Frenzy leads to adex boom as dotcoms jockey for position

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