Boom in ad spending requires strong agency association

Boom in ad spending requires strong agency association

By M. Gunawan Alif

JAKARTA (JP): Ad spending has grown dramatically in Indonesia
over the past few years from the time when the first private
television channel, RCTI, was allowed to air commercials. In
1990, ad spending in Indonesia was only Rp 639 billion. Two years
later it grew to Rp 1.03 trillion, and topped Rp 2.26 trillion
over the next two years.

This year, as predicted by Media Scene, ad spending in
Indonesia is expected to surpass the target Rp 3 trillion
(US$1.35 billion).

This tremendous growth of 469 percent for the last five years
shows us that the advertising industry has been moving in leaps
and bounds. But along the way have come new problems and
challenges.

Shortage of ad practitioners has become a serious problem, a
situation which has led to the hijacking of skills and talents,
and consequently the inflation of wages in the industry. No
wonder, Indonesia is now a fertile field for foreign
professionals. They come from the Philippines, India, Australia
and as far away as Europe and North America.

Another headache is the availability of local production
facilities to meet increasing demand of the ad agencies and their
clients. Many of the commercials must be finished at post
production shops in Singapore, Bangkok, Manila or Sidney.

And the debate is still raging about research findings,
especially with regard to TV ratings. Indonesia which has yet to
catch up with other Asian countries is already using the People
Meter measurement system.

The problems mirror the vast opportunities in the Indonesian
ad industry, especially in light of the signing of the GATT and
APEC agreements. Indonesia -- home to a population of more than
190 million with a current per capita income of $919, is a
lucrative market. For Greater Jakarta, with a population of 15
million -- the per capita income is even higher at $3,000.

With a seven percent economic growth rate projected annually,
we expect to see a steadily increasing amount of disposable
income. Premium brands are already taking advantage of this
expected growth by strengthening distribution outlets in the
major department stores. Global fast food chains and restaurants
such as McDonald's, KFC, Wendy's, Hard Rock Cafe and Planet
Hollywood are also ready to make deep inroads into the economy.

Opportunities in the ad industry have brought with them
transnational agencies like BBDO, JWT, O&M, FCB, DMB&B, Euro RSCG
and many more. These agencies establish affiliations or
partnerships with the locals.

And the number of local agencies is rapidly increasing. "As
many as 600 agencies have come to Kompas for ad placement," said
Deasy Taniredja, advertising manager of Kompas, a nationally
distributed newspaper based in Jakarta.

Out of the 600 agencies, only 122 have signed up as members of
the Indonesian Association of Advertising Agencies (PPPI). This
could well be the reason why there is no single standard on
practice or ethics in the industry. A commission war, sometimes
pressing down the rate to as low as 3 percent, has badly affected
many agencies.

A growing number of media are scrambling to get their share of
the advertising pie. Television currently gets the bulk of ad
revenues at 51 percent; newspapers now account for 32 percent,
magazines five percent, radio four percent and cinemas one
percent.

Although advertisers funnel the bulk of ad budgets to
television, the total ad spending on TV, according to many, still
does not warrant five private television channels.

RCTI, the pioneer in the private TV industry, is still at the
forefront. Its competitors are still trying their best to catch
up. There is also a tough competition among newspapers (162) and
magazines (124), that make many publications doubt if they will
survive in coming years. Radio was the media hit hardest by the
flourishing of commercial television. Five years ago, radio still
reaped 9 percent of the total ad budget. These days radio
stations have to work hard for a mere 4 percent.

The television era fortunately has helped elevate the
creativity of Indonesian advertising. Although, it was only five
years ago when the ad man returned with a proliferation of TV
commercials, industry watchers say, creativity has improved
tremendously.

The message delivered by the commercials these days are more
entertaining. Many of them however, come out so with the help of
foreign professionals, mostly by those in production house.

All these show us that the opportunities in the Indonesian
advertising industry develop in the proper way, Indonesia
requires a strong advertising association capable of charting an
appropriate course for the industry and confronting problems that
arise along the way.

To this end, there is no alternative but for the PPPI to
broaden its horizons and work still harder to advocate the
activities of the advertising industry.

At the time when the role of advertising is not yet clear in
the perception of consumers -- and sometimes in the eyes of the
government -- the PPPI must proactively seek to help the industry
members to understand not only the techniques of advertising but
also the benefits the industry brings to the development of
Indonesian business.

As a wise man once said, "Thee, who have the capabilities to
see the opportunities and take action accordingly, will make
success." I think this will also happen in Indonesia.

The writer is Editor-in-Chief of Cakram, an Indonesian language
advertising, public relations and business communications
magazine in Jakarta.