bharti Enterprises Ltd. about opening retail outlets in India after the government eased rules for foreign ownership in multibrand store chains.
Wal-Mart, which operates 17 wholesale outlets at its venture in the South Asian country, will take 12-18 months to open retail stores in the world’s second-most populous country, Scott Price, head of Wal-Mart’s Asia operations, said in a Sept. 21 interview in Hong Kong.
Ambani and Mittal, India’s 8th richest man with a net worth of $7 billion, have also invested significantly in telecommunications. Mittal’s Bharti Airtel Ltd. (BHARTI) is India’s biggest mobile-phone operator while Ambani is readying a 4G network in order to tap demand for high-speed wireless Internet.
Retail and consumption will spur advertising spending and the increased adoption of smartphones will contribute to driving more ads online and on to mobile handsets, Sorrell said.
“Mobile is a cheap form of access to the Internet,” Sorrell said. “In India, China, Russia, Brazil -- these markets will leapfrog what we saw in the mature markets, which was use of the PC. They will skip to mobile. The smartphone, mobile advertising -- that will be the access point.”
Internet advertising spending is projected to increase 15 percent in 2013, while total ad growth will be weaker on concerns about Europe, the U.S. budget and the lack of major media events next year, according to Zenith Optimedia Group Ltd. Global Web ad spending is expected to jump to $101.8 billion next year from $88.4 billion, according to Zenith.
Mobile ads, which still make up a smaller part of total spending, may grow 51 percent worldwide to $9.7 billion, according to New York-based EMarketer Inc.
In India, Google Inc. (GOOG:US) expects Internet users to more than double to 300 million by 2015, making it the world’s largest Internet market after China. The number of Internet users in India is growing at a rate of 38 percent a year, from 137 million users in October, according to Rajan Anandan, managing director of Google India.
India may increase its base of active mobile-phone subscribers to more than 872 million at the end of 2015, according to researcher Gartner Inc. The nation of 1.2 billion people, where only 3.1 percent of households had computers or laptops with Internet access as of the 2011 census, had 699 million active mobile subscribers in September, according to the Telecom Regulatory Authority of India.
Spending on online advertising in India will surge 54 percent to 43.9 billion rupees at the end of March, from 28.5 billion rupees a year earlier, according to IMRB International, a unit of WPP, the world’s biggest advertising company.
WPP, based in Dublin, slashed its full-year sales growth target for the second time in two months on Oct. 25, after clients in North America and Europe cut spending.
“2013 has no events; it has no Olympics, it has no World Cup, no elections,” Sorrell said. “2014 has the Brazilian World Cup, the Sochi winter Olympics, and of course we have another election in America. We’re likely to see significant spending again.”
WPP, which employs 14,000 people in China and 12,000 in India, is upbeat about the outlook for both the markets, the 67- year-old chief executive said.
“We are India bulls as well as China bulls,” Sorrell said of the Asian nation that has become WPP’s third-largest market, contributing $1.3 billion of annual revenue. While growth in China will be driven by urbanization, India has “big scope for growth” in advertising and marketing, as well as retail and distribution, he said.
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