Digital continues to drive APAC advtg market: Magna

Asia-Pacific’s advertising market will grow by 5.9 per cent in 2018, to USD 165 billion, according to Magna’s winter forecast. APAC maintained its position as the second largest region for advertising spend, behind North America’s USD 206 billion. This represents accelerating growth compared to this year’s 5.7 per cent growth performance.

As digital advertising spends crossed television spends in 2017, Magna highlighted that digital advertising continues to be the main driver of growth in APAC, and is expected to increase by 15 per cent in 2018 to reach USD 69 billion. This will represent 42 per cent of total advertising budgets, and is significantly ahead of television’s 36 per cent share. By 2022, Magna forecasts digital’s pie to have increased to USD 107 billion, surpassing USD 100 billion for the first time in APAC, and representing 52 per cent of total advertising budgets.

Global outlook: Mobile leads growth
Magna forecasts media owners’ global net advertising revenues to grow by 5.2 per cent to USD 535 billion in 2018. Digital and mobile advertising sales will grow by 13 per cent in 2018 to reach USD 237 billion or 44 per cent of global advertising revenues. They will comprise 50 per cent of total advertising sales by 2020.

Digital advertising sales surpassed television in 2017, reaching a 41 per cent market share (compared to 35 per cent for linear television).

Within digital, the majority of advertising sales (55 per cent) is now generated by impressions and clicks on mobile devices. Mobile ad sales grew by 39 per cent in 2017 and will grow again by 27 per cent in 2018 to reach 62 per cent of all digital ad sales. Search and social formats continue to drive digital advertising growth (growing by 16 per cent and 40 per cent, respectively, in 2017) as billions of below-the-line, direct marketing dollars are being redirected towards these formats. Social and search now represent 70 per cent of digital media spend, compared to 24 per cent for display banners and video.

Major events in 2018 such as The Football World Cup in Russia, Mid-Term elections in the US, Winter Olympics in South Korea are expected to contribute one point to global ad growth. Excluding cyclical effects, underlying advertising growth would be 4.1 per cent in 2018 compared to 5.1 per cent in 2017 and 4.9 per cent in 2016.

Within the top 20 markets, the highest growth rates are expected from India (+12 per cent) and Russia (+10 per cent). China also remains robust (+9 per cent) despite some vertical spending (e.g. automotive) slowing down. However, in 2018, Magna anticipates that the Singapore market may shrink again.

According to Vincent Létang, EVP, Global Market Intelligence at MAGNA and author of the report, “The classic quadrennial drivers (FIFA World Cup, Winter Olympics and US Elections) will offset the underlying slowdown of the global advertising market in 2018 to generate decent growth (+5.2 per cent). The transition to a digital-centric media world accelerates as digital ad sales continue to grow as fast – and often faster – than expected. We are now forecasting digital ad sales to represent 50 per cent of all ad dollars by 2020. Meanwhile linear television struggles in most major markets (US, UK, Australia etc.) as CPM inflation is no longer strong enough to compensate for declining ratings and lower demand from consumer goods.”

Through the APAC lens
Digital in APAC, like in all regions, will thus capture most of advertising spend growth this year. Growth is driven by search, social, and video. Search advertising will grow by 12 per cent in 2018 to reach USD 36 billion, a total that still represents slightly more than half of total digital ad spend in APAC. Advertising on social media will grow by 29 per cent in 2018 to reach USD 11 billion, and similarly, video will grow by 32 per cent to reach USD 11 billion.

Within each of those formats, there is a significant gap between desktop and mobile advertising sales growth. Search advertising’s +12 per cent growth rate is comprised of 22 per cent mobile growth and desktop spend shrinking by six per cent.

Furthermore, mobile search in APAC represents nearly 70 per cent of total search spend, as the APAC digital advertising economy is already heavily mobile-first.

Desktop advertising spend in social (+4 per cent) and video (+11 per cent) still remains positive, but falls significant short of mobile spend growth, which is expected to be 34 per cent and 49 per cent for social and video in 2018 respectively.

Magna expects collective mobile growth to be 26 per cent in 2018, reaching USD 46 billion. This will represent 66 per cent of total digital advertising budgets, ahead of the global average of 62 per cent. By 2022, mobile spend will represent 80 per cent of total budgets, a total that alone will be more than 40 per cent of total advertising budgets.