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Downturn hits local ad industry, foreign agencies unscathed
While many local advertising companies say they are feeling the effects of the economic downturn, their foreign peers are showing no sign of slowing down.
Biz Tequila, a joint venture between US-based TBWA Group and Vietnamese firm Biz Solutions, said its first quarter profit stayed at the same level as last year.
As the economy slows down, clients have to cut spending on expensive advertising activities but not marketing, the company said.
Ogilvy & Mather Vietnam, a subsidiary of Ogilvy & Mather Worldwide, said the economic crisis has had little impact on its advertising and public relations operations.
The whole industry is experiencing a slowdown, but it is a normal trend at this time of year when businesses are still making plans and strategies, it said.
Businesses often spend more on advertisements toward the end of the year to boost sales and reach the annual target, it said.
Lam Viet Hung, a Senior Consultant at Ogilvy & Mather Vietnam, said a few clients did cut their advertising budgets but most chose to make their advertising campaigns more focused.
The company is helping many clients with short-term campaigns so that they can promote their products with a flexible budget.
But for local firms the scenario is not so good.
Ho Chi Minh City-based Masso Group, one of the leading ad agencies in Vietnam, said it has lowered its profit target this year.
Chairman Nguyen Trung Thang said the company aims for a growth rate of 5-10 percent this year, compared to an average of 30 percent for the last few years.
Nguyen Chi Kien, Director of CMN Company, said his company has been struggling to get business after many contracts expired at the end of last year.
Unable to compete against foreign rivals, CMN has recently cut back on graphic and event services to focus on outdoor advertising, he said.
He expects a really tough time this year since outdoor advertising services need more than a year to start generating profits because of all the paperwork to be done.
Dao Van Kinh, Vice Chairman of Dat Viet Company, said foreign advertising companies are in better shape because they have long-established business relations with large international groups.
Many of these large clients, like Toshiba, Samsung, LG, Unilever and Dutch Lady, do not cut their spending on advertising even during the economic downturn, Kinh said, adding they actually spend more to stimulate consumption.
But besides television stations, Kinh’s company is among the few domestic firms whose advertising revenues have not been hit too hard by the economic problems, Tran Hung, general secretary of the Vietnam Advertising Association, said.
According to the association, which brings together 200 agencies in the country, some of its members have reported a 50 decline in business while several others have filed for bankruptcy.
Hung said with limited funds and experience, they often find it hard to take on foreign competitors, who have close to 80 percent of the market share.
Only a few local agencies are capable of developing long-term campaigns for their clients while the rest just design billboards and leaflets or do contract work for foreign firms, Hung said.
Another problem is that their clients are mainly small companies, who are more vulnerable to the economic downturn. They would trim their advertising budgets to have enough money for their business activities, Hung explained.
A garment company manager, who wished to be unnamed, said with export orders falling sharply, his company had to stop advertising to save money to pay salaries and maintain production.
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