Local ad spending set to grow 8.5% this year

Magna Malaysia chief investment officer Fan Chen Yip

PETALING JAYA: Malaysia’s advertising revenue is expected to grow at a slower rate of 8.5% this year compared with growth of 9.6% last year, according to IPG Mediabrands’ Magna Global Ad Forecast.

The 8.5% forecast for this year is valued at RM9bil against RM8.3bil last year. This projection would cause a downward shift in Malaysia’s position as the 38th largest advertising market worldwide in 2023, to the 40th spot in 2024.

Digital media owners are expected to continue their growth trajectory with a forecast revenue increase of 11.5% for 2024, amounting to RM6.7bil, Magna noted.

Search advertising and social media advertising are expected to grow by 9.3% and 15.1%, respectively. Conversely, traditional media owners are projected to experience marginal growth of 0.5% in advertising revenues.

Magna is one of the leading global media investment and intelligence companies. It is the global media investment and intelligence agency within the IPG Mediabrands network, which is the media and marketing solutions division of New York-listed Interpublic Group. Mediabrands Malaysia is part of the Interpublic Group.

Ad revenue per capita are forecast to rise to US$57 in 2024, positioning Malaysia as the 52nd highest market by ad revenue per capita.

Magna Malaysia chief investment officer Fan Chen Yip said while ad revenue for the country is projected to grow by an encouraging 8.5% this year, it must be noted that the increase in spending comes solely from digital advertising which includes non-Malaysian advertisers targeting Malaysians online.

These include overseas real estate brokers, educational institutions, international conferences, and other relevant categories that do not necessarily spur the local economy.

“Local media owners have also been massively ramping up their digital assets and offerings to meet this need, and projections of digital forming 83% of total ad expenditure in five years should serve as further encouragement to continue these investments for more digital opportunities on the horizon.

“While global events have affected economies and brand spending around the world, there are positive factors pushing the needle for advertising sales globally, and we hope for a stronger second half to raise these projections higher, towards Malaysia’s 2023 ad revenue growth of 9.6%. Additionally, we hope to see a softening of the impacts of boycotts, leading to more normalisation.

“Malaysians are also keeping watch on the recent diesel subsidy rationalisation policy and how it may affect inflation and consumers’ purchasing power, perceived or otherwise. At this juncture, it is too early to tell how this may affect the economy, as the government looks to allay public fears of price gouging and abuse of fleet fuel cards,” he added.

Magna said the 2024 Olympics is also expected to boost advertising spending in free-to-air (FTA) TV, radio, and cinema.

In the first quarter 2024 (1Q24), ad spending in the country was reduced due to geopolitical concerns around the conflict in the Middle East, it said, noting, however, that growth is expected to pick up throughout the year as the trends of increasing Internet usage and influencer marketing offset some of the weakness.

Leading the industry categories in Malaysia, it said the government and public sector, personal care and household goods, and retail sectors contributed US$60mil, US$60mil, and US$50mil in revenue, respectively in 2023.

Procter & Gamble, the Malaysian Communications and Multimedia Commission (MCMC), and Astro Awani Network emerged as the top advertisers last year.

On the global front, Magna predicts media owners’ net advertising revenues would reach US$927bil this year, growing 10% over 2023.

A record number of cyclical events are taking place in 2024, including four major sports tournaments (Paris Olympics, UEFA Euro 2024, Copa America hosted by the United States, and the International Cricket Council T20 Cricket World Cup hosted by the United States and the West Indies), and general elections in five major markets (Mexico, India, the United States, France, and Britain).

Meanwhile, Vincent Letang, executive vice-president of global market research at Magna, said: “Based on Magna’s analysis of media companies’ finances, advertising revenues were much stronger than expected in the first quarter of 2024.

“Coupled with some improvement in the macro-economic outlook, this leads us to increase our full-year global advertising growth forecast from 7.2% in December 2023) to 10%.

“All categories of media owners are faring better than expected so far this year, including traditional media owners and, specifically, television and premium long-form video.

“The introduction and rapid development of ad-supported streaming in more markets by nearly all streaming players (now including Amazon’s Prime Video) is driving non-linear TV ad sales by 16% this year, and total TV ad sales by 4%. Non-linear forms of television are finally reaching scale in terms of viewing and advertising monetisation.”