The total value of advertising spending in Hungary rose by 11.2% year on year to HUF 216 billion in 2016, according to HAA data published on Tuesday. Although the figures are promising at first glimpse, we should look behind the curtains. It is noteworthy that global players have already carved out 51% of online advertising spending.
According to data published on Tuesday, Hungary’s advertising spending looked like this last year:
The association found that the state spent HUF 6.3 bn on television commercials in 2016, versus HUF 2.63 bn in 2015. The state’s total advertising spending leaped by more than 80% year on year, which made the state the biggest spender in the sector.
The 11.18% growth had a great deal to do with sports events (Olympic Games, soccer world championship), but overall spending as a ratio of GDP remains below pre-crisis levels.
The advertising tax remains a strong drag on the advertising business, and the planned hike of its rate to 7.5% could strip the sector of additional significant funds
“The unjustified regulations of the last few years, which lacked consultations with the profession (advertising tax, the Bonus Act, extra levy on the use of public space and the law on townscape protection) continue to cause great uncertainty on the market," it added.
(Under the townscape protection law, the owner of the advertising media is the subject of local building tax to be paid on the advertising media. The bill defines a maximum annual amount of HUF 12,000 per square meter local building tax to be paid on advertising media, however, municipalities are allowed to set different tax rate in the range of HUF 0 and the above-mentioned upper limit - considering local characteristics - for the whole town or for different parts of the town. Under the Bonus Act, advertising agencies are only permitted to accept (i) the fee for the agency activity and (ii) the discount received from the publisher or the sales house acting on the publisher’s behalf.
Read our report about the amendment of the Advertising Act:
A key finding of the association was that international players continued to carve out ever larger slices of the local advertising market. Advertising spending at global players rose substantially by 25% yr/yr, which boosted the share of money spent on adverts at large multinational tech companies such as Google and Facebook to 51% at the expense of local content providers.
In an Op Ed we have recently pointed out that global companies engaged in advertising activity enjoy a huge advantage in Hungary because local authorities cannot apply tax obligations on them, e.g. they are no subject to the advertising tax, either.
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