Internet Advertising Poised to Grow

MTOutdoor advertising markets were down 42 percent in the first quarter.
Russia's once-booming advertising market will contract by at least 10 percent this year, but Internet advertising remains unaffected and looks poised to grow, ad executives said Tuesday.

Kiril Matveyev, director of Aegis Media, said the country's market would shrink by at least 10 percent this year in ruble terms, a drop that both well outpaces the forecasted 5.9 percent decline in the global market and reinforces the country's status during the crisis as a black-sheep BRIC country.

While the advertising industry showed positive growth in the first quarter in Brazil, India and China, Russia's plunged 30 percent, Matveyev told an industry conference.

With the country's gross domestic growth down 6 percent and industrial production down 17 percent year on year in April, ad executives said they did not expect the ad market to recover until next year.

"There is a significant correlation between GDP growth and the advertising market," said Martijn Peeters, a division director at PricewaterhouseCoopers.

"Almost every industry in Russia is affected by the crisis, and consumer behavior has completely changed. So any research that you did last year you can throw it out the window," Peeters said.

Sergei Vasiliyev, director of Video International, said the "main driver" behind a 20 percent drop in television advertising in the first quarter was decisions by small and medium-sized businesses to slash their television budgets by 52 percent in the first quarter.

"Small and medium-sized businesses are not doing that great, to put it lightly," Vasiliyev said. "We have seen 30, 40, 50 percent declines in airtime reservations from small businesses."

The 50 biggest TV advertisers, meanwhile, have increased their television budgets by 15 percent, he said.

But Vasiliyev cautioned that the worst was yet to come for television, which fared much better in the first quarter than the print and outdoor advertising markets, down 35 percent and 42 percent, respectively, compared to the same period in 2008, according to data from the Russian of Association Communications Agencies.

"I think the bottom will be hit in June and July, with a volume decline of 25 to 30 percent. And then in the fourth quarter, things will get better, and we will see volumes down around 17 percent, like what we saw in April," Vasiliyev said.

It may be doom and gloom for traditional advertising media this year, but the same story isn't true for the Internet, said Alexei Katkov, commercial director for Mail.ru.

"Before the crisis, a little more than half of all companies in Russia used targeting advertising," he said. "Now, 90 percent of them are looking to target. And if you want to catch a specific type of person or group, you're certainly not going to use TV. Targeting is best done through the Internet."

Katkov said the Internet advertising market did not contract in the first quarter, and he expects year-end revenues to be on par with those in 2008, or 1.2 billion rubles.

With Internet use growing rapidly in Russia, Katkov said he expected new media to soon come to dominate the advertising market, overtaking all other media except television.