Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Advertising Market Recovering From Slump




The advertising market, hit by the 1998 economic crisis, is recovering on the back of an improving economy, but it will take years before pre-crisis levels are reached, industry officials said.


"The advertising market suffered very much," said Alexander Romanov, chief executive of RAVI International, part of the Video International holding.


"We have so far reached 1999 levels, but not levels seen before that. Forecasts that the market would be damaged for two to three years have come true," Romanov said.


After the 1998 financial crisis, which culminated in a ruble devaluation and debt default, the booming advertising market slumped to $1.38 billion in 1998 from $2.7 billion in 1997.


According to Gallup AdFact data, the market continued sliding in 1999 to a mere $760 million.


But industry officials said local companies were becoming more aware of the potential benefits of advertising to raise awareness of their brands.


Irina Silayeva, executive director for Independent Media, whose magazine and newspaper publications include The Moscow Times and Russian-language versions of Cosmopolitan and Playboy, said there had been some growth in ad budgets this year.


But she expected significant growth to start from September. "The trend is positive, and expectations are optimistic."


StoryFirst Communications, the largest Western investor in this nation's media, recently said it was planning a more aggressive investment strategy following a recovery in advertising.


First-quarter revenues at CTC television channel, where StoryFirst holds a 75 percent stake, were 68 percent stronger than in the same period a year ago.


Growth has also been helped by favorable legislation allowing companies to include 5 percent of advertising costs in production costs, which are not taxable, from April 1.


Previously, only 2 percent of advertising costs were included in production costs.


"Companies are starting to think about growth now that they have survived the crisis, although no one is expecting strong growth," Silayeva said.


Romanov agreed that the advertising market would recover this year, but remain below 1997 levels. "It is only now that we are seeing people slowly unfreezing the demand they postponed after 1998," he said.


Silayeva predicted 20 percent growth for her company's ad revenues for 2000, adding it would still be much less than before the crisis.


The officials said foreign companies still dominated the market, but local firms had been helped by the ruble devaluation and were taking a larger share.


"Although it is not the biggest driving force behind the market's development, more and more Russian companies are thinking about promoting their brands. This was not the case before," said Vladimir Novoselsky, deputy CEO at Leo Barnett & Moradpour Moscow.


Gallup AdFact said Wimm-Bill-Dann juice and dairy products producer became the first local company to make it into the country's top 10 advertisers in 1999, when it came ninth.


But Romanov said only those local firms working in sectors where competition is tough, like food and cellular telecoms, were aware of the necessity to advertise.


"Although they have enough business skills and intuition, they have not yet fully understood the importance of promoting their goods. But there has been obvious progress here in the last two years," he said.


-


The top 10


advertisers in 1999


Expenditure


(millions)


1. Procter & Gamble $254.96


2. Nestl? $151.57


3. Mars-Russia $115.17


4. Wrigley $77.43


5. Unilever $77.09


6. Dandy $71.28


7. Coca-Cola $51.53


8. Pepsi Co $49.94


9. Wimm-Bill-Dann $37.81


10.Danone $35.07


Source: Gallup AdFact.