What is going on in advertising?During the economic crisis, in the cash pool of advertisement, as it also was in other branches, the flow level decreased significantly – the advertisement market shank by half. Have creative agencies returned to the prior flow level as it was during the pre-crisis time? And does the status – local agency or widely known international network representative – embodies any significance while fighting for a place beneath the sun? Andris Rubīns, CEO of DDB Latvija agency, Varis Lāzo, director of AdellSaatchi&Saatchi agency, Lauris Špillers, director of AlphaBaltic agency, and Aigars Runčis, director of Mēmais agency, participate in a conversation dealing with the competition and branch tendencies.
How is the current competition? Has market collapse made some changes in long-term?
A.Rubīns: Some have left, some have shown up – the seat is always taken. The competition is healthy enough. I wouldn’t say that there is a desperate lack of competing agencies. It can be seen in some, but only in big enough, public procurements of which a great ‘messing about’ is occurring. Due to the tough competition this ‘messing about’ exists and everything does not go to one single agency any more. There are no radical changes, and no great powers have shown up. There is one trend, what I see, - niches, digital or design agencies are approaching to full-service agency standards, as it is demanded. Clients, with whom liable and stable relations have been established, are asking for more and more. I know – many of our partners are considering to stay in this niche or to open up more. But then they understand that there are fields they are not competent in.
L.Špillers: The competition is tough taking into consideration the small market.
V.Lāzo: The latest tendency is to offer everything to everybody. There used to be a specialization – not exactly niches, but agencies stated more clearly what they offer and what they do. Now there’s a feeling that an agency which used to provide media purchasing and selling services and strategies, now does also that, that and that, saying ‘Actually, we can also make the creative part.’
A.Rubīns: It is alright – in every category one learns and patches.
V.Lāzo: Exactly – after the crisis everybody does everything to patch up. In the end of the day there is a question brought up – the quality. Really, does everybody can do everything? If being a consummate master of your craft – do the advertisement, carve spoons or make soups – it is fine that you can do your masterstroke. Specialization is not bad. For example, if five guys can make wrappings, not bad. They are making them; they have done it for years. But if they announce: ‘by the way, we can also make a profile in the social network’ it is already almost aligning with Ostap Bender’s strokes.
A.Runčis: It is an issue of tender. It is easier for the client to be engaged to one or two contacts – persons who are organizing the things to be done. If it is clear that an agency cannot manage to do everything, it involves other specialists – PR or digital solution specialists, packing designers – and then creates all this network available through one contact, agency. As it is in construction – there would be great headache if looking for a plumber, a plasterer and flooring professionals separately.
V.Lāzo: It’s already classics. That is how agencies have been working for the last 20 years.
L.Špillers: Clients are quick to weed out those which are not qualitative and to step off such full services.
Are there differences in the competition among international network agencies and local, regional agencies?
A.Rubīns: Agency chain does not always mean quality. One has to take into consideration whether the agency was created unaided, developed its power with its clients, basis and team of talents, or it is a network agency which somehow vegetates on clients of international networks and localize many concepts. In the network of DDB agencies are mostly created locally and foreign clients almost do not exist for us. All partners, clients are gained by us. The only benefit when participating in the network is experience exchange, ‘know-how’. When dealing with international projects, which have entered in our work, the easiest is any kind of testing, adapting. We don’t receive Polish or London concepts anymore. We develop our concept which localization is aided by our colleagues from Moscow, London, Stockholm or Berlin. Initially there is no difference – local or international company. Network agencies may have advantages if it the background of the network is important for the client, and also that the network have an operational scheme how to implement a project in 12 countries.
V.Lāzo: I cannot actually agree. We have more foreign clients, partners in our network. A network will not collaborate with an agency which is not locally able or just vegetates on their clients. Such partners are not needed. Sooner or later such relations will end up. I have worked in our network since 1995 when there was an attitude: ‘Here’s the layout, make it. Now!’ Today there is counterinstance – of the work done here foreign partners say: ‘That’s awesome! Let’s release it also in Poland, Ukraine, Hungary and other countries.’ The biggest disadvantage is that we would like to represent ourselves in other market, but it is actually not possible because Saatchi is the next saying ‘Wait, wait – where do you think you are going?’ Though it has reciprocal effect – none of the Saatchi offices in Poland, either in London tries to do something here by its own knowing that business in Baltic is being dealt with us.
L.Špillers: Of course, there was a big importance whether there is or there is not a network 15 years ago. The internet was not so developed and so on. Very significant was experience exchange. Now this significance is very minimal. Everything depends on the team, idea and the justification of the idea. The margin has disappeared absolutely. Even we had a proposal to join the network. I refused it. Of course, it depends on the network, but locally we might gain like three clients overall, to perform adjustments which are extra costs, reports and so on. We chose – there was no sense for us. If there is a team, we can fetch this client anyway.
A.Rubīns: During the best years we had contribution of international clients for 3% of the whole income volume. It has not been crucial to us. There are networks which are very centralized in the structure of clients.
A.Runčis: Basically we concentrate to work in the Baltic level. We have developed concepts which have been implemented also in other countries. One has to understand what is that unique ‘know-how’ either it is just a word. Of course, brand is important and when visiting a client DDB sounds more impressive than Mēmais, but the question is about the team and resources which are offered and the former experience.
A.Rubīns: There is a sense to be in a network if there are not enough resources in a local scale to invest lots of money for research or data sources which are interesting enough. Through networks we can gain access to ‘trend watching’ researches, platforms. Even though it is not an everyday need, time to time and working with more complex projects and thinking, what would be topical in future, it is a resource which would not be affordable to maintain or develop. That is what we gain from the network.
How it is with employees? Are there any differences in recruitment? Does international name, training opportunities and other factors change anything?
L.Špillers: Mostly it does not change anything. Trainings can be offered by network agency as well as by the local. The question is what the person is interested in.
A.Rubīns: One option, which we offer, is internship in any of our network offices. This year during winter time our creative director will spend one month in the office of Paris, where she will participate in their actual work, will derive experience, and will gain interesting knowledge both for herself and for team hopefully. In September the creative director of Copenhagen will be visiting us. Network opens up the ways to perform information, internship or rotation processes easier. It is obvious that a local agency can perform these processes, but then very good relations with other local agencies abroad have to be developed. For sure, it is possible to be accomplished, but for us it can be done quicker and more effectively.
L.Špillers: We have partners of independent agencies and if someone from our team is willing, we can do the internship. There are opportunities.
How did you overcome the decline of advertisement market? Is it possible to expect an assistance from the holding company as it is with banks in situations like this?
V.Lāzo: It is a reciprocal effect. If there are good foreign partners, you are not affected by crisis or you are when working in an international network. As well as one can be affected by foreign crisis, which have not arrived and neither will arrive. It is not like there is the big brother who will help. I have experienced enough situations when there are crises which have not arrived, but affected the global situation. It also affects the local budget. Then you understand that the world’s breath you feel a lot more than just as it is in the news. And controversially – we saw how crisis were sat there, while it only approaching to us. Budgets fluctuate as well as the clients’ activity. There are pros and cons by situation being even in one moment. When everybody’s fine, there is a crisis in China, it affects also your budget and business activities.
A.Runčis: The crisis was the time for us when we seized the opportunity very successfully. The moment when we overtook clients of various network agencies was exactly during the time of crisis and changes. One aspect was price, the other – we could offer appropriate or the same level quality which costs more in network agencies. During this boom when clients refused collaboration with network agencies and looked for local partners we seized the opportunity very successfully.
L.Špillers: When the economy fell we felt that the number of clients was increasing thanks to already mentioned aspects of price, effectiveness and offers. The crisis for agencies is more when losing some important client. That is the local crisis of the agency. It is more significant and can be felt more than global economic indicators.
V.Lāzo: It is a shame that price has become more influential aspect. There is a research that shows reimbursement for agencies decrease worldwide, also in Europe in last 10-15 years it has decreased for almost 40% unfortunately. The same thing is done, but faster, better and even cheaper.
A.Rubīns: Maybe it is not so significant in short-term, but it can be felt in a few years, when these persons are not more so motivated or they feel themselves not progressing and agency does not provide an opportunity for them to develop their professional skills, to draw internship and training opportunities. In long-term it might become a sad situation.
Do you feel gradual return to the level of the year 2008?
A.Rubīns: The last three years for as is at the level of pre-crisis. The last year was even a little over the lever of 2008. There was one year when we really saw the decrease in everything, starting from turnover and marketing expenditures. The question was – how rapidly agencies can react. The recent years regarding the tempo of development have been healthy enough. We can afford to return to trainings, investments in new products.
A.Runčis: We had a certain stagnation period before the crisis. As I already mentioned, during the crisis we seized the opportunity very successfully, and now the situation is better than before. We do feel the return of client’s budgets, how they are working for more impressive and greater campaigns, more ambitious ideas, they use wider range of channels. Currently, we are struggling for recourse issue, and where to find new strivers for the team.
L.Špillers: The last three years have been fixed regarding turnover and profit. We hope there will be market growth. There is no significant growth of clients’ budget noticed, but the main problem is that there are no new players in the market.
How was the year 2012-2013 for the branch and particularly for your company?
L.Špillers: I think, in general, it has been stagnating enough. There is nothing special occurring or something new happening. We have the current clients, but there are no new clients showing up. Maybe they are redistributed during the tenders, but currently the situation is too stagnated.
A.Rubīns: Most likely I would agree. Those three or four branches owning the marketing resources are still active, and I wouldn’t say that new, which would be ready to invest into brands or marketing, have shown up. The same our export tendency, which sounds good and which has a lot of fortunate stories, mainly work with the product, reaching various markets and are investing a relatively little in the value added. Such branches show up, but those are very few comparing with volumes invested by the brands of stable, great – finance, commerce and telecommunication – branches. This volume for these players is very little. There are some new projects in which we assist in the creation of export brands and help reaching areas – both food and service brands, and the well-known airline brand. There is a movement, some of them are ready to invest and some also are making a use of it. The growth regarding advertisement, marketing and communication has not been sharp relatively.
A.Runčis: I agree there are no new clients showing up, but we, as an agency, had to participate in the redistribution of clients and in the last two years we have begun the collaboration with various large international brands, creating our portfolio of clients. Along to this there is also a rising employee number – we have almost doubled it, turnover numbers show it. We are successful at striving with the big agencies and those patties we are bringing home. During the last two years we have successfully developed the digital department, various digital projects, contributing and integrating social networks successfully. The next qualitative loop would be all the mobile platforms.
V.Lāzo: We are the part of this economy, especially the part which is the local economy. Anyone of us is a part of it and we cannot be extremely different as the economy in whole. Some agencies may deal with it in a more successful way, others in less successful way. All agencies have something connected with the export – some foreign client, which is export in some sense, or the local, who is being assisted to get to the foreign market. I don’t know if the market can be called as stagnated. More likely it is floating. I cannot understand – will it happen or not, the ‘flow’ is and then it isn’t, there are jumps and spans. In the local market everything is simple, there is nothing difficult – we look at the average purchasing power indices, the average number of inhabitants. It is not of a great significance if you are a local producer, service provider or foreigner. Look, how many potential product and service receivers there are and what is their purchasing power.
Will the year 2013 go down into history, expected events?
V.Lāzo: I don’t believe that 2013 will be a year of change, but I have done an interesting observation of social networks and mobile applications. There was a boom in one moment as it was in one old IBM advertisement ‘We have to be there’. But there is no one who can answer the question ‘why’. Why and how do have to be there? Everyone had to be there. Now we have reached the next stage when companies start referring in a more serious manner: ‘Alright, we will be there. And? Do we have to be there? How do we have to present ourselves? Why should we be there?’ I have experienced some attempts of being there, but at the end there is even no justification for it. It is, after all, an investment which, as you would wish, will be worthwhile.
A.Rubīns: The first enthusiasms will pass over. Resources are set aside only when there’s a free time for the client or agency. I don’t know if one year, but this is the time when there is an endeavor to try, experiment, and start, open up new channels and build up dialogues in a sufficient amount. Ones are doing it better, others not so good. Anyway, everybody has started to keep an eye on the social media and internet environment as such very carefully. An immediate feedback is obtained which either is positive or negative. You can upload your newest video and get 30 negative comments, not understanding what to do. You can be doing the 150th competition and realize that with every time its effectiveness decreases. Currently it is like a studying period. There are no books in which there would be written down how to implement it more successfully. By this it means that the studying process happens for everyone at time. The agency presents the ideas; client expresses the confidence how important it is to him/her. Taking into consideration the top of the most influential brands, it can be seen that companies are more interested to know where they are, which is their position, is there any growth or there is not. Those who have left the top are attacking others for methodological faults, but those who have stepped higher, are extremely proud and share their joy with everybody else. This is a period of experiments regarding how, how much and how great importance has been attached to these channels of the general marketing mix.
A.Runčis: It seems that we have learned to answer such questions as ‘How? What to do in social networks? What works and what does not?’ But as Andris already mentioned, there are no books to study from, to answer the question ‘why?’ Everyone has to find the one’s own unique story, one’s own value added to give to clients through social networks. In my opinion, one has to look at the social networks as to relations with friends, meaning, either you have something to say to them or you don’t. If there is nothing to say, then one of the best opportunities in the social networks is to listen what is said about you and your brand, which is maybe not so valuable in Latvia. Maybe you do not even need to outpace defining your agenda.
What will happen in the digital environment during the next year? Will there be a rapid growth?
V.Lāzo: If they are experiencing times harder than expected, then … It can be seen that also they are looking for new ways where to find new income sources, how to integrate advertisement and how to create different marketing.
A.Rubīns: I’d like to hope and there are lots of positive signals of international brands investing into local content – either it those are concert series, some reel festival; also of local brands. I hope that even greater importance will be attached to these channels, no matter, mobile or digital, where people have the opportunity to be together where the interaction is possible. Traditional media should be applied more to inform of this content available. Meaning that marketing resources should be shifted more for the representation of the contents, people won’t spend time with a brand just like that. I hope these channels will be allocated in the media mix of greater importance, as well as resources would be shifted more for the creation of contents or products. It would be an opportunity for brands to continue the discourse because nobody talks to the TV, neither to billboard. Qualitative relations are developed mutually. Mobile phone is an awesome tool, smart phones have reached the critical mass so it would be nonsense to ignore them.
A.Runčis: I think there will not be any qualitative loop, but various stories of success to be discussed and analyzed. There are certain changes to be introduced in the channel mix, considering the initiatives of alcohol advertisement restrictions. There will be money still, but we will have to start considering ways to address the audience. I think a great part of the budget will be redistributed in benefit to the internet which has not been regulated yet actually. More attention would be drawn to the direct contact.
L.Špillers: Five years ago there was a discussion – internet or newspaper. Now it is internet versus television. Of course, there is television in the internet, but that all develops together. Television will be integrated in the internet in future. It is not happening so rapidly to change the market for the next year, but in five years the effect would be taken.
V.Lāzo: Look to what is happening around. For example, Jeff Bezos, the founder of Amazon, bought the newspaper Washington Post. To be realistic, we are not where they are, yet a little behind. It is worth looking to what they are doing and to set prognoses for the future events. The majority of all newspapers and magazines will vanish, but not disappear completely.
Source: Reklāma un Mārketings