What Lies Ahead for the Advertising Market in Russia in 2022? Is There Room for Hope?

Analyzing the Current State and Prospects of the Advertising Market in Russia in 2022

The advertising market in Russia has traditionally demonstrated a tendency for stable growth, driven by various factors such as the presence of large manufacturing companies with substantial media budgets, the emergence of new brands (including domestic ones), a more structured approach to product promotion, and advancements in digital technologies. In fact, advertising investments in Russia witnessed a remarkable 17.5% increase in 2021, as reported by the Dentsu communication group.

However, at the beginning of 2022, the situation took an unexpected turn, coinciding with the global political landscape. In light of the anti-Russian sanctions, numerous foreign brands ceased their activities in the Russian Federation, including advertising efforts. According to Andrey Skorodumov, the head of OMD OM Group, foreign brands accounted for approximately one-third of digital advertising in Russia. Additionally, Google withdrew its advertising sales in Russia, and Meta* (the parent company of Facebook** and Instagram**) was labeled as extremist. These developments, along with subsequent events, had a significant impact on the advertising industry as a whole. As a result, the advertising market in Russia experienced an almost instantaneous freeze in its growth, with sales figures plummeting by approximately 60%, as reported by Dentsu.

Given their extensive advertising expertise and insights from reputable sources, QB Agency experts have delved into the situation to gain a more comprehensive understanding.

The Current State of the Advertising Market: Trends and Expectations

Despite the challenging circumstances, the National Advertising Alliance (NAA) remains optimistic about the future stability of the advertising market. It is worth noting that the Russian market has experienced its fair share of ups and downs in the past due to various reasons.

For instance, in 2014 during the Crimea political events, the Coca-Cola Company temporarily halted its TV advertising campaign on four leading channels, citing economic reasons related to sanctions. However, the brand eventually resumed its advertising activities after some time.

Similarly, in April-May 2020 during the pandemic, many corporations paused their promotional activities in Russia. The NAA managed to retain advertisers by implementing a penalty policy, allowing campaigns to be rescheduled for a later date. The Alliance intends to follow a similar approach during the current situation.

“Most transactions are made for a year, encompassing both annual and monthly budgets. In case of non-compliance with the agreed terms, we will act in accordance with the contractual obligations,” explains the NAA representatives.

According to the Russian Association of Advertising Agencies (RAAA), the total volume of the Russian advertising market in 2021 reached 578 billion rubles. This includes 313.8 billion rubles allocated for digital advertising, 197.3 billion rubles for TV advertising, 45 billion rubles for out-of-home advertising (including outdoor advertising), 14 billion rubles for radio, and 8.2 billion rubles for print publications.

It’s worth mentioning that the top advertisers in Russia in 2021 comprised not only foreign companies but also domestic ones, indicating a diverse landscape in the advertising market.

In late March, four prominent foreign brands within the top 10 advertisers made significant announcements regarding their advertising investments in 2022. Nestle, Reckitt Benckiser, PepsiCo, and Procter & Gamble declared the suspension of their advertising budgets. Additionally, several other companies with substantial advertising budgets of at least 2.5 billion rubles, such as Mars Russia, McDonald’s, L’oreal, Ferrero, Coca-Cola, Safoni Aventis, and GSL Consumer Healthcare, followed suit in joining the trend.

What is Next?

The future of the Russian advertising market seems to be shaped by two possible scenarios. One possibility is that companies will completely halt their advertising activities within the Russian Federation. The other scenario involves a temporary pause, allowing them to return to the market at a later time. Adpass service, after collecting opinions from four major advertising groups, has presented both optimistic and pessimistic outlooks along with their potential consequences.

In the optimistic scenario, the market is projected to steadily grow and reach 515 billion rubles by the end of 2022. However, the pessimistic scenario suggests a decline to 289 billion rubles, which would be a 50% decrease compared to current statistics, bringing the market back to the levels seen in 2011. While some experts believe the latter scenario is unlikely, they do expect certain budget reductions regardless.

According to GroupM, the TV sector is anticipated to be the most affected, facing a potential decline of at least 25%. Online advertising is predicted to decrease by 17% by analysts from Publicis. On the other hand, OMD OM Group expresses concern about the digital environment, projecting a minimum decrease of 17.7% and a maximum decrease of 27.7% in the worst-case scenario for digital advertising. They also suggest that TV advertising may remain at current levels or potentially decrease by 8.7%.

Why there is ambiguity of opinions?

The ambiguity of opinions regarding the current advertising landscape in Russia stems from a combination of factors. On one hand, the TV sector heavily relied on foreign companies for advertising investments in 2021, with Nestle, Reckitt Benckiser, and PepsiCo being the top spenders. The suspension of promotion by these brands in March 2022 indicates potential losses for the TV sector.

On the other hand, it is incorrect to assume that the digital segment will remain unaffected. While Russian companies were leaders in procurement in 2021, online advertising faces challenges due to the inaccessibility of platforms like YouTube, Google, TikTok, Facebook, and Instagram. This necessitates a complete reorientation of both advertisers and the audience towards other channels to achieve positive development in the digital advertising segment.

Furthermore, foreign gaming brands have exited the Russian market, leading to a decline in digital advertising budgets. The gaming segment experienced a significant drop in revenues after major marketplaces stopped accepting payments from Russian cards. This decline is expected to impact advertising investments in the gaming sector.

Outdoor advertising, on the other hand, is predicted to suffer relatively less since the share of foreign companies in this sector is around 15% of the total budget. However, the increase in prices of materials for printing presents another challenge.

Given the mixed circumstances, advertisers are left with the question of whether there is hope for a prosperous advertising future in Russia. Although the situation presents both positive and negative aspects, data from various sources suggests that there is still hope for a brighter advertising landscape in Russia.

Outlook for the Advertising Market in 2022

The prospects of the advertising market in 2022 are influenced by various factors, including government support, increased investments, and the emergence of new brands.

One significant aspect is the expectation of state support and increased investment in the industry. Companies are relying on credit facilities, tax benefits, and support from organizations like the National Advertising Alliance. There is also hope for a relaxation of advertising restrictions on certain products such as alcohol, tobacco, and pharmaceuticals, which could lead to increased budget allocations in various advertising segments. Furthermore, experts from Dentsu suggest that the government may allocate direct funds for advertising to support national projects and social initiatives.

Additionally, there is a noticeable trend of financial companies, banks, real estate firms, and construction companies increasing their advertising budgets, according to outdoor advertising specialists from Gallery. This trend is expected to impact not only outdoor advertising but also other segments of the market.

Dentsu experts emphasize that in recent years, local companies, including ecosystems, banks, retailers, and telecoms, have been increasing their share of advertising investments while the share of Western companies has been declining. With the rise of ecosystem competition and the focus on subscriptions, the departure of Western companies is not expected to cause a complete collapse in the market.

Furthermore, experts anticipate the entry of new foreign brands from Southeast Asian countries, China, the UAE, and Turkey. These regions view Russia as a promising market to promote their products, particularly in the absence of European and American competitors.

Regardless of the circumstances, adapting marketing strategies, increasing advertising turnover, and reaching new audiences require careful planning by companies. If you are considering such changes, the experts at QB Agency are ready to assist you in navigating the current conditions of the Russian advertising market.

*The organization has been designated as extremist and prohibited in Russia.

** Social networks have been classified as extremist and prohibited in Russia.