APAC ad market to rebound by 11% in 2021 driven by paid search

Asia Pacific's ad economy is expected to rebound by 11% to reach US$193 billion. According to Magna's latest global advertising forecast, Asia Pacific remains the second largest global ad market behind North America and is US$60 billion ahead of Europe, Middle East and Africa.

The region's ad market is concentrated around China and Japan which combine to represent 69% of total regional spending. While Taiwan (+2%) and China (+0%) performed the strongest in the region, Malaysia (-22%), Hong Kong (-20%), and India (-16%) performed the worst.

Meanwhile, Asia Pacific ad spend and growth continues to be driven by digital formats. Next year, digital spending growth is predicted to rebound by 13% to reach US$114 billion as a result of the slightly easier comparison with 2020 growth. Despite the slow down in digital ad sales this year, Magna said that the medium still grew by 9% to reach US$101 billion. This was driven by social media (+19%), video (+12%) and search (+9%).

Like in most global regions, lower funnel direct digital ad formats in Asia Pacific were seen to have held up better as a result of pandemic slowdowns compared to upper funnel brand advertising. According to Magna, search, social and performance video remained "the bastions of digital ad spending strength" in the region, as a result of budgets being adjusted to reflect the new normal and brands prioritising spending that is easiest to attribute directly to sales.

The forecast added that paid search remains the largest portion of digital ad spending in the region, representing just over half of total digital budgets.

Whatever weakness core search engines might have is offset by continued organic growth in eCommerce-related products listing ads.

Meanwhile, static banners (-7%) were the only digital format to experience decline this year. At the same time, mobile digital ad sales continue to be where most growth in consumption and spending as mobile advertising increased by 16%.

On the other hand, TV ad spend as well as print and radio ad sales witnessed a decline. TV ad spend in particular dipped by 15% this year to reach just 27% of total budgets, impacted by the global recession and COVID-19 lockdowns which further accelerated the shift to digital advertising. The Tokyo Olympics were expected to boost brand advertising and TV spending this year, but Magna said that its postponement until 2021 signifies that 2021 spending will likely increase by 7.4%.

That said, consumption of linear TV during the lockdown period rose sharply, amidst its erosion in recent years. Almost every Asia Pacific market witnessed a jump in TV consumption as quarantines were enforced. However when summer came about, Magna said viewing returned to its long-term pattern of erosion.

On the print front, newspapers and magazines both witnessed a 27% and 26% dip this year. However, with print comprising only 6% of total ad spend in Asia Pacific, Magna said it did 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. Meanwhile, radio ad sales dipped by 23% this year, after a 3% decline in 2019, the first decline since 2009 in radio.

Likewise, although out-of-home (OOH) has been strong in Asia Pacific in recent years, lockdowns and quarantines have also impacted OOH audiences and sales in the first half of the year. Full-year ad revenues for OOH is predicted to have dipped 22% to US$10 billion before recovering by 10% to 2021.

Singapore

Singapore’s advertising sales dipped by 6.1% to US$1.5 billion this year. According to Magna, linear advertising dipped by 14% and the continued growth of digital ad spending (12%) was not enough to offset the heavy downturn in linear media budgets. 

Digital ad spending growth was led by social media campaigns (+21%), search (+10%), and digital video (+15%) with only static banners, which dipped by 5%, generating smaller ad sales. Digital spending growth was spearheaded by food, tech, finance, and personal care.

At the same time, TV spending also increased by 5% this year despite COVID-19-related lockdowns and the global recession. Reason being TV had dropped 10% last year due to Mediacorp cutting prices to meet declining demands. Additionally, the Singapore government increased its spending in linear media by 50% year-on-year in the first quarter to support COVID-19 safety campaigns. This represented 20% of total spending in the entire market. Government spending on TV continued into the second half although at slightly lower levels.

In addition, there was some TV spending related to the General Election held in July, as well as spending by the Health Promotion Board to tackle the 2020 outbreak of dengue in the country. Although the government ad spend rescued TV this year, Magna concluded that it was not enough to offset huge ad spend cuts from the private sector, resulting in heavy declines for print (-30%), OOH (-25%) and radio (-15%). Print hit hard by reductions in ad budgets across industries such as retail, autos, exhibitions, and real estate.

Malaysia

Media owners advertising revenues in Malaysia declined by 22% in 2020 to reach US$1 billion. According to Magna, Malaysia's ad spend performance was among the weakest in the Asia Pacific region due to several factors. The Malaysian economy shrank by 6.7% in 2020 as Malaysia has a largest exposures to industries vulnerable to COVID-19 shutdowns. Restaurants, retail and travel/tourism sectors represent 62% of small and medium businesses in Malaysia, and many of them cut ad spend massively, even when business slowdown was relatively mild and temporary.

Furthermore, Malaysia suffered one of the sharpest declines in population mobility, with transit decreasing by 80% within a few days of the beginning of quarantine. While activity has returned to normal, Magna said this still created a significant gap in spending throughout 2020 that the trending recovery in the second half cannot fully repair.

In this environment, the 22% decline in total advertising revenues came from a contrasted combination of linear ad sales dipping (42%) while digital ad spending continued to grow organically (8%). On the other hand, digital ad spend was driven by spending on mobile devices, which will still grew by 18% to represent 65% of total digital ad spending. By format, digital growth was fuelled by social media (+15%), video (+9%), and search (+7%). Only static banner display spend decreased by 9%. Linear media, on the other hand, suffered budget slashes across the board: TV (-26%), print (-49%), OOH (-44%), and radio (-50%).

Indonesia

In 2021, Indonesian ad spend is predicted to increase by 10%, surpassing the prior high in 2019. This year, the Indonesian advertising market shrank by 9.1% to US$6.5 billion. Indonesian GDP fell by a relatively mild -1.5% in 2020, significantly better than the global average (-4.4%). Despite that, linear advertising sales decreased by 16% in 2020, although digital offset that decline, growing by 6.5%.

Some of the relative weakness in the Indonesian market is due to the low adoption of digital advertising, which comprises only 35% of total budgets versus a global average of 58%. This is compared to developed markets where larger digital budgets were able to better offset linear ad spending declines as a result of the COVID-19 global recession.

Although TV ad revenues declined by 10%, Magna said it still represented 51% of total budgets. TV vendors faced weak spend during from the COVID-19 lockdown, and 2020’s TV spending is up against the tough comparison from the April 2019 with general elections that boosted TV spending. Print ad spending will decline by -30%, radio ad sales will decline by -50%, and OOH will drop by -30%.

Meanwhile, digital advertising sales grew by 6.5% in 2020 as the market share of digital advertising grew to 35% of total budgets. Strength came from mobile device spending, which increased by 17%. By format, strength came from social media (+18%) and digital video (+16%), as well as search advertising (+6%).

Hong Kong

In 2021, the Hong Kong ad market is expected to rebound by 11% to US$2.9 billion. It will then continue to grow moderately during the next four years, about 3% to 4% per year. However, because of the sharp drop in 2019 and 2020, Magna said Hong Kong’s ad economy is not expected to regain the 2018 spending level by the end of the forecast period in 2025, although it will grow back to 96% of the 2018 level by 2025.

Advertising sales dropped by 21% in Hong Kong in 2020 following a decline of 5% in 2019. According to Magna, this is the second worst performance in Asia Pacific behind Malaysia and it is mostly caused by the deep economic crisis and political uncertainty.

Quoting IMF, Magna said real GDP is expected to decline by 7.7% due to several factors. The first is of course the global COVID-19 recession, but the main cause of this extreme market weakness is not COVID-19. Instead, the decline of marketing and advertising activity is driven by public protests that started in 2019 and have been going on and off throughout 2020, creating an environment of significant uncertainty and making brands hesitant to invest.

Weakness in advertising spending has disproportionately hurt linear advertising, where spending shrank by 32%. TV ad sales fell by 30%, including a huge drop in revenues for the leading broadcaster TVB. Other linear formats such as print (-44%), out of home (-22%), and radio (-13%) also suffered significant downturns.

Digital advertising formats, on the other hand, grew by 8% to reach a third of total advertiser budgets. Growth will came from video (+14%), social media (+15%), and search (+8%). Brand marketing has also changed because of the crisis, with higher demands on discounts and bonuses for linear media. Furthermore, there is more ad-hoc planning and last-minute campaign changes in reaction to market changes, and more efforts spent on contingency plans. Finally, there are stronger eCommerce and social commerce efforts from advertisers.

China

In 2021, the Chinese market is predicted to grow by 10.9% to reach US$89 billion as GDP is expected to increase by 8.2%. This year, Chinese media owners advertising revenues were flat (+0.2%). Although this was the worst performance in the past 20 years, Magna said this was still one of the five global markets that did not shrink this year in 2020. Total Chinese ad sales for linear and digital remained stable at US$80 billion. The market performance is significantly stronger than both the Asia Pacific average (-4.9%) and the global average (-4.2%).

China was the first market exposed to COVID-19, but ultimately was not one of the worst impacted thanks to an early, aggressive and effective government response. Chinese GDP is thus expected to increase by +1.9% in 2020, according to the International Monetary Fund, the only large economy to avoid recession. Next year, Chinese GDP is expected to increase by 8.2%, higher than the prior forecasts, as some of the 2020 investment and consumption might be deferred into 2021.

Digital ad formats revenues grew by 10% to reach US$57 billion, and will grow to represent 72% of total spend, as linear media will decline much more significantly this year, Magna said. Digital ad spend growth came primarily from mobile devices which saw spending increase by 17% in 2020 to reach 83% of total digital spending. China is one of the most advanced digital markets in the world, with a huge share of total spending represented by digital media, and a huge share of digital advertising spending coming from mobile devices.

By format, search remains the largest segment, and represents 59% of total ad budgets in China. Search advertising spending increased by approximately 11% in 2020. This includes some declines in core search advertising spending, offset by continued strength from eCommerce search advertising giants Alibaba and JD.com. According to Magna, the five digital media giants - Alibaba, Tencent, Baidu, Sina, and Sohu - together control more than 75% of total digital advertising revenues in the only market where Western giants - Google, Facebook and Amazon - are completely absent.

Growth was strongest in social media advertising, where ad spending increased by 22% even in the COVID-driven recession as consumer engagement with social media grew during lockdowns and beyond. Finally, digital video advertising will increase by 11%. The only significant declines in digital media formats came from static banners, declining by 9%.

On the other hand, linear advertising formats decreased by 19%, shrinking to just 28% of total ad budgets in China in 2020. The largest share of linear spending goes to TV, where advertising declined by 18% to fall to just 20% of budgets this year. While the TV market is very concentrated in China, Magna noted that demand evaporated during the peak of the COVID-19 crisis and cost increases were unable to offset those declines. In addition, most PSTV networks stopped recording variety shows which are very popular in China. Furthermore, the delay of the Tokyo Olympics was a blow to total revenues. As a result, many brands cancelled or postponed their campaign plans.

Other linear advertising formats did not see significant spikes in consumption during quarantine. Radio consumption remained stable around 57 minutes per day, only slightly higher than 53 minutes per day in 2019. Radio ad sales decreased by 27% to just 2.4% of total budgets. Print ad sales declined by 25%. OOH advertising sales declined by only 10%, due to stability in revenues generated by digital OOH screens. Finally, cinema ad spend declined by 84% as many cinemas remain closed for most of the year.

Across industry verticals, the worst budget cuts in 2020 came from retail, auto, and travel. The strongest performance came from technology, appliances, food and beverages. Chinese car sales were already slowing down pre-COVID and declined almost to zero during the first quarter quarantine, and while they have recovered significantly since, automotive remains one of the weaker industry vertical. Travel and retail will have an overhang for the full year from both formal restrictions as well as consumer reluctance to expose themselves to public spaces.

India

In 2021, the advertising market performance will be tied to the pandemic and the business outlook depends on how quickly vaccination can get the outbreak contained. Assuming the outbreak is indeed under control at some point in the year, and the IMF GDP growth prediction (+8.8%) materialies, Magna expects all media formats to return to growth. Linear ad sales will rise 31% and digital 19%, leading to overall growth of 27%, from to US$12.1 billion.

Going into 2020, the country was already experiencing a tangible slowdown in economic activity, Magna said. The pandemic triggered advertisers to drastically cut ad spend by the end of March and signs of revival began to show up only sometime in July 2020. The extent of cut backs was severe for industries such as travel and tourism, hospitality and retail, while some product categories in personal hygiene and health, pharma, gaming, home entertainment and technology showed resilience or growth. There were also some steep spending increases from product categories that had never run any campaigns or had a negligible impact pre-COVID: Hand sanitizers, household cleaners, payment banks and surgical goods and equipment.

During the first nine months of the pandemic, access to media, distribution challenges and the fear of virus attack altered the media consumption behavior, leaving behind a softened advertising landscape. According to Magna, total advertising spends in 2020 is predicted to contract by 15.8% from to US$9.5 billion.

The only bright side of 2020 is that digital media was much more resilient and the only media to show growth, although at a slower pace. When the whole country was cooped in their homes, digital activity substantially increased across sectors including traditional brands. This aided, digital ad sales to grow double digit (+10.3%) led by social (+17%) and video (+12%) formats.

TV ad sales, the largest media format in 2019 with 37% market share, shrank by 14.8%. With this, Magna said digital will take a bigger slice of the pie, equating shares with that of TV. Overall, linear ad sales fell by an estimated 26% in 2020.

The return of live sports and broadcast production, as well as the festive season likely helped with ad spend stabilisation in the second half. It is estimated that second half of the year helped the market to recover to about of 80% of 2019 spends. While the degree of recovery varies for each media, OOH will need a longer window to reclaim and return to 2019 revenue levels.

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