Watch this space
By : Justyna Wrobel
When the media industry broke out of its 50-year cocoon under communism more than a decade ago, it effectively had to start from scratch.
Ad spending and media placement had never been necessary in the days of command economy. In 1990, for example, Poland still had only one TV station with viewing figures of 90%.
That was then. Eleven years on, seven terrestrial channels and a brace of cable and satellite channels vie for viewers. But as consumers become more sophisticated, advertisers are finding it more difficult and expensive to reach target audiences.
Small wonder then that the industry now faces its first crisis of confidence. Last year, media advertising budgets dropped for the first time, and among the casualties was one of the newest groups to feed on the decade-long ad-spend frenzy media houses.
In the beginning
When ad agencies first started up in Poland in the early 1990s, their media departments chose when and what type of ad space a client should buy to reach its customers. Divisions that plan and buy ad space in all media still exist in some agencies, while others broke off and became independent entities these were the new media houses.
"In the beginning, the (media) market was so simple that planning and buying media wasn't an important additional source of revenue," said Jakub Benke, managing director of Starcom media house. "To persuade clients to pay for that service there had to be enough money to allow an independent company to exist."
As the 1990s progressed, more media houses were set up, almost all by ad agencies. And many of these have since gone their own way. Starcom, for example, began in 1999 as a media branch of U.S.-based ad agency Leo Burnett Warszawa. This March it will register as a separate company.
According to Benke, competition between media houses became more acute at the end of the decade. This followed moves by multinationals such as Procter & Gamble, Danone, Cadbury-Wedel, Peugeot-Citroe¨n and beer producer Kompania Piwowarska to organize tenders for their media campaigns.
,Mediacom managing director Tomasz Englert sees a full range of communication in the future.
"Media houses would win those pitches," said Tomasz Englert, the managing director at MediaCom Warszawa, a media house that emerged in 1996 from Grey ad agency. "So it encouraged ad agencies to create media houses on a larger scale. Now I can't point to an ad agency that doesn't have a media house."
But as Poland's economic fortunes took a downturn in 1998, competition meant an end to many smaller media houses.
"The advertising sector realized that advertising isn't a separate part of the economy," said Jakub Bierzynski, chief executive officer of media house OMD Poland.
The slowdown in ad spending continued last year, according to Expert Media, a company that monitors media ad spending. Last year, ad spending reached zl. 7.3 billion ($1.7 billion), a 14% increase from 1999, when ad spending was zl. 6.4 billion ($1.6 billion). But with inflation hovering around 10% and large discounts for advertisers being offered by media, the ad market actually dropped by 5-10%, Bierzynski said.
About 61.3% of media spending went to television last year, 2% less than in 1999. Magazines accounted for 17.3% and newspapers 11.7% in 2000, according to Expert Media.
Bierzynski said that because budgets will again be slashed this year, changes are on the horizon for media firms.
While 1999 belonged to pension funds, which spent about 10% on total ad spending, this year's telecom, banking and financial services sectors will assign the biggest ad budgets.
The largest area for ad spending is the fast-moving consumer goods (FMCG) segment. Unfortunately, FMCG companies have decreased their spending on advertising. Benke said this was a result of Poles changing their buying habits after years of easy loans brought on inevitable debts as the economy stalled.
FMCG sector accounted for 56% of total ad spending in 1997. But last year that figure dropped to 45%, he said.
Bierzynski said even a few years ago, companies spent a lot of money on advertising simply to get people to start buying their products. "There was a need to build a demand for a product," he said. "But once they are established on the market there is then a need to see a return on invested advertising money."
Paulina Kaczmarek of OMD Poland, the only media house not dominated by a large client
Big players in the sector include Initiative Media, MediaCom, OMD Poland, Starcom and Universal McCann. Each of them had more than zl. 200 million ($45 million) in billings (money spent on buying ad space) last year.
Smaller media houses include Optimedia Poland, Zenith Media, Pan Media Western, Media Group, HMS Carat Polska and CIA Poland.
"The gap between large media houses and the smaller ones will grow," Bierzynski said, adding that an economic downturn could help many larger companies. While OMD's 1999 billings amounted to zl. 262 million ($67.2 million), in 2000 the figure grew by 27%, he said. "A recession helps to create monopolies on the market," Bierzynski added.
Today, when the demand for ad space in the media is lower than the supply, broadcasters and publishers become more conciliatory in price negotiations and at the same time large media houses can negotiate better prices.
"When the market shrinks and budgets drop, clients start to count every zloty," Bierzynski said. "So price becomes crucial." And price is related to the agency's revenue, so large media houses are able to offer better prices to their clients, he added.
Today, as the market matures, buying media in a cost-effective way is no longer an anomaly. "It is rather a basic matter," Benke said. "The competition is now in the thinking and planning. That's why modern media houses are able to do much more."
Sophistication in planning
Unlike in the past, consumers today receive their information about products from various sources. Not only by TV, radio, the Internet and billboards, but also by product packaging and store location. These communication channels, which can be as important as earlier advertisements, are what media houses are focusing on these days.
"We're able to build strategies of communication (between a consumer and a product)," Benke said. Modern media houses specialize in creating strategies that guarantee the most effective methods of reaching clients.
MediaCom won a tender last year to develop such a strategy for Procter & Gamble.
"It is already a trend and there is a place for a strategist to deal with total communication," Englert said. "A strategist means a company that covers the entire scope of communication in terms of providing information on a product to a client."
Large clients are beginning to understand the need to cooperate with media houses.
"In 1998 we put together a pitch for a media service and have worked with Starcom since then, said Marcin Barcz of Coca-Cola Services Poland. According to Barcz, media houses were the best in terms of planning and reaching a target audience. "We know who we want to reach but media houses know the best communication channels to use," Barcz said. "Cooperation with media houses guarantees a return on that investment."
Procter & Gamble has worked with MediaCom since January 1999. However, the company's connection with media houses dates from 1991, the year after Procter & Gamble entered the Polish market. MediaCom is responsible for planning and buying media for all of Procter & Gamble's brands. "Procter & Gamble has a strategy to call a pitch for media services every few years," said Marek Wegierek, marketing director for Procter & Gamble Central Europe. Previously, the company's media purchases were conducted by Starcom. "I think that all large companies work with media houses," Wegierek said, adding that they were the most efficient way to reach customers.
