Credit: Joe Yates, Unsplash
A new report released by Magna reveals that the global advertising market place shrank by -4.4% to $569 billion amidst the COVID-induced recession, but some markets (US, China) proved more resilient than initially feared, thanks to the scale and resilience of digital media formats (+8%).
“Back in the spring, MAGNA predicted that digital media organic growth factors would drive digital to grow despite the COVID-19 recession (+1% globally, +3% in the US). It turns out digital media resilience was even stronger than expected (+8% globally, +10% in the US) and possibly because of COVID-19,” said Vincent Letang, EVP of Global Market Intelligence at Magna.
“Indeed the pandemic triggered a tremendous acceleration in both supply (digital media usage and audiences, ecommerce) and demand (small businesses embracing digital media to keep their business alive, big brands pivoting towards lower-funnel marketing channels as they typically due in recession times). MAGNA believes the return of consumer mobility, major events and economic recovery will prompt most industry vertical to grow their linear advertising budgets in 2021, but the long-term trajectory has shifted even further towards a digital-centric marketing environment for years to come.”
According to the report, Asia Pacific has been less affected than other regions by the COVID-19 pandemic and economic recession. In October 2020, the IMF was expecting full-year real GDP to shrink by just – 1.7% in 2020. This is one of the most resilient performances globally, although it is worse than prior IMF expectations from earlier in the year.
This is a combination of strong economic resilience in China (GDP +1.9%), offsetting weaker performance in Japan (-5.3%) and India (-10.3%). The reduced economic expectations in APAC come almost entirely from weaker expectations for India compared to earlier in the year.
India was expected to grow in the spring, but has been revised by the IMF to the third weakest performance of all large markets in 2020 (behind only Italy and Spain).
While APAC as a region is expected to be resilient compared to other regions in 2020, this slightly negative performance in 2020 still feels like an extremely weak performance relative to the historically strong economic growth in the region.
“Notwithstanding the pandemic and accompanying economic instability, there has been a resilience across Asia that has meant spend in the back half of the year came back as visibility and confidence grew.”
Furthermore, the report stated that while COVID-19 has been largely contained in APAC, outside of India, the global and trade-reliant nature of many APAC economies means that the global recession still caused a significant headwind to local economies. The COVID-19 crisis and accompanying recession is also impacting domestic consumption throughout the region and, as a result, brands are cutting marketing spend.
There are several compounding events that remain headwinds to marketing activity and advertising spend in APAC such as the overhang of the “cold” trade war with the US, and continued political unrest in Hong Kong.
In that environment, Asia Pacific media owners’ advertising revenues decreased by an estimated -4.9% in 2020 to $174 billion. This is the weakest APAC performance since 2009 (-4.0%) and it is in-line with the global ad market decline in 2020 (-4.2%). For full-year 2020, linear advertising ad sales (linear TV, print, radio, OOH) shrank by -19%.
This is far worse than 2009’s -5.7% performance for linear advertising. The difference for total APAC growth is that in 2009 linear advertising formats represented 87% of total budgets; in 2020, linear advertising formats only represented 42% of total advertising spending. Revenues from digital advertising formats slowed down compared to 2019 (+15%) but still grew by an estimated +9.0% in 2020.
“Notwithstanding the pandemic and accompanying economic instability, there has been a resilience across Asia that has meant spend in the back half of the year came back as visibility and confidence grew. Whilst there will be many more challenges across our region as a result of Covid-19 there is a degree of cautious optimism that is reflected in the projected growth numbers,” said Leigh Terry, CEO of IPG Mediabrands APAC
In 2021, the APAC advertising economy will rebound by +11% to reach $193bn, as the
economy surpassing the prior high water mark from 2019. APAC remains the second largest global advertising, behind North America but $60 billion ahead of EMEA which. Because EMEA’s decline is expected to be even larger than that of APAC this year, the gap between the regions will widen further.
The APAC advertising market is concentrated around the two largest markets China and Japan, combining to represent 69% of total regional spending. The strongest performance in the region in 2020 came from Taiwan (+2%) and China (+0%) – the only two market to remain stable or positive despite the global recession. The worst market performance came from Malaysia (-22%), Hong Kong (-20%), and India (-16%).
Advertising spending and growth in APAC continues to be driven by digital formats. Digital advertising sales slowed down but still grew by +9% in 2020 to reach $101bn. That impressive strength was driven by social media (+19%), video (+12%) and search (+9%). Static banners (-7%) were the only digital format to experience decline this year.
“Linear media has been worst hit with negative growth across all APAC markets this year, whereas digital has shown more resilience leading to positive growth in all markets.”
Mobile digital ad sales continue to be where most growth in consumption and spending as mobile advertising increased by +16%. Smartphones and feature phone continue to play a larger role in the digital life of APAC consumers, and the Chinese market is one of the most advanced large mobile digital market globally, in terms of both features and in share of digital spending.
“Covid-19 has shown a visible impact on advertising economy in 2020 on the back of reduced economic growth. Linear media has been worst hit with negative growth across all APAC markets this year, whereas digital has shown more resilience leading to positive growth in all markets,” said Gurpreet Singh, Managing director of MAGNA APAC.
In 2021, digital spending growth will rebound to +13% due to the slightly easier comparison with 2020 growth, to reach $114bn. In APAC, like in most global regions, lower-funnel direct digital ad formats held up better as a result of COVID-19 slowdowns compared to upper-funnel brand advertising. As budgets were adjusted to reflect the new post-Coronavirus economic reality, brands consistently prioritize spending that is easiest to attribute directly to sales.
“Although digital has grown at relatively slower pace than last year it is gaining share of spends faster than expected.”
As a result, search and social as well as performance video remain the bastions of digital ad spending strength in APAC. Paid search remains by far the largest portion of digital ad spending in APAC, representing just over half of total digital budgets, and whatever weakness there is in core search engines is offset by continued organic growth in eCommerce related product listing ads.
Television advertising spending declined by an estimated -15% in 2020 to reach just 27% of total budgets. Television budgets had already declined by -3% in 2019, the first decline since 2009, and the impact of the global recession and COVID-19 lockdowns in 2020 has accelerated the shift to digital advertising.
“Although digital has grown at relatively slower pace than last year it is gaining share of spends faster than expected, leading to the highest share of advertising spends in the majority of APAC markets. Significant rebound is expected in 2021 with all markets predicted to show relatively higher overall growth than a normal year,” added Singh.
The Olympics in Tokyo were expected to be a supporting factor for brand advertising and television spending in 2020; their postponement until 2021 means that 2021 spending will likely be stronger (+7.4%), but compounded the pain felt this year in the APAC television industry. During the lockdown period, consumption of linear television, which had been eroding in recent years, rose sharply.
In China, TV viewing grew by almost 50% y/y during the early stages of lockdown, but returned to 2019 levels in the spring as businesses, schools and factories reopened. In India, linear TV consumption increases peaked around +30% vs 2019 during some weeks but have also returned to normal levels since. Almost every APAC market (like most global markets) saw a spike in television consumption as quarantines went into place, but viewing returned to its long-term pattern of erosion by the summer.
Print ad sales continued to decline, with newspapers (-27%) and magazines (-26%) both weak this year. Print represents such a small portion of total spending, however (just 6% in APAC) that these declines do not have a huge impact on total regional growth. Many verticals or brands that might consider deeper print cuts have already cut print formats entirely from their media plans for years and the remaining users. Radio ad sales declined by -23% in 2020, following a -3% decrease in 2019 (the first decline since 2009 in radio).
Out of home has been strong in APAC in recent years, but quarantines and shutdowns have hurt OOH audiences and sales in the first half and MAGNA believes full-year 2020 ad revenues declined by -22% to $10 billion before recovering by +10% in 2021.
Chinese media owners’ advertising revenues were stable in 2020 (+0.2%), the worst performance in the past 20 years for the Chinese market but one of the most resilient in the world this year as China one of only five global markets that will not shrink in 2020.
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