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May 24, 2009

Fall-time recovery

TV advertising market will recover as early as this year
In April 2009, the situation in TV advertising looked more optimistic than in the previous three months. This is the opinion of Sergey Vasiliev, CEO of Video International, stated at the conference “Advertising Market in New Economic Conditions” hosted by Aegis Media, PricewaterhouseCoopers (PwC) and Rusbrand. According to Sergey Vasiliev, whereas in Quarter 1 there was a 20% drop, last month the drop was only 17%. Moreover, by the end of the year TV advertising may restore to the last December level.
A forecast of Sergey Vasiliev indicates that after a slow-down of the drop in April, the TV advertising market will rock the bottom early this summer. In June – July, a 25—30% drop vs. the same period last year is expected. After that a recovery will set in. In the fall, the market situation will look very much like that in the spring. By the end of the year the sales of ads on TV (in rubles) will reach the last December level. This optimistic approach of Video International CEO is based on the behavior of the Top 50 advertisers. The Top 50 advertisers haven’t reduced their ad budgets on the TV channels operated by Video International; moreover, they increased these budgets by 15%. Other players very drastically reduced their TV ad presence and spending, which significantly affected the whole segment. The TV ad market development outlined by Sergey Vasiliev is acknowledged by Anna Kurbatova, analyst of UniCredit Securities: “Advertisers spare their budgets in Quarter 2 keeping them for the second half of the year”. She agrees with other market players: if there are no significant shocks in the economy first signs of the market recovery will get visible by the end of the year.
It is the TV ad which along with online advertising keeps up the highest effectiveness under the recession. This evaluation was mentioned in the report on the advertising climate in Russia delivered at the conference by PwC.  According to the PwC findings, despite the fact that the most severe drop of ad market was revealed in the television segment, the share of this ad medium in the overall media mix is growing. Anna Kurbatova believes this trend will remain till the end of the year: “For the money to get back to the press, radio and outdoor advertising, it will take much longer than two quarters”.
The PwC findings suggest TV advertising becomes the most effective means to drive brand value under the new conditions. “I guess it is true for the mass brands”, Dmitriy Pisarsky, CEO of ARMI-Marketing, agrees with the findings. “The concentration of advertisers’ funds on TV that we observe and the heightened attention of consumers towards this media segment, watching the ‘crisis’ news, budget restrictions for other entertainments – in fact, these are the two sides of the same process”.
 It is the brand development investment increasing the brand’s value which takes on a special meaning under recession, PwC analysts conclude. “Brand investments are always good as they increase its value and the value of its owner”, Dmitriy Pisarsky believes. “Yet importantly, brand investments pay back not under a crisis but at the beginning of recovery because the companies who invested in their brands are more likely to reap the fruits of the reviving consumer demand than those who followed the do-nothing strategy in hard times”. That’s an important thing to bear in mind, the expert believes. He says there are examples of brands among major Russian advertisers who behave actively now and increase their presence in the media and – as a result – in the mindset of consumers. These are, for example, McDonald’s, certain coffee and chocolate brands of Kraft Company.

Alexander Klenin, RBC Daily
May 2009

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