Digital Advertising Grows as Mulder Law Restricts Advertising on Private Media in Peru

eMarketer has significantly lowered its total media ad spending growth estimates in 2018 from 5.5% to 1.0% for Peru, with expected growth of 1.5% in 2019 in its recent report, “Latin America Digital Ad Spending 2019.” eMarketer expects future growth to remain flat throughout the forecast period, where paid media will grow from $732.0 million in 2019 to $778.4 million in 2023.

The downgrade follows ratification of Bill 2133 one year ago—more commonly known as the Mulder Law—which aimed to block state companies, as well as national and local governments, from advertising on private media.

Seen as a political play on behalf of the opposition party—initially put forth by Congressman Mauricio Mulder Bedoya in October 2017—Mulder Bedoya stated during his presentation before the Legislative Committee on Transportation and Communications that the national government was spending too much money on advertising in an attempt to “clean up its image” following corruption scandals.

Last year, eMarketer expected this bill to be problematic for Peru’s advertising industry—since nearly 11% of all total media ad expenditures come from the State itself—but opted to wait and see how the local market would respond before making any revisions to its projections.

But by the end of last year, eMarketer’s initial hypothesis was proven correct—despite the country’s economic growth of 3.8%. Alongside the bill itself, advertisers remained uneasy about the corruption problems plaguing the country—most notably, bribery payments from Brazil-based construction giant Odebrecht that ultimately led to Pedro Pablo Kuczynski’s resignation in March 2018.

Traditional media took the biggest hit in 2018, putting digital advertising to lead in growth. This is partly because Bill No. 2133 has yet to put restrictions on ad spending on state or digital media.

Although digital will account for just 16.9% of total media ad spending in 2019, the market shows promising double-digit growth in the next two years before tapering off in 2022 and 2023.

Overall, eMarketer expects digital ad expenditures to increase from $120 million in 2019 to $170 million in 2023, where it will account for nearly a quarter of total media ad budgets.

As digital continues to make inroads in Peru’s advertising market, it presents itself as an efficient option to advertisers as they think through their media strategies. The challenge for advertisers and brands in 2019, however, will be in their ability to filter through the large amount of data available in order to identify what is really valuable and actionable—in addition to supporting all communication planning with consistent measurement.