The rise of Vietnam is an Irresistible success story. So much so that it has become unfashionable to see the country as anything but a land of boundless opportunity. With investment pouring in and a hunger for progress on the streets of Saigon, comparisons are being made to its neighbour to the north.
But, say industry watchers, talk of ‘the new China’ is not warranted nor is it wanted. Sure, Vietnam is a market on the move. But it would be foolish for marketers to expect a ride on the gravy train. October’s collapse of the Vietnam Airlines pitch was a nudge in the ribs for the romantics.
The call to pitch itself was a collector’s item: a fax with an invitation to pay for the privilege of pitching. Agencies were asked to kindly put US$3,000 into a bank account with a promise to be paid back - if the work was to the client’s satisfaction. Bewildered agencies were left guessing that the client had caught wind of something called a pitch fee, but had got it the wrong way around.
Such tales are increasingly rare. The rise of the big-spending mobile phone and banking sectors are forcing Vietnam to get to grips with a marketing industry only a decade-and-a-half old. Even so, there remain some realities that outsiders need to wake up to.
The first is that Vietnam is booming. Its media market grew by 17 per cent this year, according to TNS, which measures TV, radio and print. But it did so as media prices rose by a similar degree. “There was no organic growth (here) in 2007,” observes Nicole Vooijs, MD, MindShare Vietnam. “And this year won’t be much better.”
Lots of companies are entering Vietnam, but are preoccupied with distribution in a country still modernising its infrastructure. Advertising will have to wait. “2009. Only then will the business boom again,” predicts Vooijs. “A lot is happening below-the-line, but display advertising has flattened.”
This is no bad thing, she adds. The market grew by 40 per cent in 2006: too fast, she says. “Monster growth is not healthy if the industry isn’t ready.”
The slowed market has done little to change the way media is sold in Vietnam. The two dominant state-owned TV stations, VTV and HTV, sell from a notoriously inflexible ratecard. Maximum discounts of 20 per cent are possible only if an agency spends 60 billion dong (US$4 million) or more in a year. Few agencies can do this alone, so competitors gang together in ‘buying clubs’. This wouldn’t be so uncomfortable, say agencies, if viewerships and prices were heading in the same direction.
Terrestrial TV audiences have fallen by 40 per cent, putting TV’s real inflation figure at 55 per cent - the highest in the world. Buyers including MindShare have said they will boycott VTV’s plans to auction its airtime next year (like CCTV does in China), which could further drive up prices.
But it is not the internet (yet) that is driving audiences away from terrestrial TV, reckons Thanh Nguyen, business development director of VAC Media, the media arm of Vietnam’s largest independent. It is cable TV. Vietnamese are choosing HBO and Cinemax over locally-produced shows and imported Korean dramas.
But because (like most media in Vietnam) cable is not monitored, advertisers won’t buy it. And because updated measurement systems may not work in their favour, the national broadcasters aren’t in a hurry to introduce them. Peoplemeters are expected to launch later this year, but without the support of local broadcasters.
Only after 2009 do observers think real progress will happen. By then, the Government will have tweaked some of its rules on foreign ownership. This it must do to fall in line with its WTO obligations (Vietnam officially joined in January last year).
Research agencies can be 100 per cent foreign-owned by 2009. So can cable TV companies and advertising agencies. There are no signs yet, though, that media agencies will be allowed to operate without a local partner. “There’s just too much money in media buying,” says one agency head.
There still exists a 10 per cent tax on advertising spend. There is talk of lifting it but, again, not until 2009. “Take that cap away, and media agencies would have 20 to 30 per cent more to invest through-the-line,” says Vooijs.
Business in Vietnam is tougher for advertising agencies. “Unless you have four or five network clients supporting you, you’ll struggle,” says Sabyasachi Mishra, MD of Lowe Vietnam. With Unilever, Johnson & Johnson and Vinamilk, Lowe has fared better than many of its rivals, like sister IPG agency McCann, which closed in 2006 after client losses.
Looking to the future, Lowe launched Rivet last month, a second agency for local business (meanwhile McCann is believed to be close to re-emerging through a deal with a local agency partner). “Rivet is for slow-burner clients,” explains Mishra. “They need hand holding and a business partner-style relationship. Multinationals have yet to invest in a model for local clients, which is a mistake.”
Agencies cannot operate on margins of less than 10 per cent in this market,” he adds. “Property prices are exorbitant, and rose by 70 per cent last year. And local salaries are, relatively speaking, higher than in Singapore. Staff costs are 60 per cent of your business here,” he says.
Few disagree that people are Vietnam’s biggest resource issue. The talent crunch has meant poaching is usually the only way to fill senior roles. But like in China, it is higher-paying clients that pose the biggest threat to agency talent. There are no marketing colleges or courses, so bigger agencies act as feeder schools for state-owned companies, most of which (like Vietnam Airlines) do not have fully- fledged marketing departments.
Marketing struggles to compete for talent with fashionable or more traditional career choices in Vietnam, says Thanh Nguyen of VAC Media, one of many Vietnamese to have returned to Vietnam having been raised overseas: “Parents used to want their kids to be doctors, lawyers or engineers. Now they want them to be entrepreneurs. Advertising is associated with promo girls handing out samples.”
For this, agencies are partly to blame, says Sandip Rakhit, COO of Grey Vietnam, which launched last February. “The established agencies have not been leading the market as they should. We should have a communications school by now, and an awards show should have been set up five years ago,” he says.
Vietnam’s first real attempt at an advertising awards, the Inchi Awards, is set for launch in the first quarter of this year. But without a 4As (instead, there is the media owner-led Vietnam Advertising Association, but agencies aren’t allowed to organise themselves without Government involvement), it has been left to TBWA Vietnam’s ECD Birger Linke to get it up and running. “Creativity is not where it should be here,” he says, pointing out that Vietnam has yet to win at a major international awards show. “But the industry is still so young, and the Inchis will help find and develop a trademark Vietnamese style.”
What Vietnam also needs, adds Katryna Mojica, MD of Ogilvy Vietnam, is a superstar CD to inspire the next generation: “What Yasmin Ahmad has done for Malaysia, David Guerrero for the Philippines and Barry Owen for Thailand,” she says.
Ogilvy is one of Vietnam’s most highly-regarded agencies, and its campaign to shock Vietnamese into wearing motorcycle helmets was one the country’s creative highlights of 2007. But hard-hitting campaigns aren’t common in a country with heavy censorship. “The Government’s concern is what is depicted of society,” says David Smail, ECD of BBDO Vietnam and a veteran of the local ad scene. “Vietnam is conservative, culturally-aware and patriotic. There are some things you just don’t write ads about.”
But it is hard to tell what is taboo. A shampoo ad in which a woman says she likes her man to touch her hair was taken off air after a single complaint. “Unlike Malaysia, there’s no rule book and the rules change a lot,” says Smail. Censors became especially jumpy last year when a sex video of a teen soap star, popular for being a model of Vietnamese values, appeared on the internet.
For all its peculiarities, however, there is only one conclusion to be drawn for Vietnam: the opportunities outweigh the obstacles. Matthew Godfrey, the Publicis regional CEO, used to run Bates Vietnam in the ’90s, when there were no Apple Macs, no media independents and advertising was regarded as a social evil.
“No, Vietnam is not the new China. More like Chinatown,” he says. “Media prices are not in line with reality and the market is getting ahead of itself. But India and China aside, Vietnam is Asia’s most promising market.
“It doesn’t have the political problems of its Southeast Asian neighbours. Its people are open, tenacious and hard-working. And if the market continues to grow at its current pace, doubling every five years, Vietnam could overtake Thailand in 10 years.”
