The emergence of specialists whose jobs is to take care of media placements has brought about major changes in the advertising industry. Up until recently, advertising agencies handled both the creative side of advertisements and their placement. Advertising agencies then charged a commission or fee for the creative job and for media placement, both making up the biggest portion of advertising spending.
But this condition changed with the emergence of media specialists. In principle, media specialists can take orders from any advertisers regardless of who creates the advertisements. Their ability to capitalize on these orders has increased their bargaining power vis-…-vis the media. At a certain stage, media specialists can survive from the margin they receive from the media so that they do not need to charge advertisers or the owners of the advertisements any fees.
This practice has taken advertising agencies by surprise. The advertisement pie is growing bigger from one year to the next but not their fortunes. Media specialists take placement jobs from anybody. That is why their bargaining power is far stronger than that of advertising agencies. Imagine if you managed 70 percent of RCTI’s income, your bargaining position would, of course, be quite strong. You could make the sums on the rate cards published by the media just a table of figures.
Media specialists are common in the international (read U.S. and Europe) advertising world and began to get a foothold in Indonesia in the last five years, starting with the presence of two international media specialists. One of the firms initially benefited from the historical relationship between Lintas and Unilever.
In its early days, the firm, which inherited the business of Lintas, handled most media placements for Unilever products. In order to compete, the other firm narrowed its profit margin, choosing to not seek huge profits but aim instead to establish relations, develop its client base and be content with lower profits.
This situation later changed. In early 2006, firm offering the discount won the media placement bid for Unilever. It is thought that the firm continues its practice of accepting lower profits in a bid foster relations, it will serve as the death knell for advertising agencies still hoping to generate income from media placements.
At almost the same time, the advertising industry is undergoing a major upheaval in terms of creative jobs. Several advertisers have caught on to the idea of making advertisements that are suitable to a bigger geographical scope or, in other words, advertisements that are regional in character.
Unilever and P&G have made a lot of advertisements with an Asian look so that they can be placed throughout Asia.
The reason for this choice is very clear. If an advertisement can be placed regionally, this will save money in terms of creative process and in making. Unfortunately, in many cases Indonesia has not been chosen to create these regional advertisements. You can see, for example, the talent that went into the AXE advertisement, which features a Vietnamese pair of martial artists. That’s why the advertising agencies that customarily took care of the creative process of Unilever advertisements have experienced a significant drop in work orders.
In fact, the emergence of these media specialists was anticipated by local advertising business players, though rather late. Several advertising agencies have set up their own media placement units. However, multinational companies, supported by large capital, seem to be too strong for local advertising companies.
Therefore, to survive, local advertising agencies must restructure their businesses in terms of organization to become better streamlined and more efficient and, more importantly, come up at the same time with creative, fresh and unique ideas.
In the present era of increasingly tougher competition, a full understanding of the players in the advertising industry will help create a competitive edge. The advertising industry is indeed growing significantly, but this growth must be coupled with a fair and sound business situation with a clear direction. It is here that an association like the Indonesian Association of Advertising Companies (PPPI) can play a role.
What is now needed is not a rigorous regulation because such a regulation would only stifle the advertising world, for which creativity is the be-all and end-all. What is urgently needed is a regulation that makes sure that every player competes on a level playing ground and that there will be no big gap between small and large advertising companies. Obviously this is by no means an easy challenge! (Eddy P. Kasdiono)
The Jakarta Post, March 14, 2006
