Among the reasons that Publicis and Omnicom – two of the biggest advertising companies in the world – gave for their proposed $35bn mega merger this week was the ability to better capture profits from digital media and emerging markets.
Much has already been written about digital media being the future of advertising. But the case for emerging markets is no less compelling. S&P Capital IQ reckons in a recent report that the top nine major emerging markets – China, Brazil, Russia, India, Indonesia, Turkey, Poland, Mexico and South Africa – which collectively generated $91bn in advertising revenue last year, could add at least $200bn to global advertising spending over the next 10-15 years.
From the report:
A look at the top 10 advertising markets by country illustrates the growing importance of the emerging markets. While the United States is clearly the market leader, China and Brazil are already among the top 6 advertisers, with Russia projected to join them in the top 10 by 2015.
In a separate report, media services group ZenithOptimedia predicts that emerging markets will account for about 63 per cent of global ad growth between 2012 and 2015 and will increase their share of global ad spending from 34 per cent to 38 per cent.
Among the four major global ad agencies, WPP – the industry leader – has been the most aggressive in ramping up its exposure to emerging markets.
Last year, WPP made £3.1bn ($4.7bn) – or 30 per cent of its revenues – from so-called “New Markets”. The category – which includes Asia Pacific, Latin America, Africa & Middle East, and Central & Eastern Europe – saw revenues grow by 8.3 per cent on a like-for-like basis last year. This compares to the 0.1 per cent revenue decline in North America and the anemic 0.1 per cent growth seen in Western Europe. WPP said it aimed to lift New Markets’ share of group revenue to 35 to 40 per cent.
Here are two good charts comparing the EM exposure of the “Big Four” ad agencies.
WPP’s early focus and continued investment in EMs have given it the lion’s share of the core Bric markets (see chart below).
This from Publicis Omnicom Group’s analyst presentation on Monday:
How Publicis Omnicom will use its newfound scale and firepower remains to be seen. Some of WPP’s brands, such as GroupM, JWT and Ogilvy, are very established in Asia. So loosening WPP’s grip on the Bric market might be easier said than done.
This plus the fact that many emerging markets are now facing a period of much more subdued growth, one does wonder if the Publicis Omnicom merger is not coming three years too late?
Publicis and Omnicom reshape ad world, FT
‘Stars align’ to allow for Omnicom-Publicis merger, FT
Contrasting admen team up to tackle digital challenge, FT
PR, an industry with a PR problem, FT