MEC, one of the world’s largest media agency networks, expects the media industry to continue facing a challenging year in 2014 both globally and locally due to the softening in both advertising expenditure (adex) and consumer spending.
“Consumer confidence, in terms of spending their disposable income, has been relatively rocky this year, while the advertisers are still gun shy in their advertising spending this year. We expect it would continue again next year,” MEC Global chief executive officer for Asia-Pacific Stephen Li tells StarBizWeek in an interview.
He expects advertising expenditure (adex) in Asia Pacific for this year to record a “lower” double-digit growth.
Despite the challenge, Li opines that the situation helps the media agency to grow to be more strategic and effective in providing solutions to its clients.
“Advertisers are not spending their advertising dollars as freely compared with three years ago, but it does not mean they are not spending,” he says. “It is important for an agency to be more intelligent, strategic, and insightful, because now our job is not only to come up with a strategy that is able to engage consumers but we also help our clients with data on the effectiveness of every dollar that they spent to ensure that they are able to justify their advertising budgets.”
With a presence in 81 countries. MEC has a client list that includes Singapore Airlines, Chevron and Caltex.
MEC Malaysia managing director Law Chan Keong, who is also present during the interview, forecasts adex in Malaysia to be flat or post a single-digit growth this year.
“Over the last two months, the market has softened compared with what people had expected (to happen) after the general election. Due to the global economic conditions, we can feel that adex growth is softening and we do not foresee the momentum to improve significantly in the coming months,” he says.
(According to Nielsen’s data, the country’s adex, excluding pay TV and Internet, contracted 8.4% year-on-year in August.)
“It will be a tough year, because there is a lot of implications, globally, regionally and nationally,” he adds.
Contributing to the lower advertising spending is the price war among media agencies.
Li says “the race to the bottom” has resulted in mainly price-driven and procurement-led business pitches.
“Lately, more clients are looking for the cheapest solutions; the question is whether they are looking for the best partners or the cheapest partners, which makes the media agencies feel that what we have to do to win the business actually comes down to spreadsheets of numbers,” he says.
“It’s all about being cheaper than being the best; it is becoming more difficult to influence the client’s decision when they are potentially looking at the pricing above everything else,” he laments.
Nonetheless, Li highlights that MEC benefits by being part of media giant GroupM, which means that the agency is able to negotiate advertising rates at a competitive price.
“And in turn, as an agency, it is our responsibility to provide the support by delivering exemplary works,” he says.
MEC Malaysia, which is part of media giant GroupM, was first created in 2002.
“We understand the importance of being cost-effective but at the same time, consumer relationships are things that ultimately have to be built and it certainly can’t be bought cheaply; hence if advertisers or brands are interested in building that long-term engagement with consumers, it requires agency partners that are strategic and have a real understanding on consumer insight and the ability to consistently generate work that taps on both to ensure the most effective work possible,” he says.
According to Li, attracting and retaining talent has been a constant challenge to media agencies.
“The type of talent that we need to hire is diverse, especially in the digital business segment, and the industry should’ve been hiring people from statistics background three years ago because they have a strong analytical skill set and comfortable with data and statistic which are a crucial part in our business,” he says, adding that MEC also has engineering graduates on its team.
“Previously, we used to manage one type of agency, but now we have to manage a whole different kind of person and they are also very Gen Y, who question about ‘are you paying me enough’, ‘work-life balance’, ‘am I doing interesting work’ and ‘is the work fun’,” he says.
He adds that talents is something that has kept him awake at night. “In our business we do not have machineries, factories or hardware. As agencies, the only thing we got are talent; intellectual capital is the only thing valuable in our business.”