By David Kilburn
MEDIA AGENCIES: ASIA VIEW, PACIFIC HEIGHTS
Until mid-1987, only 30 daily newspapers were published in South Korea. Today, there are more than 100. This nation of 45 million people also sports six terrestrial television networks, 27 cable channels and one digital satellite broadcaster operating two channels.
Since 1988, 278 newspapers have been registered in Taiwan, according to the country's Ministry of Information & Communications. At the end of 1996, the island nation of 22 million people had added 150 radio stations to the 33 that were in operation in 1988. Cable television, which was authorized in the market in 1993, has penetrated about 60 percent of its households and offers more than 50 channels.
When the Chinese government began reforming its economy in 1978, there were 32 TV stations. That number has grown to 2,300 today. Japan, the leading economy in Asia, is expected to gain more than 250 television channels by next spring, according to Dentsu's market analysis. The same number again will enter the market by 2005. By 2000, Zenith Media Worldwide estimates that advertising spending in Asia will account for 30 percent of the global total.
Freer trade, less restrictive economic management and the growth of an aspiring middle class have lured global marketers to the region. The arrival of these clients, and their need to reach consumers, is the catalyst for Asia's media explosion. With this stampede of clients to the region are a number of developments in the media world inherent in the West, but that are just emerging in Asia. As clients explore whether to unbundle their media budgets, buying services are establishing a broader base. This has sparked a competitive reaction from traditional agencies as they manipulate what they offer clients in terms of media buying and planning. Together, these developments have roiled what was once a simpler media landscape.
Yet Asia's media scene is somewhat of an anomaly. For instance, optimizers, the media department software just emerging in the agency and buying services offices in the mature North American market, are common in Asia. The level of research also belies the developing nature of the media in the region. 'Until two years ago, agency media service in Asia was a booking and paperwork shuffling job,' says Guy Forestier-Walker, regional managing director at Grey's MediaCom. 'It was not a strategic function, and it wasn't high tech. This has changed rapidly. Advanced computer planning and buying tools have been introduced into the region. Our clients are demanding that we become much more strategic in our media thinking.'
Raising the stakes is the entrance of some of Europe's more formidable media services in the market. Carat, Europe's largest media independent, with an estimated 12 percent share of the media buying pie in Europe, bowed in Asia in 1996 at the behest of Volkswagen. From its office in Hong Kong, Carat Asia Pacific relies on local affiliates to execute plans. That office will soon be spreading roots.
'We'll be announcing a number of additional Asian offices within the first quarter,' says Kate Stephenson, regional client services director. 'We are looking not only at startups but also at acquisitions and joint ventures.'
The second-largest European buying service, CIA, set up shop in Hong Kong in November 1993. In February 1996, it opened a second office in the form of a joint venture with Batey Ads. CIA also pitches for business in its own right. It is a strategy similar to Europe, where CIA grew initially via partnerships and affiliations with local shops. Clients include LVMH, Alfred Dunhill, Hyundai, Mercedes Benz, Sony, Visa and Tag Heuer. Chairman Chris Ingram states CIA's goal succinctly: 'To be one of the top-six media buyers in each of the markets where we are present.'
Traditional agencies are reacting, either by unbundling their own media or striking up alliances along the lines of geography to bolster their positions. Among the Western-based multinationals, Grey claims to be the first to have unbundled its media in Asia Pacific with the formation of MediaCom in China and Hong Kong in July 1995. 'We started MediaCom in Asia in anticipation of a change in advertisers' attitudes,' says Forestier-Walker. 'But now growth is client-driven. Our clients are paying much more attention to media than before. One reason is, media in Asia is no longer cheap. Value is key--in terms of planning smarter or buying cheaper, or both.' MediaCom has branches in all markets where Grey has offices, except Taiwan, Philippines, Singapore and Thailand.
Last June, Ogilvy & Mather created 'the network' from the media departments of its agencies throughout Asia. While actively pursuing ways to fuse the media activities of its agencies in the U.S. and Europe, WPP is--for the moment at least--leaving J. Walter Thompson and O&M free to explore collaborative opportunities on a country-by-country basis, based on the premise that the Asian media market hinges more on the vitality of independent local media owners than regional players offering large-scale buys. Though not incorporated as a new company, the network has its own profit-and-loss responsibilities and its own president, Andre Nair.
'We created the network because we believe media is too important a business not to be treated as a business,' says O&M Asia/Pacific president Miles Young. 'In Asia, we wished to preempt the arrival of the independents as any kind of significant force. We can see that there are a number of clients who are looking at unbundling, and that represents an incremental business opportunity for us. Most important of all is the need to understand that we set up the network as a planning and buying company--a total media company. This is because we believe the buying-only independents devalue the strategic role of media in the communication and understate the quality component in their offering.'
Since June 1996, O&M's network has won 22 media-only accounts across nine countries, including assignments for Unilever in New Zealand and Bristol Myers Squibb in China, says Nair. These wins exceed $40 million in billings.
JWT continues to evaluate if and where it will unbundle its operations. MaxMiz, a specialized media company that handles planning and buying, opened in Indonesia in January 1996. Another, Media Vision, opened in India this January. 'And we are (planning) similar openings in a number of other Asian markets,' says JWT's regional media director John Steedman. In Japan, JWT is expected to spin off its media department later this year. 'One reason is, Unilever would like to see planning and buying for the brands Ogilvy and Thompson handle placed under the same roof,' says Gus Iizuka, the former president of JWT's Japan office.
Both JWT and O&M wait to see what, if any, impact the discussions to combine the agencies' media operations in other parts of the world will have in Asia. 'Talk of one rigid global solution being imposed is not true,' says Young. 'Rather, we explore a number of alternative models, in a number of different countries. Tranli (a joint O&M/JWT media buying company) in Taiwan is one such. In China, we are looking at a looser buying alliance. In Japan, we buy through a range of agencies, including JWT. The critical point is that these experiments relate to the commodity side of the business. The network remains the O&M media brand, and one of its strengths is that we can pick and choose the most appropriate buying vehicle for both the market and our clients.'
A few months after the network's launch, Cordiant took a more radical step and restructured Bates Worldwide and Saatchi & Saatchi Advertising to expand the Asian network for Zenith. Media departments from both agencies' offices in Hong Kong and China were combined last October to form Zenith Media Greater China, with offices in Hong Kong, Beijing, Shanghai and Guangzhou. These offices, plus one in Malaysia and a Sydney branch that opened this February, are the foundation of a regional media network. 'Our model for Asia is that media planning and buying should be in Zenith, not in the agencies,' says Antony Young, Zenith's ceo Asia/Pacific.
Zenith executives maintain Cordiant's 'demerger' is not derailing plans for Asia, where talks are progressing to open three more offices, including one in Japan. The Saatchi and Bates operations broadly complement each other in countries where Zenith has offices, says Roland Crouch, Zenith finance director.
Other agency units are adopting similar strategies throughout Asia. Dentsu, Young & Rubicam is expanding Total Media, an unbundled service operating in Thailand, across Asia, with the possible exception of Japan. 'The structure of a Total Media depends on the market,' says John McClure, regional media director at DY&R. 'In Thailand, it supplements (buying for DY&R clients) but, in a number of others, it will probably replace (agency media departments). In either case, pursuing media-only clients will be a key element in the business plan.'
Last December, DDB Needham announced the 'unbundling' of its media department for Greater China to form Optimum Media. Meanwhile, Bozell's media joint venture with CIA, 20/20, will bow in Hong Kong and Singapore this year.
Local agencies are also girding for the arrival of media independents. Taiwan's largest agency, United Advertising, established The Media Buying Center to provide planning and buying services both to the agency's clients and others. Competition comes from Tranli, a JWT/O&M joint buying service, set up in 1995, and two local companies. 'These changes are not really to our advantage as an agency since our commission goes down,' says Raymond Lai, a divisional director at United. 'However, we are at least able to win incremental media business.'
The threat of the independents does not only come from the West. In Thailand, former JWT managers started Media Innovation, that country's first independent. 'The Thai advertising industry is at a crossroads,' says founder Prasert Eamrungroj. 'Advertisers are exploring the value of working with a traditional full-service agency versus creative and media independents. In addition to planning and buying, we'll be exploring ways to use media, ways of getting involved in syndication and sponsorship.'
Even in Japan, specialized planners are being noticed by clients. Since opening in July 1995, Strategic Planners International, a company formed by former Bates executives, has won business from a number of Japanese advertisers and agencies looking for smart planning that media wholesalers like Dentsu can execute. Christophe Bezu, the president of Adidas Asia/Pacific, who recently hired SPI, explains their role. 'We hired SPI, because we wanted an external point of view,' he says. 'Our agency, Dentsu, works in a certain Japanese way. We needed some people to help them look at media strategically, and help find innovative solutions.'
In a few markets, local media shops are old enough to have built their own reputations. When Margaret Lim started MediaBase in Kuala Lumpur in 1991, she found it necessary to take on some creative assignments to get credibility. Today, she competes against the likes of Zenith, MediaCom and a local media independent named Media Partners. MediaBase's roster includes many local clients and ad agencies, one of which is Dentsu's local agency, Dentsu Mandate.
As in the West, not all multinationals favor the practice of unbundling media. Leo Burnett, despite running profit and loss on a market-by-market basis, has no plans to unbundle its services. McCann-Erickson also intends to keep media within the agency, 'where it can be more tightly integrated into all aspects of our client planning,' says Garry Titterton, McCann's business development director for Asia.
Regardless of their operating philosophies, the radical metamorphosis of the Asian market spells change for all those competing for the media buying and planning revenues. 'The light has gone on in Japan,' says Steve Bretschneider, Grey-Daiko president. 'It's going to be a different media market both here and across Asia, and in the not-too-distant future.' Tokyo-based Grey-Daiko is a joint venture of Grey and Japan's Daiko.
European media shops will undoubtedly find the going tougher in Asia than it was in Europe 20 years ago. But Asian advertising markets are growing in value at twice the pace of Europe and the U.S. For the moment at least, Asia looks like a market where smart planning can create better value for clients than pure buying clout.
Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED