Local ad agencies seek protection

Anissa S. Febrina, The Jakarta Post, Jakarta

While other sectors are opening up on the back of globalization, the domestic advertising industry seems to be unprepared to compete with its foreign counterparts.

Seeing lower fees and a smaller share of the domestic advertising business, local agencies are seeking regulations from the Ministry and Telecommunications to protect local agencies.

"Our advertising business is currently the scene of an unfair business climate, with unbalanced competition between foreign- affiliated agencies and local agencies," said Indonesian Association of Advertising Agencies (PPPI) chairman Narga Habib during a media gathering on Thursday.

As the number of television stations grows, the advertising business should in theory be booming. However, most television advertising is being won by foreign-affiliated agencies.

The PPPI claimed that only 2 percent of its 343 members were affiliated agencies but they took a combined share of 80 percent of the national advertising budget. According to ACNielsen, a market research firm, the advertising budget this year will reach a net value of Rp 17 trillion (US$1.68 billion).

According to the association, there have been more foreign agencies coming into the local advertising industry since 2000. The agencies has introduced brand agency and media buying practices, which separated the creative from the marketing sides.

This division ended up lowering the percentage of fees received by full-service agencies.

Among the foreign agencies are Omnicom, Interpublic and WPP, each with its own media buyers that have been operating aggressively in the domestic market by offering lower fees. Meanwhile, most local agencies are full-service agencies.

The local industry says that this is hampering the growth of domestic agencies as they receive declining fees for their creative work.

PPPI said that protection for local agencies was needed, as was the case in Japan. "We realize that globalization is inevitable ... but currently local players are not ready," Narga said.

I-box Foreign-affiliated advertising agencies: Ogilvy EURO RSCG Adwork! Grey Worldwide McCann Erickson Lowe

Local advertising companies: Fortune Indonesia Matari Advertising Cabe Rawit Pariwara JC&K Advertising Hamdan Communications