Nielsen: Ad Spending Growth Slows, but Confidence Returns Among Advertisers

A new law requiring new parties to be 'factually verified' to be able to compete in the 2019 legislative election is drawing much criticism. (Antara Photo/Dedhez Anggara)

By : Tabita Diela | on 9:25 AM February 11, 2016
Category : Business, Analysis, Featured

Jakarta. Advertising spending in Indonesia grew at a slightly slower pace last year compared to 2014, with the e-commerce sector leading the growth on the back of the rapid rise of digital start-ups in the country, according to the global market researcher Nielsen.

According to a report from Nielsen’s Advertising Information Service released on Wednesday (10/02), ad spending in the archipelago nation grew 7.27 percent year-on-year to Rp 118 trillion ($8.77 billion) in 2015, up from Rp 110 trillion in the previous year.

The growth, however, was slower than a 8 percent growth in 2014, the report shows.

“Advertising spending growth grew negative in early 2015 , but there were signs of recovering ad spending activity in the third quarter of 2015 and it continued to grow into positive by the end of the year,” Hellen Katherina, Nielsen Indonesia media executive director, said in a statement.

She said the strong growth rate of ad spending in the fourth quarter indicated that market confidence has begun to come back among advertisers.

Nielsen’s report was based on on gross rate card – which doesn’t calculate discount, promo, bonus and other marketing gimmicks – from 15 national free-to-air television, 101 newspaper,s and 132 magazine and tabloids.

Most of the spending went to television (72 percent), and the remainder went to newspapers (26 percent) and magazines (3 percent).

Television raked in Rp 84.77 trillion in the period, which represents a 12 percent growth, while magazines and newspapers showed a 13.44 percent and 4 percent decline in ads respectively.

Indonesia’s economy accelerated in the fourth quarter of last year on the back of higher public spending, after it slowed in the previous quarters on slower domestic consumption.

The economy expanded 5.04 percent in the October-December period from the same months in 2014. It was higher than the 4.74 percent year-on-year growth recorded in the third quarter. Still, the fall in global commodity prices, including slower demand from major buyers like China for Indonesia’s key commodities, drove the archipelago nation to post a 4.79 percent full-year growth in 2015. It was the slowest pace since the global financial crisis in 2008.

When the economy slows, companies will typically ease their advertisement spending and vice versa.

Regional election year

According to Nielsen’s report,  government and political organizations still dominated ad spending by far last year.

At the end of 2015, Indonesia held  its first ever simultaneous regional elections, which propelled ad spending by political parties and their candidates.

The governments of East Kalimantan and Riau were recorded as the biggest ad spenders among other regional governments.

“Locality of newspaper is well-functioned for local government/ institution and political ads, particularly related with a regional election,” Nielsen said in the report.

It also said “more than half of local governments, known locally as Pemda, are article or advertorial news."

However, ads from online services showed  “a prominent growth,” Nielsen’s report said.

“Advertorial ads are proper form to give narration to promote the potential or new services provided by local governments,” it said.

With regards to government institutions, Nielsen’s report said ads from ministries grew 62 percent, with the Ministry of Tourism leading the growth, posting a 2,627 percent growth in ad spending to Rp 5.4 billion.

With regards to volume, the Manpower Ministry and the Ministry of Rural Developments were in the lead, with Rp 10.2 billion ad spending recorded from both ministries last year.

E-commerce, consumer

Despite government institutions leading with regards to volume, ad spending from the e-commerce sector led from the growth point of view.

Spending from such particular advertisers grew 44 percent to Rp 3.51 trillion last year.

Indonesian online marketplace Tokopedia saw its expenditure for advertising in television and print media skyrocket 1,611 percent to Rp 625.3 billion, followed by online flight and hotel booking service Traveloka, with ad spending in both media type growing 187 percent to Rp 697.3 billion.

Still, the biggest spenders in advertising by products were from the consumer goods sector, led by instant noodle brands Indomie and Mie Sedaap, which spent Rp 971.2 billion and Rp 733.7 billion respectively.

Show More

 
MORE NEWS