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Advertising market of Russia in 2008 year

RACA made an assessment of the volume of Russian advertising and marketing services, following the results of 2008

An expert commission of the Russian Association of Communication Agencies (RACA) presented its final evaluation of the volume of the advertising and marketing services in Russia for the year 2008. As per RACA data, in 2008 the Russian advertising market has grown by 17 per cent, reaching the level of 267 billion rubles, which constituted the lowest growth rate over the last eight years. In fact, over the 2003 – 2007 period the advertising market has been growing annually by 24 to 28 per cent, while in 2000-2001 it reached its maximum growth rate of 60 per cent, due to the fact that it was already on its major rebound after the financial crisis of 1998. While in July of 2008, for the first time over the last eight years, the RACA noted the slowing down of the advertising market growth rate, the least successful was the fourth quarter of 2008, even though usually advertisers spend over one third of their annual budgets in this period of the year. Due to the current financial and economic crisis, almost all deals related to advertisement placements for 2009 were temporarily put on hold in November of 2008, and many advertisers had also cut their marketing budgets.

Following the results of 2008, the largest growth, by 45 per cent (from 3.1 to 4.5 billion rubles), was noted in the New Media segment, including indoor advertising (by 35 per cent), non-broadcast TV (by 100 per cent) and film theater advertising (by 28 per cent).

Second in its growth rate was the online advertising segment (data herein do not reflect contextual advertising). This segment grew by 32 per cent, from 5.7 to 7.5 billion rubles. The RACA experts made a promise that in the future, after their methodology will have been finalized, they will be evaluating the contextual online advertising segment as well. For now, the consolidated evaluation of this market segment made by major industry players stands at around 330-350 million US dollars (see the related publication).

The television advertising market has grown in 2008 by 22 per cent, from 112.5 to 137.6 billion rubles. Next in line is outdoor advertising, with its volume grown only by 13 per cent over the last year; and also print media, in which advertising volume has grown only by 11 per cent.

As per the RACA data, only two segments have shown the reduction of advertisement: in radio advertising (by 6 per cent) and in the special advertising print media segment, in which advertising volume fell by 1 per cent.

Advertising volume across its distribution vehicles in 2008

SEGMENTS ESTIMATION, BILLIONS OF ROUBLES INCREASE, %
  2007 2008  
TV 112,5 137,6 22%
Radio* 14,9 14,0 -6%
Print media** 51,9 57,6 11%
Including newspapers 11,6 13,7 18%
magazines 23,4 27,2 16%
Ads newspapers 16,9 16,7 -1%
outdoor 40,4 45,8 13%
Internet*** 5,7 7,5 32%
New Media 3,1 4,5 45%
including Indoor-advertising 1,9 2,5 36%
«not broadcasted TV» 0,7 1,3 100%
Advertising in cinemas 0,5 0,7 28%
Total 228,5 267,0 17%

* 2007 radio segment data were adjusted. Experts have noted that estimates of the existing radio advertising market as published by the National Radio and TV Broadcasters Association, or NAT (which was estimated at the level of 15.7 billion rubles in 2007 and at 14.8 billion rubles in 2008) did not contradict the estimation made by the expert commission. The variation of absolute values was due to differirences in estimation methods used.

** Data for print media in the Magazines segment were announced only tentatively. Experts were expecting the consolidated opinion of the magazine publishers from Moscow.

*** Data for the online segment were shown without regard to contextual advertising. Further on, the expert council is planning to take into account existing contextual advertising in the Internet, after their estimation methodology will have been finalized.

RACA also produced a special separate report in order to publish final estimates of the BTL market for 2008 and to identify the fastest-growing directions and perspectives for the next few years. The estimation of the BTL market was made in collaboration with the Russian Marketing Services Association (RMSA). As per RACA and RMSA data, the Russian BTL market has grown by 18 per cent in 2008.

The largest growth was in the Consumer Promotion segment: by 21 per cent, up to 17 billion rubles. This is the largest segment in terms of volume and it occupies the largest part in the most important BTL agencies.

Positive growth dynamics was shown by the fastest-growing industry segment, which is Trade Promotion (including Merchandising): it grew by 20 per cent, that is up to 16 billion rubles. Its growth was due to the growing retail market all over Russia, to the increase in point-of-sale promotion activities (consultations, tastings, etc) as well as to loyalty programs.

Direct marketing segment (including CRM) has shown a stable growth at 18 per cent, up to 24 billion rubles. This increase was related to the significant increase of digital communications in the BTL budgets. This tendency was already apparent in 2007, but in 2008 it has become evident that advertisers were preferring up-to-date information technologies: online mailings and SMS programs, online databases, websites, interactive games, etc. Direct mail volume has grown too and the per-contact cost has also risen.

The least growth was apparent in such a market segment as Event Marketing: its key figures were influenced by the general atmosphere in the fourth quarter of 2008 when corporate and social events, along with special celebrations, were completely withdrawn.

Very preliminary expert assessments have revealed that in 2009 the marketing services market volume should remain at the level of 2008, unless, under the worst-case scenario, it would fall back to the 2007 level. That would have been made possible by a significant downward trend in consumption rates, by national currency devaluation and by a general tailspin of the economy.

In 2009 the market will undergo a significant structural transformation: larger holdings and agencies occupying the major part of the market will be able to survive; the number of M&A deals will be on the increase, which will eventually lead to consolidations of large advertising holdings. The authors of this report think that such holdings will get stronger and their services will be more accessible.

Trade Promotion and Consumer Promotion services will be in demand since manufacturers will be facing the ever-increasing task of retailing their goods and products. In this way, the following services will be most sought-after: point-of-sale consultations, retail audit, loyalty program development and realization, point-of-sale and HoReCa promotion activities, tastings, sample distributions, integrated campaigns using online communications, etc.

Ms. Irina Vasenina, co-chairman of the RACA Marketing Services Commission and President of Progression Group, has this comment: “Today’s economic crisis will become a rejuvenating, a refurbishing factor for our industry. It will mean a test for company stability and survivability. We must take into account our needs for refurbishing our operational activities, for making our services more effective, for introducing innovative solutions and suggestions. My opinion is that we must think today about how the market will fare in 2010-2012. We are entering a new period, in which business will never be the same as it had been before. Its principles and its regulations will be changing. Only those will survive under these new conditions who can adapt better or is capable of changing and undergoing a certain evolution in this life and times.”

Mr. Vadim Kulikov, co-chairman of the RACA Marketing Services Commission, had this comment for the issue under discussion: “I think that deep changes in the functioning of the product distribution network itself will become the engine for point-of-sale communications market in 2009. Firstly, it is possible that exotic settlement payment methods between retailers and suppliers (while very characteristic for Russia) will be revived (such as, e.g., consignment procedures), which will be related to liquidity issues for some enterprises. Secondly, we are forecasting now that admittance fee for allowing suppliers to enter networks will become significantly lower (or will even be abolished). Also, a situation may emerge when certain product categories will not be available on the shelves, which will stimulate the development of Private Labels, so BTL services will be then in high demand in order to promote them. We are also making a forecast that the current economic crisis will stimulate the reopening of open markets, both for buying groceries and for consumer goods (and that will, undoubtedly, increase the share of counterfeit products). Over 30 per cent of products and goods for everyday consumption will be retailed via such open markets by the second half of 2009.”

 

Marketing services market volume in 2008

** BUDGETS, BILLIONS OF ROUBLES

segments 2005 2006 2007 2008 increase, %
  Billions of roubles  
Consumer Promotion 10,2 11,7 14,1 17 21%
Trade Promotion 9,0 10,8 13,3 16 20%
DM (including CRM) 11,0 17,1* 20,4 24 18%
POSM and
In-Store Visual Communications, including:
— Permanent
— Non permanent
— Visual communications
5,6 6,8 8,3 9,8 18%
Event Marketing
(excluding of sposnorship)
2,2 3,5* 4,1 4,4 7%
total 38 49,9 60,2 71,2 18%
Average rouble and $ rate during the year 28,29 27,17 25,56 24,87  

* 2006 — DM data were adjusted.

* 2006 — Event Marketing data were adjusted.

** Data used were taken from RACA, RMSA, RDMA, POPAI-Russia, and DSNA.