If Israeli newspapers seem thin compared to their counterparts overseas, or television programming not quite so crowded with commercials, the reason is that Israeli advertisers are not big spenders when it comes to advertising and marketing.
As a percentage of gross domestic product, Israeli advertising amounted to just 0.33% last year, compared with 0.61% in Western Europe and 1.01% in North America.
Some analysts argue that comparing Israeli ad spending on a GDP basis is unfair since so much of the Israeli economy is tied up in defense and security, which by its very nature doesn’t advertise. For that reason, the global media-buying firm ZenithOptimedia also looks at ad spending on a per capita basis.
But by that measure, too, Israeli advertisers are parsimonious. They spent just $122, a fraction of the $262 in Western Europe and $528 in North America, according to data compiled by ZenithOptimedia.
Ad spending declined 4% in last year to just 3.5 billion shekels ($880 million), a figures that includes the fees ad agencies and media buyers take. Media outlets themselves get about 15% to 25% less than the total figure.
Conventional wisdom attributed the drop in ad spending last year to Operation Protective Edge, the 50-day conflict with Hamas that caused many advertisers to suspend campaigns. But ZenithOptimedia data show that in the first half of 2014 ad spending dropped 0.5% to 1%.
In fact, except for a brief pick-up in 2013, advertising budgets in Israel have remained about the same for the past 14 years. After discounting for inflation, it means spending has declined in the tens of percent, even though the Israeli economy has grown rapidly during most of that period and global ad spending climbed 46%.
“From a macroeconomic perspective you can see that the Israeli advertising market is almost entirely disconnected from the Israeli economy, as seen in the rates of economic growth and consumer spending,” says Ken Granot, vice president for research and planning at ZenithOptimedia. “You can attribute the phenomenon to [business] concentration and limited competition.”
Global advertising spending rose 5.1% last year, with even older, more mature markets like the United States and Europe showing growth of 4.6% and 2.4%, respectively, noted Gabi Attal, the company’s CEO for Israel.
Israel’s newspapers have borne the brunt of the decline, with ad spending down 33% over the last decade, but they have fared better than their counterparts in the U.S. and Britain, where the decline has been 47% and 56%, respectively, according to ZenithOptimedia.
The company sees further declines in print ad spending, by 6.5% through 2017, before the decline moderates. Digital advertising grew almost 3% last year, increasing its share of the market to 25.7% of all ad spending.
ZenithOptimedia sees the trend continuing this year, led by mobile, which last year captured mere 2% of all spending. In the U.S. it accounted for 6% and in Britain for 10%. Another big growth area will be Internet television, the company predicts.
Spending on television advertising, the biggest segment of the market with a 39.2% share equal to 1.38 billion shekels, contracted 3.6% in 2014. TV ad spending in Israel is among the lowest in the world, says ZenithOptimedia.
The TV industry is in for more trouble. Not counting July and August when Operation Protective Edge news coverage kept viewers in front of their sets, last year saw ratings down in eight of the 10 months for Channel 2, the most popular broadcaster.
“We’ve seen a watershed of sorts in which the phenomenon of multiple screen and simultaneous viewing is starting to make its mark,” he says, referring to interactive and Internet TV. “Still, the structure of the market means the [traditional] media will remain strong for the short term.”
One area that looks promising in 2015 is the old-fashioned medium of outdoor advertising. With election campaigns going into full gear, parties will be relying more than in the past on mobile and social media, but ZenithOptimedia says demand for traditional billboards should be strong as well.