- APAC growth will be 7%, 7.6% and 6.9% in the period from 2013-2015
- APAC will represent 29% of global spend in 2014
- China is now the largest market in APAC, passing Japan
- Digital will represent 26% of total APAC spend in 2014, up from 23% in 2013
- Mobile spending in APAC represents 19% of total digital spend. This is the highest outside of North America
As 2014 gets into the second half, Magna Global has updated the ad forecast for the year. Still spelling good news for the region, the forecast indicates that Asia Pacific advertising revenues will grow by 7.6 per cent in 2014 to USD 150 billion, up from 2013’s 7 per cent growth but slightly down from December’s 8.4 per cent 2014 growth forecast. APAC will represent nearly 29 per cent of total global spend this year. Growth will moderate slightly in 2015 to 6.9 per cent. The APAC economy remains one of the strongest globally, and is expected by the IMF to continue to be one of the prime drivers of global economic growth.
Television remains the largest media category in APAC and will grow by 5.6 per cent and comprise 41 per cent of the total market this year. Digital media is the fastest growing media category and will grow by 21 per cent this year to USD 39.4 billion, to reach a market share of 26 per cent at the end of 2014. The APAC digital landscape is characterised by a fast shift to mobile usage; mobile-based advertising spend will represent nearly 20 per cent of all digital spend this year.
This is ahead of every region except North America, because of a very high mobile media usage in advanced markets (Japan) but also in emerging markets (China) where many consumers are simply ‘leap-frogging’ the PC phase of internet usage. Furthermore, mobile’s 25.6 per cent CAGR through 2019 nearly matches social (28 per cent) and video (26 per cent) as the fastest growing overall digital categories in APAC. Social remains the fastest growing category within digital, and while it will only represent 7.8 per cent of total digital spend this year, this will increase to 14 per cent by 2019.
Just over half of that spend will be on mobile devices this year as more social activity migrates to mobile devices. Print continues to decline and together magazines and newspapers will represent under 20 per cent of total spend this year, down from over 40 per cent in 2000.
The markets within APAC differ significantly, with some highly developed advertising economies (Australia – USD 527 spent per capita, Japan – USD 339 spent per capita) mingling with some of the least developed (Vietnam – USD 11 spent per capita, India – USD 6 spent per capita). The fastest growth in 2014 will come from Indonesia (28.8 per cent) and Vietnam (15.9 per cent). The slowest growth markets will be Thailand (-2.2 per cent) and Australia (0.9 per cent).
APAC remains one of the fastest growing global regions, behind Latin America but ahead of Europe, North America and Africa. The growth is driven by emerging Asia that includes China, India, Indonesia, Malaysia, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam (+12.6 per cent growth in 2014) which continues to be one of the engines of global advertising growth. Emerging markets within APAC will represent USD 76.2 billion in 2014, or half of total APAC spend. Emerging Asia will represent 15 per cent of global ad revenues this year, up from just over 5 per cent a decade ago.
China: The second ad market on earth
China is now the largest market in APAC, and will represent USD 50.9 billion of advertising spend this year, ahead of Japan’s USD 43.1 billion. Looking at some of the largest markets in Asia, China will see strong growth again this year at +12.1 per cent, in line from last year’s +12.3 per cent growth rate. The IMF expects the Chinese economy to grow by 10.4 per cent this year on a nominal basis, and by 7.5 per cent in real terms. Inflation is finally under control, and will remain below 3 per cent for the foreseeable future (a significant improvement from the 7 per cent + values seen as recently as 2011).
While the overall economy continues to moderate slightly with signs of the property market slowing, the government continuing to rein in credit growth and the economy’s primary driver rebalancing from investment to consumption, digital ad growth in China remains robust and will continue to drive strong overall market growth. Digital advertising will pass TV this year as the largest advertising media in China and will represent more than 40 per cent of the total Chinese spend for the first time. This trails only the digital share of Denmark, Netherlands, Sweden and the UK globally.
Mobile will grow to represent just over 12 per cent of the total digital spend in China this year, which is a significant increase from 3.6 per cent of digital in 2010, but still below some of the other APAC markets where mobile technology has higher penetration.
Like most large ad markets, print is seeing significant declines, with total ad spend share of just over 10 per cent compared to over 30 per cent a decade ago. This decline does not show signs of slowing, and as more vibrant segments of the advertising economy cannibalise print share.
Growth in the economy will remain strong for the foreseeable future, and as a result we expect growth in the advertising economy of over 10 per cent for the foreseeable future. This means that China will grow from around 30 per cent of the size of the US advertising economy today to 40 per cent of the size of the US advertising economy by 2019.
India: Riding on the wave of optimism
A bottoming economy and a decisive verdict in the 2014 national elections is a positive story for India. The new government’s business friendly credentials bode well for the economy. With inflation falling combined with interest rates set to drop, this should provide impetus to businesses. IMF in its April 2014 report revised its earlier forecast from +5.1 per cent to +5.4 per cent of real GDP growth this year and projects to grow +6.4 per cent in 2015.
The advertising market is finally returning to double-digit growth rates after a slowdown of two years: it will grow by +12.2 per cent this year to USD 7 billion from USD 6.3 billion. It will accelerate further in 2015 (+13 per cent). National elections accelerated growth and for the first time digital media played an important role in political campaigning.
Both television and newspapers took a larger pie out of political ad budgets this year. Similar to the US, political ad spend is loosely regulated in India and fully allowed on television, where the extra demand added to the inflationary pressure created by the implementation of a ad load regulation reducing the inventory. MAGNA GLOBAL estimates that political spend will have contributed to approximately INR 10 million (USD 170) to a total TV spend of INR 165 million (USD 2.8 billion). Advertising market is still a duopoly between these two categories enjoying a market share of 80 per cent and growing at +10.4 per cent and +9.2 per cent, respectively, in 2014. Digital, like in the previous years will be the fastest growing category at +38 per cent. Within digital media, social is the sub-category growing at the fastest pace. India has become Facebook’s biggest market outside the US with more than 100 million users, a majority of whom being mostly or exclusively mobile users. Social ad spend is expected to grow by 80 per cent to USD 150 in 2014.
OOH will touch +15.6 per cent despite losing on Indian Premier League because of the venue shift out of India during the initial phase of the league. Radio industry is hopeful that the new Government will fast track Phase III auction and this is expected to aid the medium grow at +11 per cent.
Japan: The mixed mood
In Japan, 2013 saw advertising revenues grow by 1.3 per cent to JPY 4.1 trillion (USD 42.1 billion). Japan lost one rank in the global market and the world third biggest behind China (USD 50.8 bn). Following a strong post-Tsunami year 2012) (+3.7 per cent), 2013 had a slow start (-1.2 per cent for traditional media spend for the first half) and a much stronger second half (+1.4 per cent). Advertising revenues were down for print and radio, up slightly for OOH media and television (+1.3 per cent) and growing much faster in digital media (+4.8 per cent).
We still expect advertising spending to re-accelerate in 2014-2015, compared to 2013, mostly because of the newly inflationary environment: CPI inflation is expected to be at nearly 3 per cent in 2014 and nearly 2 per cent in following years. However, Magna’s advertising growth forecast for 2014 is slightly reduced (from +2.7 per cent to +2.4 per cent), as the nominal GDP forecast from the IMF was reduced by half a point between October 2013 and April 2014 (from 3.4 per cent to 2.9 per cent). Both the economy and the advertising market have been dynamic in the first quarter of 2014, in line with a strong second half of 2013. However that performance may have been mostly caused by anticipated consumption and marketing activity planned prior to the increase of consumption tax that took place on April 1st (from 5 per cent to 8 per cent).
Annualised GDP growth hit a record 5.9 per cent in the first quarter and is expected to drop by 3.4 per cent in the second quarter; retail sales fell by 4.4 per cent in April alone. The tax increase is considered risky as the previous one, in 1997, caused an economic recession and the fall of the Government, yet the economists consensus this time is that domestic consumption and economic growth should re-accelerate after one or two quarters of slowdown. Magna also reduced 2015-2016 all media growth forecast by approximately half a point to +2.0 per cent and +1.6 per cent respectively, to reflect downgraded macroeconomic growth forecasts.
In 2014, TV will grow 2.6 per cent (15 per cent for pay TV) whilst radio and magazine ad sales will decline by 1 per cent to 2 per cent. OOH will be flat and newspapers will remain resilient (+1 per cent). Once again, digital media spend will drive overall spend with a 6.8 per cent growth to reach JPY 741 billion (approx. USD 7.4 billion) a 18 per cent market share). Mobile-centric advertising will provide almost all of that growth: +22 per cent vs. +2 per cent for desktop-centric campaigns. Smartphone and tablet advertising already represent 24 per cent of total digital media in 2013 (one of the highest ratios in the world) and that ratio will reach 27 per cent this year.
Australia: The flat growth
In Australia, advertising revenue growth will grow by a modest 0.9 per cent in 2014, down from Magna’s December forecast of +4.4 per cent as a result of a worsening economic environment. Tailwinds from the mining economy in Australia have stalled, and ad spend will suffer along with the rest of the economy. Activity was sluggish in the first few months of the year, and the outlook for the remainder of 2014 is not substantially better. The IMF cut the overall nominal growth forecast by 1.1 per cent to 4.0 per cent for 2014, and given Australia’s extremely mature advertising market, advertising spend closely mirrors the economic trends.
Other significant 2014 events in the APAC region include the political and economic uncertainty in Thailand which caused the IMF to significantly cut growth from over 8 per cent to 4.5 per cent. Magna’s advertising growth forecast for 2014 has thus been cut to -2.2 per cent down from +3.5 per cent. Indonesia has an election planned for later in the summer and this is expected to be an additional tailwind for ad spend growth in the country beyond already strong fundamentals. South Korea continues to suffer from some political uncertainty regarding the transition to a new Prime Minister following the ferry disaster earlier this year. Individually these are significant for each market, but taken as a whole APAC will see growth in 2014 that is comparable to Magna’s December forecast. APAC’s continued stronger growth rate compared to the global average will see it pick up 2 share points by 2019 to represent 31 per cent of the global market.