Digital ad spend to make up 42% of HK advertiser budgets in 2021

In 2021, advertising sales in Hong Kong will increase by 15% to reach HKD 27.4bn (US$3.5bn). GDP in Hong Kong is expected to grow by 4.7% on a real GDP basis in 2021, following 2020’s 6.3% real GDP growth.  While many APAC markets are starting to struggle with new waves of COVID, Hong Kong has been successful at cutting new cases down below 10 per day, down from a peak of more than 100.

In addition, 20% of the population is vaccinated against COVID. While this might be low compared to many North American and European Markets, it is relatively high compared to surrounding APAC markets. As a result, brands feel comfortable engaging with media partners and deploying budgets, said MAGNA GLOBAL’s latest report.

Brand marketing in Hong Kong has changed largely because of the crisis, with higher demands on discounts and bonuses for linear media.

Furthermore, there are more ad-hoc planning and last-minute campaign changes in reaction to market changes. More efforts are also being spent on contingency plans. Finally, not surprisingly, there are stronger eCommerce and social commerce efforts from advertisers.

In this environment, linear advertising revenues will increase by 15.5% to HKD 15.8 trillion, representing 58% of total advertiser budgets. This is extremely impressive for linear media performance, but is primarily due to the weak growth comparison in 2020 (which saw a dip of 25.7% in linear advertising spending growth). As a result, despite the high linear growth rate, spending will only reach 86% of the prior 2019 total.

Television advertising spending will increase by 18.8%, nearly offsetting declines in 2020

Hong Kong’s television spending will reach 94% of the prior 2019 total. Meanwhile, radio will grow by 4% to reach HK$ 196 million, 92% of the prior 2019 total. OOH will also see a significant bounce back and will regain its 2019 spending level as mobility resumes. Cinema, however, will remain far below its prior total as new releases have not yet started again and consumers are not acclimated to attending the cinema.

Digital advertising spending will increase by 14% to reach 42% of total advertiser budgets.

This follows 2020’s resilient 8.8% growth rate, and is primarily driven by spending on mobile devices, which will increase by 19% to represent 73% of total digital advertising revenues. By format, search advertising (+14%), social media advertising (+24%) and video advertising formats (+15%) are leading growth. Digital will continue to gain share, growing by an average 11% CAGR through 2025, and will represent 57% of total budgets by 2025.

Taiwan forges on

Meanwhile, advertising sales in Taiwan will increase by 14.3% this year in 2021 to reach TW$ 95.7bn (US$3.3bn), following 2020’s extremely resilient 3.4% growth. The Taiwanese economy will grow by 4.8% this year in 2021 on a real GDP basis, following 3.1% real GDP growth in 2020. This is better than almost every market globally in terms of resilience through COVID, mostly because there have been almost zero cases throughout the entire crisis.

That being said, Taiwan has had its first real spike of COVID cases in recent weeks, with a spike up to 600 cases per day after seeing essentially zero throughout 2020 and the first half of 2021. Furthermore, because only 3% of the population is vaccinated, only behavioural changes will be able to keep COVID cases under control.

Taiwan has a good track record using masking policies and small limitations rather than mandatory lockdowns on restaurants or other places of entertainment, but brands have more uncertainty now around the state of COVID in Taiwan than at any time since the first few months of the crisis.

In this environment, linear advertising revenues will be flat (-0.2%) following a 12.7% decline in 2020, and will represent 30% of total budgets. Because they’re such a small portion of total budgets, this relatively weak performance (spending only being stable at 87% of 2019 spending totals) doesn’t hold back the entire market overall.

Television revenues are expected to increase by 1.2% and reach 93% of prior 2019 revenue totals (TW$ 20.3bn). Digital advertising formats, on the other hand, are expected to grow by 21.8% this year and represent 70% of total advertiser budgets.

APAC Growth driven by China

Most of the growth is going to be driven by mobile devices, which are seeing spending increase by +26% to represent 83% of total digital advertising revenues. By format, search advertising (+20%), video (+19%), and social media (+30%) are leading the way

Asia Pacific as a whole has been less affected than other regions by the COVID-19 pandemic and economic recession. Overall, APAC GDP will grow by 8.6% in 2021, powered by large markets such as China (+8.4%) and India (+12.5%), according to Magna Media brands report.

The report highlighted that Chinese media owners advertising revenues will grow by 16.1% in 2021, the strongest performance since 2011.

This will bring the total market size to CNY 671 billion (US$97 billion), the second largest market globally behind only the United States. This is extremely impressive considering that China was also one of the most resilient markets in 2020 during the COVID crisis, and one of the few to still grow advertising revenues (+2.6%).

China’s performance is ahead of the APAC average of +12.8% in 2021, and the global average of +13.5%. 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.

In total, China has had just 91,000 total cases, and has not suffered a significant outbreak since the initial wave of COVID cases in early 2020. This is different from almost every other global market, where there have been multiple waves (the worst almost always coming over the 2020 winter and into early 2021). While mobility stats and vaccination totals in China are limited by the data they disclose, life in many regions of the country are largely back to normal. As a result, consumers have continued to spend through the crisis, and brands have continued to support their businesses through advertising campaigns.

Ecommerce is also tightly integrated into Chinese society, and digital advertising spending already represents a huge portion of total budgets. In 2021, Chinese GDP will increase by +8.4% on a real basis, up from 2020’s +2.3% performance (which at the time represented the worst growth in decades).

Digital ad formats will see spending grow by 21% to reach CNY 512 billion ($74 billion). This represents a huge 76% of total advertising budgets.

China’s digital spend is the second highest globally behind only the UK (79% of budgets). Most of the growth is driven by advertising spending on mobile formats, which will increase by 25% to reach CNY 437 billion, and represent 85% of total digital ad spending.

Mobile devices are far more integrated into day-to-day life in China than they are in many Western markets, with everything from shopping to finances fully enabled on mobile devices. By format, Search remains, by far, the largest segment, and represents 58% of total digital budgets in China. Search advertising spending will increase by 23% in 2021, driven by both core search engines and Ecommerce platforms.  In China, the five digital media giants (Alibaba, Tencent, Baidu, Sina, and Sohu) together control more than 75% of total digital advertising revenues, digital growth trends are in line with their performance. For search advertising, in Q1 of 2021, Alibaba saw 40% y-o-y growth, and even Baidu (which shrank by 7% in 2020 for search advertising revenues) saw 26% y-o-y growth.

But this is still tremendous performance, and reflects a digital advertising landscape that is exploding due to the even stronger embrace of eCommerce by consumers following the COVID crisis. Beyond search advertising, digital growth will be led by social media (+25% to reach 19% of digital budgets), and video (+21% to reach 16% of total digital budgets).

Static banners (+1.5%) and other digital (+0%) will be stable following declines in 2020 as they continue to lose share and favour with brands.

Linear advertising formats will grow by +2.5% in 2021, following 2020’s -19.4% performance. This continues a trend seen in many mature global markets of linear media only regaining a little bit of the lost revenues from the COVID crisis, while digital powers ahead and continues to take share.  Within linear advertising spending, TV growth will be 83% of 2019 spending levels. The television market is very concentrated in China, and while that typically allows for some insulation through price controls, demand evaporated during COVID.

However, that cannot change the fact that many brands reoriented their brand first strategies around digital formats during COVID and there is likely no going back. Print formats will continue to decline (-4.2% in 2021) following 2020’s -26% performance. While this is the best print performance in years, it reflects a weak market that no longer represents hardly any share of advertiser budgets. Radio advertising will shrink by -2.4% this year following 2020’s -27% performance. Finally, cinema was devastated in 2020, falling by -84%.

While cinemas are starting to open back up, consumers are not returning in large numbers yet and spending will remain just a quarter of 2019 levels in 2021.

In 2022, the Chinese market will grow by +5.9% to reach CNY 710bn ($103bn), surpassing $100 billion for the first time, and representing only the second market – after the US – to pass the $100 billion mark.

 By 2025, digital advertising revenues will represent 85% of total brand budgets in China.

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