"2013 Japan Advertising Expenditure" Analysis

Dentsu Inc. has released its annual "2013 Advertising Expenditures in Japan," a report that draws industry attention. How much impact has "Abenomics" actually had? What changes are emerging across media and advertiser industries? What future outlook can be seen from the data? Toshiyuki Kitahara of DENTSU SOKEN INC. explains.

 

[1] Overview of Japan's Total Advertising Expenditures in 2013

　 Second Consecutive Year of Growth. On a Stable Growth Trajectory

Japan's total advertising expenditure for 2013 (January to December) was ¥5.9762 trillion, a 101.4% increase compared to the previous year.

After four consecutive years of year-on-year declines following the Lehman Shock (2008-2011), 2012 and 2013 saw two consecutive years of year-on-year increases, suggesting the industry has begun to enter a stable growth trajectory. Within individual sectors, advertising in promotional media such as TV spots, outdoor/transportation advertising, POP, and exhibition events performed relatively well. Additionally, satellite media-related advertising (BS, CS, CATV) and internet advertising continued to grow steadily, similar to last year.

The stable growth in total advertising expenditure is primarily attributed to the sustained economic recovery trend driven by the "Abenomics" effect and the surge in demand ahead of the consumption tax hike.

Total advertising expenditure has historically been highly correlated with GDP, often cited as an economic indicator (lagging indicator) that follows GDP by three to six months. While it will likely take some more time for the effects of Abenomics to permeate the entire economy, within this context, television spot advertising has been among the first to show a positive response.

Promotional media often feature ads directly linked to sales points, so companies are likely focusing their efforts there. POP advertising, for instance, is an inherently stable growth area. Its recovery from the period of self-restraint following the Great East Japan Earthquake may have also contributed to the overall uplift.

In conducting our advertising expenditure estimates, we rely on detailed questionnaire surveys alongside interviews with industry associations. What comes through loud and clear is the immense anticipation for a full-fledged economic recovery. We also hear from individual corporate executives expressing optimistic outlooks.

Looking ahead, key points to watch include the situation surrounding this spring's wage base increases and post-consumption tax hike consumption trends. However, with the positive factor of the 2020 Tokyo Olympics and Paralympics, the upward momentum in total advertising expenditure—which has exceeded the previous year's results for two consecutive years—is expected to continue in line with the solid economic recovery trend driven by the effects of Abenomics.

【２】Trends in the Four Mass Media

  Upward momentum continues from the latter half of the year. TV driven by spot advertising

The total advertising expenditure for the four major media outlets, accounting for approximately 47% of total advertising spending, reached ¥2.7825 trillion. This represents a 100.1% year-on-year increase, achieving growth for the second consecutive year following 2012. This result also signals an upward trend.

Breaking down 2013 into two halves: January-June saw a slight slowdown at 98.8% year-on-year due to a pullback from the previous year's post-disaster rebound. However, July-September recovered to 101.4% year-on-year, resulting in full-year growth exceeding 100%.

By industry, eight out of 21 sectors exceeded the previous year's figures: "Finance and Insurance" at 115.6%, "Food Services and Miscellaneous Services" at 110.3%, "Real Estate and Home Equipment" at 105.8%, "Household Goods" at 105.5%, and "Education, Medical Services, and Religion" at 103.1%.

Below, we discuss the estimated results for 2013 and key points for each of the four media types.

<TV Advertising Expenditures> Flexible Spot Ads Attract Demand

Television advertising expenditure, accounting for over 60% of total mass media advertising spending, reached ¥1.7913 trillion. This represents a 100.9% year-on-year increase, marking the second consecutive year of growth. As mentioned earlier, spot advertising continues to drive overall television advertising spending, a trend that persists into this year.

The growth in spot advertising can be attributed to increased demand from sponsors. Against a backdrop of economic recovery sentiment, new product launches and campaign rollouts intensified. This heightened demand focused on television advertising, a medium with strong influence for announcements, particularly spot advertising with its high flexibility.

Time advertising, while benefiting from major sports events like the "2013 World Baseball Classic" (March) and the "FIFA Confederations Cup" (June), failed to match the performance of the previous year's events such as the "2012 London Olympics Volleyball World Final Qualification Tournament." This likely reflects that some companies still harbored uncertainty about the future, given that time advertising contracts are typically signed on a half-year basis.

<Newspaper Advertising Expenditures> Falls Short of Previous Year's Level, but Placements Show an Increasing Trend

Newspaper advertising expenditure totaled ¥617 billion, representing 98.8% of the previous year's level. While somewhat sluggish until May, it showed steady growth from June onward. Ultimately, the decline in the first half of the year held back overall growth, preventing a year-on-year increase. However, the volume of advertisements placed increased, suggesting potential for future growth.

By industry, advertising placements increased significantly in "Automobiles and Related Products" (export-related sectors benefiting from a weaker yen) and "Finance and Insurance" (driven by strong performance of NISA-eligible products and direct-to-consumer insurance). "Cosmetics and Toiletries" also performed well, maintaining high placement volumes similar to the previous year.

Amidst declining circulation and the rise of online media, newspapers' unique strength—their high credibility—remains a major advantage. Sponsor companies that prioritize the trustworthiness of their brands and products continue to show strong advertising intent.

Meanwhile, newspaper companies are also focusing on various initiatives to stimulate sponsor advertising interest, such as increasing digital edition subscriptions and experimenting with new advertising methods like wrapping ads in print editions.

<Magazine Advertising Expenditures> Business Magazines Exceed 100% Year-on-Year

Magazine advertising spending totaled ¥249.9 billion, representing 98.0% of the previous year. While trends toward digitalization and the launch of major new magazines targeting women in their 40s were observed, simultaneous suspensions and closures meant overall spending did not increase year-on-year. Within this context, business magazines performed strongly, exceeding 100% of the previous year, likely riding the wave of the economic recovery trend.

By industry sector, "Fashion & Accessories" performed well at 101.3% year-on-year. "Real Estate & Home Furnishings," "Finance & Insurance," and "Transportation & Leisure" also exceeded 100% year-on-year.

The magazine industry remains dynamic. This year, major new launches and anniversary events for popular magazines are scheduled, raising expectations for new advertising market development. Furthermore, formats linking with online media are becoming increasingly prevalent.

<Radio Advertising Expenditures> Expectations for Growth in New Younger Listeners

Radio advertising expenditure reached ¥124.3 billion, representing 99.8% of the previous year's level and showing steady growth. A notable feature last year was the recovery trend observed more strongly in local areas than in the Tokyo metropolitan area.

By industry, "Real Estate & Home Furnishings" (116.9% YoY), "Automobiles & Related Products" (109.5% YoY), and "Food Services & Various Services" (105.9% YoY) performed particularly well. While this partly reflects pre-consumption tax hike demand, radio's media characteristics as an integral part of daily life were reevaluated. Consequently, sponsor companies actively provided programs and launched nationwide commercials.

One bright sign is the recovery in listening rates among listeners in their 40s and 50s, considered a key demographic. Furthermore, despite talk of young people turning away from radio, listening rates among those in their teens and 20s remained largely stable, showing resilience. This may partly reflect the gradual penetration of radiko.jp, which allows radio listening online.

Incidentally, radiko currently has 69 participating stations across 37 prefectures. Both download numbers and unique users continue to increase. By providing more listening opportunities for the younger generation who may not have radios at home, it holds the potential to attract new corporate sponsors.

[3] Trends in Internet Advertising Expenditures

　 Programmatic advertising shows strong growth. New market development also underway

Internet advertising expenditure, now accounting for approximately 15% of total advertising spending, is estimated at ¥938.1 billion for 2013. Driven by the diversification and evolution of devices, it grew by 108.1% year-on-year. This follows 2012's 107.7% year-on-year growth, indicating continued robust expansion.

Within this internet advertising spending, performance-based advertising, represented by search-linked ads, is a powerful driving force. The estimated value for 2013 was ¥412.2 billion, showing a high growth rate of 121.6% year-on-year. Since the 2012 year-on-year growth was 118.9%, this indicates even greater momentum last year.

By industry, programmatic advertising is expanding and becoming more prevalent not only in traditional core sectors like "Finance and Insurance" and e-commerce-driven industries, but also in sectors such as "Automobiles and Related Products," "Food," and "Beverages and Luxury Goods," where it is increasingly used for branding purposes.

The reasons for the growth in programmatic advertising spending include, first, its efficiency and flexibility for sponsors compared to traditional banner-based ad placements. Additionally, it is opening up new sponsor markets, such as small businesses that traditionally could not afford placements in mass media. For companies with their own e-commerce sites, it is highly valued as advertising that directly drives sales through customer acquisition.

In the programmatic advertising field, new advertising methods are continuously emerging and gaining attention, symbolized by the currently prominent DSP (Demand-Side Platform, a system that automatically maximizes advertisers' ad effectiveness). Meanwhile, in the traditional display advertising sector, market revitalization through rich media ads, such as video ads, is also anticipated to increase. Thus, the penetration of services combined with technological evolution is expected to continue underpinning the upward trend in ad spending.

Furthermore, looking at the broader landscape of internet advertising, understanding consumer behavior and psychology through big data has become a major challenge for companies. The trend of operating internet advertising in tandem with this analytical data is likely to strengthen. Amidst diversifying devices, it is also noteworthy that major media companies are beginning to manage cross-device campaigns, essentially attempting a "device-free" approach.

Release available here:
http://www.dentsu.co.jp/news/release/2014/pdf/2014014-0220.pdf

&nbsp;