Is Asia Pacific becoming a "sideshow"?
Following the annual financial reports of the big advertising holding companies, Campaign Asia published a recent column from a member of the investment community who suggested it might be. He noticed a trend—that less revenue was being generated in Asia Pacific.
Ian Whittaker's column went on to suggest that the region had fallen out of favour as a global growth engine and that at least in the short term, the big five ad holding companies were more likely to invest in North America and Europe, where returns would be stronger.
So Campaign opted to ask all the APAC leaders of major holding companies to explain where their companies stood on the region's importance. We received replies from Dentsu, GroupM (WPP) and Mediabrands (IPG). While the leaders recognised that APAC is an artificially-constructed region that is difficult to make sweeping generalisations about, they asserted its growth engine days are over, even in the short-term.
Admitting recent Covid-related challenges in China, the APAC chiefs expect a rebound and cited not only the region's large markets and rising income levels but especially its innovative chops in leading the world in ecommerce technology.
Below are their responses in full.
Ashutosh Srivastava, CEO, GroupM APAC
What is APAC?
I’d prefer to look at it from the perspective of our clients. Firstly, It would be naïve today to club all of Asia Pacific into one homogenous region. It’s an anachronistic clubbing in today’s world, and more relevant to how companies from the west looked at it in the 1990s and even 2000s.
We have ‘mature’ economies of Australia, Japan, Singapore and Hong Kong, we have ‘maturing’ economies like China, and South Korea, and we then have the ‘developing and emerging’ ones in India and Southeast Asia.
Each of these three types offers a different scale, pace of growth and opportunities; and our clients have different strategies and investment plans for them. Moreover, the strategy for companies in our sector naturally mirrors what our clients are trying to do so I don’t see any reduction in priorities or importance—either from western global or Asian companies.
The moment you see it like that, you will figure that China, India, Australia, Japan and ASEAN will all feature in the top 12 markets of major global multinationals.
Growth, short-term and long-term
It is true that North America and Europe were much quicker to resume normal economic activity, coming out of Covid, and showed high growth in the past two years compared to Asia as a result of that bounce-back.
Asia was much more cautious and slower to come out of Covid, especially China. That shows in the relatively slower pace of recovery (except India) over the past two years, but it’s a matter of months before China picks up, and along with it, so will much of this region, putting it back on a high growth curve. Already, we are seeing signs in some sectors like tourism, luxury brands and auto. India will become the 8th largest country for media investment this year, so its no longer ‘emerging’. That’s also why tech platforms and media companies won’t just sideline Asia in favour of mature major economies that showed a quicker rebound from Covid due to faster opening up, but will plateau back to their long-term growth curve.
The national and multinational business of the future
We must not forget that the developing and emerging economies in Asia have 40% of their GDP and up to 70% of the employment generated by the SME sector. Covid has seen creation of technologies and marketplaces that allow SMEs to scale both their physical, and mental availability much more quickly, and be really efficient at finding and converting prospective customers. This makes the business of marketing brands much more intense and competitive, and that will lead to even higher growth in this sector, given the relatively lower penetration of branded goods and services compared to Europe and North America.
Hotbed of innovation
None of this is new news to our technology and media platform partners. At 2.6 billion people, more than 60% of the world’s internet users are in Asia. The digital economy today is estimated to be USD 300bn in Southeast Asia and growing to USD 1.5trillion by 2030, leading to a massive upcoming boom in all kinds of services. The ARPU growth in Asia comes from acquisition of more customers, while in the US and Western Europe, it’s at saturation point amidst intense competition for share of the customer’s wallet. Meanwhile, platforms in Asia are developing new products, and driving commercial innovation—Meta for example has a small country like Vietnam among its global top 12 markets, thanks to the booming SME sector. Development of live streaming and social commerce in Asia is at a pace and scale not seen in the US or Europe. Homegrown platforms like Tiktok and Shopee, just to name two, are reinventing social and commerce practices and developing new consumer trends. And global platforms are also innovating with relevant products to serve this region. To me, this does not look like technology and platform businesses are abandoning Asia in favour of some other parts of the world!
In summary, the huge market size, growing middle class, digital adoption, mobile-first approach and increasing ad spend in the Asia Pacific region make it an important growth engine for brands, tech, and media companies.
Rob Gilby, CEO, Dentsu APAC
As an Asia headquartered holding group with more than 120 years of rich history and a deep understanding of the importance of the region, Asia Pacific continues to be a growth engine for Dentsu.
There has and remains a longstanding track record of continuous and significant progression – not just in terms of spend and economic growth, but the unwavering spirit and desire for growth. For instance, there was remarkable growth in India of over 20% in FY2022 – the highest growth market globally – as it enters an exciting new phase of digital transformation with the launch of 5G.
We’re also seeing a renewed focus on China’s economic growth as they undergo recovery post covid. There is a clear and dynamic desire from brands to engage customers in these markets as they undergo digital transformation across commerce and media.
As a sign of our commitment to support this expansion and aligned with our global strategy to support high growth regions, we’ve recently invested in senior leadership including new CEOs for Southeast Asia, India and Australia & New Zealand, as well as acquiring Aware Services – a leading data and analytics consultancy, to further strengthen our commerce offering in the region. We continue to pursue partnerships, investments and M&A opportunities across the region, as we remain confident and optimistic about the future of APAC’s growth.
Leigh Terry, CEO, Mediabrands APAC
In portfolio managing any group of businesses or markets, there is always short and long term investment decisions and risk and return horizons, however, many Asian economies are hitting their stride as pandemic supply-chain disruptions fade and the service sector booms.
China and India alone are expected to contribute more than half of global growth this year, with the rest of Asia contributing an additional quarter. A sudden re-opening for China particularly has paved the way for a faster-than-expected rebound. China has strong trade and tourism linkages, so this is positive news for Asia, as half of the region’s trade takes place between its economies. IMF analysis shows that, for every percentage point of higher growth in China, output in the rest of Asia rises by around 0.3 percent.
At UM APAC, one of our flagship agencies, we talk about ‘moving at the speed of Asia’ – and that’s backed up by the fact that according to the World Intellectual Property Organization (WIPO), a specialist agency of the United Nations, Asian economy patent filings accounted for more than 66% of the world’s total in 2020.
It's also backed up by recent analysis from tech sector advisory firm North Ridge Partners which cites how:
- TikTok has grown live commerce GMV from zero to more than $1 billion a month in Southeast Asia since the middle of 2022, and it’s apparently still growing at 20-30% per month.
- They also point out how Asian eCommerce sales are forecast to grow faster than in all other regions even though they are subject to the same macro pressures as their global peers — rising interest rates, escalating fuel costs and supply chain crunches. Indeed, their research reveals that 7 of the top 10 fastest-growing eCommerce markets are in Asia, including all of the top five. China, Indonesia, South Korea, Singapore, and Japan made the list of the top 10 markets where eCommerce has the highest share of total retail spend.
As growth is the ultimate determinant of success – our clients’ success as well as our own - we continue to invest significantly in our people, our product and our business in Asia, both for and on behalf of our clients.
Growth is an interesting concept; wider economically than just ad spend/revenue per user from a digital platform. Do we mean topline revenue from increased activity? Of course, but we also mean efficiency, productivity and ultimately bottom line margin achievement.
APAC is a key region in helping deliver that for global businesses in terms of efficiency of workforce. If you look at the overall economies – even in the short term, IMF figures for March show an improved position versus late last year with a growing amount of the world’s GDP growth coming from right here in APAC.
Short-termism in economically uncertain times may require prioritisation to achieve immediacy of numbers, however Asia still has significant short and long term growth in its own right, and the learnings that will increasingly come from East to West mean that we are taking the prudent approach of balancing both… growing all the way through and setting ourselves and our clients up for more success in the future.