2009 started with quite a shock for the advertising industry, with about half of the Ukrainian market’s top 20 advertisers from 2008 freezing budgets completely or greatly reducing them in January.  However, gradually over the course of the year advertising volumes have picked up and in hryvnia terms the market is now likely to finish 2009 only 30% down for the year, with increases of 10% to 20% planned for 2010.

Setting out on the long road to recovery

Some of the fastest growing advertisers for the last couple years were severely hit by the global financial crisis, with many banks, investment companies, real-estate and automobile companies cutting back or stopping advertising completely. In a couple cases previously high-profile companies were actually forced to shut down completely, highlighting the impact of the international credit crunch on Ukraine.  However from the second quarter onwards and especially in the second half of 2009 some of these major advertisers came back onto the market while other sectors, initially retail and smaller shops and later political advertising kicked in and started pushing up both prices and occupancy rates. The dark days of early 2009 when clusters of blank billboards dominated the Ukrainian urban landscape are now thankfully no more than a distant memory.

TV consolidates its market leader position

In this challenging environment television naturally retained its position at the most used advertising medium, increasing share of budgets from 46% to 56% of each advertising  hryvnia spent in 2009.  In the first half of the year average prices for advertising were 40% down compared to rates in 2008, yet rebounded in the second half of the year with price increases which were often in excess of 25%.  All the main advertiser categories on the Ukrainian market reduced their advert investment in 2009, but nevertheless the main cast of advertisers stayed pretty much the same, led by stalwarts such as Procter & Gamble, L’Oreal and Colgate, while a few, like L’Oreal and Astelit, took advantage of the lower prices on TV to increase the quantity of spots placed.

Don’t waste a good crisis

It has often been said by politicians and business people alike that a good crisis should not be wasted. To this end a few changes in the way TV advertising is sold have occurred this year.  In 2008 virtually all TV advertising was sold by sales houses InterReklama and Video International’s subsidiary Prioritet.  From early 2009 1+1 broke relations with Video International and brought advertising sales in-house.  In September it was announced that Victor Pinchuk’s TV channels, including ICTV, STB and Noviy Channel will also in future be represented by their own sales house Starlight Media. There is reason to believe that these in-house teams will be in demand - for 2010 the outlook looks strong with TV prices expected to increase at least 25%.

Print media taking the brunt of 2009 downturn

Print advertising has suffered more than most in the past year of decreased ad demand, with sales of image advertising down on average by about 32% in newspapers and 36% in magazines, with many of the same trends and client changes as witnessed to a lesser extend on TV.  Unlike TV, where the total number of ad minutes increased due to an increase in the quantity of TV stations, the total number of pages purchased in the printed press over the past year is down with some publications shutting down or simply printing skinnier magazines. Dutch publishing house Telegraf Group shut down its Ukrainian operations completely, selling off or closing most of its titles, while Time Out, Hello! And a plethora of other glossy titles also closed shop.  The trend for 2010 is looking more cautiously positive with banks, autos and other companies likely to come back to the market and new advertisers, especially retail, set to increase their advertising investment.   Prices are expected to increase at least 10% for 2010, with some high end glossies projecting even more ambitious price growth.

Internet advertising sector the sole 2009 winner

Internet advertising is the only market that has posted increased revenue in 2009, and market analysts are already predicting a further 25% in growth in 2010. Even in the face of the economic downturn new sites were successfully launched, such as Atlantic Group’s Feel Good, while Ukraine-based American media entrepreneur and former Kyiv Post owner Jed Sunden is focusing on further developments on BigMir, the largest internet portal in Ukraine.  Competition from Russian sites such as Mail.ru is heating up as they have opened a permanent office in Kyiv in the past twelve months, while Google continues to grow in popularity among Ukrainian internet advertising and services consumers as a favoured search and advertising delivery vehicle on the Ukrainian market. The main online growth area remains social networking sites such as odnoclassniki.ru and vkontakte.ru – similar to classmates.com and linkedin.

Outdoor advertising rebounded significantly from the first half of 2009 when the industry was hit by both the economic crisis and a simultaneous ban on alcohol and tobacco followed shortly thereafter by a ban on casino advertising. Occupancy has jumped from around 20% of all panels in January to over 90% in December, with a commensurate increase in prices as well.  Three main trends are painting a brighter picture for outdoor advertising in 2010.  First, smaller retail advertisers that first experimented with billboards as long term directions saw that this worked in 2009 and are prolonging their presence for 2010.  Second, many shopping centres and larger electronics, furniture and general retailers like MegaMaks, Araks  and Metro experimented with billboard advertising in 2009 and are planning on increasing such activity next year.  Finally, brand advertisers such as Samsung and MTS started using outdoor again in the second half of 2009 and this trend will likely continue for 2010, while even a couple Procter brands utilized outdoor advertising options in 2009.

Outdoor advertising consolidation slows

Industry consolidation within the outdoor advertising sector stopped in 2009 with no major acquisitions taking place. The main players in the industry focused on improving service for clients whereas smaller companies in some cases stopped paying city license fees and may be at risk of having their billboards cut down in 2010.  On the whole, prices are expected to increase 10% compared to the second half of 2009.

Radio saw revenue declines of around 50%, as did theatre advertising.  Both industries anticipate a pick-up of up to 20% in 2010 as clients become more active.  Despite these pessimistic figures none of Ukraine’s big radio stations were closed or changed hands in the last year.

Whereas some indicate that in-store advertising has dropped off compared to 2008, new companies such as POS media offering new in-store services have probably kept the market neutral or even caused slight growth, as advertisers with limited budgets seek to place material specifically at the point of purchase.

Election campaign provides advertsing industry with a timely boost

Of course it goes without saying that in the second half of 2009 and the onset of the presidential election campaign political advertising provided a shot in the arm to all media, especially outdoor.  Sergey Tihipko and Arseny Yatseniuk  probably lead the pack in actual investment, including outdoor and TV, since Viktor Yanukovich’s and especially Yulia Timoshenko’s campaigns are focused on media owned by friends and fellow party members, thereby reducing the amount of money actually changing hands.

As for the advertising industry as a whole, it is clear that small and medium sized agencies were squeezed between large and network agencies in 2009, with clients increasingly looking to manage their budgets in-house.  As a result many of Ukraine’s smaller agencies closed down while a couple larger agencies such as Leo Burnett and Provid actually hired extra staff.  Media brokers were exactly that – broke – for much of 2009 as their clients, especially auto or real-estate companies, stretched payment terms or stopped advertising.  As a result many media companies have increased their sales staff and now have stronger direct relations with clients. It looks increasingly likely that this will prove a  permanent change in the market.

2010 holds promise of better times and bigger budgets

Overall, advertising budgets probably dropped around 30% in hryvnia terms compared to 2008 and will increase in 2009 by 10% to 20%.  Given the drop in value of the Ukrainian currency, this year’s 30% decrease is actually a huge decline, but it would appear that the corner has now been turned. Meanwhile, in the coming year trends on banning advertising will continue with alcohol and tobacco banned from print effectively from January 2010, while the whole pharmacy industry is under threat from potential populist political measures.  In any case, there seems little doubt that 2010 will be better than 2009.

Special thanks to Visage Advertising Agency, All Ukrainian Advertising Coalition and Maxim Karimov of Perekhid Outdoor for information and assistance in producing this article for Business Ukraine magazine