Sunday, July 12, 2020

Ad Budgets Shrinking Amid Growing Media Consumption in Hong Kong

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Ad budgets to be split between online and offline ads in 60/40 in 2020 against 50/50 last year

 

By Monika Ghosh

 

On March 23, Nielsen Media released its latest ‘Advertising Projections Survey’, in collaboration with Hong Kong Advertisers Association (HK2A). According to the report, the advertising budgets of companies are expected to shrink by 7.1% in 2020, after a 1.4% increase in 2019. With foot traffic in retail areas down, and consumer spending dipping lower, the report advised that marketers should make use of new technologies to make their online advertising stand out.

 

Online advertising budgets for companies are expected to increase by a marginal 0.8%, while offline advertising budgets will be cut by 11%. Furthermore, local ad budgets are expected to shift towards online advertising with a split of 60/40 against offline advertising, compared to a 50/50 split last year. The actual decline may be much steeper, since the study did not include the impact of the fast escalating outbreak of novel coronavirus COVID-19.

 

The survey further indicated that the online advertising budget for most online channels will increase in 2020, with video ads receiving the largest share of 11.14%, closely followed by paid social media ads which will receive 11.3%. TV ads, closely followed by print ads, will continue to receive the largest share of offline advertising budgets.

 

Ad Budget Breakdown min

 

The decrease in ad budgets will likely lead to increased pressure on advertisers to pursue higher Return on Investment (ROI) on marketing expenditure. According to the survey, ROI calculation is the major challenge encountered by most advertisers. At present, they are inclined to spend on research which could help them optimize their online advertising, as opposed to dedicating budget to offline marketing.

 

As indicated by a worsening Consumer Confidence Index (CCI), Hong Kong consumers are becoming increasingly conservative with their spending. The CCI for the last quarter of 2019 was 83, while it was 99 at the end of 2018.

 

Most advertisers believed that Hong Kong’s economy would continue to remain weak in 2020, and would take at least 6-12 months to rebound from earlier economic challenges, but with COVID-19 spreading unchecked, the rebound is likely to take longer.

 

“Under current economic uncertainties, marketers should always be ready to adopt and integrate new technology for successful marketing strategies. We need to keep abreast of different media platforms to optimize various opportunities,” HK2A Chairman David Yeung said in the report.

 

“The tough economic situation can be a good differentiator for those who know how to adopt technologies to stand out from competitors. Whether they can turn potential crises into opportunities with the smart and cautious allocation of advertising budget, with the aid of state-of-the-art technology, is critical to business survival in the coming year,” said Neilsen Hong Kong Vice President of Media Clare Lui.

 

The challengers that marketers are facing may be bolstered by some better news–according to another Nielsen report entitled ‘The Impact of COVID-19 on Media Consumption across North Asia’ (March 25, 2020), social distancing and quarantine measures could increase media consumption by 60%. This could be a beneficial climate for online advertising.

 

In February, 2020, Internet usage grew to a record high of 99%, and penetration of online shopping increased by 8% (Nielsen Media Index).

 

HK TV Genre Increases 3

 

“Expanded TV viewing became the norm at this time as the average consumer was looking to be caught up on the often tense and evolving situation. Businesses that pulled back significantly in their ad spends in the current crises should look to re-engage quickly with the consumer as normalcy resumes,” said Lui.

 

Yeung echoed this statement, adding, “The key to survival is to adapt to the changing business environment very quickly and to ensure threats are turned into opportunities by tapping into technology and data.”

 

One of the report’s major takeaways is that advertisers are losing out on a lucrative opportunity by putting most of their ad campaigns on hold despite the visible increase in media consumption.

 

“The knee-jerk reaction from advertisers at a time of crisis is typically to pull back or defer spends; however, COVID-19 is characterized by a situation where increased time at home means expanded media time and heightened consumer attention,” said Nielsen Managing Director of North Asia Ranjeet Laungani. “For brands looking to authentically connect with the consumer during this difficult time and offer a solution, this is a time to lean in.”

 

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