Positive outlook for adex in 2014 as World Cup kicks in

Published: Monday November 25, 2013 MYT 12:00:00 AM 

Updated: Monday November 25, 2013 MYT 7:12:39 AM

BY M. HAFIDZ MAHPAR AND EUGENE MAHALINGAM

Bala expects total adex to rise 12% next year.

PETALING JAYA: Advertising expenditure (adex) in the country is expected to receive a “positive kick” next year with Budget 2014-related marketing activities and events such as the FIFA World Cup.

Carat Malaysia chief executive officer Bala Pomaleh said competition in the fast-moving consumer goods sector was expected to intensify next year as marketers prepared for the goods and services tax (GST) introduction in April 2015.

“Ideally, most marketers would want to be in a good market share position as they go into 2015, as there could be some anticipation of a slowdown after GST kicks in. Hence they would be fairly aggressive in 2014,” he told StarBiz.

Bala said consumers would be pressured to commit to certain big-ticket items such as property and household appliances before 2015.

“While the houses themselves probably would not have GST, the components that go into building the houses will,” he said. GST, together with rising cost pressures and the real property gains tax (RPGT) increases, would probably lead to financial insitutions boosting ad spend to promote home loan services and property developers continuing to promote their products aggressively.

Bala projected total adex to rise 12% next year, higher than the 8% to 10% growth forecast for this year.

Omnicom Media Group Malaysia (OMG) managing director Andreas Vogiatzakis said he did not expect the GST implementation in 2015 to have a “profound impact” on adex in 2014. “Perhaps in 2015, but not necessarily in 2014,” he said.

Vogiatzakis also doubted there would be a “large shift” due to the higher RPGT rates.

“Property prices have increased and Bank Negara has imposed stricter rules in term of getting loans. RPGT is implemented in an attempt to stabilise the rising property prices to avoid investors with liquid cash but it does not affect the average consumer that much,” he explained.

However, Vogiatzakis expected some adex growth in 2014 spurred by major events like the World Cup and Visit Malaysia Year (VMY) as well as higher spending by mobile operators.

“We (OMG) also expect to see further spending from the big technology players on launches of new devices and gadgets. However, we don’t forecast 2014’s spend to be very high, but foresee more of a stabilisation in adex. With the World Cup, we expect more tactical drive and spend, but not massive investment,” he said.

Bala concurred, saying that the last few World Cups did not boost adex as much as they had previously. “It would depend whether it is broadcast also on digital media like YouTube,” he said. Bala also noted that VMY spending would mainly go abroad so adex may not be much impacted locally.

Association of Accredited Advertising Agents Malaysia (4As) president Datuk Johnny Mun expects adex for 2014 to be better as it will be a World Cup year.

“Like the Olympics, it’s a major sporting event that happens only once in four years and TV stations and beverage players will likely be ramping up spending to capitalise on this,” he said.

According to market research firm Nielsen, year-to-date October adex grew 3% if pay TV is excluded (the number of pay TV channels monitored has been increased since last year) and 21% when pay TV is included.

Including pay TV, total adex hit RM10.89bil up to last month. Government institutionswas the top category by spending, showing a 102.5% jump in adex.

Mun and Vogiatzakis said adex growth so far this year had been within expectations. “Although many expected ad spend to taper after the general election, the momentum has remained. Advertisers are still spending towards the year-end as they gear up for the festive season,” Mun said.

Vogiatzakis said the elections and the Government “skewed spending to a positive outcome.” “Topped with some specific categories that increased spending, such as skin and haircare, as well as tracking of additional Astro channels and (media) inflation, the increase was sort of expected. However, apart from that, adex did not actually increase.”

Bala of Carat said the first three quarters of the year had not seen a “fantabulous” growth, but noted that adex tended to pick up at the end of the year.

“This year we (Carat) forecast an 8% to 10% growth,” he said, adding that digital adex, which is not monitored by Nielsen, was expected to increase by about 15%.