Profits are up and revenues are higher, but growth in Canada's advertising industry has been limited by challenges such as the impact of global advertising campaigns and increasing media costs, says Statistics Canada's Annual Survey of Advertising and Related Services 2004.

Much of the rise in operating revenues, which reached $5.0 billion in 2004, was a rebound from a previous decline in 2002 and 2003. The bulk of industry revenue was generated in Ontario (57%) and Quebec (26%).

Note: this survey covers the portion of the advertising industry included in the North American Industry Classification System (NAICS) classification of "Advertising and Related Services". This includes companies that create media or specialty ad campaigns for advertisers or ad agencies, those that place ads and sell media time. It does not, however, include advertising sales by newspapers, magazines, radio, television or Internet.

The numbers for 2004

Operating revenues were up 5.5% from 2003, reaching $5.0 billion. While economic growth helped raise the industry numbers, much of the rise was a rebound from previous industry declines recorded in 2002 and 2003. After inflation, total revenues for 2004 were still below the levels reached in 2001.

Advertising agencies brought in 45% of the total industry operating revenues as they earned $2.2 billion in 2004, up 3.4% from 2003. A greater increase (7.3%) was seen in more specialized advertising industries such as public relations, display advertisers and flyer distributors, which generated $2.8 billion in revenue.

The number of firms in the industry remained unchanged, with 11,900 establishments involved in advertising and related services in 2004. Advertising agencies accounted for 5,300 of these establishments.

Profit margins improved from 8.7% in 2003 to 10.2% in 2004 among advertising agencies, and from 5.8% to 6.7% in the remainder of the industry.

Operating revenues in Ontario rose 5.9% in 2004, following a 1.9% decrease in 2003. In Quebec, operating revenues rose 3.7% in 2004 on the heels of a 4.5% decline the previous year.

The industry challenges

Even with the improvement, the industry still faces many challenges. In 2004 the top five challenges for the industry were as follows:

• Demand for Canadian creative content has decreased as multinational companies use global advertising campaigns.
• The rising value of the loonie has reduced price competitiveness internationally.
• A portion of corporate advertising budgets are being diverted to marketing outside of the traditional ad industry, with increased spending on things like the company website and advertising on search engines.
• Increasing media costs have also pushed down revenues.
• Finally, the federal sponsorship scandal has put a cloud over the reputation of Canada's advertising industry.

Source: Statistics Canada

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