Advertisers and operators are looking for new compromises

Photo: PHL

The Ukrainian advertising market is going through hard times. Given the lack of stability major companies started saving on advertising and public relations, says the director of a PR agency Serhiy Blazhko. The segment of outdoor advertising in the first six months of the year compared with the corresponding period last year decreased by 30% (to UAH 500 mn), online advertising dropped by almost 20% (UAH 285 mn). The amount of advertising on TV fell by 7% (up to UAH 1.5 bn), advertising on radio was cut by 20% (UAH 150 mn) and advertising in printed media declined by 15 – 20% (approximately to UAH 400 mn).

The structure of activity of advertisers is also changing. “In 2012 – 2013 producers of excisable goods and representatives of the FMCG segment were highly active. Now the work is mainly associated with politics, conflict management and reputation,” says the expert.

From general to specific

There are common reasons for the decline for the entire advertising market: the economic slowdown, political instability and exchange rate fluctuations. TV can be considered a sort of a litmus test as it accounts for approximately half of all advertising resources. Advertising activity in this segment has dropped, despite even the most pessimistic forecasts made last year. “While in the past any grocery exhibition or contest ended with a wave of news stories on the main TV channels, today the winners are confined to corporate press releases. In 2013, news stories on TV accounted for around 40% of our PR services portfolio. Today they are less than 10%,” says Blazhko.

The most inexpensive and quick advertising media – namely, radio – also failed to maintain its position. “The trend is that there are more and more tasks and the budgets for their implementation are constantly being cut,” Director for Press and Radio at the ADV Ukraine group Lesya Kostromina says.

Along with the common reasons there are subjective factors in each segment that caused the market to contract. For example, after the annexation of Crimea the outdoor market lost a lot of advertising spaces. Reduction of the volume of the advertising market in the press is also expected due to the closure of several publications.

Struggle for the client

In conditions of declining demand the sellers of advertising spaces are ready to make concessions to potential customers. Head of the Marketing Communications at Kyivstar Tetyana Svetlova says operators often fix prices for advertising despite devaluation of the national currency and inflation. “In some cases advertising mediums provide additional bonuses [additional placements] - for active advertisers,” she says.

Market players are reluctantly negotiating prices, but they admit that the cost of placement has decreased. “This year it is possible to advertise on television 5–20% cheaper than last year. It all depends on your budget and how you manage to negotiate the price,” says a manager of a major alcohol company. The larger the advertising budget, the more compliant become operators on the advertising market. Director of the Doors Consulting company Serhiy Smolyar confirms the availability of discounts on the outdoor advertising market. He says some operators of outdoor advertising offer spaces to customers on favorable terms at discount rates. Marketing Director at UMH Publishing Natalya Boyko adds that within six months the real prices for advertising in printed media have dropped by an average of 15–20%.

Customers are willing to pay for creativity and professionalism. “Now is the time of low budgets, interesting ideas and integrated programs,” says Blazhko. As an example, he cites the most popular package programs with virtual press service and PR-consulting, which allow companies to maintain their presence in media at least at the expense of corporate comments and opinions.

Upcoming trends

“'Doing business without advertising is like winking at a girl in the dark. You know what you’re doing but nobody else does,” Director for Strategy and Research at the New Products group Borys Tkachov quoted Stewart Henderson Britt. Therefore, business cannot exist without advertising.

Vitaliy Horduzenko, coordinator of the State Committee for Television and Radio Broadcasting and Head of the IAB Research Center (Independent Association of Broadcasters) says the most dynamic development awaits radio and the Internet. “The segment of radio advertising is underestimated. From now on the situation will change, because radio ads will be sold on GRP and there are all the grounds to assume that in the first half of 2015 the share of radio advertising in the media pie will rise to 5% and the Internet will also continue to grow,” he says.

The TV advertising market is bound to nosedive due to its high cost. But, the expert says each segment of media promotion will find its consumers. “People mostly listen to radio during the days and watch TV at night,” the analyst says with optimism.