Currently worth nearly US$154 billion, Japan’s entertainment and media market is predicted to grow to more than $170 billion by 2020. That compares to nearly $767 billion in the US, and $264 billion in China.
TV is not going to stop dominating Japanese advertising any time soon. PwC’s study suggests sporting events such as the Tokyo Olympics will help propel the total TV advertising market from $11.62 billion to $14 billion by 2020, a growth rate of 3.9 percent. That compares to a projected $81.75 billion in the US.
Major broadcasters in Japan face a growing challenge from subscription-based entertainment providers such as Netflix and Amazon. To remain relevant to younger viewers, traditional broadcasters have scrambled to develop online services of their own. However, PwC expects the online TV advertising market to remain relatively small, reaching $751 million in 2020, 5.4 percent of total TV advertising revenue.
The broader online space is, understandably, showing more dynamism, and that is what this summary is going to focus on.
Japanese internet advertising in the global picture
The US is still, by a long way, the largest online advertising market, with total revenue of nearly $60 billion set to reach more than $93 billion by 2020.
Internet advertising in Asia-Pacific grew 22.4 percent in 2015 to US$44.62 billion, and the region is now the second-largest globally after Europe, Middle East and Africa (EMEA). China is still the second-largest individual national market for internet advertising (behind the US and followed by Japan) and dominates Asia-Pacific with revenue of $23.20 billion set to rise to nearly $45 billion in the next five years.
In a regional context, due to growth in other markets, Japan’s share of Asia-Pacific online adspend has dropped to below 20 percent, down from nearly 33 percent in 2011. By 2020, Japan will account for just 13.4 percent of regional digital revenue. But the market is still sizeable: between now and 2020, online adspend in the country will rise from $8.18 billion to $11.15 billion.
What’s driving online spending
Most online dollars are still channeled into display advertising in Japan—primarily banner ads. By 2020, this segment is predicted to be worth $3.42 billion. PwC notes social media is a key driver, the dominant platforms being Line, Twitter and Facebook.
Technology is also contributing to growth, PwC said. It noted that Japanese media buying is becoming increasingly automated, with strong demand for programmatic technology from premium publishers. The ad network MicroAd, for example, has more than 5,000 publisher partners in Japan. While programmatic trading is at a mature level in Japan relative to much of Asia, many marketers are still struggling to catch up in understanding the technology.
Programmatic buying is also growing fast on mobile, which is set to be worth $2.54 billion by 2020. PwC notes however that ad blocking software poses a very real threat to growth, having become more widespread since Apple allowed it in its latest operating system, which launched in September 2015.
While there are still complaints that video inventory is lacking, video showed the fastest growth in terms of display advertising. PwC cites research by Digital InFact that shows 37.5 percent of Japanese advertisers used online video advertising last year, up 17.5 percent on 2014. It’s expected to grow 43.1 percent year-on-year over the next five years to $655 million. While encouraging, the figure is remarkably small when compared to the US, where online video advertising is expected to exceed $13 billion by 2020.
Nine out of 10 advertisers in Japan that used video last year aimed to raise awareness of their products or services. That is a rather vague goal, however, and diffculty in measuring the effectiveness of video advertising is a big reason that many are still not investing in it.
Paid search remains significant, as it does in the rest of Asia. In Japan, it accounts for 26.1 percent of the total online advertising market and is set to reach $2.77 billion by 2020. Regionally, paid search was worth $14.97 billion in 2015, and is forecast to generate $27.70 billion by 2020. However, while Google dominates in most global regions, in Asia-Pacific much of the growth in search revenue will come from local Chinese players.
PwC has conducted its outlook study for 17 years. Forecasting is based on analysis of existing data combined with political, economic, social and technological factors in individual markets.