Advertising recovery underway

The Russian advertising sector is showing signs of a turnaround after taking a battering during the economic downturn.

After a 17 fold increase between 1999 and 2008, Russian advertising had become one of world's top ten markets. The ensuing 2 years have been tough but analysts are now predicting a return of double digit growth.

The famous saying in advertising is that half of the dollars are wasted; you just don’t know which half. That becomes even more of an issue when money is tight, and the crisis has forced companies think more carefully about how they spend their budgets, according to Sergey Veselov, Head of Marketing Research at ACVI.

“One of the main consequences of the crisis is that the companies might have to revise their marketing strategies. Earlier even the middle level agency thought that a client needs mixture of ad tools – TV, press, outdoor advertising, and communication events. Now they will have to decide what they need more.”

The Russian advertising market plunged 26 % last year. Internet and television suffered less than other segments. Cheaper online advertising attracted clients, while expensive televison benefited from its huge reach – especially important when it comes to fast-moving consumer goods.

TV increased its market share from 50-56% during the crisis, and is still the most important medium, says Dmitry Bartenev, President of OMD MD & PHD Group

“The specific of Russian market is that it’s a big country. Top advertisers are FMCG brands which are distributed nationally, therefore you need to be nationally present and TV is the only media to do so, and another point is the cost per contact with the consumer is relatively low next to other European and world countries.”

None of Russia’s top foreign advertisers left the market during the recession, unlike the previous crisis of 1998. In fact- almost half the top ten advertisers increased their budgets.

“In the last crisis several big advertisers left the market. And later it was very difficult for them to win back their positions which had been occupied by their competitors. This time, many companies understood there was an opportunity to take the lead,” says Veselov.

By 2012 the advertising market is expected to have returned or even surpassed its pre-crisis level. Analysts say it will remain attractive and unsaturated, and they predict continued strong growth.