Six key points you need to be aware of to know where the Latin Advertising and Media space is headed.
The Rise of the Latin American underclass
As Jose Martinez, Managing Director Latin America of Razorfish, explained during his presentation, there currently is a massively misunderstood megatrend currently taking place in Latin America. While there still is significant inequity in the distribution of wealth/income, it is also true that large sectors of the population have increased their purchasing power as a result of the boom of commodity prices and increased political stability in most Latin American countries. The facts? There are 80 million people, responsible for 46% of consumption in Brazil and 47% consider themselves members of the middle class: 58% of them own a computer, in fact, in 2007 Brazilian computer sales surpassed television sales, reaching 10.7 million units.
Major global media companies looking for growth.
Contrary to other times, when Latin America was regarded as economically and politically unstable, now major global media companies are looking at Latin America as a region where they can grow. On a per capita basis most Latin American countries, including all the large countries (Brazil, Argentina, Mexico, Chile, Peru, Venezuela and Colombia), had per capita GDPs greater than that of China in 2009.
Large companies including satellite broadcaster DirecTV and Swedish newspaper group Metro International, see Latin America as an area where they can grow at a high rate and make up for stagnant results in .North America and Europe. DirecTV Latin America is expected to amount to more than 50% of global DirectTV business by 2010, according to Jesus Mata, DirecTV Latin America’s Senior Director Advertising Services. According to Per Mikael Jensen, CEO of Metro International, up to 15% of Metro International revenues should come from Latin America by 2010.
The current economic crisis is particularly severe in Spain, and Spanish media giants (e.g. Prisa-Union Radio, Unidad Editorial El Mundo America), which have a strong cultural and language advantage in Latin America, are seeing both the U.S. Hispanic market and Latin America as an opportunity to grow.
Of course, the Latin American “boom” is also reflected on increased interest on the advertiser side: Major consumer goods companies also regard Latin America as an opportunity to grow (e.g. see the recent expansion plans of WalMart) and are increasing their marketing budgets in the region.
Fastest region of the world in online advertising….
According to Magna Global’s, a division of IPG’s Mediabrands, recent global online advertising forecast, Latin America is expected to be the fastest growing region in the world, with $3.5 billion of total “supplier online advertising revenue in 2015 on an average rate of 13,3% growth over the next five years.
The increasing Latin online advertising pie
Paid Search 2010
All other Forms of Online Advertising 2010
$29.8 billion (49.8%)
$31.2 billion (50.2%)
$1,138 million (61.8%)
$704 million (38.2%)
Latin World (Latin America, U.S. Hispanic and Spain)
$1,277 million (57%)
$963 million (43%)
Sources: Magna Global Trading (Portada’s own estimates for Latin world)
…particularly strong growth potential in online display
Google remains by far the global leader in Search; this is even more the case in Latin America, where in most markets it has a market share of over 90%. However, it’s in display online advertising where the most growth lies and where competition is wide open.
There is an increasing presence online of large brands who otherwise prioritize television advertising. While these advertisers continue to rely on television for awareness-based objectives, they are emphasizing online activities for deeper engagement.
Interestingly the online display portion of the total online advertising pie in Latin America is much smaller (just 38.2%) than in North America, a more developed market where it is expected to amount almost 50% of total online advertising expenditure (see table above). Magna Global, expects online display to growth by an annual compounded growth rate of 14.2%, versus 12.7% for paid search, to $1.36 billion by 2015.
There is a reason for that high expected growth rate: it is the catch up potential. The digital share of media budgets in Latin America is below 4%, compared to a world average of 10.4%.
…brings in new players…
Global portals such as Microsoft and Yahoo, and many regional strong publishers, often associated with print publications, are positioning themselves to capture a substantial share of the rapidly increasing online display advertising pie.
This has been recognized by relatively new entrants into the space, particularly in the news category, both El Mundo America and Infobae. These sites not only target national audiences but have made it very clear that they target users from the Spanish-speaking world at large, and obviously the advertisers catering to them, hence their significant participation both as attendees and sponsors at our Summit.
…who profit from the borderless web
The borderless web means that, Spanish and Portuguese language audiences can consume content anywhere. They can and will find the content that is of interest to them regardless of where that is produced and published. This is where Latin American, Spanish and U.S. Hispanic companies have an advantage. As Antonio Fernandez Galiano, CEO of Unidad Editorial put it during his keynote presentation. “The Spanish language is the grand bridge between Latin America, Spain and the U.S. Internet has significantly reduced the barriers in approaching such a diverse community. Latin American, Spanish and U.S. Hispanic companies can leverage their global content for Latin Audiences in all markets and add relevant local content in each of them. Angela Recio Sondon, VP & Channel Director Discovery Channel & Animal Planet, noted “Factual content travels well, but you can’t have global content without regional-local content”. Sondon recommends a mix of 70% global content versus 30% local.