THE lights went out on March 28 and July 25 last year. The first date refers to Earth Hour, one of the most successful marketing campaigns in Malaysia; the second, to the passing of the advertising industry’s creative icon who led that campaign (and created many other celebrated campaigns) – Yasmin Ahmad.
The local advertising industry went through one of its darkest moments in 2009, with clients slashing budgets and agencies undercutting each other to win business.
But the industry was more resilient than it had been in the previous downturn, and there is now a mood of cautious optimism as it sees some light at the end of the tunnel.
According to market research firm Nielsen, the country’s advertising expenditure (adex) was back on growth track in the second half of 2009. The Nielsen Consumer Confidence Index jumped nine points to 96 in the third quarter from the preceding quarter – just a point shy of the figure achieved in the first half of 2008. (The index measures confidence in a scale of zero to 100.)
Advertising is said to be a leading indicator of the economy, and while all this sounds positive, the industry is taking the Nielsen figures with a pinch of salt.
Based on Nielsen’s data up to November, the adex growth for the whole year should be about 6% (13% in 2008). However, Nielsen calculates adex using media owners’ official rates, which do not include discounts given to advertisers.
When it comes to actual adex growth, media specialists (companies that plan media strategies for advertisers) and creative agencies have diverse views. Estimates range from a double-digit contraction to a single-digit growth.
Universal McCann chief executive officer Prashant Kumar’s estimate is on the high end. “Even though some of the data may be inflated, the real growth numbers may not be far from there,” he says. “A lot of growth has happened in digital including search, Astro and out-of-home media, which are not captured or partially captured by Nielsen.”
Mindshare Malaysia leader Rahul Thappa, however, thinks there was no growth in real adex for 2009.
M&C Saatchi Malaysia managing director Datin Lara Hussein feels that adex was largely flat last year. And GroupM chief executive officer Paul Corrigan goes further than that. He says that not only was there no growth but the market probably contracted by 7% to 8%, “albeit from a high base in 2008.”
Even more downbeat is the Association of Accredited Advertising Agents Malaysia (4As) president Datuk Vincent Lee’s estimate. He says that if discounting and other bonus enticements were factored in, “we’re looking at a contraction of some 12% last year.”
“CEOs of several media groups have been quoted in the news as stating that real adex growth, in their opinion, ranged from minus 10% to minus 15%,” Lee notes.
But for this year, everyone interviewed by StarBizWeek, however, seem to agree that there won’t be a strong V-shaped adex recovery despite advertising-boosting events like the FIFA World Cup and the Winter Olympics.
Universal McCann’s Kumar forecasts a U-shaped recovery for Malaysia in 2010. “The outlook is optimistic but it’s cautious optimism,” he says.
And while he expects the World Cup to add some zing, he is pessimistic that telcos will spend with the same fervour as before. Kumar says telcos’ ad spendings were down significantly in 2009, reflecting their declining average revenue per user.
Thappa of Mindshare concurs that advertisers are becoming cost conscious. While they may have liquidity at hand, the advertisers want to be reassured of real business returns rather than mere brand recall. “Need-based spending will continue to a large extent,” he says.
He forecasts real adex to grow 5% to 7% this year.
4As’ Lee also projects a single-digit growth, doubting that there will be any major growth spike due to the World Cup.
Advertisers would remain cautious, he says, because regardless of how well Malaysia is doing, the effects of the global recession will be felt through the directives from headquarters that are generally located in countries experiencing the worst of the crisis. “Malaysia’s adex, afterall, is still largely dependent on big multinational advertisers,” he adds.
Aegis Media Malaysia executive chairman Margaret Lim says the sentiment is for a “protracted V-shaped” recovery.
“For 2010, with an improved GDP performance, and the line-up of FIFA World Cup, we should see a spike in June–July with an average adex growth of 10%. However, in a slow and cautious growth environment, we are conservatively projecting an 8% growth in adex,” she says.
Thappa says the adex gap between TV and print media is expected to narrow further this year due to the World Cup activities and sponsorships, but newspapers are still expected to maintain the lead.
Kumar of Universal McCann sees huge opportunities in Star Publications’ diversification and greater openness to innovate as well as The New Straits Times Press’ resolve to better monetise its assets.
On digital media, Lim of Aegis says once the broadband penetration reaches 50% (the Government’s target for 2010), there would be strong changes in consumer behaviour online and savvy marketers will take advantage of this. “Over the next two years, we believe digital media will share a prominent space in adex.”
A major challenge for the advertising industry this year will be the talent shortage. Thappa of Mindshare says the talent situation is dire and agencies are falling over each other trying to hire from the small pool.
“The industry needs to hunker down and invest collectively in supporting educational initiatives at the graduate and post-graduate levels. At the same time, it must do all it can to be attractive to young talent; those that seek more balance from life than the industry can offer at present,” he says.
Lee of 4As says Malaysia must guard against slower industry growth versus regional markets. “Otherwise, as workers are more mobile these days, Malaysia may continue losing local talent to other high economic growth markets like China.”
Rate-cutting among media specialists is believed to have intensified in 2009. The problem is expected to continue this year, Kumar says.
Lim laments that some agencies were offering media rates below cost and media fees at zero to 1%. “Unless the industry as a whole can come to an agreement not to undercut, we will see a breakdown of our business model,” she warns.
For 2010, Corrigan of GroupM would like to see clients place more faith in their judgment of what represents business-building work. “The current emphasis on ‘cheapest rates, cheapest CPRPs (costs per rating point)’ has a place in terms of accountability and efficiency, but also represents a danger in terms of stifling genuine good, strategic work in favour of the lowest measurable denominator,” he says.
