The FINANCIAL — Cropped marketing budgets are forcing outdoor advertisers to renegotiate rentals and drop profit margins. With ad rates plummeting as much as 30-40% percent companies are trying to keep their current clients and concentrate more on medium and small size businesses than before the crisis.
Key players of the sector are underlining the main advantage of outdoor advertising – immediate results that seems to be crucial for business today. Levan Lomtadze from The FINANCIAL investigated the current situation on the billboard market and outdoor advertising in general.
As Misha Jikia, General Director of Vellagio, told The FINANCIAL, it’s quite unlikely that even higher discounts will play any significant role in attracting high or medium volume customers.
“As the history of other countries shows outdoor advertisement companies are much better at weathering crisis than many companies from other sectors. In addition, outdoor and indoor advertisement is a relatively low fixed cost business and net profit margins are reasonable.”
“We are observing overall demand reduction, rather than shift in demand, in all sectors of the economy, including our industry. The demand for outdoor advertisement may decrease a bit further, though it will be stabilized from spring and then will be flat for some time,” General Director of Vellagio explained.
Dima Chikovani, Deputy Director of Outdoor.Ge, that owns 15,000 sq. meters of advertising space throughout Georgia, from which 10,000 sq. meters is in Tbilisi says that prices have decreased but not dramatically.
“Current prices on spaces are 15-20% lower than 5 months ago. Renting has fallen significantly in the regions. When we’re talking about falling prices, we’re not talking about 40-50% change. We had discounts for our clients before the crisis began. The thing is that now discount offering are done in a more frequent manner. Currently at Outdoor.ge we offer bonuses that are alternative options for clients who don’t have the budget they had 5-6 months ago.”
“The decrease in overall demand was equal to the halt in economic development and was around 30-40%. Banks and construction companies who were the main clients for advertisers are in a difficult situation. For this reason the financial crisis has hit them hard. Advertising companies are starting to work more with small and medium size businesses now than 5 months ago. Before the crisis offerings were made mainly to large businesses, while now the market has kind of expanded,” Chikovani adds.
Prices of billboard spaces have been decreased by 20-30% on average according to the Outdoor and Financial Director of Imperial advertising company, Irakli Tavberidze. The main reason is that marketing budgets of companies have shrunk due to lack of sales.
“This year there were 6 orders but practically none of them were realized. I hope that demand will rise a little bit as outdoor advertising is cheaper and more effective than most other sources of the media. Currently prices of billboard spaces are ranging from USD 40 to USD 45 per sq. meter. Before the crisis these prices were fixed. EUR 45 was the highest price and EUR 18 the lowest,” he says.
Before the war in August Vellagio was charging up to EUR 40 per sq. meter for advertising space. Now the maximum price could be EUR 25- 30 per sq. meter. The company maintained auto dealers, some banking institutions, fixed and mobile phone operators, oil companies.
“We have exclusive rights for indoor and outdoor advertisement means at Tbilisi and Batumi international airports. Due to the highest quality of these locations with the highest customer traffic, billboard spaces were most expensive there. There the rates have also been decreased somewhat by 20-25 %,” states Misha Jikia.
Vellagio is part of Wissol Group and has 3,700 sq. meters of space throughout Georgia. Since 2007 the Wissol Group has been presented on the market through its sub-brands: Wissol Petroleum, Wissol Gas, Air Wissol, Wissol Bunkering and Wissol Gas Distribution Company. The parent brand, J.S.C. Wissol Petroleum Georgia operates the largest network of petrol and compressed natural gas (CNG) stations in Georgia.
The leading companies on the outdoor advertising market are Sarke Outdoor, Outdoor.Ge, Vellagio and Alma+.
“It’s vital to keep your clients during an economic downturn. More preferable is to wait for a period of time and not put pressure on customers in terms of prices. We will recover from the crisis and when it happens those companies are surely going to come back. We should be able to retain long-term relationships with loyal companies.”
“I don’t think that in Georgia outdoor advertising could be changed by internet advertising during the financial downturn. Here internet advertising isn’t developed enough to satisfy the needs of the companies,” Deputy Director of Outdoor.Ge told The FINANCIAL.
Outdoor.ge was established in June of 2008. The company acquired advertisement spaces from 6 large companies on the market. Among those companies were: Aisi, Imperial, Imperia Star, E-Media, Link Media and Ashriali. The acquisition was made with British investments.
Typically showing large, ostensibly witty slogans, and distinctive visuals, billboards are highly visible in the top designated market areas. Bulletins afford greatest visibility due not only to their size, but because they allow creative “customizing” through extensions and embellishments.
“The reduction in demand should reasonably cause some mergers and acquisitions in the industry. If interesting opportunities become available we will study them. Our company has long term vision for this sector, so we are ready to grasp opportunities potentially created by the current situation. In such an environment we will be benefiting by the financial strength of our parent, Wissol Group,” claims Misha Jikia, General Director of Vellagio.
Advertising companies are losing clients from banking and construction sectors as these companies were most affected by the financial crisis and Russian occupation of Georgia.
“The sectors most affected by the recent crisis are construction and real estate developers. We have lost them altogether. Some banks have also stopped placing ad images and currently are revising their ad budgets for 2009. Companies retailing consumer electronic products have also significantly decreased their activities,” Jikia continues.
Jikia also says that from the second half of the year this sector will undoubtedly see recovery. During the current financial crisis companies will come to a point where they have to advertise their products and services more heavily. The cheapest and at the same time highly effective advertisement mean is outdoor advertising.
Written By Levan Lomtadze