Apart from the easing of limitations on non-Korean companies, the
country's economic recovery has given the green light to advertisers -
especially multinationals - to start spending in a big way again
Foreign advertising agencies in Korea are increasingly breaking away
from their local joint venture partners and standing independent, or
pouring large sums of money into new JV set-ups.
The impetus for this trend has been due to the government's lifting of
its foreign investment limitation.
Added to this has been the fact that the country's economic recovery has
given encouraged advertisers - especially multinationals - to start
spending in a big way once again.
Ogilvy & Mather and Leo Burnett are leading the charge towards
independence, while two Japanese agencies, Hakuhodo and Dentz, have
struck joint-venture deals recently.
The higher adspend by multinationals is highlighted by the fact that
more than 10 per cent of Korea's ad billings originated from foreign or
JV agencies.
In addition, some 15 per cent of the TV commercials aired in the country
in 1999 came from foreign advertisers.
Multinationals' market share has, therefore, been growing; three per
cent in 1996, five per cent in 1997, almost eight per cent in 1998.
The figure is estimated to have exceeded 10 per cent last year and it is
forecast to break the 20 per cent barrier in 2000.
Based on these bright prospect, McCann-Erickson bought out its JV
partner last October.
"We believe very much in the future potential of the market and will
cater to the new market requirements," said McCann Korea president and
CEO John Down.
"As companies restructure, many will need strong communications partners
to help them with growing the consumer demand end of their
business."
Meanwhile, Cordiant Communications Group (CCG) - a global advertising,
marketing and communications specialist, which holds Bates Worldwide in
the US - has purchased an equity stake in Diamond Ad, worth US$120 million.
The agreement follows a restructuring at Diamond's largest client,
Hyundai, and the partnership is aimed at improving the local agency's
financial structure.
Under the deal, Diamond's management and business operations will remain
unchanged, however, CCG will take charge of Hyundai's international ad
campaigns.
On another front, Japan's Hakuhodo has established JVs with Korea's
largest ad agency, Cheil Communications, and Cheil Bozell.
Hakuhodo's aim is to be among the top five agencies in the country
within three years.
Its chance of achieving this is seen as good because it will be playing
a pivotal advertising role in the import of Japanese cars into the
Korean market this year.
Of special note is the success of one of Korea's newest agencies in
attracting foreign capital. Set up in 1998, Lee & Partners has signed a
50:50 JV contract with DDB Worldwide.
DDB Worldwide chairman and CEO Keith Reinhard said the JV aims to be
within the top 10 agencies in the country by year-end.
"We have set this year's billings target at US$90 million, 40 per
cent up compared with last year, and this is entirely possible because
of the synergies we bring from our global network and because Lee &
Partners' creative work is very competitive," Mr Reinhard said.
