Olivia Parker
Jun 15, 2017

APAC ad growth speeds up, bucking global trend: Magna report

Digital ad spend is also set to overtake TV ad spend in the region for the first time in 2017, says the agency's latest report.

APAC is the second largest growth market in the world in 2017
APAC is the second largest growth market in the world in 2017

Advertising spend in Asia Pacific will grow by 5.6 percent in 2017 to US$156 billion, overshooting previous forecasts by 0.2 percent and ensuring the region holds its position as the second largest market after North America ($196 billion), says the latest Magna Advertising Forecast report from IPG Mediabrands. Growth is then expected to slow slightly for the next two years before rising to 5.6 percent again in 2020.

The report shows that as a region, Asia Pacific is performing significantly better than the world. Net ad sales globally will grow by 3.7 percent in 2017, a major drop from the 5.9 percent growth rate of last year. This analysis is corroborated by another recent forecast by Dentsu Aegis Network, which puts global ad market growth this year at 3.8 percent, down on 2016's growth by 1 percent. This slower performance was not unexpected, says Magna's report, because of 2017’s lack of major cyclical sports events and a natural slowdown following the spike caused by last year’s US elections.

Despite Asia-Pacific’s strong growth, however, the region presents a decidedly mixed picture across the different markets. China (+7.3 percent) and India (+11.5 percent) will exhibit some of the strongest ad spend growth in the world; but Singapore (-4 percent) and Hong Kong (-1 percent) are two of just three markets in 70 to show declines, as they did last year.

India will outrank Italy for the first time in 2017

In the continent as a whole digital ad spend—which accounts for a 37.8 percent share of total budgets—is due to overtake TV ad spend (37.7 percent) for the first time in 2017. Paid search is the largest format within digital, set to grow at a rate of 13 percent to reach $31 billion; followed by display—up 1.8 percent to $9 billion; social—up 31 percent to $8 billion; and video—up 32 percent to $8 billion.

Mobile advertising in APAC is also ahead of the global average and will make up nearly 60 percent of total digital spend by the end of the year (versus 54 percent worldwide), becoming three-quarters of the digital total by 2021.   

Again, however, digital’s share varies significantly between markets. It amounts to over half of overall budgets in Australia and China but only single-digit share of spend in markets such as Philippines, Vietnam and Thailand. "In these markets, growth in total digital usage can come not only from behavior changes, but also from penetration improvements and technology upgrades," explains Luke Stillman, Magna's vice-president of Digital Intelligence. "Brand behavior changes take time, however, as even consistent double digit percent growth off a low base takes a while to change the media mix significantly."

Print is the only format in decline in APAC

APAC linear-TV ad sales, meanwhile, remain healthy, with 2.2 percent growth comparing favourably with a global decrease of 1 percent. But despite this slow growth, comments Stillman, TV’s share of total ad spend in APAC is declining from 39 percent of spend last year, to just 33.5 percent of spend by 2021. "In most regions we see the same trend with television: slow growth in advertising spend, but declining share as a percentage of total campaign budgets. Viewing is declining in almost every developed market, but brands still want the mass reach and impact that comes with TV, so cost increases offset those viewing declines."

Print media ad spend is down in Asia Pacific by an average of 8 percent across newspapers and magazines, meanwhile, compared to a global average decrease of 9.5 percent; and radio and out-of-home will see low to medium single digit growth.  
       
Big four trends

China: +7.3 percent

  • China remains the largest ad spend market in APAC with $62 billion expected this year and 7.3 percent growth on 2016, slightly higher than predicted.
  • Digital ad spend is predicted to rise 12 percent to $33 billion in 2017, a 52 percent share of the overall market, versus 42 percent globally.
  • Within digital, mobile is set to grow 23 percent this year to take 61 percent of total ad spend. 

Australia: +4.7 percent

  • Australia’s ad revenue growth is likely to be significantly lower than in 2016 (7.8 percent) and weaker than expected (6.2 percent was predicted).
  • The country's digital ad spend share is due to grow 16 percent this year to $6 billion, a 52 percent proportion of total budgets.
  • The strongest growth in digital comes from video, which will grow 45 percent this year to be worth $0.7 billion. This is explained by a "concentrated TV landscape with media owners that are very focused on digital content and quality of experience," says Magna. 

Japan: +2.6 percent

  • Japan’s growth rate this year matches the average for the last five years. It is expected to slow in the next two years, however, when the government's postponed VAT increase is implemented, but growth should recover in 2020 when the Olympic games comes to Tokyo. Japan's total ad market is worth $39 billion, the third largest in the world.
  • Television retains its position as the top media category in Japan with 42 percent of total ad spend, compared to digital’s 27 percent. 
  • However, digital ad sales will grow by 11 percent this year, with mobile ad sales representing the majority ($6.3 billion, up 24 percent). Advertising on social will see its biggest growth this year with a rise of 35 percent, followed by video (18 percent).

India: +11.5 percent

  • Ad sale growth in India is strong but down a few notches on the predicted 13.5 percent forecast, mainly due to the government’s demonetisation of the 500 and 1,000 rupee banknotes and the ensuing economic instability. An acceleration in growth of 12.5 percent and 14 percent in the next two years is expected as India hosts the Cricket World Cup and goes to the polls in a general election.
  • Television and print retain 40 and 35 percent respective chunks of the total ad spend pie, growing at 10 and 6 percent this year; while digital ad sales will also increase 28 percent to form a 17 percent share of the total.

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