Ad spends to remain muted until H2CY25: GroupM COO

GroupM’s latest This Year Next Year (TYNY) advertising forecast report indicates that the Indian advertising sector is projected to grow by 7% in 2025, reaching Rs 1,64,137 crore and adding an incremental Rs 10,730 crore. However, despite this growth, ad spending remains under pressure due to economic uncertainties.

The report indicates that India’s GDP is expected to grow by 6.5% in 2025, and it continues to be a robust market for advertising, ranking 9th globally. Digital advertising expenditures have now approached Rs 1 lakh crore, propelled by advancements in AI, commerce, retail, media, and hyper-personalised marketing.

However, it further highlights that most advanced economies are experiencing disinflation and a cooling labour market, factors that could impact global demand. 

In a candid discussion with afaqs!, the GroupM leadership delves into the challenges of slowing ad spending, the rise of retail media, and the evolving role of AI in advertising.

Ad spending to remain muted

The Indian market has faced uncertainty as global economic headwinds persist. Businesses are compelled to reevaluate their advertising and marketing strategies due to consumption challenges, inflationary pressures, and fluctuating demand. 

Ashwin Padmanabhan, chief operating officer, South Asia, GroupM, notes that in the December quarter, several FMCG companies in India, with the exception of Marico, notably reduced their advertising expenditures. This pattern is expected to continue this year.

He recognises that urban consumption is decelerating, posing a significant challenge for advertisers. Rising raw material costs have further constrained budgets, leading to reduced spending on non-essential activities, including advertising.

"Companies are managing costs by reducing SKU sizes or exploring ways to save. Although price increases cannot always be transferred to consumers, margins are diminishing. This has resulted in decreased advertising expenditures, particularly from the consumer goods sector," says Padmanabhan. 

As consumer disposable incomes increase and demand rebounds, volume growth will ensue, leading to opportunities for competition over market share. 

Although several major events, including the Champions Trophy and IPL, are scheduled for the first half of 2025, Padmanabhan suggests that spending may not recover until the second half. Government initiatives, such as revised tax slabs, may eventually bolster consumer sentiment, but their impact will take time to materialise.

“For the time being, spending may continue to be subdued, akin to what we observed last year,” he adds.

Retail media cannot be ignored

The report indicates that by 2025, retail media is expected to represent 13.2% of total advertising expenditures in India. The medium has reportedly experienced a 40% compound annual growth rate (CAGR) since 2019.

When asked whether retail media is poised to become the next major driver of advertising and marketing expenditures, Padmanabhan responds, “Retail media is a key driver of incremental ad spending, though it hasn’t yet surpassed traditional channels. However, its rapid growth trajectory makes it impossible to ignore,” says Padmanabhan.

Non-alcohol brands to embrace live events 

2025 is expected to be a significant year for live events in India. Large-scale events such as the concerts of Coldplay and Diljit Dosanjh have shown that Indian audiences are becoming more willing to invest in experiences. 

According to Vineet Karnik, managing director of content, entertainment and sports at the media investment company, the belief that Indians do not purchase tickets is outdated.

“Consider IPL matches, which have an average occupancy of 80%, or concerts featuring artists such as Ed Sheeran and Coldplay—audiences eagerly queue to purchase tickets," he adds.

He notes that events with high audience engagement and anticipation draw considerable sponsorship opportunities. Innovations such as live-streaming concerts enable brands to achieve a broader reach. As the industry matures, more mainstream brands, beyond alcohol and youth-focused categories, are expected to invest in live events.

“For now, alcohol brands dominate live event sponsorships, but as streaming integrations grow, FMCG and other sectors will increase their participation,” he adds.

Catering to Gen Alpha

Although advertising spending may stay subdued in 2025, marketers will actively explore innovative ways to meet their creative and media objectives. The report indicates that 2025 will see notable advancements in Generative AI, along with the rise of advanced AI agents capable of transforming the marketing landscape. 

The latter half of 2025 is expected to bring a new era of advanced AI agents capable of autonomously planning, executing, and measuring marketing campaigns. 

Parthasarthy Manadayam, chief strategy officer, South Asia, GroupM, emphasises that marketers must be prepared to engage with the new Generation Alpha. He observes that for this generation, authenticity, intent, and purpose in marketing will be important. 

"Privacy will be crucial, as this generation is likely to be more aware of and savvy about consent and data usage. Their methods of seeking information will differ from our current approaches, necessitating an evolution in SEO strategies for digital assets," he adds.

Manadayam also points out that engagement needs to be interactive and gamified to attract the attention of Generation Alpha, as they tend to have shorter attention spans.

According to him, brand loyalty will be increasingly shaped by algorithms, influencers, and genuine connections. Consequently, brands must create innovative engagement strategies to foster enduring relationships with this emerging generation.