Advertising Spending in Indonesia Recovered, TV & Tobacco Dominate
Growth of advertising spending in Indonesia's printed and electronic media grew 14 percent year-on-year (y/y) to IDR 134.8 trillion (approx. USD $10.1 billion) in 2016 from IDR 118 trillion in the preceding year. This growth pace is nearly double the annual growth pace that was recorded in 2014 and 2015 at 8 percent and 7 percent, respectively. These data come from a new report released by Nielsen’s Advertising Information Service earlier this week.
Accelerating growth of advertising spending in Indonesia is a sign that local companies and entrepreneurs have regained confidence in the benefits of investing in advertisement as a strategy to attract new buyers and boost their corporate earnings. This renewed confidence is attributed to the acceleration of the nation's overall economic growth, implying consumers' purchasing power is rising accordingly.
Indonesia experienced a long economic slowdown between the years 2011-2015 and for businesses this was reason to cut spending on advertising as people's purchasing power was weakening. Especially in the last two years of the macroeconomic slowdown (2014 and 2015) there was a significant decline in advertising spending growth.
Overall, in 2016 local companies in Indonesia spent most on clove cigarette advertisement. In Indonesia the tobacco industry is one of the biggest industries as a large portion of Indonesian men smoke (especially the clove cigarette type, locally known as kretek). In the future there could occur a problem for media as the Indonesian government proposes to ban the advertisement of tobacco-related products on television and radio. This ban would plague owners of television stations as spending on television advertising dominates the advertising market, contributing 77 percent of total spending on advertisements in 2016 (up 22 percent compared to the preceding year).
Meanwhile, advertising spending on printed media fell short of expectations, possibly because of the rapid rise of digital start-ups in Indonesia. This development also led to a number of (printed) newspapers and magazines to shut down their operations over the past year.
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