Spending for ads jumps significantly

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.