Ad industry sees promise in unity government

Mediabrands Malaysia chief executive officer Bala Pomaleh

PETALING JAYA: The advertising industry is expected to hold up and see positive growth in 2023 amid headwinds, thanks to the formation of the new unity government which is anticipated to spur more foreign investments into the country.

As the industry is closely linked to the resiliency of the economy, agency leaders and analysts said a positive economic growth on the whole would bode well for the advertising landscape.

They also expect the economic growth to be boosted by private consumption with the opening of borders and economic activities.

Mediabrands Malaysia chief executive officer Bala Pomaleh said though 2023 would be more challenging with the whole world anticipating a recession, Malaysia may well buck the trend.

He attributed this to the buoyancy of markets and positive sentiments over the formation of the unity government which is expected to be more stable and inclusive.

“It is predicted that foreign investors will have more confidence to invest in Malaysia, which will spur our growth again. Locally, we are also anticipating that some of the prevailing issues around talent shortage and development will be addressed, which will aid the ad industry greatly.

“Overall, the industry is in a much stronger position now and we certainly see an exciting buzz that has enveloped the country,” he added.

Based on Magna Global’s forecast that was published in June 2022, it projects this year’s advertising expenditure (adex) at RM6.1bil. It forecasts 2023 adex to grow 5% to reach RM6.5bil, with brands continuing to spend heavily on digital advertising formats.

Magna is the global media investment and intelligence agency within the IPG Mediabrands network, which is the media and marketing solutions division of New York listed Interpublic Group.

Mediabrands Malaysia is part of the Interpublic Group.

Bala, who is also the Media Specialists Association president, said the ad industry would also continue to be fuelled by private consumption and by businesses coming out of the Covid-19 pandemic.

In terms of categories, he said consumer packaged goods would remain resilient and expects tourism and travel and its related food and beverage, hospitality and entertainment categories to fully take off in 2023 after a slower than expected start this year.

He said another interesting category would be telco, with major developments with the expansion of the 5G infrastructure, noting that all these developments are positive for the growth of the ad industry.

Bala said an upcoming category to watch for would be environmental and social governance (ESG) communications, as Malaysia has set very ambitious ESG goals to become a carbon neutral country in 2050, which is just 28 years away.

“We are already seeing a lot of movement across five pillars – deploying renewable energy, managing carbon emissions, water and waste, driving the development of sustainable cities and accelerating the green economy – with companies also actively pursuing their ESG programmes.

“A lot of education and information will need to be disseminated effectively as we chart the sustainability path and we expect the ad industry to play a key role in this effort,” he pointed out.

The Association of Accredited Advertising Agents (4As) senior adviser and Oxygen Advertising managing director Datuk Johnny MunThe Association of Accredited Advertising Agents (4As) senior adviser and Oxygen Advertising managing director Datuk Johnny Mun

The Association of Accredited Advertising Agents senior adviser and Oxygen Advertising managing director Datuk Johnny Mun said the outlook of the overall ad market for 2023 is one filled with excitement and expectancy.

Buoyed by a newly elected Prime Minister who assured Malaysians of stability and more progressive policies to woo businesses and investments, he said market confidence would be restored.

This in turn should be a boon to the ad industry which is predicted to grow by about 5% conservatively over 2022, he noted.

On the downside, he said there is the expected global downturn led largely by the lethargic European market and in part China’s economic activities slowdown due to geopolitical challenges and its own zero Covid-19 policy.

Mun added that: “The adex for 2022 is expected to be around RM4.8bil and I predict a 5% growth for 2023 to surpass the RM5bil mark. We may probably see a lot more promotion-driven type communications as marketers will be challenged to gain shares in light of price hikes in most sectors.”

On another note, he said the rosy days of partying have long passed for the ad industry, with 2023 being no different. Though marketers would continue to invest in brand building activities, the dwindling margins would surely pose a big challenge to ad practitioners, he noted.

There would be a need to increase the business size considerably just to stay positive, he said, adding that rising employment costs and expertise shortages remain the key stumbling blocks for ad agencies.

Mun said although Malaysia would not be spared by the global slowdown if it happens next year, there are growth drivers in the areas of manufacturing, services and importation of goods that would spur the economy and the ad industry as well.

Like other optimists, Mun is also hopeful that with more Covid-19 relaxations, the tourism industry could make a comeback, which is positive for the industry.

Meanwhile, Entropia founder and senior partner Prashant Kumar also echoed his confidence in the unity government.

He said there is tremendous positivity owing to the new government as reflected in the way financial markets have responded.

Prashant said this would translate into a generally positive sentiment among the top 20 (T20) group.

“For this sentiment to trickle down to the big middle mass, people will be watching the policy decisions in the next few months, especially pertaining to relieving the inflationary pressures on the urban lower middle class.

“A sustained virtuous cycle of positivity requires a healthy balance of short term consumer measures and larger systemic and structural industry issues. But I am overall positive about how consumer markets will be gearing up,” he said.

Entropia senior partner Prashant KumarEntropia senior partner Prashant Kumar

Prashant foresees 2023 to be better than 2022, noting that there are very useful learnings from the last five years as to what is the right recipe to an economy of hope.

He said the pandemic has also forced the transformation on a lot of industries and as such, they must reflect their new “improved selves” to attract consumers.

Furthermore, native digital players, especially in the e-commerce space must focus on building their brands as a sustainable advantage.

“Certain segments of people are coming out in droves with a lot of revenge travel and revenge shopping.

“The advent of 5G and industry 4.0 technology in more areas - cloud, Internet of Things, artificial intelligence, enterprise solutions etc, is going to turbocharge some of the diminishing categories such as telcos. All these will spur the ad industry at the same time to a higher level,” he added.

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