Adspend in traditional media by dotcom and other Internet-related
companies has exploded across the Asia-Pacific region.
However, despite feeling euphoric about this substantial new revenue
stream, advertising agencies across the region have adopted a cautious
stance when dealing with this category, because of real fears that a
shakeout of the virtual world could occur at any time.
Indeed, the third week of April saw global stock markets shiver as
dotcom stock values began to slide, signalling what many fear will be
the bursting of the bubble.
From a base of almost nothing, the spend last year by Internet firms in
the markets of China, Hong Kong, Indonesia, Malaysia, Singapore, Taiwan,
Thailand and Vietnam totalled US$109 million, according to
ACNielsen.
At US$45 million, Hong Kong was the biggest market in 1999 - but
that's likely to be seen as peanuts this year, because the amount spent
on advertising in the first two months of 2000 has already topped the
US$31 million mark, compared with just US$2.8 million in
the same period last year.
The phenomenal growth can also be measured by the number of dotcom and
other Internet firms in Hong Kong - four in January last year; 114 last
December; and 230 in February.
But despite this frenzy of activity, there is an air of caution among
agencies.
Euro RSCG has picked up seven accounts since last November worth
US$35 million.
Of Zenith China's 11-plus new account wins, seven are dotcoms and
they've helped to plug an estimated US$120 million to US$160 million hole in its billings following the defection of P&G to the
Burnett/D'Arcy media tie-up, Quest Media, late last year.
Both Euro and Zenith and other agencies working with cyber clients,
however, said they have been extremely selective about the type of
dotcoms they take on.
"If we know they are a flash in the pan, we won't take them. We will
only take those dotcoms which we believe have a strong vision and
quality leadership.
"Many dotcoms have no positioning. I would hate to be the one pointed
out as being the agency behind a failed dotcom" Bates regional president
Jeffrey Yu told MEDIA.
Many agencies have put in place similar guidelines on the types of
dotcom clients they are willing to take on. These include finding out
who are running the company and what their business plans are, how they
plan to generate a revenue stream and how they will pay the agency.
As one agency head put it: "If they tell us their revenue stream is
simply through an IPO we get scared. And if they tell us they will pay
us through a combination of cash and stock options we refuse them
straight away."
Some agencies said they actually demand payment from dotcom clients
before a campaign even runs, because they were afraid that they would
not get paid for a multimillion US dollar campaign in the event a dotcom
folded.
And with the typical dotcom in Hong Kong holding average annual
advertising spend of US$2 million each, according to agencies,
the risks are high.
"These measures have to be taken because dotcoms are unlike the bricks
and mortar businesses which generate a regular revenue stream," said J.
Walter Thompson International group president Miles Coleborook
"A lot of them are running on venture capital money."
Many ad agencies in Asia also believe the Internet industry will
consolidate - and many dotcoms will fall by the wayside.
However, industry observers don't see such a shake-out as the end of
cyberspace.
"After the shakeout or readjustment, the market will re-settle and we
will see growth again," said CIA Medianetworks regional managing
director Mark Austin.
"I doubt though that dotcoms will be allowed by the markets to operate
on business plans that do not have a clear short-term profit target,
sustainability and the marketing skills to build a viable business
brand."
Added JWT regional chief operating officer Kevin Ramsey: "I think that
following the consolidation, it will come down to just a small number of
power brands."
