Russia Is a Drag on Global Ad Growth, Experts Say

At least one forecaster expects an ad drop next year in the country hit by conflict, sanctions and low oil prices

Russia has become a drag on global advertising spending growth amid a slowdown due to its conflict with Ukraine and resulting sanctions and related effects, industry experts said at the UBS Global Media and Communications Conference in New York on Monday.

Vincent Letang, executive vp and director of global forecasting for Magna Global, said that Russian ad spending would continue to "struggle" in 2015 after weaker growth this year.

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He added that the country was among "the big disappointments" that are affecting actual ad growth in 2014 compared to his forecasts, with ad revenue momentum "slowing down significantly" heading into the new year, he said.

Out of the BRIC countries — Brazil, Russia, India and China — Russia now lags behind the rest "significantly" and is growing more in line with mature markets, said Letang. He argued that Russia, for now, can no longer be considered part of the fast growth seen in the rest of the BRIC region.

ZenithOptimedia CEO Steve King echoed that Russia, along with Ukraine, has been affected. "Conflict, sanctions and low oil prices have brought growth in Russia and Ukraine to a sharp halt," he told the UBS conference. He predicted a 1.8 percent ad gain in Russia this year, with Ukraine down more than 48 percent.

"Russia is the single biggest negative revision due to the combination of declining energy prices and the partial withdrawal of Western investors amid geopolitical tensions," Magna Global said. For 2015, the firm lowered its Russian ad growth forecast from 7 percent to 0.8 percent.

Central and Eastern European ad growth will hit 2.2 percent this year, "a significant deceleration" from last year's 7.2 percent growth rate, and lower than the firm's spring forecast of 6.3 percent driven by the weakness in Russia, Magna said. "Russia is also at the epicenter of many of the regional headwinds," it said. "Compounding these impacts are ad market specific head winds, including the upcoming ban on pay TV advertising."

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Another prognosticator predicted an ad decline in Russia next year. "Russia is going negative next year" after a slight ad gain this year, said GroupM futures director Adam Smith. He added that it would be the first BRIC country to see an ad revenue drop next year since Russia did so in 2009.

Letang said Monday that China was also seeing a slowdown in ad growth, with Brazil being hit in 2015 due to a "struggling" economy and the fact that 2014 benefited from the soccer World Cup in Brazil in 2014, while 2016 will see a boost from the Summer Olympics in the country.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

 

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