The road ahead for media owners will not be entirely smooth this year, but there are points of acceleration and momentum.

“The macro landscape remains bumpy and local consumption is not great,” says Vivek Couto, director of Media Partners Asia (MPA). “Elections and the Fifa World Cup will help buoy demand but macro softness is limiting growth prospects.

"That said, we expect more momentum in most emerging markets from Q2 onwards, especially in the second half of the year when underlying market demand will reveal itself in the absence of any major events. That will be crunch time.

“One concern is that spends from multinational advertisers have yet to accelerate in 2014,” Couto adds.

“There were some budget cuts in Southeast Asia and India in the second half of 2013, and we have yet to see a significant reacceleration in Q1 2014, although a few big advertisers have started to increase budgets in a couple of Southeast Asia markets.

In addition, demand is looking a lot better in mature-cycle markets such as Australia and Japan, while Korea – in the doldrums for 2012 and 2013 – is likely to rebound in 2014.”

According to MPA, net advertising revenue (measured after discounts) rose 5.7% in 2013, and is forecast to climb a further 7% this year.

Indonesia leads in terms of growth, although MPA has downgraded its forecast for 2014 from +19.5% to +15.4%. Indonesia is followed by China (+11.6%) and India (+10.1%), which is expected to pick up momentum in 2H 2014.

Mature markets Australia and Japan will also grow reasonably well from a high base, both increasing ad spend by 3.5%. Korea’s ad market is expected to see a 4.1% lift in 2014, after a marginally below flat performance last year.

Growing Pains For Emerging Markets

While the global economic outlook has improved, developed rather than emerging markets appear to have benefited the most.

Morgan Stanley’s economics team expects global real GDP to improve gradually to 3.4% growth in 2014 from 3.0% last year, led by an improving outlook for developed economies, while “emerging market economies are likely to struggle with their transitions to new growth models.”

Real economic growth in Asia ex-Japan came in at 6.1% in 2013, according to Morgan Stanley. That pace is expected to moderate to 6% in 2014, before reaccelerating to 6.4% in 2015.

In China, domestic demand will continue to face the heat, due to weaker productivity and high levels of debt. As a result, economic growth is expected to slow from 7.7% in 2013 to 7.4% this year.

Expectations for China’s ad market have been largely lifted by forecasts of 30%-plus growth for digital media (set to pass 25% market share this year), as well as an 11% lift for out-of-home (set for a 21% share).

TV should trend along mid-to-high single-digit increases, while print will stay flat or experience marginal growth at best.

In India, the economy experienced a prolonged period of stagflation for much of 2013. However, some economic indicators have improved in recent months, including declines in the current account deficit and moderation in the fiscal deficit, while the rupee has strengthened.

Clarity on the political landscape has also improved with renewed hopes that a BJP-led coalition may come to power in 2H 2014, displacing a desultory Congress. This has boosted secondary capital markets as well as foreign investment flows, with Goldman Sachs recently upgrading its India market outlook.

The consensus among media buyers is that India’s ad market will expand at a low double-digit rate (10-12%) in 2014, with stronger growth expected in 2015.

In TV, the key challenge will be increasing yields as volumes drop to implement a government-prescribed ad cap. Frequent channel blackouts, as operators execute government plans to roll out digital cable, have led to ad hoc reporting of TV ratings.

Print will benefit from political as well as government advertising, continuing to make up more than 40% of India’s ad spend.

Radio will expand with new licenses and the launch of new stations, strengthening radio’s reach in rural markets. This will attract advertisers in the FMCG, consumer durables and auto categories.

SOUTHEAST ASIA: gROWTH, BUT MOUNTING PRESSURE

Southeast Asia’s key ad markets continue to grow rapidly from a low base, but are experiencing mounting pressures.

In Indonesia, economic and advertising activity moderated in 2H 2013.

The economy will remain resilient in 2014 while facing headwinds, although the 2014 Fifa World Cup tournament and national elections will help boost advertising growth.

The big pressures this year are coming from rising interest rates, fuel price increases and softer commodity prices. The economy should grow by 5.7% in real terms during 2014, and by 6.0% in 2015, according to consensus economist estimates.

Multinational advertisers in Indonesia started to control and in some cases cut ad budgets during 2H 2013. This trend is expected to continue to some degree in 2014, although some MNCs are holding back until after elections in May-June.

Local advertisers meanwhile are stepping up aggressively, with regional brands in categories such as FMCG starting to go national with their campaigns. 

Among MNCs, Unilever will maintain its spend levels this year. In March, the company implemented its first price increase in the personal care segment, and is likely to maintain advertising and promotion spends at 13% of total sales in 2014.

Most of this budget has been going towards TV, which has close to 70% of the Indonesia ad pie, but spend has also been rising on digital, which is on course for a 4.5% share of Indonesia’s ad market by end-2014, on the back of 30-40% annual growth rates.

The ad market in the Philippines grew 12.6% in 2013, boosted by the economy and elections but somewhat offset by natural disasters.

Ad demand normally plummets in post-election years, but local buyers suggest demand remains relatively robust, with forecasts calling for 6.4% growth this year.

The key issue is with TV, which has ~70% of ad budgets. The sector faces the onset of digital terrestrial TV, which threatens to fragment audiences, as well as consolidation, with a heavily bleeding third player (TV5, owned by PLDT) looking to stem losses.

Political risks in Thailand have increased and economic growth has largely halted. MPA’s base case is that the political impasse will be resolved in 2014, most likely near mid-year. Net ad spend growth will soften from 10.2% in 2013 to 3.5% in 2014.

Longer-term, Thailand’s ad market has significant depth and potential, supported by a stable economy and expanding inventory, particularly with this year’s launch of 24 digital terrestrial TV channels.

Digital advertising is also expected to strengthen, following a similar trend to Indonesia.

The economic outlook in Vietnam has stabilized but growth will remain below potential, with problems facing the banking sector, state-owned enterprises and the real estate market.

That said, Vietnam’s ad market should still grow by 9.1% in 2014, versus 9.8% last year. Going forward, advertisers are expected to increase focus on the rural market, where two-thirds of the population lives.

Malaysia’s economy will also fare better this year. Exclusive Fifa World Cup coverage is expected to boost ad revenues for leading pay-TV operator, Astro.

So far, both free TV and newspapers have enjoyed healthy growth through Q1, but magazines and radio have found the environment more challenging.