Magna Grows More Optimistic On Japan’s Ad Market

14 June 2013 12 h 09 min Comments Off

magna

(IPG Mediabrands, Jun 13, 2013) MAGNA GLOBAL predicts global ad revenues to grow 6% in 2014

In 2013 APAC and Latin America growth will offset the stagnation in EMEA and North America

Top Stories

  • The new MAGNA GLOBAL advertising forecast study analyzes media owner ad revenues in 73 markets worldwide.
  • MAGNA believes Media Owners Advertising Revenues will grow by +3.0% in 2013 and accelerate to +6.1% in 2014, to $515 billion.
  • In 2013 APAC and Latin America growth will offset the stagnation in EMEA and North America.
  • In 2014, US and European markets will benefit from economic recovery and global sports events. China remains a reliable growth engine and Japan makes a surprise return in the growth club.
  • Digital Media will grow by +13.4% in 2013, reaching a 23.3% market share.
  • Social media generated $5.9 billion in advertising revenues in 2012 and we anticipate an impressive 39.6% growth in 2013.
  • Automated “programmatic” buying already represents 17% of online display transaction in the US and up to 30% in some other advanced markets.

MAGNA GLOBAL predicts the global advertising market to grow by +3.0% this year, to $485 billion and accelerate by +6.1% in 2014, to $515 billion. Compared to MAGNA’s previous forecasts, published in December 2012, this represents a downgrade revision for 2013 (-0.1%) and a small increase for 2014 (+0.1%). This is the result of MAGNA analyzing ad market conditions in 73 individual markets, adding three new markets this time: Sri Lanka, Pakistan and Kenya.

The predicted acceleration in ad revenues is in line with expectations of acceleration in economic growth in the second half of 2013 and throughout 2014. In its April 2013 report, the IMF predicted 2013 real GDP growth to reach +3.4% globally and 2014 to accelerate to +4.0% in 2014. Although the economic forecast is more modest for developed markets (+1.2% and then
+2.2%) and for Europe in particular (+0% and then +1.3%), it will in many cases bring the economic environment to the point where business growth triggers not only ad spend growth but, in some markets, faster-than-GDP growth. In many markets where marketers have been cautious, they may at last switch from optimization mode to expansion mode.

Digital media will continue their double-digit growth in 2013, as ad revenues will increase +13.4% to $113 billion. Growth will be driven by search (+14.6% to $52 billion), video (+21% to 6.6 billion) and mobile formats (+54% to $12 billion). Other formats will barely grow, and actually decline in many markets due to the commoditization and deflation of display inventory.

Television advertising will slow down in 2013 due to the absence of global events. Following a +5.0% growth in 2012, ad sales will grow by only +2.0% to $197 billion but TV remains the leading media categories (40.5% market share) ahead of digital. Print formats continue their secular decline: in 2013 newspaper ad revenues will decline by -3.4% and magazine revenues by -5.1% to a combined $110 billion (a 22.7% market share). Radio advertising will grow by 1.2% to $32.5 billion and out-of-home media revenues will increase by 3.0% to $32.6 billion

2013-2014 across geographies

There are wide regional and national contrasts in the global advertising landscape in 2013. There will be almost no growth thus year in EMEA (+0.4%) and North America (+0.7%). On the other hand, we are increasing the 2013 forecast for Latin America (+12.5% up from 11.9%) and for APAC (+5.9% v. 4.7% in December).

China: a successful soft landing

The Chinese economy successfully engineered a “soft landing” in 2012, with real GDP growing by +7.8% compared to +9.3% in the previous year (source IMF) and inflation coming under control (it was +1.8% in 2012 following +7.8% in 2011). The Chinese government can thus afford to continue stimulus programs and maintain high-single-digit real GDP growth rates in the mid-term. In its April report, IMF forecast +8% of real GDP growth this year and +8.2% next year. When factoring inflation, that translates into low-double-digit nominal GDP growth for the next five years.

Advertising spend had its own soft landing last year; it increased by 9.3%, which was the first time it grew at a slower pace than nominal GDP. In 2013 we expect the advertising market to grow by +11.6% to RMB 302 billion. Television continues to command the highest media market share, growing 7.6% to 109 billion and while digital is rapidly gaining (+27% to 88 billion). Supported by robust domestic demand, ad expenditure will grow again by 12.1% in 2014 and by 12.6% in 2015 and China will pass Japan to become the 2nd largest media market globally by 2016.

Another “sleeping giant” is waking up in Asia: Japan. In April, the IMF raised its real GDP growth forecast to +1.6% for 2013 (+0.4) and to +1.4% for 2014 (+0.7). The IMF is acknowledging a paradigm shift in Japanese economy: after 10 years of deflation, CPI inflation is expected to be flat in 2013 (+0.1%) and up by +3.0% in 2014, which, by Japanese standards, sounds like hyperinflation. The perspective of more dynamic economy and positive inflation in the mid-term has led us to change our advertising spend scenario too. We revise ad revenue growth forecasts from +0.2% to +1.5% in 2013 and from +2.3% to +2.9% for 2014.

2014: strongest growth since 2010

For 2014 MAGNA GLOBAL is predicting global advertising revenues to grow by +6.1% to $515 billion, i.e. a slight acceleration compared to our December forecast (+6.0%). This will the biggest annual growth since 2010, when the global advertising market grew by +8.2%.

The global ad market will be driven by a stronger economy (+4.0% of real GDP growth according to the IMF), aggressive economic policy in China and China and hopefully some recovery in Western Europe. In addition, ad spend will be driven by the even-year events: Soccer World Cup in Brazil (with soccer becoming increasingly popular in markets like Japan, China and the US), Winter Olympics in Sochi, Russia, and the mid-term election cycle in the US. Since the “Citizen United” decision of the Supreme Court that removed any limitation to fund-raising and campaign spending, ad spend around mid-term congressional elections and “propositions” have become almost as big as they are in a presidential race year.

We have increased our forecast for North America from +5.1% to +5.6% (US: from +5.4% to +5.9%) and our forecast for EMEA from +3.2% to +3.4%. APAC will grow by +7.4% and Latin America by +12.8%.

Digital Media

In its new report, MAGNA GLOBAL is also focusing on two major trends affecting digital media advertising: the rise of programmatic buying and social media.

Programmatic buying is a method of buying and selling digital display inventory through automated, data-driven platform and, sometimes, through real-time bidding. It is fundamentally allowing the demand side to buy audience for online display and video formats as they buy key-word search. Programmatic transactions continue to grow in the US, commanding an increasingly large share of display advertising revenues. In 2012, programmatic transactions represented $2.4 billion i.e. 17.4% of total display advertising, and we expect this to increase to 48% of revenues by 2017. Internationally programmatic still lags the US in most markets but has fewer of the growing pains as many of the technological solutions already exist. Western Europe has seen the most robust international RTB growth with some markets very advanced such as the Netherlands with 29% of revenues transacted via programmatic methods. Expansion in APAC and South America is still in more nascent stages.

In recent years, social media has really become an integral part of the Internet user’s online experience. Advertisers have only in the past couple of years been able to effectively capitalize on this digital channel and social continues to hold great potential. Global social advertising revenues is estimated $5.9bn in 2012, growing 36.8% compared to 2011. In the long-term, social advertising is expected to increase from $8.2bn in 2013 to $22.6bn in 2018, representing a 22.7% CAGR in the next five years. Social Media is a growing segment, representing already 7% of global internet advertising, growing to 11% by 2018.

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