Many ad firms may go bust next year
Many ad firms may go bust next year
JAKARTA (JP): Many advertising companies, particularly small
and medium operations, may be forced to close their doors in the
recession forecast for next year, an analyst has warned.
Executive secretary of the Institute for National Development
Studies, Umar Juoro, said Saturday ad firms could collapse due to
a likely slump in orders amid the economic downturn.
But he said those companies which could adjust to changing
consumer trends might be able to ride out the tough times.
The drop of more than 50 percent in the rupiah's value since
July may cause advertisers to cut their advertising budgets, he
said at a seminar on prospects for the advertising industry.
Advertising firms would be simultaneously pressed by high bank
interest rates due to the tight monetary policy, he said.
Big companies could survive through establishing affiliations
with foreign firms, he said.
"Currently, the government is still protective toward local
advertising companies, but if the sector gets more liberalized,
large companies must form alliance with foreign companies in
order to survive."
Umar predicted that total advertising spending next year would
not reach set targets.
He said revenue growth might also decrease from 19 percent
last year to between 10 percent to 15 percent, but the growth
would still be double the economic growth expected next year.
"The industry will not die," he said.
He added that domestic consumption would boost the country's
high economic growth prior to onset of the predicted crisis.
"Recession would not drastically cut consumption, but it would
made consumers more value-aware," he said.
Umar said total ad spending last year reached Rp 3.8 trillion
(US$950 million), and was projected to reach Rp 4.5 trillion this
year.
Next year, ad spending was expected to hit Rp 5.3 trillion, 39
percent below the expected target of Rp 8 trillion, he said.
He said problems besetting the property and finance sectors
contributed to the decline.
Ad spending by property firms made up about 15 percent of the
total this year, but it would fall to no more than 7 percent next
year, he said.
The exception in retaining its market share would be low-cost
housing, he said.
He believed that lower purchasing power resulting from this
year's financial crisis would propel domestic consumers to be
more value-conscious.
It would in turn force local advertising firms to cater to the
middle and lower market segments, he said.
"The marketing trend for next year would be towards mass
marketing, which mostly contains of middle to lower market
segment, products for upper segment would be in short demand."
Middle and small advertising firms must promote their
understanding of the local market needs to their clients, he
said.
This required that ad campaigns be more functional instead of
focused on shaping an image, and also able to tap into the
public's aspirations, he said.
For the next two to three years, price would become the most
important factor in marketing products, he said. Consumers would
spend their money on products and services which gave them the
most value for money.
Advertisers must be able to convince companies that consumers'
interests had shifted, and make their campaigns more realistic,
he said.
Advertisements should represent the value of the products
instead of the image received from them, he said. (das)
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