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Outdoor advertising runs out of growth steam – http://tinyurl.com/dk7p5l

April 30, 2009: Cutbacks in marketing budgets across corporate Kenya are slowing down growth in outdoor advertising that was until last year the fastest growing segment of the media buying market.
The industry whose value was estimated at Sh10 billion  last year is rapidly losing its market grip as companies revise brand building plans, citing uncertainty in the business environment.
It has emerged that a number of outdoor advertising industry players have reported significant reduction in placements, raising the possibility of job losses and forced consolidation in the sector.

“Right now, companies are looking for all possible avenues of cutting down on cost and unfortunately the advertisement beat is being affected,” says Mr Joseph Ng’wano, the deputy general manager at Outdoor, an advertising agency.

Ms Lilian Maina, a director at Media Masters, another outdoor adverting agency, says that their business has gone down by 50 per cent.

‘Most of our clients used to advertise on bill boards but since November last year most of them have shifted their advertisements to small media since they are cheaper,” she says, adding that billboard advertisers have moved to small media stands.

Despite warnings by experts that brand positioning and building is most critical during times of economic downturn, cutbacks in advertising spend have continued. Some of the top spenders in outdoor advertising that have slowed down on their bill board exposure include telecoms giants Safaricom, Zain, Telkom Kenya, Econet, beer maker East African Breweries and soft drinks giant Coca-Cola.

“Strong brands have particularly proven their worth in cases where economic downturn makes mergers and acquisitions the most viable option for the survival of a business,” said Doug de Villiers, the chief executive of Interbrand Sampson Group.

“Besides its role in the valuation of partners, strong branding also informs decisions as to what business names will survive the merger,” he said.

Advertising usually accounts for 40 per cent of a firm’s marketing budget but Mr Ng’wano said that the spend is normally the first casualty of cost cutting measures.

This is especially so in Kenya where the traditional model of managing in a crisis starts with review of internal activities including training and HR.  Kenya’s economy is expected to expand by a margin of two per cent this year.

Most manufacturers have started cutting back on production citing high cost of doing business in the country.

Such moves are also expected to culminate in huge cutbacks in advertising budgets as a cost savings tactic.Advertising agencies say that most companies, especially those in the manufacturing sector have slashed their 2009 advertising budgets, a move that is now causing jitters in the multi-billion shilling advertising sector which has in the past few years experienced growth in the numbers of registered new firms.

Kenya has experienced an explosion in the number of media and advertising firms in the recent past but the new move by the firms to choke their advertising spend is likely to stunt the growth of the advertising agencies which are increasingly finding it difficult to attract business. Most firms are already considering retrenching their staff to cut down on costs.

The wilting of advertising stream for agencies the world over is normally countered by the reduction of payroll by most firms as salaries account for more than half of the agencies expenses.

A spot check by the Business Daily indicated that most billboards on Mombasa Road, Jogoo Road, Langata Road and in the Central Business District have been empty without advertisements for almost three months now.

Outdoor has specialized in billboard and trailer advertising concepts— the charges range from Sh80, 000 to Sh100,000 per month for billboards and Sh15, 000 to Sh20, 000 per day for trailers.

Gone down

The firm owns 100 billboards of which 30 have been empty for the last three months.

Mr Ng’wano explained that most companies have reduced the number of adverts that they used to place on billboards.

“Companies that had six to eight adverts on billboards have reduced the number to between three and four adverts,” says Mr Ng’wano adding that billboards are Outdoor’s major sellers and they account for 80 per cent of Outdoor’s business.

“Because of this reduction in billboard adverts our business has gone down by 60 per cent,” says Mr Ng’wano.

Media Masters does billboard advertisements as well as small media advertisements which includes bus stop stands.

Media Master charge between Sh120, 000 and Sh160, 000 per month for billboard advertisements and Sh60, 000 to Sh40, 000 per month for adverts on bus stops stands.

The shift by advertisers to small media has forced Media Masters to put up more small media stands in an effort to cushion their loss on billboards adverts.

“We have put up 10 more small media stands and we are still leasing with the Nairobi City Council for new stands,” says Ms Maina.

Players in the industry feel that business is bound to remain slow in the better part of the year unless the business environment improves.

“Right now there is no fundamental that we can rely on to push business up. If the economy improves then our business will improve too,” says Mr Ng’wano.

In a recent interview with the Business Daily, Thomas Omamo, the managing director of ZK Advertising said top spenders in advertising were growing cold feet.

“Indications show that there would be a pull back by advertisers,” said Mr. Omamo.