No fresh orders for many ad agencies

JAKARTA (JP): The economic crisis has severely wounded Indonesia's advertising industry, with some ad agencies receiving no fresh orders in the past three months, analysts said yesterday.

"The industry is now in a cathartic state," said Ken McKenzie, the owner, publisher and editor-in-chief of Hong Kong-based Media Magazine, said at an advertisers' forum here yesterday.

Some agencies had decided to temporarily cease their operations until the economy recovered again, he said.

"They have put themselves in the refrigerator until the market turns around," he said.

The chairman of the Jakarta chapter of the Association of Indonesian Advertising Companies, RTS Masli, said yesterday that at least one of the chapter's 107 members had reported it was no longer active.

Masli said that corporate spending on advertising had dropped 70 percent this year as most companies cut their budgets in order to survive the crisis.

He said the industry "would be lucky" if advertising spending in the country was between Rp 1 billion (about US$117.7 million) and Rp 2 billion this year.

McKenzie said that between 15 percent and 50 percent of the entire workforce in the advertising industry would be laid off as a result of the recession.

He said it was hard to estimate the numbers being laid off because there were too many layers of companies in the industry here.

In addition to mainstream agencies, "there are peripheral agencies, people who paint signs who regard themselves as part of the advertising industry, and all sorts of small operations."

He said the mass layoffs were also necessary because there were too many people in the industry before the crisis hit the country.

"They were like moths flocking around the lights, everyone sought opportunities to make money," he said.

But McKenzie predicted that once companies rationalized their operations, and once the market picked up again, they could emerge much stronger.

They could "leapfrog their rivals" very easily he said, citing as an example the advertising industry in England which came out stronger after a recession in the late 1970s.

"During the recession, some companies worked three days a week, with candle light, they laid off many people and cut their directors' salaries," he said.

"But they kept their best people and trained them as best as they could, and the loyalty of these people were so tremendous that when the economy returned they were stronger."

Advertising companies must therefore use the downturn as an opportunity to build a strong corporate culture by training their most talented people to prepare to grab new opportunities once the economy recovers, he said.

To survive, advertising companies must be prepared to "move down the food chain", by venturing into other opportunities like brochures, annual reports and packaging development and design.

He said advertising agencies must also maintain some sort of advertising presence, such as through low-cost visual points of sale presence or outdoor posters.

Companies could also look at alternatives such as public relations, or -- if there was no other way -- merge with foreign companies, he said. (das)