Hong Kong Internet advertising: What's dominating spend?

The revenue of Hong Kong entertainment and media (E&M) fell significantly last year due to the pandemic, according to Global Entertainment and Media Outlook 2021-2025: Hong Kong summary conducted by PwC.

Hong Kong's E&M revenue fell 11.1% year-on-year in 2020 from US$8.81billion to US$7.83billion due to COVID-19 disruption, which deeply affected the media sector and closed down entire modes of entertainment. Globally, E&M revenue fell only 3.8% year-on-year, while APAC, excluding China, fell on 1.38% year-on-year in 2020. China performed best as it only fell 0.02% year-on-year.

However, on the flip side, the sharp decrease in Hong Kong means that Hong Kong's E&M revenue will see a year-on-year rise of 7.65% from 2020 (US$7.8 billion) to US$8.4billion in 2021 when the pandemic effect subsides. Over the next five years, total E&M growth in Hong Kong is projected at a compound annual growth rate (CAGR) of 4.4% to reach US$10billion in 2025.

The entire advertising industry was significantly impacted in 2020. The report said that internet advertising was by far the least impacted advertising segment, growing by 9.0% to reach a global value of US$336.2 billion. The internet advertising market in Hong Kong has grown rapidly in recent years and the growth was still healthy in 2019. It increased by 12.5% year-on-year before slowing slightly to 9.7% in 2020 as a result of the disruption caused by the COVID-19 pandemic.

The total revenue from internet advertising in Hong Kong was US$765 million in 2020, and is predicted to rise to US$1.1billion by 2025, at a 6.9% CAGR. In 2016, the total revenue stood at US$381 million. In common with other markets across the world, Hong Kong’s internet advertising market has been shifting towards mobile, which will drive growth over the forecast period at 10.8% CAGR. Wired revenue, in comparison, will see a slower increase at a 3.1% CAGR.

In 2020, mobile ad revenue made up 45.5% of total revenue and is predicted to account for 54.6% by 2025. All sub-segments of mobile ad revenue will grow over the forecast period, with video display being the fastest-growing sub-segment at a 20.4% CAGR. This reflects a shift that is happening across many global markets, where advertisers are moving away from traditional search and display towards video. Video is also the only sub-segment of wired revenue to see significant growth, increasing at a 5.6% CAGR over the forecast period.

When it comes to OTT videos, the increase in growth was mainly due to subscription video on demand (SVOD), which was up nearly 30%, a growth level not seen since 2018. SVOD is now worth US$49.2 billion, or around 84% of all OTT revenue. Transactional video on demand (TVOD) also saw accelerated growth, with year-on-year growth expanding from 8.2% in 2019 to 10.3% in 2020.

While Hong Kong is a relatively saturated market, OTT revenue is still growing strongly, expected to increase at a 10.4% CAGR from US$263.7million in 2020 to US$432.2million in 2025. SVOD revenue will increase at a 10.8% CAGR from US$240.9million in 2020 to US$401.7million in 2025. In line with the rest of the world, SVOD will make up the majority of total OTT revenue with a 93% share by 2025.

As for video games and eSports, Hong Kong's video games market revenue reached US$991 million in 2020, and is set to cross the US$1.0 billion mark in 2021, with revenue reaching US$1.2 billion by 2025 at a 4.3% CAGR. This steady growth reflects a mature market with high rates of smartphone penetration now negotiating a shift to digital revenue.

The report added that the profile of Hong Kong’s market differs from that of mainland China. Without the same restrictions on gaming content, console, PC and mobile gaming are all popular and expanding, the Hong Kong market's social or casual gaming will lead the growth.

Lastly, Hong Kong's box-office revenue dropped sharply last year due to the pandemic. In 2020, the pandemic ensured that Hong Kong’s box-office revenue fell by nearly three-quarters year on year to US$70 million. This is expected to recover at a 31.6% CAGR between 2020 and 2025, at which point it will be US$276 million. The broadening taste of local cinemagoers is another positive trend. Hong Kong audiences once rarely looked beyond Chinese and American films, but titles from Japan and South Korea are becoming increasingly popular in this market.

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