Wherever you are in the world, the year ahead is going to be rocky. But in the US and Europe especially, the next 12 months look tough for the marketing industry. For marketers and agency groups in the West, Asia takes an enhanced role as the driver of growth.
The view from New York, says Daniel Morel, chairman and chief executive of Wunderman, is that Asia is more than ever the place to invest. “People are concerned in Asia, but not to the same extent as in the US and Europe,” he notes, predicting continued growth in China of four to five per cent. “They are looking at it as an opportunity. They will invest here rather than in Europe because the immediate return will be higher.”
That view is backed up by other US-based agency heads. Dave Senay, president and CEO of Fleishman Hillard, talks of the “vast” opportunities in Asia as the West slows down, while Chuck Brymer, president and CEO of DDB, says “lots of clients are still making big bets on China”.
That begs the question of what form this shift of priorities will take. Will agency groups seek to squeeze profit from the region to maintain business performance, or will they invest in their businesses to secure long-term growth?
Matthew Godfrey, Publicis’ chief executive for Asia, confirms that “expectations are going up” for operations of multinational businesses in Asia, though he adds that those in China and India will feel them most keenly. At the same time, however, clients are looking for their agencies to deliver greater efficiency. This is not necessarily a bad thing. According to Godfrey, the networks will look at building “growth engines” such as digital, activation and CRM, which he says have some way to go to catching up with their US and European counterparts. “Agencies will look at squeezing resources in line with client spend,” he says. “But although there will be a squeeze, there will also be a differentiation between advertising and digital.”
Another industry source indicates that the multinational clients are unlikely to raise budgets, and that “investment” by both brands and agencies may in reality translate as tolerance of slightly lower margins in certain markets with potential for growth.
Stating that agencies in Asia will face a balancing act of managing “the cost rigours of the short term” while “preparing for the long term”, Chris Thomas, BBDO’s Asia chairman and chief executive, agrees they would be prudent to maintain investment in specialised areas such as digital and CRM.
Nonetheless, some are sceptical about the widespread talk of continuing investment in the region. Citing the recent hiring freeze implemented by WPP, Chris Jaques, M&C Saatchi’s Asia chief executive, states that any operational investment is highly unlikely among the major networks in the near future. “It would be extremely naive to spend on operations on the basis of return on investment,” Jaques says, noting that delivery on short-term margins will be extremely difficult under the circumstances. With Japan, Hong Kong and Singapore already in recession, he says there is “no guarantee that Asia will pull through in 2009,” adding that Asia is still not a genuine priority for most New York- and London-based networks.
The challenge for Asian agencies, then, is to deliver on these expectations on reduced resources.
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