India, Indonesia lead APAC ad spend growth, China slows down: MAGNA
MAGNA Global has revisited it ad spend forecast numbers as the year comes to a close and the dynamics of various markets become clearer. While the story is still positive and digital media and Asia Pacific continue to play lead roles, MAGNA has made changes in country wise performance. Overall, MAGNA GLOBAL estimates that ad revenues grew by 5.5 per cent this year, to reach the half-trillion mark (USD 512 billion). Advertising sales will grow by 4.8 per cent in 2015 to reach USD 536 billion.
The new 2015 forecast is in line with its previous forecast of 4.9 per cent published in June 2014. This represents a slight deceleration from the 2014 pace but factoring in the ad revenues generated by the non-recurring events of 2014 (mostly the Winter Olympics, FIFA World Cup and US mid-term elections) that accounted for approximately one point of incremental ad spend growth, the 2015 growth should be considered decent by recent standards. 2015 is still going to be stronger than the growth experienced in the last odd-numbered year of 2013 (4.2 per cent).
Looking at individual markets, some of the most significant revisions in MAGNA’s 2015 forecasts are found among BRIC markets. China and Brazil advertising revenues are still predicted to grow by a decent amount (8.6 per cent and 5.9 per cent respectively) although two to three points below previous expectations. Russia is the single biggest negative revision, due to the combination of declining energy prices and the partial withdrawal of Western investors amidst geopolitical tensions; the 2015 advertising growth forecast is cut from 7.0 per cent to 0.8 per cent. India will become the most dynamic among the four BRICs, with an expected ad spend growth of 13.3 per cent following a similar pace in 2014 (13.2 per cent). The biggest upwards 2015 revisions come from Indonesia (from 13 per cent to 17 per cent) and Argentina (22 per cent to 36 per cent) and the most significant among top 10 markets comes from the UK (from 3 per cent to 4.7 per cent).
Asia Pacific: China slows down, India accelerates
APAC advertising revenues are expected to increase by 6.9 per cent this year, slightly lower than last year’s 7.1 per cent growth and marginally lower than the spring forecast of 7.6 per cent. The chief driver of this slowdown is the softening economic prospects in the region.
Chinese growth forecasts continue to move lower and GDP growth is pacing at the lowest rates in five years. While Chinese ad spend growth (11.6 per cent this year, 8.6 per cent next year) remains significantly ahead of global levels, the weakness in housing sales, property development, and manufacturing activity continue to add headwinds to the economy.
In Japan, the shock created by the sales tax increase this year has hit economic activity but this is more or less offset by a new inflationary economic environment driving up media costs; we thus expect advertising spend to increase by 3 per cent this year and by 2.7 per cent next year.
The Indian advertising market showed strong growth this year (13.2 per cent) following two lackluster years (2012: 4.6 per cent, 2013: 8.0 per cent). The general elections that took place in the first part of the year generated massive incremental spend primarily benefiting television. The outcome of the election, bringing a new BJP-led Government to power, improved business and consumer confidence, which prompted MAGNA to increase its 2015 ad growth forecast to 13.3 per cent. The new Government is also committed to invest billions in order to connect millions of rural Indians to broadband internet, in a plan advertised through a recent meeting between the new Prime Minister Narendra Modi, and the Facebook founder Mark Zuckerberg.
The strongest growth in the APAC region in 2014 came from Indonesia (21.5 per cent). It has been another strong year for the Indonesian market off a low base (just USD 29 per capita is spent on advertising in Indonesia). The poorest performance in the region came from Thailand with a 2.3 per cent decline in advertising spend, hit by a tumultuous year politically and economically.
Digital: APAC’s fastest growing media
Digital remains the largest growth driver in APAC, and increased by 22.7 per cent this year to represent over one quarter of total advertising spend for the first time. Growth continues to moderate, but digital continues to take share from every other format. TV remains the leading format in APAC, but digital advertising is rapidly developing and will pass television to become the leading format by 2019.
Within digital, the fastest growing formats are social (58.6 per cent growth), followed by video (37.6 per cent growth) and search (25.5 per cent growth). Social spend has advanced rapidly and now represents 7 per cent of all digital spend in APAC. Social and video are a focus of brands in APAC, and will grow to match what is spent on banner display by 2019. Mobile spending in the region represents over 20 per cent of total digital spend this year, and this will rapidly grow to over 40 per cent by 2019. Mobile spend on social formats continues to lead the way, and other formats will follow.
Television remains the dominant format for advertising spend in APAC, and spend will grow by 3.5 per cent this year and represent slightly over 40 per cent of all advertising dollars. Broadcast television continues to dominate the TV landscape, although multi-channel television is gaining share due to slightly higher growth rates, and by 2019 will represent nearly one quarter of TV dollars. Print continues to lose market share, and newspaper and magazines together will represent less than one in five advertising dollars this year. This is down from one third of all spending as recently as 2008.
APAC will continue to be one of the stronger regional drivers of global advertising spend, although its lead on the global growth rate continues to narrow. Its total share of global ad spend will only increase slightly between this year and 2019, from 29 per cent to just over 30 per cent of total spend.
“In 2014, the long-awaited European recovery finally came in time to partly offset a weaker-than-expected growth in the US and the BRICs. In 2015, the lack of non-recurring events, the continued slowdown of the BRICs and the deflationary effects generated by the rise of digital media will inhibit global advertising growth, in a slight disconnect with the positive acceleration in the macro-economic environment,” said Vincent Letang, MAGNA GLOBAL’s Director of Global Forecasting and author of the report.
Some of the top lines from the MAGNA forecast are:
#1 Globally, media owner advertising revenues are forecast to grow by 4.8 per cent in 2015 to USD 536 billion. The new growth forecast is in line with MAGNA’s previous forecast (4.9 per cent in June 2014) and represents a deceleration from 2014 (5.5 per cent).
#2 The stronger economic environment expected for next year (3.8 per cent for real GDP compared to 3.3 per cent in 2014) will not offset the negative impact caused by the absence of non-recurring drivers like Winter Olympics, FIFA World Cup or the US mid-term elections this year.
#3 Despite the stability of the top-line growth forecast for 2015, significant revisions have been made on a country-by-country basis. On the upside, Australia, India, Japan, Spain and the UK will grow faster than previously forecast. China, Russia, Germany, Brazil and Canada will grow as well, but at a lower rate than previously expected.
#4 The non-recurring sports events of 2014 contributed to the global growth of television (5.2 per cent). The FIFA World Cup was a clear positive in some markets like the UK and the US, but it was neutral in Germany and below expectations in Brazil. The Winter Olympics and mid-term elections bonanza proved below expectations in the US. TV is expected to grow again in 2015, globally, driven by a positive pricing trend in Europe and parts of Asia (3 per cent).
#5 Digital media grew strongly again this year (17.2 per cent to USD 142 billion) driven by mobile campaigns (72 per cent) and social formats (64 per cent). Global digital revenues will reach 30 per cent market share globally in 2015 (15.1 per cent to USD 163 billion). Based on MAGNA’s long-term forecasts, digital media will catch up with television in 2019, when both account for 38 per cent of global advertising revenues.
#6 Digital media is already the #1 media category in 14 of the 73 markets analysed by MAGNA in this update, including the UK (highest share in the world: 47%), Australia, Canada, Germany, China, Sweden and the Netherlands. In the US, digital will outgrow television revenues by 2017.
#7 Most other media categories suffered from the competition of television and digital in 2014. Newspaper ad sales decreased by an average 4.3 per cent while magazines ad revenues shrank by 7.3 per cent. Radio was flat (0.1 per cent) and out-of-home media grew by 3.4 per cent.
