IPG Mediabrands Malaysia CEO officer Bala Pomaleh
PETALING JAYA: Despite the growing challenges facing the advertising industry, there are growth drivers that will propel the sector in 2024.
With Malaysia’s economy showing some resilience, analysts and agency leaders said the ad industry could pick up, in line with the country’s economic growth.
Malaysia’s gross domestic product (GDP) rose 3.3% year-on-year (y-o-y) in the third quarter (3Q23), from a near two-year low of 2.9% in 2Q23, beating analysts’ estimates for a 3% y-o-y expansion.
On a nine-month basis, GDP expanded 3.9% y-o-y.
The government is projecting GDP growth of 4% in 2023 and between 4% and 5% in 2024, underpinned by expansion in domestic demand and improvement in external demand.
IPG Mediabrands Malaysia chief executive Bala Pomaleh, who is also the Media Specialists Association president, said to navigate the increasingly complex landscape, agencies would need to prioritise investing in the best talent to stay ahead of the game and give them the best returns.
Amit these global uncertainty and economic changes, he said agencies would need to adapt – and do it fast.
He said due to the fast pace of tech evolution and competition from the likes of artificial intelligence (AI) that has exploded into the foreground, marketing solutions and products need to be fluid.
Agencies will need talent that is agile and can think and react quickly to capitalise on what’s best for clients and give them the best advice to succeed, he said.
“Our biggest growth driver will be to continue upskilling talent, to ensure people are at the forefront of technology, innovation and creativity which will help sustain our growth.
“Investing in talent in a multi-disciplinary way is important and this is best done when internally, agencies create an environment for people to thrive and hone their skills through opportunities for training, mentorship and technical certification.”
At the same time, he said agencies need to also allow for a culture of adaptability, so people are equipped to withstand challenges that come their way.
“This will help drive better client solutions, consistent personal development and a collaborative approach to problem solving. Humans and the human touch will become the game changer in 2024,” Bala added.
According to Magna’s global advertising forecast, Malaysia’s advertising expenditure (adex) is set to decrease slightly in 2024, against the 2023 forecast of RM6.6bil.
Magna is one of the leading global media investment and intelligence companies. It 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.
Association of Accredited Advertising Agents Malaysia (4As) acting president Ryusuke Oda
Emphasising on technology, the Association of Accredited Advertising Agents Malaysia (4As) acting president Ryusuke Oda said with physical communication returning to pre-Covid-19 levels, coupled with the advent of AI, advertising communication will expand at an accelerated pace in the near future.
“AI technology, underpinned by the same binary numbers of 0s and 1s, is set to become our exciting partner in very human creative areas such as copy writing and art, with amazing speed and in-depth brainstorming on Chat GPT.
“Finding the ideal expression, I would think there are already many people in the industry who are endlessly producing visuals on Midjourney,” said Oda, who is also Hakuhodo Malaysia managing director.
Midjourney is a generative AI programme and service. It generates images from natural-language descriptions.
Datuk Johnny Mun, 4As senior adviser
Datuk Johnny Mun, who is the senior adviser of the 4As, said 2023 itself has been a rather challenging year.
While adex is expected to grow faster compared with last year, there seems to be a trend where marketers have been taking back many roles that were traditionally for the ad agencies.
“The sourcing directly for service providers thins out a large part of the earnings of ad agencies. Often, the quality of the end product is compromised through this venture to seek cheaper alternatives. Service providers here include freelancers (with low operating costs) like photographers, film production houses and others.
“I foresee that this will be the norm going forward and agencies will need to relook at the total business structure to survive. The days where ad agencies earn their full commissions from production work and media have been long gone.
“Margins today are razor thin and to compensate for this erosion, many are forced to seek volume over quality work just to pay bills,” Mun, who is also Oxygen Advertising Sdn Bhd chief executive, noted.
Elaborating on ad industry trends, he said the trends that are predicted to take centre stage from 2024 include video marketing, social commerce, AI-powered marketing, privacy-centric marketing, brand purposed and social-responsibility marketing, first-party data marketing and streaming and connected TV.
Mun said there could be a small shift from traditional channels in all likelihood owing to cost concerns.
All these trends point to marketers switching to group-specific targets versus the mass targeting that traditional media offers, he added.
M&C Saatchi Malaysia CEO and founder Datin Seri Sharifah Menyalara Hussein
As for the growth of the ad industry next year, M&C Saatchi Malaysia CEO and founder Datin Seri Sharifah Menyalara Hussein said it is difficult to predict where clients are likely to put their money, given the increasing uncertainty brought on by conflict, inflation and slow economic growth.
However, she expects better momentum for the ad industry in 2024 with global events in the pipeline, adding that global ad spending is forecast to increase by 8%.
Outlining the growth drivers for the industry in 2024, she said these include major sporting events like the Olympics and Euro 2024, emerging technologies such as augmented reality and virtual reality.
This is anticipated to create new opportunities for advertisers to come up with immersive and interactive campaigns, data analytics and personalisation, eCommerce expansion, mobile advertising, influencer marketing, sustainability and social responsibility, and video content.
Amid the growth drivers, there could be some hurdles which may impact the industry’s growth.
The geopolitical risks which include the prolonged Middle East conflict, escalation in the Russia-Ukraine war and slower global economic growth for 2024 could put the ad industry in a tough spot.
Bala said 2024 would be a tougher year to navigate, adding however that there are opportunities for growth if, domestically, Malaysia maintains a level-headed approach to business and how it operates.
The current boycott of a multitude of large international brand-names (and even some local brands) is escalating, yet it may not necessarily be having its intended effect, he said.
“Historically, brand boycotts appear to exert minimal influence on the target nation’s economy.
“In fact, these current boycotts may more deeply affect Malaysians themselves, as many of these businesses are franchised and are predominantly Malaysian-owned.
“Likewise, Malaysians who are employed at these establishments will be affected in the long term, as decreased consumer spending affects the company’s bottom line and could warrant reduced employment in the future.”
He said this may have severe socioeconomic repercussions down the line.
“Currently, it is mainly food and beverage establishments that are affected by this boycott.
“However, should these boycotts cross over to retail, household and other verticals, it could have a devastating cascading effect that will affect the Malaysian economy and further impact consumer spending in 2024.
“Thus, it falls on every individual to think in a sensible way, so that actions now don’t bite them in the future,” Bala stressed.
Against the backdrop of the announced luxury goods tax hike and an environment of rising wages for staff in the sector, Oda said advertisers would now want to invest their precious budgets even more optimally.
“In this context, there will be an increase in demand for professionals with comprehensive consulting skills and strong project-management skills, who can work closely with clients, consult deeply in their marketing objectives and work out which services (in the industry) can provide the best solutions and with which budget allocation.
“This is the same for both general and specialised agencies,” Oda said.
Sharifah felt the Israel-Hamas conflict and local boycotting of businesses may create annoyance for brands, their public relations and in the mid term, possibly market share.
“Brands will be compelled to state their stance, explain certain issues involving the brands’ actions elsewhere.
“Also branding issues will crop up, for instance US Pizza intending to change its name and Zus Coffee’s conflicting explanations on the origins of its name.”
On cost, Sharifah said a spike in global food and commodity prices due to supply distortion by geopolitics and tariffs is a key downside risk that could inflate domestic prices and put a brake on local consumption demand.
