| Adspend Expected to Grow by Nearly 70% in Georgia (2009), ZenithOptimedia says |
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22/04/2009 16:50 (212 Day 20:21 minutes ago) | |||||
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The FINANCIAL -- Vsevolod Krutko, Managing Director of Tbilisi office, talked with The FINANCIAL regarding the future outlook of Georgia’s ad market.
While leading businesses in Georgia claim to have shortened advertising budgets, ZenithOptimedia, one of the world’s leading global media services agencies says adspend is expected to grow by nearly 70% next year in the country. “2009 will be the first year that total ad expenditure will exceed USD 100 million,” says ZenithOptimedia. The company believes Eastern and Central Europe are forecasting return to positive growth of 4.5% in 2010.
“The ad market is still in its infancy in Georgia; 2009 will be the first year that total ad expenditure will exceed USD 100 million. TV is the dominant medium, accounting for 83% of the market in 2007. Indeed, it is only within the last three years that press, radio and outdoor advertising have been widely used and monitored, and Georgia has no real new media industry,” the report says.
Vsevolod Krutko, Managing Director of Tbilisi office, talked with The FINANCIAL regarding the future outlook of Georgia’s ad market.
Q. The report says that unprecedented economic problems have led the company to predict a 6.9% decline in global ad expenditure in 2009. But in for Georgia the company forecasted 70% growth in 2009. Can you explain what is behind such an optimistic outlook? (taking in to consideration the fact that many companies in Georgia said they have shortened their budgets for TV, radio, outdoor and print media)
A. The report says that the 70% growth is predicted mainly due to excellent performance on TV. First of all, please note that the market volume is estimated in Rate Card prices (before discounts). Then we have to realize that this year some strong players are back actively to media investments after a slow-down in 2008: P&G (actually is the #1 player in investment now), Unilever, Glaxo Smith Klein. The second reason for growth is renewed broadcasting of Imedi TV and growing Channel 1. Increased advertising capacity means that you have to invest more to keep substantial media weight. Also, keep in mind that the Rate Card price for Imedi TV is rather high compared to other channels, thus increasing total Rate Card spend.
Communication companies are also active in the media as usual, because the category is likely to suffer less from the recession. Considering the decline in ad spend, it is mainly due to development companies. Even banks who claim to have cut down on advertising investments, have not decreased activity on TV as it is of great importance now in terms of image communication.
In General, Georgia is one of the few former USSR states with positive GDP growth predicted in 2009, so ZenithOptimedia and international advertisers are very optimistic about the country.
Q. You said “impressive growth is largely thanks to excellent performance by TV”. In contrast to this - local TV companies claim a strong decline of ad spending rates. Can you clarify this situation?
A. Regarding Imedi, the channel does have significant growth compared to last year, as it wasn’t broadcasting until Q4 2008. So their sales increased greatly compared to “zero” last year. And the trend is, as the channel’s rating grows, that the ad volume on the channel will continue to grow during the year, if the political situation is more or less stable of course. Investment on Channel 1 also increased since it was included in the pool of channels sold by MediaHouse, and its ratings have grown.
In general TV companies forecast volumes by advertisers’ commitments at the beginning of the year, and these commitments are very cautious due to global economical instability. But if we have a look at the actual rate card spend in March 2009, we will see that it has grown by 66(!!!)% compared with the same period of 2008.
Q. “Internet expenditure is also expected to show impressive growth in 2009, but since it only accounts for 0.2% of total expenditure at present, it does not have such a large impact on the overall growth figure”. Can you give us more details about internet advertising in Georgia. What is the expected growth of this segment?
A. Penetration of the internet is still rather low in Georgia. Nevertheless, media consumption during the crisis tends to shift to internet more than to other media, as entertainment, books and a lot of other products and services are much more affordable online. As far as we can judge from our advertisers, the share of internet will grow slightly in the total adspend structure. In general the internet market is predicted to grow by nearly 100% in 2009.
Q. The report shows that TV is the dominant medium, accounting for 83% of the market in 2007 in Georgia. But it also says TV occupies 33% in Central and Eastern Europe.
A. Georgia is still a traditional market in terms of media consumption and media sales. Very few media agencies offer clients media splits relevant to their business, including not only TV but a media-mix of several instruments allowing the advertisers the best media ROI. Especially in the time of a crisis, very few are ready to take risks and invest more in expensive outdoor or ambient media. What’s also important to note is that with the current sales system TV remains the most flexible media and the cheapest one in terms of cost per thousand contacts. In CEE for example digital TV already takes a much bigger share, allowing viewers to skip advertising completely, so the effectiveness of TV investments in these countries falls dramatically, which is not the case with Georgia.
Q. The report says Georgia has no real new media industry. What does it mean? What are the challenges in Georgia?
A. Well actually Georgia is moving in the right direction very fast. Clients, especially the ones with limited marketing budgets, tend to be more innovative in the media. The latest case of our campaign with Hewlett-Packard shows how effective new and ambient media can be: manholes in the streets, pads on the tables in cafes, non-standard bus-shelters branding with sound, etc. So far, due to the reasons explained above new media is not widely used in Georgia, but it has real potential for development.
A. Most CEE countries are developing markets, with all the features of a “young body”: all diseases run in a much more vivid and active way, but the recovery takes less time. After the investment risks decrease and international financial assistance arrives, the consumer market and consequently advertising will continue growing.
Q. What is the type of research your company used?
A. First of all we cooperate with AGB Nielsen Georgia and IPM for media research and monitoring. Also part of the information was collected from polls held with media owners. For comparative calculations and forecasts we also used International ZenithOptimedia Tools, specially designed for market and category analysis.
According to ZenithOptimedia advertising expenditure across Central and Eastern Europe grew by 10.9% in 2008, representing a third year of double digit growth. However, the global recession has begun to affect the region in a dramatic way, and we expect to see a 13.9% decline in total ad expenditure growth in 2009.
“Many countries in the region have approached the IMF for financial assistance as they struggle to cope with the effects of the downturn, and the scale of these economic crises go some way to explain why the CEE ad market will see greater budget cuts than the Western European ad market in 2009. However, we expect CEE to recover faster, and are forecasting a return to positive growth of 4.5% in 2010.”
“Traditional media will be hit hardest this year; we expect newspapers, radio, cinema and outdoor to decline by more than 20%. Online, however, will continue to prosper with a forecast 14.5% growth in 2009 and 17.7% in 2010. Although it is still very much a minor medium, accounting for just 3.0% of total expenditure in 2007, we expect it to gain ground quickly at the expense of the struggling traditional media, and predict that its share of the ad market will increase to 6.1% in 2011.”
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