Media and Advertising Market Trends of Hungary in 2021

“The Hungarian advertising market is growing, over the pandemic, and on a path of increase…” – could be written, because it has some truth in it, but counting with the real inflation value the whole market it shows only a minimal growth, and if we subtract the money spent on global platforms, we can even observe some decline, or at least stagnation. In the meantime, many things that affect the sector have changed.

Client side: skyrocketing prices

Although by the end of 2021 the economic growth reached the level of 2019, and the GDP surpassed that of the same year, the production potential of the advertisers has become hectic, and sometimes exceedingly expensive. This means that a car might not be finished in 1 or 2 years, the transportation costs are at an all-time peak – and many other affecting factors must be taken into consideration by marketing specialists when deciding whether to run a campaign.

Agencies: increasing workforce demand, decreasing incomes

Agencies today have to face labour shortage, plus salaries grew significantly in the past 1 or 2 years, while it has never been more important to keep the employees. The question of home office occupies the whole world, and I believe a hybrid system might be the most agreed-on as a solution, but that would not mean any cost reduction for the agencies. The setting up of new meeting rooms and the space demand of each team requires just as much space as before, and even more funds must be allocated to finance this new model.

The headcount is also increasing because campaigns are getting more and more fragmented. Today, in the digital space, we are counting cents, while before, on traditional channels, we counted millions. Besides, the digital field demands very nuanced knowledge, and we are still finding out what we need to and what we want to offer to our clients. The situation is also hampered by the legal environment: calculating with the established 15% agency fee on a 300-euro campaign – on which two experts work for several hours –, we earn less than 38 euros.

What has a seriously harming effect on us is that during tenders, there is no real competition on the market. The state’s influence is so huge that our “elbow room” where we could seek new income sources is getting smaller. When a potentially profitable assignment appears on the horizon, agencies start a price competition (or the client itself creates the tender to contract under more favorable conditions on an inflating market). In Hungary this, along with the fixed 15% agency fee, results in decreasing incomes for the agencies.

The major players

The state’s influence leads to a great exposure on the advertising market, both on the marketing budgets and media owners’ revenue. Although the growth rate of state spending is has slowed down – in 2021, even for the time of pre-elections, it had not reached the level of 2020 –, the state and state-owned companies remain the biggest spenders on the Hungarian market. In 2021, the amounts spent on advertisements of domestic tourism were outstandingly high, the Hungarian Tourism Agency became the third biggest spender (with 21 million Euros), after the Prime Minister’s Office (76 million Euros) and Szerencsejáték Zrt. (gambling service-provider, 24 million Euros).

Two tax changes are under implementation that concern media owners: an advertising tax (it is reintroduced from 2023: media owners have to pay it based on their advertising incomes) and the abolition of a relaxed entrepreneur tax that mostly applied to content creators and other suppliers. This most probably will induce a price growth of contents, and so, advertisements that are around them.

We cannot leave out global digital giants as the greatest beneficiaries of advertising incomes (one third of the total spending goes to Google, Facebook and other smaller, international companies). They do not only profit from advertisements but from digital solutions provided to agencies, advertisers and media owners as well. In 2023, third-party cookies will be eliminated from every browser, so we will have to find ways to use our own and the clients’ data, and of course pay for the new technology.

How to break the vicious cycle?

All in all: costs are emerging, incomes are dropping, while workforce expenditure is growing. The current situation prompts the question: where lies the future of the media-agency sector in such a small country where market forces are so imbalanced.

First we need a rise in prices, applied evenly to everyone on the market, and then we need a change in attitude and perception. Advertisers should accept that media-agency services are just like anything else that we buy as private individuals: there is a basic price, but you have to pay additionally for added services. There are some sectors in which we can change – let’s say, every two years – for better tariffs, but eventually, the circle closes, and we cannot hold onto low purchase prices on the long run.