The first thing Jeff Cressall does in the mornings these days is reach for his BlackBerry and look at updates of the Dow Jones Index. The Asia-Pacific president of Universal McCann confesses to have never been so interested in the movements of the financial markets. Two of his biggest US-based clients, Microsoft and MasterCard (which with its ‘priceless’ ad campaign has encouraged consumers to spend more for over a decade) have responded to the economic downturn by dramatically cutting their global marketing budgets. Asian budgets will be affected too. “We knew a slowdown was coming. But no-one quite expected it to be quite so severe,” says Cressall. “We hit a wall, and marketing budgets are suffering as a result.” Like rival MasterCard, AmericanExpress is making cuts too, and is trying to change the way the credit card industry is perceived. Tim Isaac, the regional chairman of Ogilvy & Mather, says that AmEx wants to challenge the notion that credit cards burn a whole in people’s wallets. “AmEx wants to be seen as a budget management tool; a way to get better value out of the money you spend.” The same is true of Ogilvy and media agency Mindshare. They are looking at ways to get more from a smaller AmEx ad budget, shifting money away from newspapers, outdoor, magazines and TV into below-the-line media. Media such as electronic direct mail (EDM), in which AmEx is investing significantly, not only cost less, but they are easier to measure and – supposedly – give greater returns for the advertiser. The recession story is now as Asian as it is Western. DBS, Singapore’s largest bank, is reviewing its marketing activities after posting a 38 percent drop in third quarter profits and sacking 900 of its staff, some of whom star in its ‘Living, breathing Asia’ campaign. Mindshare, which buys media for DBS and is Singapore’s largest media agency by billings, has reported that most of its clients – which include Nike, SoyJoy and Prudential – will be cutting their marketing spend by about 15 percent this year to ease the pain of shrinking company revenues. Over at Toyota, a company that lost US$2.1 billion in the final three months of last year because of plummeting sales, senior vice president of marketing Asia Pacific Vince Socco says that cutting his marketing budget was the “prudent thing to do” given the market conditions. “To spend or not to spend on advertising is the classic question that props up at every business reversal. However, the current one is not your run-of-the-mill downturn. The closest we have come to this is the 1997 Asian Financial contagion and the SARS crisis of 2003. This is a once-in-a-hundred-years catastrophe of such proportions that none in the industry has had the experience of dealing with.” Most companies in Asia are looking closely at their marketing budgets. An R3 survey conducted in October found that 94 percent of top Asian marketers, representing US$3 billion in media spend, would most likely be making cuts in the first part of the year – the majority by more than ten percent. Forty percent of those marketers said they are now investing more in ‘unpaid’ activity, such as viral marketing, and less on traditional media such as TV. Unilever, the world’s second largest advertiser, is an exception. Ashutosh Srivastava, the regional CEO of Mindshare, points out that the recent fall in commodity prices has eased pressure on Unilever’s bottom line, giving the company more to spend on advertising. “FMCGs will make cuts in other parts of their business, but not on advertising. If anything, they are likely to increase ad spend by 5-10 percent in the first two quarters of this year to expose weak competitors. The focus will be TV, which is the proven FMCG model to get mass reach.” Unilever’s chief marketing officer Simon Clift has said that while his company is increasingly using new media, in some cases too much money has been spent on digital (Unilever’s Pond’s brand is cited as one Asian example) and the medium still has a way to go to prove its worth. Mark Newton, media director at digital ad agency Qais Consulting, concedes that advertisers that have not spent much time or money on digital marketing before, and have no benchmarks for its performance, are unlikely to try it in a recession. “The barriers are just too high,” he says. In any case, Srivatsa says TV has become increasingly attractive for FMCGs, as advertisers that spent heavily during the boom times, such as real estate, have disappeared leaving less ‘clutter’. If research is to be believed, however, the picture is not rosy for television. It is too early to tell how the media markets of Asia-Pacific are likely to fare this year (research firm The Nielsen Company has yet to collate spend data for Q4 2008), but Aegis Media predicts that the region’s ad market will grow by 4.2 percent this year. The bad news for broadcasters is that TV advertising, which accounts for 59 percent of the region’s US$114 billion ad industry, is expected to grow by just 3.1 percent in 2009; slower than magazines (3.6 percent), radio (7.7 percent), out-of-home (7.2 percent) and much slower than online (23.9 percent), which is driving most of the growth in the market. Only print will grow slower – at 1.1 percent – while cinema is expected to shrink by 0.8 percent. China, India, Indonesia and Australia will be the region’s only growth markets for TV advertising in 2009, predicts Aegis Media; China’s TV market will grow at 9 percent and Indonesia’s at 10 percent. In Japan, where unofficial reports say between 10-20 percent of its US$36 billion ad market was wiped out in the last few months of 2008, spend on TV will fall by at least 2 percent at least. The worst hit in percentage terms are, like Japan, the more mature media economies; Singapore, down 15 percent, and Hong Kong, which could drop by 10 percent. Even gloomier news is that TV’s 3 percent growth figure is not “real”, according to Aegis Media’s Asia Pacific CEO Patrick Stahle. “Inflation is the reason the media market will expand,” he says. “There has been no growth in advertising volumes, so no growth in real market value. Media owners are trying to protect their revenues by building in inflation.” But broadcast revenues in TV-driven media markets are, to an extent, insulated, says Stahle. “To move away from TV in China, where you can hit millions of people with one channel [CCTV], would mean having to try much more fragmented alternatives like out-of-home.” The same is true in Indonesia and the Philippines, where TV takes over 70 percent share of advertising. This could change, though, if marketers get frustrated with the time and money needed to produce a TV spot, and the lack of flexibility compared to putting up posters or running a price promotion. “Clients have to commit for the longer term when they make a TV commercial. Production takes time, which most advertisers do not have. Especially now. Marketers are thinking shorter term about media that will immediately lift sales,” says Stahle. Stahle has lived through four recessions in Europe and Asia. The difference with this one, he says, is that it is global, so a rebound will probably take longer than in the past. He adds that unlike other slowdowns, the advertising market – usually a good indicator of impending economic gloom (marketing is the first cost-centre to get cut) – has been fairly resilient until now. At the moment, the IMF predicts the world’s real GDP growth will decline from 3.8 percent in 2008 to 2.2 percent in 2009, and increase to 4.2 percent in 2010. Typically recessions last less than a year (9 and a half months), so the IMF doesn’t expect this one to be short. On the bright side, while US, European and Japanese economies are expected to shrink, (non-Japanese) Asian GDP will grow at more than double the global rate, led by China. Meanwhile, worried broadcasters are bending over backwards to ensure advertisers do not have an easy reason to not re-new contracts. Star’s VP of advertising sales Jonathan Ellis uses Malaysian telco giant Maxis as an example of a client being given star treatment, with “360 degree exposure” including on-air, on-ground, online, mobile and even print and outdoor advertising around Star World’s Heroes show. Star also created a ringtone remix of Shadows, an Indonesian song used to promote the show on air, for Maxis subscribers to download. CNN has introduced consultancy units for specific advertising sectors and a media agency-style Strategic Solutions Group, which helps clients come up with sponsorship ideas. These are ways for advertisers to “get more value out of CNN”, says VP, news, advertising sales, William Hsu. The news broadcaster also has plans to introduce biometric testing to gauge viewers’ emotional responses to ads, and show clients how well their campaigns are working. As well as go all out to keep key clients happy, BBC World News’ VP of sales for Asia and Australasia Sunita Rajan says her sales team is “not waiting for the market to come to us”. Winners in this downturn will go to market with a deep understanding of what their customers need, then tailor a proposition to suit them, is her view. She wants to pull in more clients from the private sector that haven’t used TV before, then cross-sell the BBC’s new digital channels bbc.com and a soon-to-launch mobile component. Rajan says that this quarter has been unusually slow, but points out that TV viewing tends to increase in recessions, as consumers hunker indoors away from the mall, so all the more reason to keep spending. She thinks that in some areas there will be an increase in marketing activity, such as sponsorship and ad-funded content. “Media agencies are pushing hard to get more for their money,” she says. Others fear, though, that marketers’ wait-and-see approach could mean that complicated, time-consuming projects are put on the backburner. Tourism Australia’s tie-up with Australia the movie was two years in the making and was planned and executed before the film was made. “We used parts of the movie in TV commercials, and the movie itself is basically a two hour 45 minute ad for Australia,” says Stahle, whose agency engineered the tie-up. “Branded content requires marketing and management to take the necessary decisions early. Short-termism in recessions puts these sort of ideas under threat.” With such uncertainty surrounding marketing budgets in Asia, the broadcasters that do not depend on them are looking better placed to weather the gloom. Ashutosh Srivastava says that people did not hurry to cancel their cable subscription in past recessions. Movies, sport, soaps and so on give pleasure in hard times. “People would rather scrounge on other things,” he says. In this sense, the television industry in India, where pay-TV is relatively well advanced, will be less likely to suffer this downturn than in markets such as Malaysia or Indonesia, where advertising dependent free-to-air operators are the dominant players with the biggest share of viewing. But recessions do not make people rush to buy new cable subscriptions either. SingTel launched mio TV in Singapore in July 2007. Five months after launch, it had 27,000 subscribers. A year later, mio TV has just exceeded the 50,000 subscriber mark. By contrast, market leader StarHub has amassed 511,000 subscribers thanks to a 13-year competition-free headstart. No player, advertising-dependent or otherwise, is immune to global recession, especially in a market like Singapore, which starting contracting a lot earlier than most in Asia. It is, says Srivastava, simply a case of survival of the fittest for media companies and marketers alike. “There will be no cuts on marketing spend when it comes to media that converts into sales. Recessions have a nice way of naturally selecting the media owners who can argue that their channel can do this best.” TVAplus