Advertising generates €7 for the economy for every €1 spent

But the industry still needs to do a better job of communicating its economic benefits across Europe as policy makers look to limit online advertising.

By Sarah Vizard 15 Jan 2017 11:01 pm

Every euro spent on advertising boosts EU GDP by €7, contributing €643bn to the 28 countries in the bloc and creating millions of jobs, promoting competition and boosting innovation.

That is the conclusion of a new report by the World Federation of Advertisers (WFA), which is using the findings as a stepping stone to promote the positive impact advertising has on economies.

The study, conducted by Deloitte using econometric modelling, found advertising contributes 4.6% to EU GDP and accounts for 6 million jobs. That includes people directly involved in producing advertising, as well as businesses such as publishers reliant on advertising for their revenues and people employed across the wider economy due to the consequences of ad activity such as sales people and those in hospitality.

The report follows a previous study by the Advertising Association (AA) in the UK in 2013, which used the same methodology to conclude that for every £1 spent on advertising there is a £6 boost to the economy. According to the AA, the ‘Advertising Pays’ drive in the UK helped change policy makers minds about the role of advertising and the WFA is hoping for a similar impact across Europe.

“[This research] enables us to argue more forcefully and convincingly about the positives of advertising,” WFA CEO Stephan Loerke tells Marketing Week.

“There are a lot of headlines about advertising but they usually put the industry on the defensive. They are usually in the context of trying to address perceived challenges such as obesity among children or data privacy. But advertising actually plays an important role for the economy and society and this is totally left aside.

“This is all the more contradictory as most EU governments have a clear focus on generating growth through innovation. We need a positive proactive public agenda that explains why advertising is a good thing. It needs to be much more proactively promoted and championed.”

We need a positive public agenda that explains why advertising is a good thing. It needs to be much more proactively promoted and championed.

Stephan Loerke, WFA

While the WFA report focuses on the EU number, advertising’s contribution to the economy has been calculated across a number of different countries including Japan and Australia. And this found that advertising has a similar contribution across countries, tending to vary between €6 and €8.

Those variations tend to come down to a number of things. While the metholodology cannot be definitive, countries with lower ad spend per capita tend to contribute more to GDP, as do countries with a higher proportion of their economy given over to services.

But the major difference appears to be in the size of the online ad market. The research suggests that ad markets with a proportionally bigger share in digital are likely to be more effective at creating GDP.

That is why the WFA is particularly worried about proposed EU legislation that would limit digital advertising. Announced this week, the ePrivacy directive has the aim of boosting users’ privacy online but to do this it recommends giving internet browsers the choice of whether they opt-in to third-party cookies that can track people across the web when they install the browser, rather than on individual websites.

Yet at the same time the proposals will allow publishers to track if people are using ad blockers and ask them to turn them off if they want to see ad-supported content.

“It looks like a significant percentage of people would reject cookies but could then be constantly bothered by websites requesting them to accept cookies,” explains Loerke.

He then cites separate research that suggests 89% of internet users would reject tracking cookies as a reason for his concern that the new rules will have “major implications” for the digital industry.

“We are concerned that what has been put forward will have unintended consequences and impact the digital ecosystem as we know it,” he says. “The EU has a growth agenda focused on digital… but to put forward a regulation like the one we see would, we think, very significantly hurt those ambitions. This is yet another case where we feel there is not enough understanding by policy makers of the benefits of advertising.”