Aussie ad market contributes less to economy than in Canada and Europe

Rosie Baker
By Rosie Baker | 17 January 2017
 

Australian advertising contributes almost $60 billion to the economy according to a new report from the World Federation of Advertisers.

The report shows that the total ad market in Australia is valued at EUR9.2 billion (AUD$13bn) with the contribution to gross domestic product (GDP) sitting at around EUR41.2 billion (AUD$58.5bn).

If you take Australian GDP for 2014 as AU$1.8 trillion (according to http://data.worldbank.org) that makes it around 3.2% of the total.

The report, which aims to show the contribution advertising makes to GDP across Europe found that in 2014 advertising contributed over €640 billion to the gross domestic product (GDP) of EU economies. It also included data on Australia, Japan, Korea and Canada. 

The report shows that the contribution to GDP in Australia is lower as a percentage than in other markets. Across Europe, €92 billion (A$130.5bn) was spent on advertising in 2014, contributing €643bn (A$912bn) to GDP – or 4.6% of the total.

And looking at a more easily comparable market, Canada, where the ad market is valued at €9.1bn (A$12.9bn), contribution to GDP is much higher at €58.2bn (A$82.5bn). Which makes it around 5.4% of Canada's GDP (if you take Canada's GDP as A$2 trillion in 2014, (again according to data.worldbank.org).

The WFA report uses a multiplier effect to calculate the contribution to GDP. For most countries it sits between 6 and 8, but Australia's multiplier is far lower at 4.5, because the market has a higher ratio of ad spend to GDP. This does make it difficult to make direct cross-country comparisons.

It echoes a local study commissioned by the Communications Council in 2016 to calculate the value the creative industry contributes to the economy, but puts the contribution higher.. The Advertising Pays report, carried out by Deloitte, found that the creative industry contributed $40billion to the Australian economy in 2014, representing 2.5% of GDP, and supporting 200,000 jobs. 

AdNews has reached out to The CommsCouncil for a comment on the latest WFA report.

The AANA has this morning welcomed the WFA findings saying it “delivers further evidence of the significant economic value of advertising”.

AANA CEO Sunita Gloster says: “While the estimate of the multiplier effects of advertising to GDP varies from market to market, because it is impacted by factors such as the structure of the individual economy and the mix of media spend, this latest study again points to the vital role advertising plays in driving local economies. In every case, advertising makes a hugely significant contribution to GDP and stimulates innovation in products and services.”

It is the first ever EU-wide report looking into the contribution of advertising, and judges that advertising contributes through supporting competitiveness, providing information on products and services, increasing choice of goods available, and driving innovation.

“Advertising is a vital economic engine that encourages competition, drives innovation in business and provides significant benefits to society by funding or part funding media services, from news to entertainment. Policy-makers should be mindful that ad restrictions have important economic, social, and cultural consequences,” says Stephan Loerke, CEO of the World Federation of Advertisers.

“Advertising matters for employment, innovation, culture and entertainment, and supports media plurality, which is fundamental to democratic freedoms. The benefits are pervasive and run through the fabric of society,” adds Loerke.

The report also looked out how advertising funds media, finding that with less advertising TV would rely on more subscription models, publishers' independent would be challenged,and radio stations wouldn't be able to provide daily news updates on-air and sporting and cultural events would need to seek funding from elsewhere.

A separate element of the report also says the Australian TV market is the least funded by public money, one of the lowest levels of subscription funding and has the highest proportion of funding comes through advertising,as a result of the structure the industry follows here.

 

Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop me a line at rosiebaker@yaffa.com.au

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