Friday, January 11, 2008

Views differ on ad sector prospects

Views differ on ad sector prospects

After two years of struggling through difficult times, Thailand's advertising industry saw a glimmer of hope in last year's fourth quarter, lit by the festive season and the general election.

Published on January 4, 2008

Now there are even grounds for good news. There's a good chance the industry will reach a value of Bt100 billion in 2008for the first time, up from about Bt90 billion in 2007. The bad news is the value will be driven not by real spending growth, but rather by media inflation.

TBWA Thailand managing director Chaipranin Visudhipol, who is a former president of the Advertising Association of Thailand, and Creative Juice/G1 chief executive Witawat Jayapani, the association's current president, do not believe Thailand's economic outlook will improve after the installation of a new government.

They point out that many of the politicians are the same old people who have been playing out their roles for years.

"A coalition government will have mainly the same old politicians, with a high possibility of unexpected political incidents - even collapse - at any time," Witawat said.

Chaipranin said the private sector had given up hope in a new government.

"They've witnessed unreliable political situations over the past two years. Even after the country gets a new government, it will be nothing better," he said, from which Witawat concluded: "We can see nothing in the ad industry until late next year."

Another negative factor seen by Witawat is instability in global oil prices.

He said major industries like property were able to capture only middle-market to low-end customers and that the economic outlook gave no hope to an automobile industry confronted with dwindling sales.

However, Chaipranin gave a different view on the negative factors. He said they had been around for so long that businesses had become accustomed to them and that they were no longer considered serious.

"What we'll see in 2008 is more businesses grouping together among themselves to cooperate and smooth out their operations. Unlike before, companies will work harder to boost their own businesses, instead of hoping and waiting for the government to create better economic conditions," he said.

Cooperation between companies will not be obvious this year, because many of them will still feel uncomfortable about sharing information and working with others, Chaipranin said. Generally, Thais prefer to work as individuals rather than in teams, so the new spirit of cooperation will not have any early impact on the ad industry in terms of a real increase in spending on advertising. However, the change in business behaviour will slowly become more obvious, he said.

Despite the high possibility of the ad industry reaching a value of Bt100 billion in 2008, Chaipranin said the economic outlook for the year remained gloomy. Advertisers will still be very careful with their spending, and that is why media inflation - an increase in advertising fees by media channels - will be the key driver in reaching the new value.

Chaipranin predicts media inflation this year will be about 5 per cent, whereas Vichai Suphasomboon, CEO of advertising and marketing firm Carat (Thailand), said the figure would be more like 7 per cent, following 8-10 per cent inflation last year.

While estimating a higher rate of media inflation, Vichai has a totally different outlook for the fortunes of the advertising industry this year. He believes the industry will do better.

"Everyone has been patiently waiting and watching [the economic and political situation] for a year, but to maintain smooth business operations they cannot keep quiet for long," he said. "I believe many companies are already planning new marketing events and product launches. There will be a lot of activities in 2008; they're just waiting for the government to settle down."

Y&R ad agency's Sohn Chongsrichan tends to agree.

"The political situation can be compared to a factory that has been closed for a year. The present government did not want to make any major decisions. So after the election, the factory will be opened once again," Sohn said. "All political parties [which he compared to companies] already have their marketing activities and plans for producing products and have also set up managers for each division. They're waiting for the time to show their work - but whether the work will be good or bad is another matter.

"Investing in new infrastructure is the best way [for the new government] to impress the people, particularly in a big city like Bangkok. So we'll see some mega-projects happen for sure, and those projects will create a lot of jobs."

In terms of which industries will be the top advertising spenders in 2008, Vichai selected six with high potential.

First is the property sector, particularly city-condominium developers, following the recent emergence of a big market in which young people are moving away from single-detached houses and townhouses and seeking condominiums with convenient access to their work. This also creates a big market for furniture, consumer-electronic products and city cars, he said.

Second is cosmetics for men who are becoming more concerned about their appearances. Third is health products and services, following the recent strong trend towards health-consciousness. Fourth is the gigantic market for women's cosmetics and toiletries. Fifth is the market for sporting products, which will be driven by Euro 2008 and the Beijing Olympics. The strong sporting trend will also create a boom in the soft-drink market. Sixth is high-technology products, especially with many technology companies preparing for the coming iPhone.

Vichai said many advertisers would also grab the opportunity - while others would continue to keep quiet - to capture consumers' attention and shorten the time taken to build wide product awareness.

"Consumers' savings are rising significantly. They have purchasing power but are keeping it in bank accounts. They're waiting and watching all situations," Vichai said. "In addition, Thailand is still an important market to foreign investors despite the strong baht, because of various conveniences and the reasonable cost of living. If the government gave more support in the area of corporate tax, we'd easily compete with other countries."

Sohn also sees the possibility that the government and its agencies will spend on advertising next year in an effort to build awareness or rebrand their organisations and inform the people about their missions and visions for the future.

In terms of media channels, television remains the most attractive, because free-to-air television is the cheapest medium and the all-time favourite of Thai consumers, Sohn said. Newspapers remain the second most attractive advertising channel. A good future is seen for cinema ads and outdoor channels, particularly the many new forms of outdoor advertising.

Digital channels will become more popular, driven mainly by consumers aged 12-20, but it is doubtful this will see 30-per-cent growth as forecast, Sohn said.

Nitida Asawanipont

The Nation

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