Media Agencies: Sea Change




As media proliferates in Asia, the media-buying world begins to unbundle
While the currency crisis rocks Asia Pacific like a powerful earthquake, the economic tremors have had a far-reaching effect-a wave is slowly building, gaining momentum, growing out at sea. Not exactly a tsunami, the rising water is inexorably moving toward the shores of China, Singapore, Australia, Thailand, Malaysia, Taiwan, Korea, India and other countries in the region, where an $87 billion advertising industry awaits the big splash-the arrival of media-only specialists.
OK, OK. While the pounding-surf metaphor may be a little overreaching, the Asian media industry has come to a crossroads. But questions abound. Will Asia follow Europe, where specialists now buy more than 70 percent of the media? Or, after an initial push, will the U.S., where traditional agencies still dominate media, be a better model? And what of the pioneering independents, Carat and CIA? Can they repeat their European success, or will they be eclipsed by the new agency media specialists, such as Zenith, WPP’s MindShare and Omnicom’s Optimum Media Direct?
First, a history lesson: In the not-so-distant past, Asia Pacific was a seller’s market-home to traditional terrestrial TV stations and a limited number of magazines and newspapers. But with the arrival of new satellite, broadcast and cable channels and a glut of print choices in the past five years, media specialists have proliferated. Better research and the spread of “peoplemeter” TV audience measurement across Asia have improved the understanding of how media fit into people’s lives. Then came the economic downturn, and agencies were forced to think for the first time about planning and negotiating media-buying strategies. Thus, Asia’s media marketplace shifted to an increasingly fragmented but dynamic buyer’s market, where media became the focus. And media-only specialists began to thrive and prosper.
“I’ve yet to meet an advertiser who does not place media efficiency and value as their No. 1 or No. 2 priority in the current environment,” says Antony Young, Asia/Pacific CEO of $1.3 billion Zenith Media, the region’s largest specialist.
New shops have opened throughout the region, including MindShare, which WPP formed last October by fusing the media departments of J. Walter Thompson and Ogilvy & Mather into a new subsidiary; OMD, formed by Omnicom from the TBWA, BBDO, DDB Needham media departments, initially in Hong Kong; and Leo Burnett’s StarCom last month. More established networks, such as Zenith, Mediacom, Carat and CIA, are also expanding. DMB&B’s planned launch of MediaVest, plus new initiatives expected from True North (Bozell, Foote, Cone & Belding), DY&R, Dentsu and Euro RSCG, will add momentum. Only one agency is bucking the trend-McCann-Erickson Asia-Pacific, AOR media provider to Nestle, Johnson & Johnson, Unilever and others across many Asia Pacific markets. “We consider McCann’s media-with all our systems, technology and people-to be a powerful brand, one that does not need to combine strengths to stand on its own,” says Marcio Moriera, regional director.
Across Asia, but excluding Japan, media specialists could well buy 12 percent of all media this year, up from about 5 percent in 1997. Kelly Clark, deputy CEO for MindShare A/P, predicts this number will grow to 50 percent in five years as media specialists increasingly take over agency billings.
To bolster the point, Clark notes that, with better planning and buying strategies, MindShare found, on average, TV costs in China were reduced 11 percent across more than 125 TV channels, including many of the top markets, such as Shanghai. In Singapore, costs across all media have been reduced 15 percent, on average.
“Smarter planning may deliver greater and more sustainable benefits over the long run than volume buying,” emphasizes Mike Cooper, OMD CEO. “Enhanced media planning is where we can make a difference of 15-30 percent.”
The quantum leap in media planning is aided by a growing roster of specialized tools and techniques, some adapted from Europe, others piloted in Asia. Every agency now uses optimizers, with names like Atlas, Zeus and Zoom, which evaluate frequency and scheduling models. The tools and new brand names are symbols of transition to a new environment where agencies that do not become adept at moving planning to higher ground will inevitably see media assignments from sophisticated marketers walk out the door.
“The quality is so good, and pace of development so high, it is becoming hard for anyone to stand out based purely on the quality of tools and techniques,” says Mark Austin, regional managing director of CIA. “The key point of difference lies now in the quality of people and the depth of insight and strategic thinking they can bring to bear.”
Going the extra mile, specialists like MindShare and Zenith are tailoring their proprietary tools to specific clients. “We are not using cookie cutters,” says Clark. “What will differentiate the successful? They will be able to create bespoke solutions to individual clients.” The bespoke approach creates a new partnership with clients-the tools will be customized to specific brands or categories and wedded to the client’s data streams.
This helps explain one new trend, says Young: “Most of Zenith’s recent assignments have been for both media buying and planning-quite different from the normal market trend of awarding buying and retaining planning with creative agencies.” These include Coca-Cola in China (moving from DMB&B and Leo Burnett), Calvin Klein regionally and Gillette in Singapore.
Last year in Australia, Procter & Gamble moved planning out of the creative agencies and into Zenith. MindShare’s Sony assignment in Hong Kong plucked media from BBDO, DY&R, and Fusion, a local agency. In another switch, Unilever China moved strategic media planning for all toothpaste brands from Lintas to MindShare Shanghai-the first time Unilever had taken media planning from a creative agency in the region.
This focus on planning has planted the seeds of yet another media-buying possibility-the consultancy. There’s little information about how much consulting work exists now. But media people refer to it and cite a few examples where confidentiality is not an overriding issue. A year ago this kind of business was not even mentioned.
Advanced Technology Group, a MindShare subsidiary, for instance, has opened Singapore and Sydney offices to work with Asian clients such as Heineken, Unilever and R.J. Reynolds Japan. Projects include cross-frontier media overspill analysis, econometric modeling, international brand portfolio management and the development of systems to help clients attain the best media practice. The consultancy business creates incremental fee revenues and draws additional clients seeking specialist skills-about 40 percent of ATG’s business comes from clients that do not otherwise use WPP agencies.
Traditional ideas about what constitutes media are also being challenged. Drawing the JWT and Ogilvy media departments together is only the first step of MindShare’s march into Asia. Direct marketing, program sponsorship, digital media, events and outdoor are part of the plan, too.
“Our focus is on accountability, simultaneously developing delivery and evaluation capabilities,” says Clark. “Some through acquisition or strategic alliances, others in joint initiatives with our shareholding agencies.”
MindShare is already developing a direct-response tracking and modeling software. It has installed a dedicated programming and syndication team in China, working with Kodak, Motorola and De Beers; created an Internet advertising tracking system in Hong Kong to help clients manage online investments; and organized the current Aaron Kwok (Hong Kong’s Cantonese pop king) concert promotion tour in Hong Kong for Pepsi. Including the ATG, Clark believes these new areas will contribute more than 50 percent of MindShare’s incremental revenue growth within the next five years.
While media buying may become “commoditized,” approaches to planning and broad views about media will lead each of the specialists to define its own culture and personality. Ultimately, the marriages of media departments will be distilled into cultures as unique and complex as those of purely creative agencies.
A complex, often impenetrable market, Japan is keeping change at bay. Media buying in Japan is dominated by Dentsu, which takes a third of all television time, including 40-45 percent of prime time. For multinational advertisers, Japan poses problems of international best practice and transparency. “Japanese advertisers do not yet demand the same accountability as their Western counterparts and are only just beginning to scrutinize the details of their spending,” says Kim Walker, president of Strategic Planners International, Japan’s only independent media specialist.
But many feel change is on the way. “There’s no doubt Dentsu is far more outward bound and sees the need to expand regionally and globally. Part of that must be recognition that there will be change in the market,” says CIA’s Austin.
For the moment at least, Dentsu trails the Asian agency pack in advanced media planning technologies. “I think [Dentsu’s] position in the market has blinded them to some of the advances going on in media on a worldwide basis. It’s a tough market to enter without question, but I think there’s more opportunity there than people imagine,” says Alec Gerster, Mediacom worldwide chairman. In Asia, Mediacom is now established in all Grey Advertising markets, though in some, like Japan, the enhanced services are only provided to existing clients, notably P&G.
Though the major agency networks are forcing the pace of change, the independents are here to stay. “I don’t think they’ll be eclipsed. [Carat and CIA] have great track records in Europe; we welcome strong competition,” Clark says.
Both Carat and CIA have strong client relationships based on their performances in Europe, and were urged to Asia by clients elsewhere-a testament to the bonds that media skills can forge.
“It will be a balance neither reflecting Europe, where independents caught the agencies asleep, nor the U.S., where independents have had a difficult time becoming a meaningful presence,” Gerster believes. “Asia Pacific could end up a balanced market, where media dependents and independents both thrive.”
But amid the region’s turmoil, media now provides agencies and specialists with an opportunity to move up the food chain and keep at bay the consulting firms that are increasingly taking a media role in the West. It remains to be seen who in Asia will catch the wave.
Asia Pacific’s Advertising Spending
Country …. 1998 forecast …. 1997 actual spending …. Change …. 1998 projected share
Japan …. $45,629 …. $44,551 …. 2.4% …. 52.3%
China …. 11,312 …. 10,012 …. 13.0% …. 12.9%
Taiwan …. 5,452 …. 5,012 …. 8.8% …. 6.2%
India …. 4,341 …. 3,901 …. 11.3% …. 5.0%
Australia …. 4,022 …. 3,913 …. 2.8% …. 4.6%
South Korea …. 3,853 …. 4,412 …. -12.7% …. 4.4%
Thailand …. 2,540 …. 2,831 …. -10.3% …. 2.9%
Hong Kong …. 2,298 …. 2,064 …. 11.3% …. 2.6%
Indonesia …. 1,860 …. 2,684 …. -30.7% …. 2.1%
Singapore …. 1,519 …. 1,434 …. 5.9% …. 1.7%
Malaysia …. 1,381 …. 1,203 …. 14.8% …. 1.6%
Philippines …. 1,217 …. 1,118 …. 8.9% …. 1.4%
New Zealand …. 1,076 …. ,995 …. 8.1% …. 1.3%
Vietnam …. ,868 …. ,763 …. 13.8% …. 1.0%
Total …. 87,368 …. 84,893 …. 2.9% …. 100.0%
Source: MindShare Asia/Pacific. Figures in millions of dollars (U.S.)