AdEx Report Card – 2022-23

In FY 2022-23, global challenges unfolded, be it post-Covid recovery stumbling, or the financial implications of the Russia-Ukraine war. Zooming into Pakistan, a political subplot adds complexity. The State Bank of Pakistan (SBP) pragmatically hits the brakes on imports and digital payments to shore up dwindling dollar reserves. The consequence? Stagflation emerges, causing the consumer price index (CPI) to ascend.

Amid this economic storyline, and despite the turbulence, the ad expenditure (AdEx) stands firm, reaching Rs 81 billion in FY 2021-22 and rising slightly to Rs 81.9 billion in FY 22-23. The ad industry, a reliable supporting actor, proves its resilience without stealing the spotlight.

This dynamic unfolded as key players strategically increased ad spending or skilfully maintained existing levels in response to tandem threats. The result? The overall AdEx held its ground, maintaining its figure despite spending reductions from various clients.

Television, the AdEx hero, claims a 50% throne. In TV spending, ARY, Geo, and Hum command a triumphant 45% slice. Nestlé, Lakson Group and Pepsi significantly amp up spending, balancing the once-dominant trio’s – Unilever, Coca-Cola and P&G – conservative approach when compared to the same period last year (SPLY). Across certain categories – such as beverages and personal products, players hold their ground, maintaining spending like seasoned actors. Hold onto your seats – the suspense builds as overall TV reach defies the odds, increasing by five percent compared to the SPLY.

But here’s the subplot: as TV AdEx grows, new contenders burst onto the stage – ABN News, Green Entertainment, Hoora TV, InPlus TV, Mun TV, Talon News, TV Today and Voice News, signalling not only a changing narrative but a potential blockbuster for TV. It’s a tale of growth, innovation and a cast ready to redefine the script.

Globally, digital outshines television with explosive growth. In Pakistan, it’s the second-largest medium, despite being the fastest-growing. Its contemporary significance is monumental. In our local plotline, digital faced a hurdle this fiscal year with the SBP slamming the brakes on payments, as mentioned earlier. After an intermission, restrictions were lifted, but a new script unfolded due to remittance limitations. Despite these challenges, the digital realm survived, gaining a seven percent value, not by its strength but due to increased Forex reserves, resulting in rising AdEx in FY 22-23 compared to the SPLY.

Now, about the stars of the digital stage. Google claims 65%, while Meta, TikTok, and local publishers step into the spotlight, forming the remaining 35%. It’s a digital drama that navigates hurdles, embraces growth and showcases the dominance of digital giants in the evolving AdEx narrative.

In the realm of digital entertainment, OTT platforms like ARY, PTCL, PTV Flix and Tamasha, among others, have taken quite a cinematic journey; bursting onto the scene, they amass following with exclusive premium content. Video consumption has more than doubled in 2023, setting the stage for an exhilarating future for OTT platforms in Pakistan. It’s part of a revolution where these platforms redefine content consumption.

In the dynamic realm of digital storytelling, podcasts have surged into the spotlight in recent years. Examples like Thoughts Behind Things, Happy Chirp, and How Does It Work aren’t just podcasts; they’re cultural phenomena, commanding avid listeners and showcasing incredible potential. 

In Pakistan’s e-commerce realm, growth has been the consistent theme, boasting a CAGR of an impressive 48% over the past five years. Current statistics reveal that e-commerce sales account for 13% of the retail market as of Q3 FY 22-23. However, challenges emerge as prevailing internet issues threaten to cast a shadow on the field’s development.

A subplot unfolds as funding scarcity leads to the closure of prominent marketplaces like Airlift, Jugnu MedznMore and Tokri. The inability of these ventures to navigate the economic landscape or pivot towards asset-light models has sent ripples through investor confidence, adding uncertainty to the market.

Print media in FY 22-23 faces a substantial decline compared to its glory days, with a 21% decrease in the number of advertisers – from 934 to 737. Existing advertisers scaling back their investments further exacerbate the situation. This sudden downward trend signals a challenging chapter for an industry that has long been a cornerstone of information dissemination and communication.

The narrative of out-of-home (OOH) advertising sees highs and lows. Before 2016, it gained momentum, but there was a dip in FY 20-21. Recent years show recovery, with digital out-of-home (DOOH) introducing a new chapter. Despite optimism, a challenge arises: inadequate tracking leads to poor transparency and a lack of measurement. This flaw introduces unpredictability, making the reliability of this medium a cliffhanger in the grand narrative of advertising.

The smallest of the overall advertising mediums, radio, has not seen any substantial changes over the past few years. However, there is light at the end of the tunnel, as even slight growths can signal a chance of an increase in investment in this medium, as we saw in the previous year; it is hoped that this medium will rise and claw its way up from its current weakest position.

The gaming scene in Pakistan is rapidly expanding, with e-sports leading the surge. Numbers have nearly doubled since 2017, drawing in gamers from diverse backgrounds. Major players like Google and Microsoft are investing significantly, hinting at a future where reality and the virtual world blur. Get ready for a gaming revolution happening right now.

Expectations for January to June 2024:

• Development of local digital platforms: The foreign remittance issue could be a silver lining for local digital platforms, redirecting digital ad spend. Brands will prioritise maintaining a presence in consumers’ minds, making the exploration of these local platforms crucial for them.

• Development of local OTT platforms: SBP’s payment limitations open a door of opportunity for OTT platforms. Shifting investments to these platforms becomes a strategic move, as local content will have a platform to be available readily, along with their international counterparts. 

• The resurgence of e-commerce: The convenience of online shopping has become the talk of the town, prompting businesses to make a digital dash and enhance their virtual storefronts. According to the SBP, by the end of FY 23-24, the e-commerce market is set to break records, exceeding Rs 150 billion.

• The trend of influencers: The influencer game is stronger than ever in Pakistan. Influencers aren’t just social media stars – they are brand allies with substantial sway.

. Changing demographics: Generations are changing, with Gen Z in adolescence and Gen Alpha taking the spotlight. Brands must adjust strategies. It’s not just advertising; it’s about understanding the future audience.

• Role of AI: Marketing automation is set to dominate. Anticipate improvements in tools and brace for GPT-4. The game-changer? AI and automation tools are becoming cost-effective, moving within reach for everyday use. 

• Role of data and analytics: Imagine this: data analytics steering marketing strategies. Media companies use cutting-edge tools to analyse every byte. This data-centric approach is a powerful transformation, empowering informed decisions that redefine the future of marketing.

• Importance of first-party data: First-party data is replacing third-party data. This rising star is under scrutiny for data governance, ensuring quality and security. The regulation should enable advertisers to micro-target ads with detailed insights. 

• Challenges in broadcast media: The industry’s future is bright, but challenges exist in the present. Over-reliance on government support is a problem, rooted in the less-than-ideal track record of innovation in Pakistan’s broadcast media industry. The missing link? Tracking and attribution, akin to its digital counterpart. It’s a call for evolution in an industry at a crossroads.

As the digital stage in Pakistan develops, it’s clear that the presence of very few local digital platforms is resulting in the funnelling of a substantial chunk of digital advertising expenditure overseas to the likes of Google and Meta. Given this dynamic, our data-crunching crystal ball envisions that the next six months are expected to be a thorn in digital’s side due to decreasing remittances and payment issues. It’s a wake-up call for the advertising industry to ponder its role in the national narrative – is it a drain on dollar reserves or a catalyst for bringing dollars home through export-based subsidiaries? It’s time for the industry to make a pivot that leaves a lasting impact on both the economy and the ethos of Pakistan.

Rubab Rizvi is Chief
Data Scientist, Brainchild.
rubab.rizvi@starcompakistan.com