PwC sees online advertising overtaking TV in Japan in 2019

Here are some Japan-specific highlights from PwC's latest forecast of media and entertainment spending through 2022.

Japan will remain the world’s fourth-largest internet advertising market for the forecast period, with revenue growing at 4.6% to $15.2 billion by 2022. That compares to $127.4 billion in the US. Internet advertising revenue is set to overtake TV in 2019.

Mobile is by far the biggest source of online advertising revenue (46% last year) and will be worth $8.5 billion by 2022. It’s not surprising when you consider that Japan has the highest number of mobile internet subscribers in the world.

Mobile video advertising is an especially fast-growing area, and is expected to be worth $925 million by the end of the forecast period.

Wired display accounted for 27.1% of digital advertising revenue last year, followed by paid search at 15.2%. PwC points to a possible increase in the use of ad blockers, citing research by JustSystems that showed a third of internet users in Japan used them in 2016. Overall though, people still seem more content to view advertising in exchange for content than people in a number of markets including the US.

TV advertising will be worth $14.5 billion in 2022, against internet advertising’s $15.2 billion. Still, that means Japan will overtake China to become the second-largest global TV market.

Nippon TV continues to hold the ratings lead (8.2% of all-day audiences), with 68.2% of its revenue coming from advertising in 2017. TV Asahi is the second most popular network, followed by TBS, Fuji TV and TV Tokyo. TV advertising

PwC sees Japan’s TV industry as “extremely advanced” in terms of the varied ways in which people consume content. It anticipates impressive growth (27.7%) in online TV advertising to $1 billion by 2022, with online TV advertising making up 7% of the total TV advertising pie.

B2B advertising is often overlooked, but revenue grew 1.3% last year (the highest growth rate for five years) and is expected to continue to grow at that rate until 2022. At the same time, PwC notes that low prices weigh the sector down.

In the world of gaming, total revenue including esports is set to hit $17.1 billion by 2022. In-game advertising will be worth $460 million by 2022, making Japan the third-biggest market after the US and China.

The future looks promising for esports due to the recent legalisation of tournaments, but the market is still worth less than 10% of those in China, the US and South Korea. Brand activity around esports is expected to pick up as the sector grows.

Lastly, PwC puts Japan “at the forefront of consumer VR” and predicts 19.3 million headsets in the market by 2022. Still, it says that is too few to support advertising revenue, and content developers are struggling to make money. It notes however that developers are looking at more opportunities for B2B applications of VR, which is probably where brands will concentrate their activities in this space.