Sector Report

Korean advertising sector

by Seungjoo Ro / May 20, 2016

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The advertising revolution will not be televised but you might see it online, with commercial breaks. A better network environment, cheaper data, more content and optimised platforms have transformed how Koreans watch TV. With internet viewing the new norm, traditional TV ad revenue will decline, creating opportunities for platforms that can publish video content or advertisers that specialise in digital media. But ad agencies have been slow to adapt and still allocate about 36% of their budgets to TV, while digital media gets 29% and online video just 1% as of 2015.

As video consumption grows online, ad budgets will inevitably shift too. The 21% YoY drop in 1Q16 domestic TV advertising spend sent shockwaves through the media industry as lethargic domestic consumption could not explain away the collapse. Major brand advertisers have long been aware that they can no longer achieve the same reach on traditional offline media such as TV, radio and cable. But now it seems the inevitable shift in ad budgets has finally started, with advertisers who have embraced online video in tandem with traditional channels enjoying greater effectiveness.

This is creating a 4tn won opportunity for online platforms Three key developments are leading the evolution: mobile devices, browsing habits and channels. For online platform providers and media-content owners this has unlocked new opportunities. Online platforms have emerged as strong distribution channels for video, while content holders have found a way to increase distribution and scale revenue per content. Mobile media is less fragmented, while better technology is addressing advertisers’ pain points.

Online video ad spending will rise to 1.4tn won by 2021, taking an 11% market share. Online platforms with publishing capabilities and ready access to eyeballs will win a larger share of the advertising wallet, at the expense of traditional media. We forecast online video adspend to rise from 100bn won to 1.4tn won by 2021, taking 11% of the total share.