RIGA - The business of advertising agencies worldwide is to creatively use various means of communications in order to share innovative ideas and concepts with the targeted audience. In very simple terms, the ultimate goal of this information sharing is to let a broad number of potential customers know about the select products and services. In good times, employing a professional advertising agency will boost the client's sales exponentially and bring the money invested in advertising back to the client within the first days of the campaign. In bad times, when the advertising budgets are being sliced and diced across all economic sectors in the Baltic states, the advertising agencies are forced to face a new, much more challenging economic environment. The beginning of this year was characterized by the overall drop of client activities that made the industry performance figures drop by a significant margin.
According to the Latvian Advertising Association, a public organization supervising the advertising industry in Latvia, spending on media advertising in the first six months of 2009 barely reached 28.6 million lats (40.8 million euros). The figure, which constitutes a stunning 42 percent drop year-on-year, is in line with the overall state of the Latvian economy which has been hit hard by the global financial crisis. The same source reports that magazine advertising in Latvia has dropped by 59 percent, newspaper advertising fell by 54 percent, TV and radio dropped by 36 percent and 35 percent respectively, while Internet spending plunged 24 percent, year-on-year. These are rather discouraging statistics, considering that two years earlier, in 2007, the Latvian advertising market grew 24 percent year-on-year and reached almost 94 million lats, according to TNS.
The history of the creative industries in the Baltic states is not very long 's it doesn't exceed 20 years. Latvian advertising specialists do not have the benefit of extensive experience in dealing with the adverse economic conditions that their Western counterparts have. Currently, the almost constant increase in advertising volumes resulting from steady economic growth in the pre-crisis years is being eclipsed by a considerable business slowdown. Still, commenting on the present market situation, director at Latvian-based agency A.W.Olsen & Partners Gints Lazdins remains optimistic. "There is a lot of truth in the expression 'crisis starts in the people's minds.' Crisis is something new and unexpected, and as everything new and unexpected, a crisis pushes you to change the way of thinking. And the key is - how fast you can adapt to the new business environment. Businesses that can adapt quickly will survive and grow, for others it will be more difficult. We definitely want to be among the first ones. We see and feel that people, both clients and partners, act and react differently than they used to do before, but for us this means new challenges to increase the creativity."
Last year, among the most aggressively advertised brands in Latvia were TELE2, Proctor & Gamble, Coca-Cola, LMT, Danone and Maxima. The battered Latvian banking industry has not been able to maintain its enthusiasm for large advertising campaigns, which is understandable considering the global credit crunch and associated liquidity constraints that negatively impacted on marketing budgets.
Parex bank, which has traditionally been one of the most visible brands in the Baltic media space, has undergone a change of management and massive restructuring. The bank is still advertising select services, such as Maxi savings accounts or pension funds, but it is clearly not as active in the media space as it was a few years ago. Potentially, Parex will be shopping for a partner in revamping its somewhat tarnished brand, but most likely this will not happen before the first quarter of 2010.
Still, there were a few advertising campaigns that attracted a lot of public attention, not only in Latvia, but also across the Baltic states. Hansabanka, one of the largest banking groups in the Baltics, finally completed its 'branding' transformation into Swedbank, at the handsome price of 10 million euros. The campaign has been praised for its spotless execution across all three Baltic countries, but criticized for destroying the Hansabanka brand, which at the time was one of the most valuable brands not only in Latvia, but also in Lithuania and Estonia.
The human face of Maxima supermarket chain stores, Centis Ubele, has tried his best to convince Latvians that the pre-made salads that they are purchasing are freshly made, and not finished off with the old dressing and mixed anew the night before (a Latvian urban legend, which the store has tried to dispel with the help of the international advertising agency DDB). The campaign also produced mixed results, but if we believe one of the core marketing maxims, that any publicity is good publicity, then the Maxima brand has certainly received a lot of media attention thanks to the advertising efforts.
Inspired Communications, the creative solutions provider, received an award at the international advertising festival Golden Hammer for cleverly spraying graffiti over a pedestrian tunnel in Old Riga. Each colorful graffiti painting is promoting the mobile communications' service provider Zelta Zivtina, which is very popular among young Latvians. The tunnel promotion has already been used to host the international music festival 'Rigas Ritmi' and has generated a lot of positive publicity.
Even the Latvian state has recently enlisted the help of advertising agencies in order to promote itself as an exciting and tourist-friendly destination. The motto of the campaign was 'Latvia. You won't believe it till you see it.' Five 30-second long video-clips featuring the Song and Dance Festival, vocal group Cosmos, the Latvian blue cow, the Aerodium wind tunnel and Pedvale Open-Air Modern Art Museum were broadcast on CNN, BBC and Euronews. Also, promotional posters were placed in London's Underground - a smart idea considering that the number of people riding the Tube is so large that the touch screen ticket machines at the stations have been recently upgraded, all in 17 languages.
Apparently, the advertising market in Latvia is still very much alive and is undergoing some interesting transformations. According to Lazdins, seeking strategic partnerships with a strong international franchise is one of the most effective ways of prospering in tough times. As just one example, in 2008 W.Olsen & Partners became joined with Scholz & Friends European Agency, thus gaining access to a wide pan-European network of business contacts. The agencies that belong to the S&F Group specialize in originating and executing the entire spectrum of creative ideas, from advertising to public relations, and from online communication to TV productions. Sharing and exchanging information with one of Europe's leading creative networks was invaluable, while W.Olsen & Partners was working on two recent high-profile projects - the European Parliament election campaign and NATO's 60th anniversary campaign.
Significant changes in the advertising sector have not been limited to partnership and consolidation issues, notes Lazdins. The crisis has transformed both traditional and new media in the sense that managers tend to integrate new media into their mix of communication tactics utilized by the Baltic companies. Since online advertising has the unparalleled capability to reach a global audience quickly, efficiently and at low cost, significant investments are being made in Internet advertising. Apparently, the current advertising marketplace looks somewhat akin to the Earth after it has been hit by a giant asteroid - the older species are dying out or mutating, while completely new robust species are emerging out of the gene pool mix. "We see how business newspapers are joining with dailies, how specific magazines and radio stations are leaving the market, how dailies are strengthening their Web pages and decreasing the number of prints. That's why we are looking for new communication tools. Web communication is growing day by day and it gives businesses a flexible communication platform," says Lazdins.
The final prevailing tendency that Lazdins pointed out is based on the need for creative and efficient communication to ensure the firm's success in the market - at strictly limited advertising budgets. The need to strategically use advertising money explains the popularity of so-called 'low budget creative campaigns,' which are still able to produce surprisingly good results.
Lazdins says that "there is a lot to Charles Darwin's rule, in the advertising industry in Latvia, as well as on the global level - those who survive will become much better and will bring the whole industry to a new, significantly higher, quality standard.