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6 Questions to Magna’s Vincent Letang on trends shaping APAC ad revenues

Magna Global’s ad forecast for 2014 spells some positive news for global advertising revenues. In specific, Asia and the digital landscape are slated to record some high decibel activities in the year ahead. While recognising the high digital growth and penetration in China and digital sophisitication in markets such as Australia, Magna Global has also singled out Vietnam, Indonesia and Philippines strongest growth markets in APAC. Video is already on the rise in the region and programmatic, despite its low penetration in APAC, is becoming important in size for specific markets in the region as well.
In a conversation with DMA, Vincent Letang, EVP, Director of Global Forecasting at Magna Global, elaborates further on some of the trends that are defining advertising revenues for the region.
There have been too many conversations to say that markets such as India and China are slowing down in the APAC. Do you think some of these conversations will change with the expected 8.7 per cent growth in the region?
We expect an acceleration in ad spend in markets like China and India in 2014 due mostly to one-time advertising boosts. In addition, the economies are stabilising, and in India’s case improving in 2014. Nominal GDP in APAC region will improve from 7 per cent to 7.8 per cent in 2014 in comparison to 2013, which drives some of the year on year improvement seen in our forecast.
You have sited SE Asia markets as markets of strongest growth – what is contributing to this growth and what are the digital ad revenue trends for the three markets of Vietnam Indonesia and Philippines?
The ad spend growth is primarily driven by economic growth. Nominal GDP in most of the Southeast Asian markets is growing in double digits. In addition, there are some special circumstances in some of those markets in 2014 such as Presidential elections in Indonesia next summer that will cause additional strength especially in TV advertising. In regard to digital growth, all of those markets have very low current digital penetration (at around 5 per cent), so growth remains very strong but off a low base. Digital alone is not yet large enough.
China is set to be the second largest ad market globally. Given the nature of the market, that has very strong state-owned and local Chinese brands vs global companies, what are some of the challenges ahead for agencies and marketers?
China will pass Japan in 2015 to be the second largest market. The biggest challenges for international players in the Chinese markets, other than regulations that favour local players, are things such as local digital infrastructure; you can’t take the same lessons with Facebook and Google to the Chinese market and implement your strategies there. In addition, the TV sales houses are very concentrated and it makes negotiation more difficult. I do think that as the market increases in size over the next several years, you will increasingly see global companies dominating the top 10 brand spend as they do in most other large international markets.
IPG Mediabrands has cited video content as an important segment for digital advertising spends. Are you seeing enough video uptake in the APAC region?
We expect digital video comprises 10.3 per cent of the total digital spend in APAC in 2013. That compares to 8 per cent globally, so APAC is ahead of the global average in the amount of video ad spend. We expect APAC to retain this advantage through our 2018 forecast period, so there is certainly video uptake in the APAC region.
We are seeing conversation of SoLoMo making way for HoMo – or using mobile at home. But mobile is still a personal device – are there real opportunities for advertisers with this increased use of mobile at home? Or is this a trend that media owners need to focus and develop before advertisers can leverage?
This is likely a scenario where media owners need to force the change so that advertisers can leverage it. We have seen globally that moves by Google and Facebook to increase mobile advertising have quickly resulted in much higher amounts of mobile spend. Since the share of impressions is already ahead of the share of spend on mobile devices, and the experience of mobile advertising, especially on tablets, is quickly mirroring that of desktops, we expect the next several years will result in many more opportunities for brands to leverage that mobile attention.
As your report states programmatic trading is significant in the United States. Even though there are enough conversations in APAC as well, the percentage of spends is still miniscule. What are some programmatic trading trends in the region that you may have come across?
One of the challenges in the big APAC programmatic markets – China and Japan – is that there isn’t the same ecosystem that there is elsewhere globally. Instead of the traditional demand side platforms and ad exchanges, there are local solutions. Since most of the programmatic activity outside of the US at the moment is done by international brands, they’re used to transporting strategies and solutions they used in the US into other global markets. This is more difficult when none of the companies and solutions are the same as they’re using everywhere else. In addition, some markets such as Japan have much more concern over information privacy and some companies are trying to develop their own in-house solutions to mitigate that risk. That being said, we do believe that despite programmatic not reaching the same market penetration in APAC markets that it will reach elsewhere in the immediate future, the size of China and Japan (#2 and #3 globally) will mean the amount of spend there is still significant.

Noor Fathima Warsia

A veteran journalist in the Indian marketing, media and advertising fraternity, Noor Fathima Warsia took on the role of Group Editor -– APAC for Digital Market Asia in May 2013. Noor has focussed on tracking trends and developments in the Indian media industry.
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