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.