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11.08.2008

Bank Austria Macroeconomics Sector Report:
New elections and EURO ensure 2008 is satisfactory advertising year

  • Exceptional stimuli balance out weak economic growth and allow advertising industry to increase turnover by 5 to 7 percent
  • Competitive pressure curbs profit trend
  • No noticeable cool-down in advertising economy before 2009; growth falls below 4 percent

The impending National Council (Nationalrat) election and recent European Football Championships are expected to bestow a favourable 2008 on the Austrian advertising industry. These exceptional stimuli ought, in fact, to be strong enough to balance out weaker economic growth and allow the sector to record an increase in turnover of 5 to 7 percent. That is one conclusion from Bank Austria's Macroeconomics Department's latest sector report. Recently advertising and marketing communications achieved turnover of 4.2 billion euros and employed around 20,000.

"Advertising expenditure is closely linked to economic trends and has once again risen significantly with the economic upturn of the last two years," explains sector analyst Günter Wolf. Accordingly Austria's businesses spent an average of 7 percent more on advertising in 2006 and 2007. That corresponds to 2.5 billion euros on advertisements on TV, in the press and on hoardings in the preceding year, and another 0.6 billion euros were spent on direct marketing campaigns. Whilst the classic media are making relative sacrifices in market share, despite high growth rates, the online advertising market is showing a significant increase. In Focus Research's sector definition it recorded a 77 percent rise for the previous year, but the increase was still 30 percent in the first six months of 2008.

In comparison to other economic services, advertising is less profitable, but the sector's earnings situation improved steadily during the strong advertising years of the late 1990s, as sales profits show, rising from 2 percent to 6 percent in 2002. Since then, average sector profitability has remained unchanged. Despite the lively advertising economy, the earnings situation is not expected to have improved significantly in 2006 and 2007. No average earnings data for the sector are as yet available, but competition for additional advertising expenditure has risen appreciably. The trade association thus reported an increase in membership of more than 10 percent in 2007, which corresponds roughly to the sector influx in the boom years of the late 1990s. Growth in advertising expenditure, however, remained well below this level.

The advertising economy is not expected to cool down noticeably until 2009. Bank Austria economist Günter Wolf sees things thus: "With an anticipated increase in expenditure below 4 percent, advertising expenditure's share of GDP will also fall in 2009 for the first time since 2001. At any rate the share will remain below the 1.2 percent mark." Compared internationally, relatively little is spent on advertising and marketing communications in Austria. Advertising expenditure's share of GDP in the USA is around 2.2 percent and even in Germany it is still 1.3 percent, despite a prolonged economic downturn. This means that in the long term, Austria's sector still has adequate potential for growth.

Enquiries: Bank Austria Press Office Austria
Tiemon Kiesenhofer, Tel. +43 (0) 50505 ext. 52819
E-mail: Tiemon.Kiesenhofer@UniCreditGroup.at

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