Promising ... but not quite stable<\/p>\n
The Indonesian advertising market has developed very rapidly
\nduring the last few years thanks to a continued increase in
\nadvertising expenditure (adex) for consumer goods. Pradeep
\nHarikrishnan, the research advisor of Initiative media
\nspecialist, highlighted many important aspects of future growth
\nin the country's ad industry in a recent interview with The
\nJakarta Post. Below is an excerpt of the interview.<\/p>\n
Question: According to a survey, Indonesia's adex grew by nearly
\n35 percent in 2004; one of highest in Asia. Do you think this
\nhigh growth will be sustainable in 2005?.<\/p>\n
Answer: Initiative estimates the real growth in 2004 as 30
\npercent, which is one of the highest in the region. This is the
\nactual increase in advertising expenditure after accounting for
\ninflation in the rates and taking into account the discounts
\noffered to advertisers. A major factor that contributed to the
\nhigh growth in 2004 was the spending on election campaigns by
\npolitical parties. The adex growth in Indonesia is primarily
\ndriven by the relatively low cost of advertising on TV. TV
\naccounts for three-fourths of advertising spending in the country
\nand registered almost a 40 percent growth in terms of volume
\n(number of spots on air).<\/p>\n
In 2005, the growth is expected to be lower, with no spending
\non elections campaigns. Fast Moving Consumer Goods (FMCG) -- such
\nas toiletries, cosmetics, branded food, beverages and home care
\n-- which is the prime driver of advertising expenditure in the
\ncountry, may not increase its advertising spending significantly
\ncompared to last year.<\/p>\n
On the other hand, the automotive industry, telecom services,
\npharmaceuticals and consumer durables are all business sectors
\nthat will contribute significantly to growth in 2005.<\/p>\n
With such a high growth, like China, Indonesia, is considered
\none of the most promising ad markets in Asia. Do you agree with
\nthis statement?.<\/p>\n
Not really, because the advertising growth in China has been
\ndriven by strong economic growth being sustained year after year.
\nForeign investment in China is, by far, the highest in the region
\nand with the entry of global brands, the advertising industry in
\nChina has seen high growth in terms of services and media
\nexpenditure. In Indonesia, growth has been driven by internal
\nconsumption of products and services, which is sustainable only
\nwhile there is income growth. If disposable income drops due to
\nany reason, the spending will stop and so will the advertising.<\/p>\n
So while the Indonesian market appears promising now, it is
\nnot as stable as China. It is volatile and unless foreign
\ninvestment and spending on global brands increase, the situation
\nwill be quite unpredictable.<\/p>\n
TV media remains dominant despite the clutter problem. Do you
\nthink its dominance will continue in the future?<\/p>\n
TV is dominant in Indonesia for a number of reasons. The reach
\nof the print media is low and fragmented. There are no national
\nnewspapers or magazines and for a country with such high literacy
\nrates (80 percent), readership of newspapers and magazines is
\nlow. Radio is very fragmented and the fact that effectiveness on
\nradio is much below TV is well known. So the increasing reliance
\non TV (which is the only medium that provides national coverage)
\nhas fueled the high clutter situation.<\/p>\n
TV will continue to dominate the advertising business, at
\nleast in the foreseeable future. However, the way TV is used for
\nadvertising will change. We see an increasing use of sponsorship
\nand built-in advertising (where the brand is part of the
\nprogram). Also with the entry of new regional channels and the
\nincreasing reach of satellite channels, the supply situation (for
\nadvertising space on TV) will increase resulting in
\nrationalization of the clutter. Right now we have a limited
\nnumber of channels and hence demand exceeds supply, especially in
\nprime time.<\/p>\n
What is the fate of the print media, radio and outdoor
\nadvertising in your opinion?<\/p>\n
The dominance of TV will not undermine the value of other
\nmedia like print, radio and outdoor. Each will have a bigger role
\nto play in future provided they are used in a manner that is
\nsuitable for the product category and takes into account the
\nrelationship consumers have with the medium. For example we know
\nfrom our research that while TV creates brand awareness quickly,
\nit does not provide detailed information sought by consumers.<\/p>\n
Also consumers prefer to get the details through newspapers or
\nmagazines, which have higher credibility than TV, for many
\nproducts. The trust in print media can be utilized for brand
\nbuilding but fails to deliver if it is used for creating large
\nscale brand awareness. So using the right media at the right time
\nfor the right purpose will always be better than using TV alone.
\nOutdoor does help in creating a larger than life image for brands
\nor a sense of ubiquity.<\/p>",
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"sponsor": "Okusi Associates",
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