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Ad spending to keep moving up on consumption growth

  • The Jakarta Post

    The Jakarta Post

| Mon, June 24, 2013 | 11:47 am
Ad spending to keep moving up on consumption growth

Media companies are optimistic that advertisement revenues will keep growing as big advertisers will be unlikely to cut their commercial spending in the face of looming inflation.

In the first quarter, ad spending saw a two-digit increase compared to the same period last year.

Jakarta listed PT Media Nusantara Citra (MNCN) estimated that advertisements would increase between 15 and 20 percent this year.

'€œMore local companies '€” such as Mayora and Kalbe '€” will spend on advertising. Local companies are getting stronger in line with growing domestic consumption,'€ Teddy Pun, the head of investor relations at MNCN, said.

He added that 55 percent of advertising entering MNCN came from local companies while the remaining came from multinationals. According to Teddy, local companies allocate 3 to 4 percent of their spending for advertisements and multinational firms around 12 to 15 percent.

Figures from Nielsen showed that the national advertisement expenditure reached Rp 23.18 trillion (US$2.3 billion) during the January to March period of this year, increasing by around 23 percent from Rp 18.83 trillion in the same period last year.

Almost all categories showed increases, except communication equipment and services, which slipped 3 percent.

Processed food producer PT Mayora Indah said advertisement spending would likely be reduced by frequency, not by value, in an attempt to maintain brand awareness in the market.

'€œWe used to hit all areas, there were ads for Mayora products at every hour on every television station. We may be more selective
and choose prime time slots,'€ Mayora corporate secretary Yuni Gunawan said. She added that Mayora had allocated around 10 percent of its annual spending for advertisements.

PT Visi Media Asia (VIVA) also expected that it would enjoy income from growing advertisements. VIVA reported a 27 percent increase in revenue to Rp 311 billion in the first quarter of the year from Rp 244 billion in the same period last year.

 '€œMost advertising came from consumer goods producers. There has been a significant increase in pharmaceutical advertising,'€ VIVA finance director Charlie Kasim said.

As the country is nearing an election year, some may expect income from political ads. In the first quarter of the year, government and political organization'€™s advertisement spending rose 55 percent, according to figures from Nielsen. Charlie said he did not expect much.

'€œThere were a number of advertisements for regional elections in the first quarter. However, historically, we have never gained much in election years. In 2009, political ads only accounted for less than 10 percent,'€ Charlie said.

However, he added that VIVA would likely see more as its audience share now stood at 12 percent.

Visi Media Asia now has two television stations: news channel TVOne and entertainment channel ANTV, and also runs news portal Vivanews.

Another news channel, MetroTV, concurred; saying contributions from political advertisements was only around 10 percent.

'€œUsually, we will see growing political ads in the second semester ahead of the '€˜political year'€™. However, we now only have 12 political parties taking part in election next year, less than the amount five years ago. So, we aren'€™t expecting much,'€ news director at MetroTV, Suryopratomo, said.

He added that Metro TV had gained Rp 465 billion from advertisements during the January to March period, increasing by around 13 percent compared to Rp 410 billion in the same period last year. Out of the total, 13 percent of the ads were related to regional elections, according to Suryopratomo.

Metro TV'€™s audience share is now 4 percent.

'€œWe were in a period where it is very difficult to seek-out advertisements. There has been a shift in which advertisers are also seeing that the news has a special segment and special viewers, a potential place for advertisements to get specific customers who have purchasing power,'€ Suryopratomo said, adding that its news program that aired at prime time received two-year contracts from advertisers.

'€”JP/Raras Cahyafitri