Positive stir in advertising market is tangible, but caution prevails

KLAIPEDA - According to TNS LT, the biggest market research company in Lithuania, the advertising market experienced a 39.2 percent slump last year, to 329.6 million litas (nearly 100 million euros). At the beginning of the year, the research company predicted a further 14 percent advertising turnover fall for this year, though it foresaw a 15 percent rise in Internet advertising. In 2009, the advertising market plunge surpassed the murkiest forecasts, reaching the level of 2004.

Thus, in 2009, compared to the previous year, newspaper revenues generated from advertising fell 46.7 percent, or 72 million litas, while magazines suffered a whopping 48.6 percent, or a 36 million litas, slump in advertising revenues. Meanwhile, TNS LT claims TV earnings slimmed down by 37.2 percent, to 145 million litas in 2009, as radio stations saw a 28.2 percent fall the same year when the Internet sector suffered a 33.3 percent decrease in advertising scope. According to Gytis Juodpusis, TNS LT director, the staggering slump was due to smaller customer advertising budgets, considerably lower media-advertising tariffs and severe competition over advertising orders. Thus, according to TNS, in 2009, versus 2008, media advertisement revenues fell from 161.2 litas to 98.3 litas per capita.

In the beginning of the year, the market research company predicted a further 14 percent dip in the advertising market.  However, Carat Media Planning Agencies Network foresaw a 2.9 percent rise in the market this year. Both companies agreed on a 15 percent rise in the Internet advertisement market. Last month, Carat re-outlined its forecasts for the rest of the year and 2011, asserting that the Lithuanian advertising market, following a predicted 3.9 percent market rise worldwide, will see its recovery starting next year. According to the Network, the forecast has been adjusted to a faster than predicted U.S. advertisement market recovery and a rapid growth of Asian and Latin American markets. It seems that with the world economy’s leveling-off, positive changes are seen in the advertising market as well, Carat reported last month.

The Media Planning Agencies Network has announced that the market experienced a 12 percent fall in Lithuania in the first half of 2010, while the decrease in Latvia and Estonia was 18 percent and 6 percent, respectively. Carat predicts the fastest revenue growth for TV, which, according to the prognosis, should slice off 45 percent of the total advertising cake, while Internet Web sites should go strongly in second place. The prospects for print media, according to Carat, remain the vaguest, as a further decline in advertising revenues is predicted.

However, with the wobbling market forecasts, Gintaras Seputis, president of Lithuania’s Communication Agencies Association, asserts “The positive stir in the advertising market is evident. Recently, we have been seeing much more activities in marketing campaigns, as well as order placements for media.” According to him, the market has bottomed out and is slowly growing. “After the dreadful plunge in 2009, the biggest achievement of this year is that the market was able to reconstruct and readjust, and is moving up. All advertising companies usually count on big turnover numbers in the last quarter, as usually it generates as much revenues as the rest of year,” Seputis maintained.

However, he remains cautious about forecasts, declining to elaborate on concrete numbers. “The market is just still too shaky to name a certain number,” the Association’s president said, avoiding a forthright answer. He claims that the crisis-stricken advertising market has experienced irreversible changes – some advertising companies merged, some filed for bankruptcy as others clung to life downsizing their teams and exhausting current assets. “As far as I know, some regional advertising companies have ceased their activities, filing for bankruptcy,” Seputis said.

He asserts that with the crisis lingering, some new advertising trends have evolved. “For years, advertising has been supported by a simple equation, which is the more people, the more sales. In the previous years, the marketers were focused on reaching more target audiences. But this had been an outdated policy for the last couple of years. Nowadays, marketers are concentrating on customer satisfaction, as instead of attracting more customers, they are focusing on retaining their existing customers. This substantially differs from the earlier market trends,” he maintained.

Domantas Gailius, brand and development manager at Inspired Communications advertising company, says that the essential feature of the advertising market in 2009 was fear and uncertainty about the future. “The fear and uncertainty has caused substantial changes in advertising, as well as in previous customers’ marketing plans. Besides, the uncertainty has deterred so-called additional value-creating communication – throughout all the year, consumers were ‘fed’ with numerous discounts and lesser prices. In other words, all advertising was based on rational arguments, which often do not bear a long-term perspective. To speak in images, if following an ad, you bought a 30 percent discounted sausage, there exists a small probability that you will become its loyal purchaser. Most likely you will buy another brand’s sausage already tomorrow, just because it is 30 percent cheaper,” Gailius pointed out to The Baltic Times. 

He depicts 2009 as “the saddest year for print media.” With the value added tax hiked up to 21 percent and advertising customers’ low budgets, Gailius maintains, print media’s content has considerably deteriorated, as many newspapers laid off their journalists, slashed royalties, printed their newspapers on worse quality paper and thinned editions. “The aftermath of the saving policy included lesser readership, smaller ratings, and lack of investors. It is like a closed circle,” Gailius concluded. According to him, in 2010, the 2009-defining fear and uncertainty little by little started to dwindle, as there appeared more imaginary ad campaigns. These kinds of campaigns do not focus on a product’s price, but on its brand. Besides, comparing this year to the previous, he claims, Internet Web sites tended to cut off a bigger slice of the print media’s take.

Print media’s outlook seems to be quite dim, as its long-time hegemony has been seriously challenged not only by the Internet and conventional computers, but also by World Wide Web in smartphones. “The more people have easier access to Internet, the more traditional media is challenged. With the increasing spread of smartphones, marketing and advertising specialists tend to aim more at the trendy Internet advertising market,” suggested Gailius. He maintains that the downturn has both positive and negative effects. “Therefore, many advertising companies’ customers started treating advertising agencies as if price-slashing institutions, or, in other words, something that does not create any additional value product. The bonus of the crisis is that many customers started deliberating on the importance of efficiency and the ways of increasing it with lesser budgets. This shaping up trend, contrary to the first one, instigates improvement,” the Inspired Communications manager pointed out.

He acknowledges that the downturn has severely affected the advertising market, as the advertising budgets have shrunk in half. Therefore, competition among different advertising companies has considerably increased. Despite big competition in the market, Gailius asserts there is a high deficit of skilled advertising specialists. “That causes a certain chaos in the market, which an ordinary advertising consumer can notice when seeing an unperceivable and meaningless ad. “Bearing that in mind, we have been shaping our team very thoroughly. It consists of only the very professionals now.  Parallel to that, we are investing a lot into research methodologies, work-tools, world experience and the latest market up-dates. It allows us to offer services that reflect the worldwide advertising experience and the knowledge of the local market. Inspired Communications is specializing in efficiency-based creation of communicative strategies. Therefore, we are trying to orient to the enterprises that conceive very well what services they need. Any other definition of the market segment is hardly appropriate here, as, for example, specialization according to business categories is hardly possible due to the minuteness of the market,” Gailius said.

Despite the murky reasoning, the advertising market expert remains positive about the prospects of the market, claiming, “Advertising is an engine of capitalism, therefore, with the recovery of consumption, recovery of the advertising market will follow unavoidably. Advertising creates consumption needs and satisfies them. Therefore, as long as the capitalistic system exists, the advertising market will prosper.”

Rolandas Ragaliauskas, director of Media House, the largest Baltic advertising company, characterizes this year’s advertising market as “stable and swinging to a larger advertising scope.”
“I hope that the worst times are already gone. Last year was the worst ever for our company, as we, like most advertising companies, experienced a nearly 50 percent slump. However, this year, we are holding on to last year’s level, which means we likely have bottomed out and are inching up,” Ragaliauskas suggested to The Baltic Times. In order to stay afloat, he says, Media House had to implement unpopular solutions, like laying off 30 percent of its employees. According to him, some advertising agencies have gone into bankruptcy, while most teetered on the brink of survivability. However, his company is counting on the shaping up of positive signs in the market, which could mean recovery may be around the corner.