Azerbaijan: backyard of the media advertising market

The results of 2013 and the first half of 2014 show a steady growth of the global advertising market, according to ZenithOptimedia. But this does not apply to the Azerbaijani media market, which marked on July 22 its 139th anniversary.

According to the forecast for 2012-2015, an international network of advertising agencies ZenithOptimedia (included in group VivaKi - a media structure of transnational communications holding company Publicis Groupe), global ad spending in 2013 increased by 3.9% compared with 2012, and reached $ 518 billion.

TV continues to dominate

Television continues to be the world's largest media in terms of volume of advertising investments. In 2013, it totaled about 40% of all advertising investments, in second place is internet advertising with 21% share. The increase of investments in TV advertising by 5.2% in 2014 (in 2013 growth totaled 4.4%) is forecasted.

Automation of Internet-buying and development of RTB

Internet is the fastest growing media communicating segment. In 2013, the volume of online advertising grew by 16.2% at the global level. In the period from 2014 to 2016 we forecast growth of advertising investment in this medium by an average by 16% per year. The fastest-growing category of Internet advertising is a banner advertisement - 21% average annual growth in 2014-2016. The automation and optimization of purchasing advertising (programmatic buying) and the development of RTB-technology facilitates the growth of traditional display formats; advertising in social media and online video segment also develops dynamically. According to forecasts, in 2015 the banner ads will bypass the share of paid search, which will show 13% average annual growth in the reported period. In 2016, global investment in advertising internet display will reach $ 74.4 billion, while as investments in paid search will reach $ 71.1 billion.

Mobile Technologies

Mobile advertising continues to grow. At the moment its growth is by six times ahead of the development of online advertising in stationary media. According to the forecast of ZenithOptimedia, in the period from 2013 to 2016 the average annual growth of mobile advertising will be 50%. This is due to the rapid penetration of smart phones and tablets. For comparison, Internet advertising on fixed media in this period will grow at an average dynamics 8% per year.

In 2013, global investment in mobile advertising totaled $ 13.4 billion (the 12.9% share of global investment in online advertising as a whole and 2.7% of global advertising investments in all media), then according to the forecast, by 2016 year their volume will total $45 billion (share - 28% of Internet advertising investment, and 7.6% of the investment in all media.) This will allow mobile advertising to overtake radio, magazines and outdoor, and become the fourth largest media in the world in terms of advertising investments.

Developing and developed markets

Despite the dynamic growth of developing markets, the U.S. remains the largest contributor to the influx of new advertising investments on a global level - 26% of new advertising dollars per year in the period from 2013 to 2016. After the USA come younger and more dynamic markets - China (17% of new investment), Argentina and Indonesia (7% each.)

Seven out of ten advertising markets in the top 10 countries with the largest contribution to the development of the global advertising market are developing countries. In general, they provide the world advertising 44% of new investment in the coming three years.

China is currently the third largest advertising market power (after the USA and Japan.) China gradually catches up with its Asian neighbor, and ZenithOptimedia predicts that in 2016 it will be ahead, becoming the second largest advertising market country in the world. In 2016, France will fall from eighth to tenth place in this list, and Canada - from the ninth to eleventh. In the top ten on their place will be Indonesia and South Korea.

Largest advertising markets ($ million)

Azerbaijani market

According to the comparative analysis of the situation, Azerbaijan, as before, remains far away from the world trends in the development of media and advertising market. Even the Press Council had to admit a twofold decrease in the advertising market. Although television continues to maintain superiority, the amount of advertising on it fell from $ 102.5 million (AZN 80 million) in 2008 to $ 57.7 million (AZN 45 million) in 2013-th. On the background of the growing global advertising on the Internet in Azerbaijan, compared with 2012, last year there twice was decrease in the market - from $ 7.6 million ( six million manat) to $ 3.8 million (3 million manat); the same situation is observed with the amount of advertising in the press. Thus, the total volume of media advertising market ranged within $ 65.4 million (51 million manat.) There is no accurate data, because the media advertising market is mainly "gray", just like the economy of the country as a whole.

Golden 1%

There is still discrepancy in Azerbaijan between international advertising norms and GDP, which is expressed by the following formula: the media advertising market should total 1% of the GDP. For example, at the beginning of the global crisis in 2000, global GDP reached $ 32.2 trillion, and the amount of the advertising market - $ 327 billion. Later, this ratio reduced due to declining advertising market in connection with the crisis of consumption. This ratio is an indicator of a healthy economy and media.

Over the past 10 years the volume of the media market advertisement in ratio to the GDP ranges with 0.1%, despite a more than threefold increase in GDP. This is an important proof of state control over the market media advertisement.

In 2006, Azerbaijan's GDP reached $ 20 billion, and the share of advertising in it is 0.14%. In 2013, with a GDP of $ 73 billion (57 billion manat) the share of the advertising market ranged between $64 million, or 0.09% of the GDP. In 2012 this figure was within 0.11%. It means that the amount of the advertising market is almost by 10 times lower than the world norm. Under the current GDP of $ 73 billion the advertising market volume should range within $730 million. Approximately $350 million would be the print and online media. Approximately such ratio of the volume of advertising is presented in democratic states.

Causes of degradation in the media advertisement market

In Azerbaijan it is impossible to obtain the compliance of the international standards of the media advertisement market and GDP for several reasons, including political and economic reasons.

First, it does not suit the authoritarian regime, which is interested in information management and disorientation of the society, to have a large and free advertising market, since it threatens the formation of financially and politically independent media, as it was in the 90s of the last century.

Second, the economy depending on energy is not able to stimulate the development according to the international standards. Although the share of energy sources in GDP over the last eight years decreased from 67% to 44%, the economy's dependence on oil remains high.

Almost 59% of the state budget, approved in 2013 in the range of $ 24.4 billion (19.154 billion manat), is formed by the transfer from the State Oil Fund in addition to direct revenue from the sale of energy. In general, the dependence of the budget on oil reaches 3/4. This indicates a low potential for actual advertisers concentrated in the non-oil sector. In developed countries, just small-size and medium-size business is a backbone of the economy and the driving force of advertising.

Third, Azerbaijan, as an authoritarian state is not interested in the development of a free economy, free trade and free competition, what for objective reasons is a threat to the regime. Economic freedom inevitably leads to personal freedom, freedom of speech, and finally to political freedom.

Fourth, the "gray" economy of Azerbaijan forces most potential advertisers to do their business, as much as possible, behind the closed doors, in a semi-legal status, in order not to attract the attention of the fiscal authorities.

Fifth, due to the above reasons the culture of advertising has been eliminated in the country. Even business entities which need them, are unaware of the strength of its impact and consider it a burden.

Killing the printed media

In 2013, the process of killing printed media entered its final stage. The government blew another strike banning the sale of newspapers in the subway and on the streets, which led to a two-three-fold drop in sales and circulation. The policy of suppression of independent and opposition print media launched in 1998, successfully continues today. Among the economic instruments used during these years are: increase of prices on printing materials, publishing services, press distribution, destruction of newsstands, ban on street sales and advertising.

Newspapers and magazines have been brought to the critical financial condition, exist only mainly due to legal and illegal subsidies from the government. Basically newspapers are sold in retail, tens or hundreds copies of each issue, and the majority of them have no advertising.

For relative minimum profitability daily sales should be at least 3,000 copies. In this case, the income without the costs on printing and distribution will be approximately $17,000 per month. Of more or less 40 prints, there are a few newspapers with such an indicator. If to add to it 40 online media, we get about 80 media. On average, their keeping requires about $ 15-20 million per year. But some media receives illegally from several hundred thousand to several million dollars per year; and plus grants to the newspapers of the State Foundation to Support Media Development under the President of the Republic of Azerbaijan, which grow from year to year.

For 2013 year the Foundation awarded grants to the print media amounting more than $ 5 million. The Foundation , which in accordance with the presidential decree on July 31, 2008 is to develop and implement a strategy for economic, political and creative freedom of the media, has not presented yet any policy document in this area. If to take into account that the members of the Foundation Board were re-elected in 2013, and re-approved by the President, it means its activity fully suits Ilham Aliyev.

Forecast

There are not any solutions allowing talking about changing the reconstruction of authoritarian political and economic system of Azerbaijan. And it provides a basis for concluding that the dependence of the media on the state will grow. Last year, for the first time, the government openly announced that it buys the loyalty of journalists by offering them free apartments. A 16-storey building ( 154 one, two, or three rooms) with total area ​​15,000 square meters and $ 22, 4 million manat. Thus, one square meter cost to the treasury 1,500 manat, which is by four times higher of its first cost price. And "journalists" involved in brutal struggle for free housing, chose to ignore this blatant corruption. The construction of the next House of Journalists is at full swing, and it will be put into operation by the 140th anniversary of the press.

Conclusion

Thus, creating and exacerbating the economic crisis in the media for 15 years , the government eventually managed to make the national press dependent on the subsidies. It may be called the most important victory of the regime over the press freedom in 2013, and the defeat of society that has lost freedom.

* The term government refers to the power and regime.