Spaced out - ad sales drop 10%

Advertising agency revenues are expected to fall by another 10% in the next year as recession-wary clients continue to rethink expenditure on brand promotion. "This year sales are down about 25% compared to last year," said Konrad Pudło, new business and development director at Expert Monitor, a Warsaw-based research company. "I think they are not going to do any better down the line. There may be more crises to come. I expect at least another 10% drop."
Key pacemaking industries, such as car and consumer goods producers, are mostly responsible for the decline.
The revenue falloff is predicted to continue whether or not the economy picks up, due to continuing uncertainties in global markets and the absence of clear signs of recovery in key Euro economies, including Germany and France. Another factor agencies blame is a lack of appreciation by many Polish firms of the need for sophisticated marketing techniques, especially to develop brand loyalty.
The advertising market has been chilled for the past three years. "There is not much new business; there are not many pitches," said Marek Janicki, president of McCann-Erickson Polska. "The current alignments between clients and their agencies are quite stable. As for new business, or switching clients, there is a lot less going on."
Retrenchment is the answer in many agencies. "After several meetings with advertisers and ad agencies, I find that advertising agencies are prepared to lose more workers," Pudło said.

Some agencies, however, won't have the option of restructuring to stay competitive.
"I think that there will be fewer ad companies," Pudło said. "Some of them will go bankrupt. The biggest ones will have to work together."
Janicki said McCann-Erickson would not have to cut staff. The company has not performed nearly as well as in the past when its typical annual growth was 20%, but it still records what it considers a respectable 2% increase in revenue, he said.
"Clients are not ready for sophisticated marketing tools yet," Janicki said of Polish clients in particular. They paid new ideas only lip service. "But there is not much action going on; they only talk about it, he said"
And agencies are unlikely to make the breakthrough soon, as clients are giving traditional methods almost equally short shrift.
Agora recently reported that advertising revenues at its flagship newspaper, Gazeta Wyborcza, sank 22% in the third quarter. Gazeta Wyborcza is the nation's number one daily, and the Agora group to which it belongs dominates print media advertising with more than 50% of the total national market.
Janicki said the car category had become number four or five in terms of sales: "It used to be one or two. The budgets in real terms were cut. Maybe they were not cut drastically, only 5-10%, but in a market that used to grow 20-30% that is dramatic news."