India’s OTT advertising maze, trials and trends

Over-the-top advertising in India continues to grapple with challenges despite streaming platforms, primarily driven by subscriptions, increasingly pivoting to ad-driven models.

For instance, American streaming platform Netflix recently said that the markets where it offers ad-supported tiers account for 80% of its global ad spending, highlighting the challenges faced by OTT advertising in India.

Besides contending with low cost per mille (CPM), or cost per thousand impressions, the landscape saw significant competition from digital-ad platforms for OTT players.

Industry giants like YouTube and Facebook, along with e-commerce, social media and short video platforms, are emerging as major rivals for capturing impressions and audience attention. “In India, digital advertising in the streaming industry is at a nascent stage with spending shifting rapidly from TV to digital. While we have a massive user-base, effective ad rates are low. Therefore, for bigger global streaming players, it might be financially prudent for the short- to mid-term to continue to rely on subscription over ads,” Neeraj Sharma, managing director, growth markets, media lead, Accenture said.

One short-term obstacle to growth could be the TV ecosystem’s limited understanding of how digital advertising works. “Also, attribution, or the ability to identify whether ad-spends yielded the rights results, is also limited. In the near future, when commerce is more seamlessly integrated with the OTT platforms, attribution issues will be resolved to a certain extent,” Sharma said, adding digital advertising is anticipated to grow further, as sports and live or unscripted shows migrate to OTT platforms.

Media industry experts concurred that Netflix’s move to exclude India from its ad tier underscores the complex challenges in the Indian advertising market, and could have been influenced by various factors unique to it. Specific market dynamics, regulatory constraints, and overall maturity of the advertising ecosystem can pose challenges, Gautam Madhavan, founder and CEO, Mad Influence, an influencer marketing agency, said.

“India’s advertising landscape grapples with notably lower CPMs compared to global counterparts. The cost efficiency imperative forces platforms and media owners to adopt innovative ad monetization models distinctly suited for the Indian market Second, the relatively lower share of connected TVs (CTV) in streaming viewership in India, in comparison to more mature markets, poses a challenge. Advertisers may exhibit hesitancy in allocating significant investments, considering evolving nature of consumer behaviour and preferences in this region,” said Jay Ganesan, senior vice-president, APAC, Amagi, a media technology startup.

Certain platforms may also have to customize content to align with preferences of mass-market audiences to negotiate higher rates. While Netflix and Prime Video are actively expanding their Indian language catalogues, much work needs to be done. Sachin Kumar, founder of digital agency Bottle Openers, said digital ad growth is likely to continue, due to rising popularity of local language content and significant opportunity from 5G rollout. “Netflix has critically acclaimed global content and Indian shows, but do not appeal to masses; integrations beyond ad inventory are prevalent in such content as well. Regional content is what is working for other platforms. Lack of sports content is one of the biggest hurdles, as Indians are emotionally connected to sports,” Raghav Bagai, co-founder, Sociowash, an integrated advertising agency, said. LiveMint