Chaebol agencies are nothing new in Korea, where some foreign players have looked to build their growth on the back of this business. WPP now owns stakes in Diamond and LG Ad, another former chaebol shop. And with chaebol advertising accounting for up to half of all television and print space, such a strategy would appear to make commercial sense in cracking a market which some say is as near impossible to penetrate as Japan is.
The flip side, of course, lies in the very real possibility that the big chaebol business carries an element of risk in addition to opportunities.
The expiry of Diamond's contract with Hyundai at the end of 2004 is a case in point, and a solid proportion of this business is expected to go up for pitch in 2005. At Hyundai Motors, meanwhile, the possibility of shifting its advertising and media business back into a new in-house agency also appears to be a real one.
The sum total of these developments represents another blow for Korea's increasingly beleaguered advertising agency sector. The eighth largest advertising market in the world continues to exert a strong pull on MNC agencies, but the widespread consumer slump has flattened growth - after nearly five years of rapid expansion generated in part by the availability of easy credit - and led to layoffs at a majority of shops, both international and local.
This downturn is reflected in the Korea Broadcasting Advertising Corporation's (Kobaco) forecast of decreased ad sales in 2005, the first time a drop has been predicted. Revenues also dropped in 2004, on the back of weak consumer demand, and significant budget cuts by advertisers.
Despite this scenario, it is worth noting that Korea's story remains an essentially positive one if a longer view is taken. In the last 10 years, the country's economic growth has powered the rise of independent and foreign-owned agencies as realistic competitors to the chaebol agencies, and its domestic brands have gone global with resounding success.
But buying a chaebol agency does not provide a quick and painless route towards unlocking the market's potential. As with other Asian markets, multinationals must have a plan of action to grow the business base beyond what a chaebol partner can bring, as insurance to ensure their continued viability when contractual obligations expire.