Analysis of "2016 Japan Advertising Expenditures"—Five Consecutive Years of Growth Driven by Expanding Internet Advertising and Steady TV Media

 

The 2016 advertising market grew 101.9% year-on-year, marking five consecutive years of positive growth.

 

Japan's total advertising expenditure in 2016 reached ¥6.288 trillion, a 101.9% increase year-on-year, surpassing the previous year's results for the fifth consecutive year since 2012. Japan's advertising expenditure can be broadly categorized into three segments: advertising expenditure for the four mass media, internet advertising expenditure, and promotional media advertising expenditure. Their respective shares of total advertising expenditure are: four mass media at 45.5%, internet at 20.8%, and promotional media at 33.7%. In recent years, while the share of the four mass media and promotional media has gradually declined, the share of internet advertising, which has continued double-digit growth since 2014, has increased year by year. This trend is becoming increasingly clear as the driving force behind the positive growth of the advertising market.

 

 

Advertising expenditure for the four mass media outlets—newspapers, magazines, television, and radio—totaled ¥2.8596 trillion, down 0.4% year-on-year. Within this, television media advertising (up 0.7%) and radio advertising (up 2.5%) performed well, but print media—newspaper advertising (down 4.4%) and magazine advertising (down 8.9%)—fell short of the previous year's levels.

Internet advertising expenditure reached ¥1.31 trillion, up 113.0% year-on-year. This breaks down to ¥1.0378 trillion in media fees (up 112.9%) and ¥272.2 billion in production fees (up 113.4%). Within media fees, programmatic advertising expenditure surged significantly, reaching ¥738.3 billion (up 118.6%). Promotional media advertising expenditure totaled ¥2.1184 trillion (98.9% YoY). Areas like "Outdoor Advertising" and "Exhibitions/Video, etc." benefited from new commercial facility openings and renovations. Event-related advertising and promotional activities utilizing new technologies such as VR (Virtual Reality) also drew significant attention.

Fundamentally, advertising expenditure trends are strongly linked to economic conditions. Looking at 2016 as a whole, while concerns about downward pressure due to a strong yen, weak stock prices, and protectionist tendencies were seen in the first half, advertising expenditure expanded gradually in tandem with the economy. This expansion was driven by the effects of major events like the Rio 2016 Olympics and the Ise-Shima Summit, as well as the rise in stock prices toward the end of the year.

 

 

Latest Trends in the Internet Advertising Market

 

Twenty years ago, in 1996, internet advertising spending was a mere ¥1.6 billion. It grew rapidly, surpassing radio advertising spending in 2004 and newspaper advertising spending in 2009. By 2014, total internet advertising spending (combining media and production costs) exceeded ¥1 trillion, and in 2016, media costs alone surpassed ¥1 trillion.

The trend of the advertising market shifting to the internet continues, with programmatic advertising showing particularly strong growth. Against the backdrop of advancements in ad technology, expectations are rising for programmatic advertising that can effectively deliver ads by combining with multiple databases, leveraging data integration capabilities.

Demand for video advertising also continues to expand, with in-feed ads (ads displayed in the space between content) on social media emerging as a new growth area. By device, smartphone advertising remains robust, while traditional PC-based advertising is declining, making the mobile shift and programmatic shift even more pronounced.

Private Marketplaces (PMPs), which allow advertisers to restrict placement, are gaining widespread adoption in Japan due to their valued functionality. PMPs, which guarantee high-quality ad placements, can also contribute to higher advertising costs per unit, and are expected to further drive the expansion of internet advertising spending.

Future Trends Based on 2016 Developments

 

Here are several notable points regarding events and advertising spending in 2016.

・Digital First

In the US, the election campaign that brought President Trump to power reportedly led to an explosive increase in digital subscribers for The New York Times. Many major US media outlets have adopted "digital first" or "internet first" strategies, shifting their focus to digital. While they are still exploring advertising models centered on the internet, there is no turning back.

Japanese newspapers rely heavily on home delivery systems, so they don't experience the drastic decline in advertising revenue seen in the U.S. This creates a dilemma, making it difficult for them to transition fully to digital. However, new trends are emerging, such as internet TV and game manufacturers—industries that traditionally didn't use newspaper ads—launching campaigns.

Furthermore, while the advertising market volume is still small, unlimited e-magazine subscription services are steadily gaining traction, and more magazines are making the full transition to digital editions. The digital adaptation of so-called traditional media, including television, is drawing attention.

・The Battle for Smartphone Screen Space

In internet advertising, the shift from PCs to mobile is becoming even more pronounced. According to a 2014 Ministry of Internal Affairs and Communications survey, smartphone usage among those in their 20s reached nearly 95%, and the shift to smartphones is also significant among middle-aged and older demographics. Customizing ads for smartphones is essential, and the battle is now about how to dominate the small smartphone screen. As more people feel they "can't live without their smartphone" or "live with their smartphone," the competition for screen space, this territorial battle, will only intensify. As seen with the hit "Pokémon GO," I expect we'll see a rise in ads combining location data and AR (augmented reality) in the near future.

・Media Credibility

News questioning the reliability of so-called curation sites has emerged, putting media credibility under scrutiny. Since much online news originates from newspapers and broadcasters, attention is focusing on the trustworthiness of information disseminated by traditional media. Enhancing the reliability of the internet as a medium is a challenge that must be addressed by the entire media landscape, including traditional outlets.

 

 

While efficiency and optimization are strengths of internet advertising, these aspects are closer to sales promotion—how to sell products. However, advertising's fundamental function extends beyond mere promotion. It should encompass branding, recruitment, and even the power to influence society. As internet advertising grows more complex and diverse, we must fully grasp the benefits of accessing diverse information. We must ask anew, "What is advertising?" and reexamine advertising expenditures, including whether the current approach of aggregating data by media unit is appropriate. Japan began estimating advertising expenditures in 1947. For the past 70 years, advertising has been a mirror reflecting the times. How we reflect the changes in the era and society within advertising expenditure data—this is a challenge we ourselves must address.

Details on "2016 Japan Advertising Expenditures" are available here (Dentsu Inc. News Release).