Spending for ads jumps significantly

By Frits H. Pangemanan

JAKARTA (JP): Total spending for advertisements in the country is expected to jump to Rp 1.66 trillion (US$774.21 million) this year from Rp 1.38 trillion last year, with television commercials taking 49.1 percent worth Rp 816 billion.

"The high increase is supported by the significant growth of four business sectors which are the biggest advertisers in the country," Koes Pudjianto, chairman of the Indonesian Association of Advertising Agencies, told The Jakarta Post in an interview here on Friday.

The four business sectors are automotives, pharmaceuticals, household goods and the property business, he said. "The advertisement spending of the four sectors increased by 14.63 percent to Rp 1.17 trillion last year from Rp 1.02 trillion in 1992."

Koes, who is also chairman of Binamark advertising and marketing services, said that his association's annual survey indicated that the four sectors last year held a combined share of around 50 percent of the advertisement spending, up from only 25 percent a year earlier.

He said the details of the 1993 billings of all business sectors are now being prepared for publications which will be issued later this month.

But he estimated that vehicle industry was the biggest advertiser in newspapers, spending around Rp 53.42 billion or 15.4 percent of total advertisement spending, followed by property with Rp 34.80 billion or 10 percent.

For television commercials, pharmaceutical producers, with expenditures of Rp 150 billion, topped the rank, dominating around 25 percent of all spending for commercials, he said.

"I am of the strong opinion that the spending of pharmaceuticals and consumer goods producers will significantly grow in the next few years, as a result of the operations of some new television stations in the country," he said.

Koes argued that Indonesians are basically more familiar with audio-visual advertisements. "And the presence of new stations will in turn prompt the growth in spending for commercials because television has better access to people in various places within a very short time," he said.

Spending for television commercials will likely increase to Rp 816 billion this year from Rp 613 billion last year and Rp 390 billion in 1992. The spending only reached Rp 51 billion in 1990.

According to the association, spending for advertisements in newspaper is expected to rise sharply to Rp 553 billion this year from Rp 484 billion last year and in magazines to Rp 114 billion from Rp 108 billion.

He said television's market share will dominate around 60 percent in the future.

Capital

Koes expressed concern that although commercial spending is increasing, advertisement agencies are not well prepared. "Demand for advertisements grows faster than the development of infrastructures for their production," he said.

He said advertisement production, which needs high technology, has become capital intensive in nature.

"An advertising agency should have at least Rp 2 billion or Rp 5 billion in capital for starting its business," he said.

Advertising agencies have to invest a lot of money both for procuring working facilities, including computer and workshop, and for hiring experts responsible for the planning of the market.

"Over 50 percent of our capital is usually used for hiring experts," he said. "We should use experts because the market is very complicated," he said.

He said an advertising agency can no longer rely on a tradition mechanism, in which anybody can offer advertising services for speculations.

"However, many agencies ignore the new trend," he cautioned. "They are not aware that advertising has now become an integrated businesses."

Furthermore, the trend of the advertising is currently shifting to the segment-oriented market, he said, adding that Femina, Gadis and Matra magazines, for example, showed the trend with their billings being forecast to increase to Rp 13.19 billion, Rp 4.72 billion and Rp 3.53 billion, respectively, this year from Rp 11.85 billion, Rp 3.62 billion and 2.52 billion, respectively, last year.

Experts

Baty Subakti, managing director of B & B Communications, told the Post that the segment-oriented market requires more experts, which in turn needs more investments.

"But, our industry is now facing not only a lack of investment but also human resources," he said.

He expressed concern that Indonesia has yet to operate an educational institute to produce experts in advertisements.

"Thus far, we have relied on natural instinct of business, instead of using professional skills," he said.

Koes, meanwhile, said that his association this year started informal education programs in cooperation with the ministries of workforce, trade and information, with hopes to educate and train its members and people interested in the business.

He said many of the country's agencies still rely on foreigners, including those from the Philippines and the United States.

Paul Kamardi, director of the Matari Advertising company, claimed that In Indonesia, his company has acted as a training center of the industry. "The agency provides employees for other agencies," he said.

Many executives quit Matari due to dissatisfaction with the remuneration. They were offered better pay by other agencies.

Kamardy said around 500 former executives of Matari, billed to be the third biggest advertising company in the country, now work for other companies or have established their own businesses.

Koes, who was last year appointed by the association as its chairman, said that training and informal education are considered priorities.

New ruling

In addition, the association is also now preparing a new ruling on the advertising industry, which is scheduled to be proposed to the government in the near future, he said.

"The reason is simple. Thus far, we have no clear ruling on the business," he said. The government has given the green light to us to prepare a kind of regulation in the advertising industry.

"All things related to the planned ruling are now under discussions," he added. It is expected to include the taxation, capitalization and coverage of the business.

He conceded that the industry is relatively new in the country, thereby forcing the association to formulate details of the coverage of the business.

In case of irregularities, for example, the association has no capability of taking administrative measures against offenders.

"We have a code of ethics, but it is only for members," he said.

Only 132 out of the 435 existing advertising agencies have joined the association.