Total payments for advertising placements decreased by three percent last year after a one-third increase in the two preceding years following the coronavirus pandemic of 2019–2020, calculated at constant prices. The decline in the advertising market last year was entirely due to lower payments to domestic media. Advertising revenues for domestic media shrank by nearly 10% while payments to foreign media increased by 4%.
Last year, total payments for advertising purchases amounted to over 26.4 billion ISK, of which 13 billion ISK went to foreign media, or 49% compared with 13.5 billion ISK to domestic media, or 51%. The distribution of advertising funds between domestic and foreign media in this country is similar to that in the other Nordic countries. Daily and weekly newspapers are no longer the most important advertising media. Last year's advertising revenues were nearly evenly distributed among online media, television and radio, with about one-fifth for each, while the share of daily and weekly newspapers have significantly decreased year-on-year.
Since 2009, advertising expenditures have grown at constant prices by 13 billion ISK, from 13.4 billion to 26.4 billion last year. This corresponds to an increase of about 97%. The growth has been several times greater in payments made for advertisements in foreign media than in domestic media. Payments to foreign media increased more than twentyfold, while payments to domestic media increased only by 5%. The chart below shows the development of payments for advertising purchases domestically and abroad during the period from 2009 to 2023, at constant prices.
An increasingly larger portion of advertising funds flows to foreign media. According to data on service imports, ad spending in foreign media has increased continuously since 2013, and now stands at 49% of the total advertising payments, as depicted in the chart below.
It can be reasonably assumed that the majority of the amount spent on advertising in foreign media is due to online advertisements, particularly on social media and search engines. Information about the distribution of payments to individual parties in service import transactions is not available. However, it can be assumed that a significant part of the money that Icelandic advertisers spend on advertising in foreign media goes to two entities, Alphabet (owner of Google and YouTube) and Meta (owner of Facebook and Instagram). In recent years, the share of these two entities has accounted for well over 90% of payments for advertising placements made via credit card transactions, which encompass about half of the total service imports related to advertising and related activities. It is important to emphasize that only a portion of the funds flowing to foreign media is due to purchases of advertisements aimed at Icelandic consumers. Therefore, it is incorrect to view the outflow of advertising funds as entirely at the expense of domestic media revenue.
It can be inferred that the increasing flow of advertising funds out of the country is primarily due to two interconnected reasons. On one hand, the emergence and rapid spread of social media have provided advertisers with improved utilisation of advertising funds by reaching larger audience and better-defined consumer groups than traditional media allows. On the other hand, the increased outflow of advertising funds can be attributed to ever growing marketing of the tourism industry abroad. The distribution is between payments for advertisements on their appeal to domestic and foreign consumers is entirely uncertain.
The distribution of advertising funds between domestic and foreign media here is similar to what occurs in most of the other Nordic countries. The chart below shows how this distribution is Denmark, Norway and Sweden. The share of advertising funds flowing to foreign media has steadily increased over the period in all four countries. Similar to Iceland, the share of foreign media in advertising payments in Denmark has risen from just under 30% to about half from 2016 to 2023. In Sweden, the share of foreign media has increased even more, rising from 27% to 60%. In Norway, the proportion of advertising funds flowing to foreign media is lower than in the other three countries. However, the trend there has been the same, with a steadily increasing weight of foreign media in the ad spending, from 17% at the beginning of the period to 42% last year.
Certain reservations must be made regarding such comparisons. There are differences between countries regarding which foreign media the information covers. Unlike Iceland, where total service transactions are considered, encompassing all payments to foreign entities, the information for the other Nordic countries is limited to payments to the largest entities, namely, media from Alphabet (Google and YouTube), Amazon, Meta (Facebook and Instagram), either some of them or all. It can be assumed that this does not significantly hinder the comparison between the countries, as the market share of others is considered to be quite limited.
Advertising purchases in domestic media decreased by 1.4 billion ISK from 2022 to 2023, calculated at constant prices. After a brief growth in advertising revenues in the following two years after the Covid-19 pandemic, revenues for domestic media fell by 10%. Looking at the longer term, payments to domestic media were a quarter lower last year than in 2016. Looking further back, revenues for Icelandic media were over 40% lower than in 2007 when they were at their highest in the year prior to collapse of the financial system in fall of 2008. The image below provides an overview of the development of advertising revenues for domestic media from 2009 to 2023, shown as an index on the one hand at variable prices and on the other at the price level of 2023.
Last year, about 60% of advertising funds went to three media types; online media (21%), television (20%), and radio (19%). Daily and weekly newspapers, which have traditionally been the most important advertising media, were the fourth largest advertising medium last year (16%). The most significant factor of the decline was the cessation of the free daily Fréttablaðið in the first half of 2023, which had been among the most important advertising media since its establishment in 2000.
In recent years, the share of daily and weekly newspapers in media advertising revenues has been rapidly declining. This can be attributed to two interconnected factors: on one hand, the emergence and spread of online media, and on the other, the general decline in the circulation and readership of newspapers and their reduction. At the same time, advertisers have increasingly found space for their advertisements in other media, particularly on domestic and foreign websites. The share of other media in advertising revenues was significantly smaller. It is noteworthy that the share of environmental advertising has steadily increased in recent years, with its share being 13% in 2023 compared with 3% five years earlier.
Initially, the share of domestic online media in advertising revenues was quite limited. In recent years, their share has steadily increased, and it is now such that one-fifth of advertising revenues fall to them. Nearly three-quarters of advertising revenues on the web last year went to websites associated with traditional media.
The relative distribution of advertising revenues across different types of media in the Nordic countries and globally is shown in the table below. The percentages are derived from combined domestic and foreign payments. There are various difficulties associated with obtaining comparable information between countries. In some countries, the focus is on advertising revenues, while information for other countries is based on total expenditures for advertising placements. The characteristics of the Icelandic advertising market are somewhat unique when looking at the distribution of advertising revenues by media types in the Nordic countries and beyond, as the information in the table indicates. Notably, the share of radio is much higher in Iceland than in most countries. In recent years, the Icelandic advertising market has moved closer to what is seen in the Nordic countries regarding the relative distribution of advertising funds between different types of media.
About the data
Information about advertising revenue of the media is derived from annual accounts and according to information from The Icelandic Media Commission from 2011. In the instances when information is lacking from media operators the advertising revenues are estimated from VAT tax reports. Hence, it must be kept in mind that the figures are partly based on estimates. The data do not include catalogues and directories, direct marketing, direct and multiple mail or advertising on non-domestic web sites. Sponsoring is included. Previously published data is reviewed with access to new and previously unknown information.
Information about payments to foreign media are derived from the databases of payments for import of services and credit cards payments for services.