Advertising industry market size
Paper presented by Ronan Redmond at The National Advertising Conference in Abuja Powered By Advertising Regulatory Council of Nigeria (ARCON) on 30th November, 2022.
Content: Size of the market by revenue over the different revenue lines (conventional media, digital media, PR, advertising creative, ooh, experiential, trade marketing etc.). Compare the number with a few markets in Africa
Introduction
Good morning,
My name is Ronan Redmond and I welcome and appreciate this opportunity to address such an esteemed audience at the National Advertising Conference today. It is good to meet so many colleagues here in Abuja.
I wish to commend the Director General and the team at ARCON for taking the initiative in organising this conference and for especially giving us the opportunity to discuss bigger strategic issues for the Nigeria advertising sector at a very suitable location and far removed from the distractions of our working lives back in the office.
By way of brief introduction, my own background is fully immersed in working in Media and Advertising and always in the business of Commercial Media. After six years spent here in Nigeria, I am passionate about monetizing media here and in Africa!
Previously, I held commercial media roles across Europe including in: Ireland, UK and the Czech Republic. As well as working on behalf of Media Owners, I have also worked with Media Agencies and also directly with Advertisers. These roles always focused on maximizing advertising revenues. It is fair to say I am immersed in all sides of the advertising Industry.
I suppose I’m now Irish / Nigerian! I’m currently the Commercial Director with TVC Communications. Today I want to address you simply as someone with a passion for advertising and growing the sector and I want to share with you my colleagues some macro advertising thoughts
Specifically, I was asked to speak about: the size of the advertising market by revenue across the different media sectors.
I am happy to do that but really only as a starting point to my paper!
Instead, I want to address why the size of the advertising market is so important. Market size is a key component of any strategic business planning. Knowledge of the size of the market allows us to fully assess opportunities and accurately plan our approach when driving future growth.
When we take the time to assess the real size of the market then we will find answers that might reveal how we can achieve the level of market growth we require to sustain all of our businesses in the years ahead.
In most territories, the reason why the stakeholders want to know the size of their advertising market is because by having a comprehensive understanding of size, helps them to present a case for investment (usually by advertisers) and financial support and funding (usually by legislators)
Calculating market size can help convince those potential investors and financial supporters that the advertising industry is a sector in which they can put their trust and finances into.
I really want to address today ways I believe we can begin to go about growing the size of the total Nigeria advertising industry.
After all, it is in all of our interests no matter what part of the media & entertainment business (whether above the line and or below the line) we are engaged with that we are carrying out our work in a large and growing market.
It is also in the interests of any new Government administration that it gets shown by us the importance of the size of the advertising industry, as a contributor to Nigeria’s GDP and as an engine for growth in the wider economy.
We need to demonstrate to Government that advertising is a suitable sector which they must support, and in return a strong Nigeria advertising sector is another option as a means of diversification away from a dependency on oil revenues.
Introduction – Arresting Fact!
Let me begin by making a BOLD OBSERVATION based on my years working in Europe.
It is my firm opinion that those of us in leadership positions in the communications and advertising industry, that some of us can be described at times as being poor communicators.
While on the one hand we may be very proficient at producing and airing great adverts which help in the selling of our client’s products and services, but we can be then on the other hand poor communicators when it comes to making a convincing case which could articulate and sell the importance of our own industry to others.
We can be guilty of underselling the important contribution the Advertising Industry makes to a company’s bottom line or indeed the important contribution the advertising industry can make to growing the economy.
The reason for this poor communication is straightforward. We get consumed by the everyday issues involved in the running of our own companies. We become far too busy selling on behalf of our clients that we don’t have enough quality time remaining to look at the Macro picture and address how we might actually grow the size of our Advertising Industry
I believe this lack of a Macro view has much to do with the holding back of any potential increase in the size of the Nigeria advertising market.
Convergence and Consolidation
So now to the importance of advertising to the economy.
It is generally accepted that advertising’s contribution to growing “sales” and “profit” is well known and understood. All of the World’s leading brands have been built through consistent marketing and advertising, which has created demand and increased revenue for these businesses
But advertising also plays a very important role in market economies by facilitating communication between businesses and their customers. It provides consumers with information to support their purchasing decisions and strengthens incentives for businesses to enter markets, grow exports and to develop products through innovation and new product launches
Advertising also plays an important funding role in enabling media services. We the media owners rely on revenue we collect from advertising to keep our businesses going.
The broad role that advertising has in the economy means its economic impacts are far-reaching and not just focused on the advertising sector itself
In today’s Global World, the advertising industry is proving to be very dynamic and changing at real pace. Media has moved quickly from an era of traditional outlets such as: Television, Radio and Outdoor to a new media order which in developed markets is already dominated by a tight group of digital tech and traditional media companies
New buzz words are popping up in advertising discussions, words such as Convergence and Consolidation
Media Convergence refers to the merging of different types of mass media such as Traditional Media, Print Media, Broadcast Media, New Media and the Internet as well as portable and highly interactive technologies through digital media platforms.
This all results in the combination of the 3Cs, that is: Communication, Computing and Content as all three can now be integrated through technology.
The most relevant example of media convergence is a Smartphone that blends together various media functions which were once the preserve of traditional media on our phones
In response to this convergence, media companies are now pursuing a strategy of media consolidation,and this is the concentration of media ownership under the umbrella of a few large companies and or individuals.
This consolidation is driven by a need for scale in order to compete. In the case of traditional media companies, the need to compete with new big tech firms who have recently entered into the advertising space and very quickly these new tech firms have become dominant players. I believe, Nigeria has room for media consolidation as there are still too many media outlets underperforming and holding back the industry.
Media Convergence and Consolidation has given rise to a blurring of the lines between the different players who each in their own way chase advertising revenue as a single source or supplementary source of their company’s income inflows
It is now becoming more difficult today to accurately define what is actually an advertising company and or what actually is a media company.
I have heard it said that Media today can best be defined to include everything from MARVEL (which is the franchise owned by Disney) to META (the tech owners of Facebook) and then to also include everything that lies in between these two outliers!
This is a real blurring of the lines between media and entertainment practitioners operating in the advertising space. The blurring of these lines forces us to reconsider who and what to include when we try to gauge the size of the advertising market. Our calculations will now have to go well beyond only including traditional media players, we must also include new tech entrants or otherwise we are in danger of underselling ourselves when we try to make our case for more support to Government.
To put market size into context let’s first look at the Global advertising market. This will help us to better understand where Africa and more importantly Nigeria rank in terms of size and perhaps it will motivate us to set about growing the size of the Nigeria advertising market
The Global advertising spend this year is estimated to be$655Billion according to The World Advertising Research Centre (WARC).
Not surprisingly, the Global advertising outlook is gloomier for next year because economies are stalling as inflation rises sharply due to supply-side pressures, exacerbated by the war in Europe and a slowdown in Chinese manufacturing.
The top markets account for over 70% of the Global advertising spends. The USA accounts for 35%, China / Japan / South Korea 20%, Europe 15% next South America and Canada and so on.
Africa only accounts for up to $6Billion or 1% of Global Advertising Spend (WARC) and Sub – Sahara Africa (SSA)still only accounts for $3Billion or 0.47% of the total Global Advertising Investment (Source: Africa Index / Group M).
These very low Africa numbers in comparison have been attributed to the fact that Africa is made up of many different countries with many different cultures and languages, unstable rules and regulatory environments, and a historic lack of data to help understand the marketplace.
That might be plausible as an explanation, but I would contend that the same explanation applies elsewhere. Take in Europe for example, that continent is made up of different countries, cultures and modes of governments and yet the size of the advertising market is so much bigger in Europe when compared to Africa.
Why is there such disparity in size between Europe and Africa?
Could it be that the advertising practitioners in Europe are better at compiling the real size of the advertising industry there?
Could it be that when calculating size, they take into account the blurred lines between traditional media and new media?
Maybe the European practitioners are just more focused on demonstrating and making the case to their legislators on how their industry is an engine for growth to the European Union and in turn they elicit support and funding that helps their advertising industry grow
I wonder if it’s just coincidental that in Sub Saharan Africa, and from such a small share of the Global advertising spend (0.47%) that Sub Sahara Africa represents only 2% of the World’s gross domestic product. Are these two variables: advertising size and the size of the Gross Domestic Product actually linked?
To answer these questions there is clearly more which needs to be studied and researched about any possible link between the size of the advertising market and the contribution it can then make to the Gross Domestic Product (GDP)of the wider economy?
So back to Europe;
So how do we go about unlocking the true potential size of the advertising market in Nigeria?
One suggestion I would make is to look for some more insight from elsewhere and in this instance, I want to go back and look at the work already done in Europe to find this link between the size of the advertising market size and contribution to GDP.
A number of years ago in Europe, and at the behest of The World Federation of Advertisers (WFA), along with the support of a wide range of industry stakeholders, Deloitte who are the very respected international professional services network, were commissioned to quantify the economic impact of advertising, both across Europe as a block and in a selection of other developed markets
Deloitte delivered The Economic Contribution of Advertising in Europe Report. This report has one over-riding objective: to demonstrate what the contribution of advertising to the European and national economies is, as well as assessing its tangible benefits to EU citizens
This is the first-ever European Union wide report to isolate the economic and social contribution of advertising. This was no easy task, as there are a large number of factors which can influence GDP. However, Deloitte created an econometric model to isolate the benefits of advertising to the European economy, and to individual EU markets and countries such as Japan and Canada
The model was based on many years of WARC data from as many as 35 different and developed markets, and in summary the report found that advertising spend in the European Union has a seven-fold impact on the wider economy.
This was a very thorough and ground breaking piece of research and at the end of it the European advertising industry had access to a seismic body of work. The findings of this comprehensive Deloitte research left no reader in any doubt but that Advertising delivers ‘powerful economic benefits’ across the European Union
In particular, the Deloitte study identified three key areas where advertising provides direct or indirect benefits to European economies and citizens;
- Firstly, Economic benefits: the report finds that for every Euro spent on advertising is estimated to add an additional seven Euros to Gross Domestic Product. This means that the 92BillionEurosspent on advertising at the time in the European Union would have contributed a staggering 643Billion Euros to Gross Domestic Product there, representing 6% of the overall Gross Domestic Product in the European Union. The study found that advertising contributes to the wider economy through its ability to support competitiveness, providing consumers with information on products and services, and helps to increase their choice of goods and services.
This, in turn, drives innovation by incentivising businesses to create differentiated products and services, allowing them to out-compete their competitors not just in the EU but around the world
- Secondly, there are Employment benefits: the Deloitte report finds that advertising provides almost six million jobs in the EU, that is equivalent to 6% of all employment in the European Union. These jobs come in three areas: the first area is people employed directly in the production of advertising. Next, are those jobs created in media and online businesses that are funded by advertising, including journalists and content producers as well as people working in out-of-home or television? These roles have both greater job security and an average salary that is higher than the European norm. Then there are those jobs that are created in the wider economy as a consequence of advertising activity. These range from sales jobs to roles supporting the advertising business in industries such as hospitality.
- Thirdly, there are Social Benefits: The other area where the Deloitte report finds that advertising plays a role is that it provides personal and social benefits by funding or part funding media services. Advertising ensures that European citizens benefit from news, entertainment and communications tools at a reduced cost or even in some cases for free. The money spent on advertising at the time of the report directly funded content of all kinds. Without advertising, funding for all sorts of media would be reduced.
In summary, Deloitte’s The Economic Contribution of Advertising in Europe Report has proven to be a very persuasive report about the importance of the size of the advertising market in Europe.
So, what happened after this excellent report was published. How did the advertising stakeholders in Europe use the findings to their advantage?
Well straight away and now that they were in a position to quantify the contribution the size of the advertising industry makes to Gross Domestic Product (GDP) the European advertising stakeholders were in a stronger position to lobby legislators
There followed better and more informed communication and collaboration between the advertising industry stakeholders and legislators and this in turn has delivered massive growth in the size of the European advertising market. The European advertising industry has grown by a whopping 40% in size from the time the Deloitte report was delivered in 2017 to 146Billion Euro in 2021. And as the key Deloitte report finding shows, this huge increase in advertising spend then drives the economy, and contributes to EU GDP
In turn European Union funding initiatives are now in place to support European media and entertainment. One such funding initiative is called Creative Europe. This is a European Union programme for the cultural and creative sectors. It has a budget of € 2.44 billion and is now in its second phase. This initiative supports the European film and audiovisual industries in the: development, distribution and promotion of their work. It also contributes to boosting European creative talent via training programmes, as well as to film education, heritage and audience development.
The Multiplier Effect
For me the most interesting part of the Deloitte study is the concept of the “Multiplier Effect” which is a measure of the impact of ONE Euro of advertising spent as a contribution in real terms to the economy. In the case of Europe, the average multiplier was determined to be SEVEN and the effect of a multiplier of SEVEN clearly demonstrates, the real link, and the contribution of the advertising investment to the general economic performance across the European continent
A similar study in my own country Ireland titled “Advertising: An Engine for Economic Growth” tells a remarkable story, that for every ONE Euro spent on advertising in Ireland (population of 5Million) is estimated to generate 5.5 Euros to the Irish economy. In Ireland the Multiplier is 5.5!
The findings contained in these studies are clear… that advertising has a catalytic activity in… promoting innovation, competition and growth in the economy to the extent that policy makers should enable an environment where advertising’s ability to be a driver of the economy is maximized.
Policy makers must consider direct forms of support such as financial incentives to allow the advertising industry in those markets to grow faster and contribute more given advertisings enabling effect on the economy.
Nigeria
In Nigeria, we can learn from these studies to plot a path to grow the advertising market here and convince Government for more support
To me it is clear what we need to do: firstly, we must establish the real size of the Nigeria advertising market. In order to do this correctly we need to define what sectors are included in the computations. Advertising is so now much more than just 60 seconds spot adverts. Today clients invest as much budgets into branded content creation, sponsorships and real – life activations and we need to include these spends into our market size findings.
When we have established the real size of the advertising market then we need a reputable study by a Deloitte, PWC or one such other firm to establish the Multiplier effect of the Nigeria advertising industry on the GDP of the Nigeria economy.
We need to undertake research to find the Multiplier!
Back to the present. Unfortunately, there is limited available spend data for the true size of the Nigeria advertising sector. The information we do have available is the very commendable OMD Media Facts report which is published every year. This is really an excellent publication but even the authors will say it has limitations in its scope.
For instance, the handbook records spend for categories: TV, Radio, Outdoor and Press ONLY. The 2020 Media facts figure for the size of the Nigeria above the line advertising market is put at N107.2Billion or estimated $250 M dollars.
It is my belief that this figure is under reported. Not included in the 2020 figure is any estimate for the online category. Also, I don’t believe that below the line and Government spend categories are fully captured and represented.
Instead, it is my estimation, when these categories are included, that the real size of the Nigeria advertising market is closer to N500BILLION plus or an estimated $1Billion dollars. I am also confident that the great work ongoing around a new audience measurement survey and the planned roll out of DSO will further protect and grow this figure.
Even still we are left wondering, in today’s dynamic and fluid media and entertainment industry, whether my estimated figure of N500BILLION or ONE Billion dollars is the real actual size of the advertising market?
Again, I don’t think so because as I said earlier, we are now living in the age of a very dynamic media space, where the lines between the different sectors: Advertising, Film and Music is now very blurred. Everyone in each of these sectors is chasing advertising revenue!
Take for example the video streaming companies such as Netflix and Prime Video who are now heavily marketing their offerings in Nigeria. These companies and others are looking for new markets because of the slowdown in consumer uptake and poorer “average return per users” in their US and Europe businesses. The video streamers are now increasingly turning to an advertising funded model to support their future revenue growth. Now those of us already working in the traditional advertising media will be competing with Netflix and other streamers for advertising revenue!
In my current role, I engage daily with Independent Producers who come to me with series they have produced and already funded by advertisers. The producers are simply wishing to buy airtime on my channels to air these series.
Can we now make an argument that Nollywood, Film Production and video streaming is becoming co – dependent or even dependent on the advertising sector and that it then as a sector should also be included in any consideration for the size of the advertising market?
I believe that the Advertising industry and Nollywood will become bedfellows. Therefore, I believe that going forward and when making a case for the size of the Nigeria Advertising sector, that available data for the size of Nollywood /Film production sector can and should be included. Let’s consolidate if we want to make a case for government support. There has to be strength in numbers
What are the Nollywood numbers? Well, the US Department of Commerce, International Trade Administration in their guide to doing business in Nigeria estimate that Nollywood is worth $3.6Billion Dollars (2016) and possibly as high as $6B in 2021.
So here is where we reach the crux of my hypothesis, and where I set out two examples to you this morning that might focus our attention on the importance of the size of the market and then of finding Nigeria’s multiplier value?
Let me present two scenarios ASSUMING A Nigeria Multiplier of SEVEN in line with the Deloitte’s earlier European Average.
In Scenario One
If we assume Nigeria’s Advertising market size is my own estimated $1Billion dollars
When we then apply the multiplier value of SEVEN to the One Billion Dollars, this delivers a contribution of SEVEN BILLION DOLLARS to the economy or 1.6% of GDP to the wider Nigeria economy! World bank says Nigeria GDP is $441B in 2021
This now is a truly great story to share with policy makers
But it can get a lot better
In Scenario Two, if we assume advertising and Nollywood are now bedfellows and so we assume a combined market size of $4.6B, this number is again made up my own estimates for advertising and the US trade department figures for Nollywood.
Again, we assume the multiplier is SEVEN in line with before
Now this contributes a staggering $32.2BILLIONor 7.3% of GDP. Now we have an amazing story to share with policy makers
So, looking to the future in Nigeria, there is room for a robust media & entertainment industry, with Advertising and Nollywood cinema production together being the star attractions
The Nigeria advertising industry does not exist on its own but rather it is woven into and influences the entire economic eco system. This needs to be understood by all of the stakeholders, including: the media owners, the advertisers, and the legislators
We need to change perceptions here. We must paint a picture for the relevant stakeholders of a large Advertising and Creative sector which can in turn be the engine for economic growth in Nigeria
Perhaps following this ARCON conference, there will be wider collaboration between all of the stakeholders and across all of the advertising and marketing sectors to create a MULTIPLIER MOVEMENT.
I urge the industry and perhaps this forum to consider and commission a body of research to find the multiplier effect and help impress upon: Government, Legislators and Businesses the importance of the advertising sector as a contributor to GDP and an alternative to a dependence on oil.
When we find the multiplier, and can articulate advertisings contribution to GDP then the State must play its part with our sector. We badly require, a Sectoral Support Fund to be reinvested back into: new talent, training and technology, areas where the lack of funding is holding back the sector. The fund can come about in any number of ways including offering tax credits on advertising services and or tax credits on incremental year on year advertising and film spend.
In Conclusion, I remain very optimistic for the future of advertising in Africa. Just look at Nigeria today; indeed, Nigeria is projected by PWC to be the World’s fastest growing Media and Entertainment Market.
Nigeria can become an African hub for advertising companies. The State can be more attentive and receptive to our industry. Together we can learn from other markets such as: United Arab Emirates and Egypt who each invest back into the Media & Entertainment Industries in their own countries. There they have each established: Creative, Media and Production Free Zones, where advertising and media companies operating in these zones are exempt from all types of taxation such as Value Added Tax (VAT), Income Tax, Corporate Tax and Customs.
Finally, it must all start by getting an accurate figure for the size of the advertising market in Nigeria, next we need research to find the Multiplier Effect and finally we are then in a strong position to really demonstrate the positive impact of all of this on the wider Nigerian economy
Then I believe that the advertising sector can becomes a key central part of the Media & Entertainment Industry here, and across Africa!
Thank you
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