Online advertising: though minimal but still upward trend

Publication date: 15 Apr 2020

OMD OM Group has presented its 2020 growth and development forecast for Russia’s advertising market. The forecast is based on the assumption that the epidemic in Russia will last for three months, and all restrictions imposed in the country will be lifted in July. As long as Russia’s economy is dependent on oil prices (the country’s top export which has a large impact on the ruble’s exchange rate), such factors as Brent crude oil prices and the USD/RUB exchange rate were also taken into account.

• During 2020, the USD/RUB exchange rate might rise above 80 but on average is expected to be around 74 rubles per 1 US dollar.
• The Brent crude oil price is expected to average $37 a barrel.

Investment in advertising: what awaits us by the end of 2020?

Outdoor and press advertising will experience the deepest decline that will result in a loss of more than 25% of media investments by the end of the year.
Radio will lose almost 15% year-on-year; investments in TV will shrink by 10%.
Investments in online advertising will increase by slightly more than 2%.
Performance-based ads will gain 8%, while banner ads are expected to lose 8%. Investments in SEO and video advertising will remain at the level of 2019.

• It is worth noting that online was the only growing segment of Russia’s advertising market in 2019.

The advertising market as a whole will decline by 5.7%. If the coronavirus situation gets worse, OMD OM Group forecasts that every additional month of isolation will result in a loss of about 2% of advertising investments in annual terms.

What do other experts think?

• Analysts at Goldman Sachs expect the online advertising segment to lose 3% amid a general drop of 15% in the advertising market.
• According to Morgan Stanley, Russia’s advertising market will fall by 10-15% in the second and third quarters, and will resume its growth no sooner than 2021.
• Bank of America expects a 4% gain in the online advertising segment and a 4% decline in the advertising market as a whole. Given a forecasted 20% drop in Russia’s second quarter GDP, online advertising might shrink by 15% during this period but later on, in the second and third quarters, will gain 4% and 11% when economic situation in Russia improves.
• Wood & Company forecasts that Russia’s advertising market will fall by 10%. Though online advertising is expected to grow by 5%, a decline in this sector is also defined as a possible scenario in case of a deep recession.