Adex recovery likely this year

Potential catalysts: Bala says there are growth drivers which will be positive to the industry.

PETALING JAYA: Amid the resurgence and a sharp spike in Covid-19 cases coupled with looming uncertainties, not all is doom and gloom for the domestic advertising and media industry.

As the industry is closely correlated to the economy, there are growth drivers that would spur it this year despite potential constraints.

Media Specialists Association (MSA) president Chanchal Chakrabarty Pic below) said after a drop of about 18% in advertising expenditure (adex) in 2020, a 50% recovery in adex is expected this year and a growth of about 9% in line with the gross domestic product (GDP) projection of 6% to 8% for the year.

Chanchal: There are positive signs on the horizon with the vaccines expected to be available soon.Chanchal: There are positive signs on the horizon with the vaccines expected to be available soon.

With the recent resurgence in Covid-19 cases, he said another economic setback is anticipated which could impact the growth for the year.

The economic outlook has a direct correlation to the ad and media industry hence the effect is bound to be seen, he told StarBiz.

“Nevertheless, it is not all gloom and doom as there are positive signs on the horizon with the vaccines expected to be available soon.

“As such, it could be realistic to assume the resumption of normalcy in both economic conditions and societal activities by the second quarter of this year which can lead to a burst of consumer revenge-spending as consumer sentiment improves.

“This would then surely have an immense positive impact on the industry, ” said Chanchal, who is also the CEO of GroupM Malaysia.

He noted that there are bright spots in the wake of the pandemic. Some of the trends, he said for instance digital transformation, e-commerce, shift in consumer purchase journey were accelerated three to five years ahead of the curve and all these points towards a betterment of the industry.

While this has adversely impacted some businesses, certain categories like e-commerce/online marketplaces, food and grocery delivery service, digital payments, over-the-top (OTT) platforms, gaming and other digital platforms in general have gained significantly.

This revolution is here to stay leading to further online population growth which would be a boon to the ad and media industry, he said.

Mediabrands Malaysia CEO Bala Pomaleh added that should stricter movement control order (MCO) measures come into place, the travel and hospitality, entertainment, food and beverage (F&B) and the property sectors would be further affected.

Magna, the centralised Mediabrands resource for intelligence, investments and innovation strategies, predicts Malaysian adex would grow by 15% this year.

“Typically, adex growth is double that of GDP, however given the lower base we are coming from in 2020, it is unlikely that spending will reach 2019 levels.

“The record number of cases reported daily is severely impacting the healthcare system and economic activity, with localised lockdown measures looming.

“This is highly likely to impact media spends for Chinese New Year and may well continue over the next two quarters to affect Hari Raya spends, ” he pointed out.

However, Bala said there are growth drivers which would be positive to the industry. This includes the rise of the contact-free economy.

He said the last year has spurred innovation, transformation and adoption across a wide number of areas including digital commerce, telemedicine, and automation.

“The pandemic has proved to be a turning point in changing consumer behaviour and business adoption.

“As such, media opportunities in data, analytics and dynamic content remain ripe as brands fight for eyeballs and screen time with their consumers who will still largely be spending time at home, ” Bala noted.

To address the cautious spending on the part of advertisers in this climate, he said fiscal measures can be considered to help motivate spending.

For instance, a reduction of the sales tax, if stretched across the next three years could help the economy revive and grow, Bala noted.

On the challenges for this year, M &C Saatchi Malaysia CEO and founder Datin Seri Sharifah Menyalara Hussein, (pic below) said it would be in three key areas – people, business and costs.

The shrinking pool of high-calibre talent would get even smaller, she said, noting that this would be the toughest challenge as people move out of the industry to seek better, more lucrative careers in start-ups or other more inspiring tech- and digitally-led industries.

“The pandemic crisis would impede healthy salary growth and perhaps compromise training and other opportunities.

“Where will new business come from, if there is no stimulus coming from the government and big businesses? Realistically, it will take time for the industry to recover to pre-Covid-19 days.

“At the same time, our client remuneration model needs an urgent review. Agencies will not be able to sustain the high cost of doing business if revenues shrink following an archaic style of remuneration.

“Constant price wars, undercutting, and blind discounting are not helping agencies at all to survive, let alone hire the best talent. This, in the long run, is beneficial for neither agencies nor clients, ” she added.

What should the industry’s mantra be for 2021? Sharifah said it’s innovation.

She said smaller, smarter agencies would thrive as they are leaner and more agile.

Agencies need to innovate and automate and discover new ways to evolve and grow. It is predicted that the combination of human intuition and machine prowess would be the game of the future, she said, adding that it would be about intelligent creativity to increase efficiency and impact.

“Agencies of the future may shrink in headcount, but they will need to grow in technical prowess. These challenging times present us with a real opportunity to look at our business model anew, and to transform ourselves to meet the changing needs of the consumer, business and client.

“Those who embrace the change and adapt quickest will see the brightest light this year as we leave the dark tunnel of 2020 behind, ” said Sharifah.

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