Advertising market in 2006: Russia beat the West in advertisement

Advertising market in 2006 grew by 29% having reached the level of almost $6.5 bln. Growth rates of the Russian market much exceed the western showings. At the same time, growth in all segments of the branch is observed. The highest rates are seen in the Internet. According to forecasts, in 2007 prices for advertisement will rise.

Association of communication agencies of Russia (ACAR) published its own estimation of the total amount of advertisement in 2006. According to the calculation, the amount of Russian advertising market in the previous year made $6.49 bln., that is by 29% more than in 2005. The association included advertisement on television, radio, in printed mass media and in the Internet in its estimation.

As usual, the segment of television advertisement, estimated by ACAR as $3.16 bln., represents the main part of advertising market of Russia.

I is by no means a subjective peculiarity of Russian reality, but rather a global trend: in many countries the share of television advertisement makes 50-60% of the entire advertising market.

It is also understood which channels were the first to «apply» this money. As usual, in the recent year the top three channels by advertisement allocation included federal channels «Pervy», «Russia» and NTV. They are followed by STS, its IPO became one of the most significant events at the media market of 2006. Besides, progressive success of TV3 and НТВ+ is also observed, which in the previous year obtained more than 30 new channels, than indicates appearing of real advertising budgets in the digital television segment.

The epoch of digital television is coming, in 5 years we will live in a changed country, where each citizen will have access to 100 television channels.

Experts expected that in connection with approval of new act «About advertisement» last year, which considerably restricted opportunities of advertisers in the TV broadcasting, many companies will start using non-traditional means to promote their products. But it did not happen, advertisers mostly stayed at their occupied positions and did not change their traditional preferences and continued advertising their products under customary schemes.

At the same time, price for advertisement last year grew by 30% proportionally to the demand.

The reason of rise in price is that the offer reduced by 12% also due to the restrictions applied in the act «About advertisement». It, to opinion of ACAR council experts, allows to speak of inevitable growth of price for television advertisement also in 2007.

«The act «About advertisement» also promoted increasing of sponsor budgets on television – by 40-50% in the previous year, the same was with the product placement segment (integration of goods and services advertisement in films and serials), which shown approximately the same growth rates in 2006», – Mitroshenkov notes. At the same time, the experts states appearance of quite a dangerous tendency: «Radical reduction of television broadcasting may adversely affect the national producers, since advertising budgets of domestic companies are not comparable with those of transnational corporations, which will gradually force out the Russian competitors from television».
The advertisement in printed mass media were much less affected by the new act. At the same time, rates of development of such advertisement surprised the experts – this segment grew by 18% in 2006 as compared with 2005 and made $1.64 bln. The main surprise was presented by newspapers: in general the segment growth made 19%, and about 24% in large cities.

The growth was provided by advertisement of alcohol and medicines producers, and also that of financial and transportation services.

The reason on such an active growth in this segment is not only that newspapers in general become more professional, but also that advertisers gradually abandon «carpet bombing» on television and prefer more segmented audience of newspapers, which is more efficient in combination with advertisement on TV.

Advertising printed publications also showed high growth rates – 13% in the previous year, mainly in regions. This segment reached the level of $590 mln.

However, there are outsiders in the sector of printed mass media – it is magazine segment, which now stagnates and its volume is $705 mln.

Meanwhile, rapid growth of advertising market in the outdoor advertisement segment moved Russia to the third place in the world by growth rates after Great Britain and USA. Volume of this market in 2006 made $1,18 bln., and its growth – 30%. The trends in this advertisement sphere remind of the situation which took place on television: the last year amount of advertising areas reduced by 10% (thus, in that year the number of advertising constructions at the Garden Ring was halved), at that demand for outdoor advertisement grew significantly, due to which cost of advertisement placing at outdoor carriers grew. The main advertisers in this sphere are retail networks, telecommunication companies, participants of tourist industry, sectors of real estate, entertainment and producers of household appliances.

During the year changes took place also in the participants list at the market. Before 2006 there was the only leader in this segment on allocation of outdoor advertisement, that is company News Outdoor, in the previous year another market operator, Gallery Group, was approaching to it. The most danger in this segment in the future is reduction of outdoor advertisement allocation from domestic companies – approximately the same as that on television. Such result may be reasoned by consolidation of the «outdoor market» operators, due to which washing-out of small and medium participants takes place.

In addition, ACAR was the first to make attempt to estimate the so called indoor-advertisement – advertisement in cinemas, shipping centers, airports and railway stations, to opinion of the association experts, will develop in the future very rapidly due to growth of network trade and increasing of passenger transportation. According to the association estimates, this segment of advertising market made about $50-60 mln in 2006.

CAR experts also calculated the advertising instruments new for Russian market. Advertising budgets in BTL ACAR are being calculated for the second year, this time in cooperation with Russian association of marketing services (RAMS). According to data of the two association, the BTL market made $1.65 bln. last year and grew by 22%.

Notwithstanding considerable growth, BTL as before becomes non-traditional method of advertisement allocation in Russia: this segment takes only 20% of advertising budgets of companies, unlike the West, where this percentage is 60%.

As expected, the most active in BTL-advertisement in 2006 were tobacco and beer producing companies, mobile operators, perfumery companies. However, producers of strong alcoholic drinks decreased their activity due to problems with distribution in the previous year.

Estimation of the BTL-advertisement market made by ACAR does not completely correspond to the real situation, as this segment is not transparent enough so far. Their calculation is based on the information of 25-30 key advertisers from key industries. They multiplied the declared advertising budgets of those companies by 2 and obtained approximate market estimation.

No one undertakes now to estimate exact prospects of advertising market. Anyway, to opinion of ACAR, all above-mentioned segments will grow with significant rates the nearest years, unlike the formed western market, where the growth is limited by 5-10% per year. However, it is difficult to express the correct figure. The matter is that the advertisement market is only about 15 years old in Russia and, under experts’ forecast, it will be growing notably the nearest 5 years. Then it will stabilize and allow to make exact forecasts for the future.

Advertising budgets of Duma parties’ election campaigns will make noticeable share in the total advertisement market in 2007. The are standards prescribed in Federal law that define the amount allowed to each party to spend for election campaign. Real money will be spent for election campaign by about 9-10 parties of 16 parties that will participate in the election.

Meanwhile, in addition to the budget officially allowed by the law, parties also often use administrative resources which cannot be measured in money. Thus, we often may just guess at real cost of election campaign of one or another party.