WFA News

Adspend AND GDP – 2014 Update

June 19, 2014 – ALERT 19/14

Management Digest

In past ALERTs we have discussed various studies that conclude that adspend is a driver of economic growth. There was a further study by Deloitte published late last year that assessed the economic impact of advertising in the Irish economy. It calculated that €1 in adspend generated €5.7 for the Irish economy. One of the objectives of the study was to provide evidence to Government that it should encourage advertising instead of enacting restrictions. There was good reason – In 2013 adspend as a % of GDP was 0.41% which is exactly the same as in 1980 and down from 0.61% in 2007. It is predicted to be much the same in 2016 at 0.43%.

ZenithOptimedia publish adspend data that mainly focus on adspend by country and media. Included in the publication is data on adspend as a % of GDP. The latest release of data published earlier this week reveals that a previously deteriorating situation has changed to stable. It has data since 1980 and makes predictions up to 2016.

We are of the view that adspend as % of GDP is a better measure of the health of the advertising industry than raw adspend data, which does not take into account inflation.

Adspend as a % of GDP has deteriorated substantially in some countries. For the period 2000 to 2016 the reduction is 61% by Philippines, 38% by Australia, 35% by USA, 30% by Taiwan, 28% by both New Zealand and Singapore, 25% by Malaysia and 23% by Vietnam Other countries such as Canada, Hong Kong, India, Japan, and Thailand are relatively flat over the period.

On the positive side Indonesia enjoys growth of an amazing 208%.

There is concern – adspend grows the economy. If undue restrictions are imposed then inevitably economic growth will be undermined. The GFC has been the main reason for the downturn but the persistent attacks by the health lobby have probably dented consumer faith in advertising. It is noteworthy that the countries with higher reductions are those with the more vociferous health lobbies.

In this ALERT we review the situation in various APAC countries. We also update the performance table we published last year in ALERT 11/13.

Adspend Data

The USA has had a long history of adspend as a % of GDP exceeding 1%, which is generally considered to be the benchmark. In 1980 it was 1.24%, in 1990 1.40% and in 2000 1.52%. As a consequence of the GFC it reduced to 1.01% in 2010. It has maintained around 1% over the
last few years and it is predicted to continue until 2016.

Australia enjoyed a long period of adspend as a % of GDP being in excess of the benchmark 1%. In 1980 it was 1.16%, 1990 1.18% and 1.17% in 2000. However by 2010 it had slipped to 0.92% and last year it was 0.81%. It is predicted to slide even further to 0.77% in 2016.

New Zealand has had periods of exceeding 1% and generally has been near that mark. In 1980 it was 0.91%, 1990 was 1.30%, 2000 was 1.27% and in 2010 1.03%. In 2013 it was 0.98% and by 2016 is predicted to decline to 0.91%.

Thailand has been somewhat of a rock star. In 1980 it was only 0.30%. By 1990 it had doubled to 0.62% and in 2000 was 1.04%. It has retained around the benchmark 1% figure for this century with 1.06% in 2010, 0.99% last year and predicted to be 1.06% in 2016.

China is also a success story but still has a long way to go. In 1980 adspend barely registered with o.o1%, by 1990 it had grown tenfold to 0.11%, in 2000 it reached 0.4o% and in 2010 a modest increase to 0.44%. It maintained this level in 2013 with 0.45% and is predicted to be 0.47% by 2016.

The Gold Medal goes to Indonesia. In 1980 the adspend was 0.14% of GDP, by 1990 it was 0.22%, 2000 was 0.34%, 2010 was 0.61% and 2013 was 0.79%. In 2016 it is predicted to reach 1.06%

The following table is an update of the same table we included in ALERT 11/13.