How to measure the performance of the advertising market?

THE weCAN RANKING

Which are the most developed advertising economies in Central and Eastern Europe? Editors feel compelled to find the best, the fastest and the strongest ones when looking at the myriad of data from the region’s countries lined up against each other. Not least because the countries that top the imaginary ranking, thanks to their economic figures and the underlying contexts, may serve as an example for the others - illuminating the key aspects and the path of development.

Still, it is not that simple to compare the development level of different countries’ advertising market, and obtain an indicator that measures all extents of it – which is actually what we intend to do now. It is especially difficult in a place where we don't need to dig deep to find characteristics of each country that are undoubtedly in the forefront at a regional level. Although the HDI and GDP rankings constitute an excellent starting point to assess the human or economic development of a certain country, they provide little clarity about the state and the role of the advertising market – which is considered to be an important indicator of the general market processes – within its overall performance.

The GDP figures of Ukraine and Serbia are only 22% and 44%, respectively, compared to the average of the 14 countries examined in the CANnual Report. But do they really lag behind other countries of the region as much as these figures indicate? In Ukraine, for instance, Internet penetration is close to the regional average and the popularity of online banking and e-commerce is only slightly below, while the online ad spending per head exceeds it by far. And to say the least, Serbia has one of the strongest online markets in terms of purchasing power, according to the social status of its Internet users. Although it is only on the middle ground in terms of online ad spending, it has a strong TV market and the highest rate of Facebook penetration. It is hard to believe that the 13th position it takes on the HDI and GDP rankings faithfully reflects a similar level of development of the local advertising market that we would expect – based on the structure of ad spending and the social composition of consumers.

It is a bold statement that the ad spending per capita data, which is a generally accepted indicator when analyzing the advertising sector, does not by itself resolve the contradictions mentioned above. Nevertheless, this is the case, considering that the ranking based on this figure does not significantly differ from the list that ranks countries according to their GDP. Still, this does not mean that we cannot consider these important macroeconomic data as unquestionable starting points while looking for a new indicator. This is exactly what we did when created weCAN Ranking. Along with Central and Eastern European countries, we also tested it on big (advertising) markets, and it showed exactly what had been expecting.

The development of Central and Eastern European countries’ advertising market and the indicators of that of some bigger countries, calculated on the base of weCAN Ranking’s methodology

WeCAN Ranking (WCR) is an index that shows the percentage the ad spending per capita data represents within a country’s nominal GDP. It is important to note that we calculated both of the baseline (GDP per capita and ad spending per capita) data using the number of population older than 14 years to ensure that the basis of calculation includes only advertising target groups with independent purchasing power. So the WCR does not show how modern a given advertising market is, and it does not compare its current state to global trends. However, we should add that the sub-rankings of TV, online, radio or print ad spending figures set against the background of the GDP per capita data tell a lot about the structure of the advertising markets. WeCAN ranking rather reveals if the advertising market as an economic sector is stronger or weaker than what the overall economic performance of a country would suggest.

If we place the data of HDI, GDP, ad spending per capita and weCAN rankings next to each other, we can see that the latter radically confuses, or rather restructures our perceptions of Central and Eastern Europe’s advertising markets. There is nothing surprising about the results of the region’s most developed markets here: Slovenia tops all four lists, clearly illustrating that strong economies cannot coexists with a weak advertising market. However, there are more examples of the opposite case. The 4th position of Serbia or the 9th of Ukraine are encouraging with respect to the future of their economy. The case of Romania (that ranks as last) proves that low economic performance combined with an underperforming advertising market is the worst combination. It should be pointed out that in this country the state has taken measures during the last few years to influence the market (for instance, it passed a law that abolishes the bonus of advertising agencies). Similar steps have been taken in Hungary, too, but we will feel their full impact not earlier than next year. So WCR may paint a much more positive picture of Hungary, sharing the 2nd and 3rd position with the Czech Republic, than the situation would actually confirm.

While we were finalizing the methodology of weCAN Ranking, one of our colleagues asked what the point of such an indicator actually is, beyond the fact that people (and nations, too) like to compete, to show that they are better than others and, if possible, to win!

The answer is simple. WCR is an alternative, which, placed next to HDI, GDP and ad spending per capita figures, serving as the basis of calculation, helps observe Central and Eastern European countries from a different perspective, and get a more nuanced picture. For example advertisers, who plan to enter a market in the region, can rely on weCAN Ranking while wondering whether it is worth targeting other countries that have a lower economic output. It may well be that a country, although having more moderate macroeconomic figures, is characterized by such strong purchasing power, ad receptivity or such a developed level of information and communication technology that it can prove to be a place where advertisers have a solid basis for success on the market.

If WCR will be found helpful even only by a few people in those decision-making processes, it was worth to create this alternative index. And weCAN affiliate partners or other market participants will certainly be there to help figure out all the details.

Author: András Viniczai, Editor-in-Chief of the CANnual Report 2015

For more information on the advertising markets of Central and Eastern Europe download the CANnual Report for free.