The Central and East European (CEE) advertising industry is growing at an astonishing pace, according to the CANnual Report 2018. While television is still the dominant media type in most countries of the region, digital, partly thanks to online videos, is catching up quickly. In Russia, the digital superpower of the region, advertisers spent €2.5bn last year on online advertising, which makes up 20% of the total ad spending of CEE.
weCAN, a network of independent advertising agencies in CEE, has just released the fourth edition of its annual publication called CANnual Report, which drills into how political, economic and social processes affect the local advertising industry and media landscape in 15 countries of the region. It includes figures and insights about Bosnia & Herzegovina, Bulgaria, the Czech Republic, Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Serbia, Slovakia, Slovenia and Ukraine.
Russia is the digital powerhouse of CEE
Russia is the biggest media market in emerging Europe. Advertisers spent €2bn more in 2017 than they did the previous year, and the value of the Central and Eastern European advertising market reached €13bn in 2017.
This increase is primarily generated by the Russian market that attained an explosive growth mainly thanks to the increase of digital advertising. Last year, this segment grew by €700mn in Russia, reaching €2.5bn, and making up 20% of the whole Central and Eastern European ad market. The example of the advertising industry demonstrates that the Russian digital market is improving at an astonishing pace.
Russian ad spending grew by 14% (in rubles) or €1.5bn, half of which went to digital. It was the highest growth rate that the local advertising market reached during the last three years, which elevated Russia from eighth to sixth position in the emerging Europe ranking.
In most countries, except for the Czech Republic, Hungary and Lithuania, television continued to be the media type that swallowed up most advertising spending last year. Moreover, the regional average of share by media types reveals that television continues to make up 45% of the CEE ad pie, while one-third of the ad spending goes to online.
“We perceive a more nuanced picture about the dominance of television if we juxtapose advertising spending and the growth rate of spending. While TV-advertising grows in this field by an average 8% within the region, the growth rate of video spending is 26%! This means that while video is still far behind television, it is catching up at an amazing pace,” weCAN said in the report.
There are huge differences between advertising markets in the region in terms of growth. Millions of Ukrainians watched the news during the EuroMaidan in 2013 and the Ukrainian revolution in 2014 through online video streaming channels. Video news site Hromadske.ua, for instance, became the largest channel in the history of YouTube in terms of total viewing time.
Thanks to the social-political context and the high media inflation that urges advertisers to find new tools beyond traditional media types, the online video segment in Ukraine is improving particularly fast, which is also reflected by the outstanding growth rate of advertising spending flowing to this field.
Ukraine obtained a higher position in the weCAN Ranking as it recorded the highest growth rate in CEE in 2017. Following a stagnation in 2015 (or a decrease when measured in euro), the local advertising industry grew by 27% in 2016 and by a staggering 40% (or 30% in euro) last year.
Media booming in Central Europe
To provide a more insightful picture of the advertising economy, the report’s editors created the so-called weCAN Ranking. It reveals the performance of 15 Central and Eastern European advertising markets compared to each other by showing the percentage of the ad spending per capita within a country’s nominal GDP per capita.
In the Czech Republic, 2017 was a staggeringly successful year of growth. The economic rise of the previous years reached its peak, and the advertising market grew by 9%. This helped the Czech Republic keep its leading role in the ranking.
Hungary has improved its position because the media market grew by 17% in 2017. In line with the trend of the last few years, one of the main engines of the advertising market was — once again — the state. The Prime Minister's Office was the largest spender, spending more than twice as much as Telekom (€31mn vs €15mn net).
This trend is reflected in the print segment as well. The state has been pouring advertising funds into provincial and tabloid media that have recently fallen into pro-government actors’ hands. Consequently, the Hungarian print sector grew by 18%. Hungary was the only market in the region where the share of this media type increased within the entire spending volume.
Out of the Visegrad Four, only Poland scored lower than last year. In parallel with the growth of the Polish economy, the legislative environment became increasingly unstable (especially regarding tax regulations) and the Polish government had replaced more and more private entities with state-owned ones that led to private entrepreneurs suspending their investments.
This distrustful attitude is reflected by investors’ behaviour on the Polish ad market: the growth during the first three quarters was 1%, and it actually reflected the economic upturn only in the last quarter that usually generates the highest consumption figures anyway. So both the local economy and the advertising industry developed dynamically in 2017, however, the economic growth outpaced that of the ad industry. Consequently, Poland achieved a lower position in the ranking.
In Croatia and Bosnia, advertising spending decreased in 2017 because of the Agrokor crisis. In 2017, Agrokor, the biggest Croatian company, was on the brink of collapse, not being able to pay its debts, though it has since struck a restructuring deal with creditors. Agrokor’s problems were a big shock for the Croatian media market, too, as Agrokor’s estimated budget decreased by 50%. Similarly to Croatia, the Agrokor crisis also led to a decrease in the Bosnian market, where the group is present with a retail company called Konzum. All other CEE markets recorded a growth in advertising spending in 2017.
The CANNual Report 2018 can be downloaded for free from www.cannualreport.eu.