Special Discussion: "Japan's Advertising Expenditures in 2021." The Era of DX and Advertising's Social Responsibility

※Related Article
"2021 Japan Advertising Expenditures" Analysis - Advertising Market Shows Significant Recovery. Internet Advertising Expenditures Surpass Total of Four Mass Media Channels for the First Time

 

Following a significant decline in 2020 due to the impact of the novel coronavirus disease (COVID-19), Japan's advertising market saw a major recovery in 2021.

Particularly noteworthy is that total internet advertising expenditure reached ¥2.7052 trillion, surpassing the combined advertising expenditure of the four major media outlets(*) for the first time since the survey began.

We invited guest speaker Tatsuya Kurosaka, who handles consulting on management strategy and business development for the telecommunications and broadcasting sectors and has served on government committees including the Ministry of Internal Affairs and Communications, to join Ritsuya Oku of Dentsu Media Innovation Lab. Together, they explored the future of advertising, including data utilization and media credibility.

<Table of Contents>
▼In an era of total digitalization, the "social responsibility of advertising" grows
▼E-commerce Platforms Holding User Data Become the New "Media"
▼Amidst an Overflow of Information, the Value of Mass Media's "Credibility" is Now Being Questioned
▼ Demand for video is actually increasing. What's needed is a redefinition of television's purpose

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In an era where everything is digitizing, the "social responsibility of advertising" is increasing

Oku: In Japan, internet advertising spending surpassed television media advertising spending in 2019. Then in 2021, internet advertising spending exceeded the combined total of the four major mass media advertising expenditures. How do you view the 2021 results, Mr. Kurosaka?

Kurosaka: Looking at total advertising spending, there were significant increases and decreases in 2019 and 2020 respectively. However, fundamentally, I see 2021 as an extension of the growth trend seen up until 2018. So, the advertising industry in Japan is experiencing steady upward growth. However, when it comes to whether Japan's GDP (Gross Domestic Product) or economic growth rate aligns neatly with this advertising expenditure growth, I personally think it doesn't grow as much as advertising expenditure does.

Oku: While GDP and advertising spending have historically shown strong correlation, it's true that internet advertising expenditure has recently surged, significantly driving overall advertising spending.

Furthermore, considering how the COVID-19 pandemic accelerated digital transformation (DX) in Japanese society and how the internet will increasingly permeate all commercial flows going forward, the "share of advertising expenditure relative to GDP" may well expand further.

Kurosaka: Advertising has become a significant pillar supporting the fundamental activity of our daily lives: information flow. However, amidst the vast flow of information, advertising risks inadvertently supporting fake news (misinformation and disinformation). This also signifies that the "social responsibility of advertising" is growing even more critical.

Oku: The issue of trust in information flow is a major topic underlying the growth in advertising spending. Your point that increased advertising spending also means increased responsibility for advertising is very important. Next, let's look at advertising spending by medium. Internet advertising spending has finally surpassed the combined total of the four traditional media. Is there anything notable in the breakdown of internet advertising spending?

Kurosaka: My attention is drawn to the fact that "performance-based advertising" continues to grow its share of internet advertising media costs, now reaching 85.2%. While the growth in numbers is positive, if this expansion includes issues like ad fraud or the "cheap but poor quality" aspects of internet advertising, we must closely monitor whether this significant growth is truly socially appropriate from the perspective of information distribution.

Oku: Programmatic advertising has a structure where results are visible through numbers, so there's a tendency to focus on improving those numbers.

Kurosaka: Next, I want to focus on "Digital Advertising Spending Originating from the Four Mass Media" (※). I felt the figures for TV media digital were still relatively small. There's a major trend where the internet is shifting from "text-based" to "video-based," but is there really room for significant growth there? The potential of TV media is something I'm curious about.

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Oku: "Digital advertising spending originating from the four major mass media" has shown high growth rates in recent years, but it hasn't yet offset the overall decline in spending across these four media. In that sense, I also feel we should look forward to future developments. On the other hand, traditional mass media advertising spending has recovered significantly since the sharp decline in 2020 due to the COVID shock. What are your thoughts on this?

Kurosaka: I'm also particularly concerned about television media advertising spending. While it appears to have grown significantly in 2021 compared to the pandemic year of 2020, if we consider 2020 an exception due to the COVID shock, drawing a line from 2019 to 2021 shows a trend that has been continuously declining.

Oku: While 2020 was impacted by COVID-19, creating a discontinuity in the data, excluding that year, we might see a gradual decline since 2016.

Kurosaka: Television still holds a strong position, accounting for 27.1% of Japan's total advertising expenditure. That's how the numbers appear, but it's not that simple. While this graph alone doesn't show it, comparing it with data from the National Association of Commercial Broadcasters reveals a widening gap in revenue between Tokyo-based key stations and local stations. This disparity existed before, but as long as television as a whole continued significant growth, that pain was absorbed. If we're now seeing signs of gradual growth saturation, I feel television is finally reaching a major turning point.

E-commerce platforms holding user data are becoming the new "media."

Oku: Today, I really wanted to hear from Mr. Kurosaka about data utilization in ad delivery. Due to the impact of COVID-19, people are spending more time online. The internet offers various convenient services and platforms; in exchange for free use, they collect diverse data from users, which is then leveraged for ad delivery and marketing.

Amidst this, "third-party cookies," which have supported mechanisms like programmatic advertising, are facing a crossroads from a personal data protection perspective (※). Could you share your thoughts on the relationship between advertising and user data?

※ Web Dentsu Inc. News "Cookie-Free" related articles

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Kurosaka: I thought the increasing regulation of third-party cookies might have a bigger impact on internet advertising spending, but the numbers show significant growth. This likely means internet advertising spending is growing so substantially that it's pushing back against the cookie issue.

That said, the trend toward data protection and consumer safeguards is irreversible. As platforms and ad delivery businesses increasingly prioritize data privacy, the advantage of "first-party data" will only strengthen. This refers to user data obtained directly from a company's own services.

Within internet advertising spending, I want to highlight "advertising spending on product-selling e-commerce platforms." Its growth is exceptionally strong, and its scale as advertising expenditure is becoming increasingly significant. I think this represents one budding trend in the integration of internet advertising into people's daily lives.

Oku: The term "merchandise-based e-commerce platform advertising expenditure" requires some explanation. In "Japan's Advertising Expenditure," e-commerce platforms selling goods like home appliances, sundries, books, clothing, and office supplies are termed "merchandise-based e-commerce platforms." "Merchandise-based e-commerce platform advertising expenditure" is defined as the advertising budget spent by businesses "operating stores" on these platforms within the platform itself.

Kurosaka: What I'm thinking about is how these e-commerce platforms, along with lifestyle-focused sites and apps, are becoming "media." E-commerce platforms are no longer just "shopping venues"; they've transformed into media where people enjoy themselves daily, gain various information, and spend valuable time. By "media," I don't necessarily mean a place where news flows; I'm referring to the media function where "simply being there provides enjoyment or new information."

Oku: I see. Over the past few years, I've noticed this trend of platform companies becoming media entities, not just e-commerce platforms. Possessing user "purchase" data is a significant strength as an advertising medium. Amazon certainly started as an e-commerce site, but it entered the "media side" with entertainment services like Amazon Prime Video. Now, it operates as a massive media entity leveraging its first-party data on "what users are buying" to provide various services.

Conversely, traditional mass media outlets—the four major media types—which were originally rooted in media, seem to be insufficiently capturing user behavior. This area likely holds greater potential.

Kurosaka: Regarding television media players entering the online media business, gaining user engagement, and utilizing user data as first-party entities—well, they're still "nowhere near there." However, this is partly unavoidable because the traditional television business model is inherently very robust. Even amidst the wave of digitalization, they've managed to generate solid revenue. Precisely because it's so robust, they can still get by, making swift business transformation difficult.

But when it comes to how they perceive their own business, the time will inevitably come when they must resolve to see themselves not as broadcasters, but as a "video business" centered on content. When trying to attract young talent capable of creating compelling video content as a video media company, the question is whether they can say something like, "(As a business, online video and TV) are about 90% the same."

In this era of overwhelming information, the value of mass media's "reliability" is being tested.

Oku: The shift from broadcast business to video business is crucial. Production and editing are already IP-based, essentially communication. The remaining question is how to deliver it to users. The transmission route—whether it's "broadcast" or "communication"—is changing right now. Following NHK Plus, all five major commercial networks are finally launching real-time streaming.

Kurosaka: Since we're using telecommunications—an infrastructure that's inherently less stable than broadcasting—to deliver content, we absolutely need to discuss "reliability." The quality of traditional TV and radio broadcasts was guaranteed because they were defined based on the "broadcasting" infrastructure, including its physical characteristics. Naturally, when the transmission method changes, different requirements become necessary.

For instance, if we use telecommunications—specifically the open internet—to deliver TV programs, viewers use a variety of providers and carriers. However, internet protocol technology is fundamentally "best effort," meaning it can only guarantee "we can provide speeds and quality up to this level at best." Furthermore, telecommunications also incur costs. Building dedicated infrastructure just because the open internet is unstable isn't realistic. Options like cable television or utilizing existing infrastructure must be considered.

In that regard, broadcast waves can deliver services with a certain degree of uniformity. They also represent highly reliable infrastructure, like how radio can still be received and listened to during disasters. The physical transmission efficiency of broadcast technology cannot be ignored.

But does that mean we should just stick with "broadcasting"? Modern TV demands interactivity (two-way communication). Considering data transmission from homes to broadcasters—the "uplink"—inevitably requires combining it with "communication" networks. Given the complexity of such combinations, it becomes reasonable to argue for unifying everything under "communication" networks, even if this means accepting variations in stability and speed per line.

Oku: This isn't a debate with a simple conclusion; we must proceed by examining each aspect individually. Regarding reliability, this connects to the earlier discussion about the role of local stations. There's talk of NHK and commercial broadcasters collaborating to use broadband as an alternative for delivering TV programs to areas without radio wave coverage.

Kurosaka: Overall, I think it's about preserving as many "options" as possible, encompassing both broadcasting and communications. Each option should be properly evaluated, and individual operators should make their own decisions. It would also be ideal if users could make informed choices about where they want to live based on the available information infrastructure.

Oku: You mentioned "reliability in transmission" earlier, but "reliability as content" is another crucial theme. While it's being discussed in the " Study Group on the Future of Broadcasting in the Digital Age," how to address biased information online, exemplified by fake news, remains a challenging issue with no clear resolution in sight.

Kurosaka: Exactly. Trying to regulate this easily inevitably leads to restrictions on expression. Even within the fake news problem, there's a significant difference between misinformation and disinformation. These two must be strictly distinguished based on the presence or absence of malicious intent. Furthermore, to take it to an extreme, if it doesn't clearly infringe on someone's rights, the "right to lie" isn't entirely non-existent.

The biggest problem is that we, as information recipients, are extremely vulnerable. We're like infants, lacking the very tools to judge whether information is true or false, beneficial or harmful to us.

This leads to two approaches. One is urging everyone to "improve your literacy," but this is difficult. If someone votes based on misinformation and makes a strange choice, is it solely their fault for believing the misinformation? Not necessarily. Yet, providing incentives for people to study and improve their literacy seems unrealistic.

That leaves the other approach: having the information providers themselves supply the "clues" and "evaluation tools" that recipients need to make judgments. For example, right now, there's a huge amount of uncertain information and rumors about Russia and Ukraine circulating online, isn't there? In response to this, news organizations could add something like meta-information to the content, effectively "visualizing its reliability." By establishing rules around this, we could gradually foster a culture online where people understand that "irresponsibly spreading information is unacceptable."

Oku: So it's about increasing the means to judge whether information is reliable. And we also need to verify "what motives the sender has for disseminating it," right? There are also many cases where it's difficult to label something as true or false – what's truth for one person might be fake news for another. When it comes to how the industry will tackle solving these issues, I think there are areas where progress is quite difficult.

Kurosaka: The reliability of information is indeed no simple matter. In the pre-internet era, mass media largely shouldered this responsibility. But now, information flow is rapidly shifting to the internet. How do we embed that traditional "trust" into this internet infrastructure? I believe it requires combining every possible approach and tackling it with an all-out effort.

The demand for video content is actually increasing. What's needed is a redefinition of television's purpose.

Oku: Let me return to television media one last time. I believe television, as an information industry, must focus more on younger audiences to secure its future prospects. Mr. Kurosaka, how do you view what's commonly called the "shift away from television," or rather, the "shift away from television devices"?

Kurosaka: First, there's the argument that since younger generations don't own TV sets, we should make content accessible on smartphones. I think there's some validity to that. However, I believe the younger generation isn't "turning away from TV" per se; rather, TV's role has simply changed. Why? Because video content is overwhelmingly popular online. Young people aren't watching less video; their video-watching habits are actually increasing.

Oku: It's fair to say video is central to the internet today. Internet advertising spending shows tremendous growth in video ads, finally surpassing 500 billion yen in 2021. While the pandemic's stay-at-home demand certainly influenced this, the habit of "watching videos online" seems to be expanding and taking root across all generations year by year.

Kurosaka: I'm in my late 40s, part of the TV-watching generation. Back when I was young, I think everyone sought interesting information or breaking news from TV. Just lying on the sofa watching TV and laughing was the best. But for today's young people, TV isn't that anymore. I wonder if TV has now become like newspapers were for our generation. In other words, what TV is now being asked for is precisely the "reliability" we've been discussing today.

Oku: When discussing "digital advertising spending originating from the four major mass media," reliability is a major keyword. For example, even when companies place ads online, the four major mass media have built up trust over many years. Including newspapers, magazines, and radio, I think that's the strength of these media as digital advertising platforms.

Kurosaka: This might actually be something the mass media folks would react to with, "Huh? Really?" (laughs). But I genuinely believe television professionals need to seriously confront this. The kind of content we sought – "interesting stuff," "content we felt glad we watched" – is changing for younger generations. It's not that television is being rejected outright; there might be a disconnect where they're saying, "This isn't it; this isn't what we want to see."

If that's the case, TV stations need to redefine what's expected of them. Even long-established companies are now told it's crucial to redefine their reason for being, their purpose. I think it's equally important for TV and mass media to redefine what's currently expected of them.

Oku: Given Japan's current demographic, older viewers make up a significant portion, and they watch a lot of television. That core fanbase is what supports the 27.1% figure we mentioned earlier. But looking ahead to when younger generations become the center of Japanese society, it's clear that mass media will face challenges unless they start thinking now about how to respond to younger audiences over the medium to long term. Today, Mr. Kurosaka's discussion has clarified several key challenges. Thank you very much.

※Mass Media Four Media =
Newspapers, magazines, radio, and television media (terrestrial TV + satellite media-related). Data prior to 2011 estimates the four major media as newspapers, magazines, radio, and terrestrial TV.

※Digital advertising expenditure originating from the four major media outlets =
Refers to advertising expenditures within internet advertising costs that are primarily provided by operators of the four major media outlets (newspapers, magazines, radio, and television media) through their internet media services. This is not included in "advertising expenditures for the four major media outlets."
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