Waiting for the other shoe to drop: Digital in Indonesia

“It’s as exciting as a gold rush waiting to happen, but infrastructure for broadband access is still underdeveloped," explained Paramita Mohamad, chief strategy officer, Lowe Indonesia. "Also, nobody has successfully cracked online payment system in Indonesia. I know digital is not only about e-commerce, but there are ideas that are linked with micro fund-raising. So stuff like the Indonesian version of Kickstarter (WujudkanID) or Project Refresh are still facing huge challenges.”

Indonesia’s ad industry is also trapped in a vicious cycle, because there hasn’t been much in the way of digital advertising, clients are unwilling to try it, and because clients are unwilling to try digital advertising, digital doesn't take off. .

“Clients don’t really understand digital. They say ‘social’ but often they have no real idea of what it entails. It’s quite a ‘follow me’ market, but once a campaign here really takes off, it’s all going to just explode,” commented Berndt Söderbom, president director of McCann Worldgroup Indonesia.

Mobile advertising too isn’t as advanced as it should be considering the country’s massive Blackberry addicted population. “Despite the popularity of Blackberry Messenger (BBM) here, data is still very expensive and the bandwidth just isn’t there,” pointed out Fachry Badry, business unit head of McCann Digital. “Also, BB just isn’t as flexible a platform to write advertising and programmes for as Android or iOS.”

Fachry estimates that BB has a 15 per cent market share of all of Indonesia’s mobile users, Android has three per cent and iOS has one per cent. “There is an expectation that Android will drive smartphone and digital advertising growth here when phones that cost less than US$100 are launched,” added Fahry.

When Android phones take off, the dominos start to fall and Indonesia is expected to leapfrog past line-based internet service and head straight for mobile. “Indonesia is an archipelago. I think Telkom (Indonesia’s leading telco) has minimised their investment in land-line network. Mobile has been growing so fast,” agreed Paramita.

At present, TV dominates Indonesia’s media spend accounting for 58 per cent of the US$5.74 billion advertising market. While this makes for a comfortable climate for agencies, TV viewership is starting to erode as internet users grow.

“Digital has become the mass media. They haven’t stooped watching TV but they are busy with their mobile devices, while they watch it,” said Venke Sharma, digital technical advisor at Leo Burnett Indonesia. “As agencies and marketers, we need to be where the consumers are. It’s more about cultural practices than about technology.”

Fighting to be the first to make the coveted digital breakthrough is also about guarding revenue streams, said Paramita. “I suspect clients are starting to consider dabbling, albeit cautiously, in digital. There’s demand, and if we’re not careful small digital or social shops will provide the supple. Perfect for making the agencies more keen.”

As the trend gradually shifts around to digital, agencies looking for early-mover advantage in this market have started buying up local digital shops. Ogilvy Indonesia and McCann Indonesia have both voiced an interest in making acquisitions, while JWT recently acquired Magnivate via XM Asia.

“Agencies have also started recruiting people, giving them sexy job titles that include the word ‘Social’ or ‘Digital’,” commented Paramita wryly. The true holy grail of talent though would be technologists like U/X designers or information architects, she noted.

However, agencies shouldn’t be looking to tack on digital capabilities but to take an integrated approach, advised Sharma. Leo Burnett Indonesia, he said, is focused on ensuring that every “account person understands digital and every creative person can think digital”.

“The winner will be the agency with the right capabilities, that lands the right client, at the right time of the mobile market’s maturity,” commented Söderbom. “Who wouldn’t want to be that agency?”

Look out for the Indonesia Report: Today and Tomorrow in the May edition of Campaign Asia-Pacific for deep insight into this fast-growing nation’s advertising landscape.