Dentsu Report: Newspaper Ads Down 1.7%, Internet Ads Up 55%

Dentsu Inc., Japan’s largest ad agency, on Feb. 20 released its annual advertising sales report for 2005. The report says total ad spending, covering all sectors, rose 1.8 percent from 2004, hitting 5.9625 trillion yen in a second consecutive year-on-year increase.

Breaking ad spending down by category, each of the four categories of newspapers, magazines, radio and television suffered declines in ad sales, dropping 0.7 percent in total. Ad spending in newspapers fell 1.7 percent to 1.0377 trillion yen, reversing the first year-on-year gain in four years registered in 2004. Newspapers' share of total ad spending fell 0.6 percentage points to 17.5 percent. Ad spending on television fell just 0.1 percent in its first year-on-year drop in three years. However, ad spending on the Internet continued to climb, surging 54.8 percent. Search-engine-linked advertising continued to lead among advertisers seeking maximum cost-effectiveness, with demand for this kind of advertising soaring among Internet ads.

According to the report, ad spending was up from 2004 as part of a general recovery in the Japanese economy. The Aichi World Expo in the first half of the year and the general election in the latter half were also major factors in the increase. Nevertheless, the rate of the increase was less than that recorded the year before.

The results by media category were as follows;

(Newspapers)
As the Japanese economy continued to recover, ad spending in newspapers showed marked improvement toward the end of the year, in part due to the general election. But total ads sales in newspapers were down from 2004, when sales rose for the 2004 Summer Olympics in Athens.

By type of newspaper, ad spending in local newspapers, sports dailies and evening newspapers were all somewhat weak compared to that in national newspapers.

Ten out of the 21 major industries spent more on newspaper ads. In particular, the “foodstuffs,” “cosmetics/toiletries” and “home electric appliance/audio-video equipment” industries respectively spent 13.3 percent, 8.3 percent and 15.0 percent more on ads. Cosmetic and health-food makers, personal computer makers and advertisers use newspapers for direct and mail-order sales to boost credibility among customers. Ad spending for “automobiles/related products” in newspapers plunged 14.5 percent, while falling only 4.9 percent for all four main media together. Ad spending for “beverages/cigarettes” was down 8.5 percent in a reaction to a surge in 2004 due to an unusual heat wave. “Information/communications” ads sales were down 8.0 percent due to a lack of popular items for sales promotions. A decline in ad spending by these major industries worked to curb the growth in aggregate ad spending in 2005. Ad spending by “governments/organizations” was up 5.3 percent due to the general election.

(Television)
Spot advertising increased 0.1 percent, but program advertising dipped 0.6 percent in a correction related to the 2004 Athens Olympics.

The “finance/insurance,” “real estate/housing facilities” and “home electric appliances/AV equipment” sectors respectively spent 8.0 percent, 7.4 percent and 7.3 percent more, with 10 other industries also increasing their ad spending. But advertising spending from the “cosmetics/toiletries,” “foodstuffs” and “beverages/cigarettes” sectors was down respectively, by 4.8 percent, 5.3 percent and 2.8 percent. The same was the case with some other sectors that generally focus on television ads.

(Magazines)
Ad spending in magazines dropped 0.6 percent for the fifth consecutive yearly decrease. Of the five largest industries that spend the most on ads in magazines, four cut their spending in 2005. Those four were: “cosmetics/toiletries” (down 5.9 percent), “information/communications” (down 7.7 percent), “automobiles/related products” (down 1.7 percent) and “distribution/retailing” (down 0.6 percent). The sole exception was the second-largest ad buyer, the “apparel/fashion/accessories/personal items” sector, which boosted ad spending by 5.0 percent. In addition, eight other industries increased ad spending on television, including the “finance/insurance” (up 5.8 percent) and “foodstuffs” (up 3.7 percent) sectors.

(Radio)
Ad spending on radio dipped 0.9 percent for the fifth consecutive year-on-year decline. By sector, “pharmaceuticals/medical supplies,” “governments/organizations” and “real estate/housing facilities” respectively spent 10.9 percent, 18.7 percent and 11.3 percent more on ads. But major industries such as “automobiles/related products” (down 4.7 percent), “finance/insurance” (down 4.8 percent), “transportation/leisure” (down 4.4 percent) and “beverages/cigarettes” (down 7.5 percent) all spent less.

In other types of media, ad spending on sales promotions-related media grew 1.3 percent for the second consecutive year-on-year rise, while ad spending for flyers and transportation advertising logged a third consecutive yearly increase. With the Aichi World Expo as a main factor, ad spending on exhibitions and screen displays rose 6.2 percent. Ad spending on satellite media surged 11.7 percent, with spending on cable television up 4.0 percent and on CS satellite up 12.0 percent. Ad spending on BS satellite also grew, climbing by an impressive 19.8 percent on higher subscriber membership. On the down side, advertising spending on teletext plummeted 60.0 percent.

Advertising on Internet sites jumped as broadband growth pushed up the unit rate for advertising, as well as total ad revenues. One noteworthy development was the successful launch of the broadcasting of movies for free over the Internet. Of the total ad spending on Internet sites, which came to 280.8 billion yen in 2005, search-engine-related ads accounted for 59 billion yen. Ad spending on mobile-phone-related media, totaled 28.8 billion yen in an uptrend as beverage makers, carmakers and some other major clients began actively using mobile media for mass sales promotions.

Among advertisers, it is becoming normal to use both conventional mass media and the Internet in a strategy called a “media mix.” Cosmetics makers and health-food makers are among the leaders in advertising via all types of media.

Advertising Expenditures by Medium(2005)
	Advertising Expenditures (\Billion)	Comparision Ratio(%)	Component Ratio(%)
Total	59,625	101.8	100.0
Major Media
Newspapers	10,377	98.3	17.4
Magazines	3,945	99.4	6.6
Radio	1,778	99.1	3.0
Television	20,411	99.9	34.2
Subtotal	36,511	99.3	61.2
Sales Promotion
Direct Mail	3,447	103.1	5.8
Flyers	4,798	100.7	8.1
Outdoor	2,646	99.2	4.4
Transit	2,432	102.0	4.1
POP	1,782	102.1	3.0
Telephone Directories	1,192	88.8	2.0
Exhibitions/Screen Displays	3,522	106.2	5.9
Subtotal	19,819	101.3	33.3
Satellite Media	487	111.7	0.8
Internet	2,808	154.8	4.7

Dentsu Predicts 2.1% Rise in Ad Spending in 2006

On the same day as it released its ad-sales report, Dentsu Inc. issued a prediction that nationwide ad spending will rise 2.1 percent in 2006, to 6.0883 trillion yen.

It predicted that ads would rise on the continued increase expected in corporate earnings for a wide range of industries amid the generally strengthening economy. It predicted that capital investment will keep rising as production expands and outmoded facilities are upgraded. Dentsu also predicted that the market for IT- and digital-related goods is likely to keep growing.

There are several major sporting events taking place 2006, ranging from the 2006 Olympic Winter Games in Turin to the 2006 FIFA World Cup in Germany. They and other factors should all contribute to higher ad sales.

Dentsu predicted that advertising spending in newspapers would increase marginally as the economy keeps improving. In particular, it predicted that ad spending will rise in the “information/communications” and “home electric appliances/AV equipment” industries due to progress in ground-based digital broadcasting and “number portability” for mobile phone users, as well as in the “finance/insurance” industry amid corporate realignments.

Dentsu also predicted that ad spending by the “foodstuffs” and “cosmetics/toiletries” industries, which grew markedly in 2005, will keep rising in 2006, but at a slower rate.