Agency: Bartle Bogle Hegarty
campaignlive.co.uk, Friday, 22 July 2005 12:00AM
In Eastern Europe not so long ago, walls symbolised oppression - the impregnable physical divide between the command economy and the free market. Today, the chances are these walls will be covered with billboards from brands looking to build their profile in this fast-developing region. Goodbye 1917 revolution, hello 96-sheet execution.
Rupert Murdoch's News Corporation, which through its News Outdoor Group subsidiary already has a 30 per cent share of the Russian out-of-home media market, has recently been in negotiation with the European Bank for Reconstruction and Development to secure $130 million to fund out-of-home acquisitions in Russia. News Corp was thwarted by the Russian parliament in its attempts to become a significant player in the country's commercial television market and has identified outdoor as the best means of securing healthy ad revenue streams in the country. NOG is active in Poland, Hungary, Romania, the Czech Republic and Bulgaria, as well as in Russia, where it is headquartered.
"The reason for the focus on Russia and the other Eastern European markets is quite simple - there are out-of-home businesses with higher margins than Western Europe and with a quicker return as well," Mike Segrue, the Kinetic global chief client officer, says. "NOG has a strong, tight regional management team based in Moscow, which acts quickly and effectively and they are, of course, supported by the excellent political and media contacts that Murdoch enjoys."
NOG now has around 25,000 advertising billboards and hoardings in 90 cities in Russia, and expansion is a racing certainty. It runs an out-of-home school to train advertising and media agencies how to plan, buy and create effective out-of-home work.
The belief is that Eastern Europe has a vibrancy, excitement and profitability that Western Europe cannot match.
Eastern Europe promises above-average growth for media owners and for the majority of advertisers too, as its markets continue to open up. The major brewers have been acquisitive.
For example, SAB Miller is attributing good results in part to successful sales in Russia and other CIS markets.
"From an out-of-home point of view, the high-margin scenario that NOG enjoys in Russia may not be replicated in some of the other Eastern European markets. But there's a feeling that it's a matter of time before Viacom starts to develop its out-of-home offering there. JCDecaux and Clear Channel already have a regional presence here, particularly in the Baltics," Segrue says.
JCDecaux also has a 50:50 joint venture with the Austrian company Gewista, which trades as Europlakat International and is in six central and Eastern European markets. JCDecaux also has 35 per cent ownership of Germany's Wall, which has had the street-furniture contract for central Moscow since the early 90s.
"Russia is definitely the big one," Clear Channel's chief executive for Northern Europe, Rickard Hedlund, says. "There's a lot of pent-up demand. There isn't a major player across the region in the way you have in Western Europe with JCDecaux, Viacom and Clear Channel. But it's early. We will see more consolidation, definitely."
Clear Channel has expanded into the region out of Stockholm, moving into the Baltic states and St Petersburg at the beginning of the 90s and latterly expanding into Moscow and Poland too. Hedlund makes the point that standard poster formats in the region tend to be bigger than those in Western Europe, with six-by-three metres popular in Russia and 12-by-five metres not uncommon. While this makes for impactful, even intrusive posters, Hedlund accepts proliferation also creates more "noise" challenges for creatives to cut through.
"Billboard is very developed in the region because a lot of countries up until 94/95 did not have a commercial TV market," Barry Cupples, the chief executive of the region's largest media agency, OMD, says. "Austria and Hungary have the highest number of billboards per capita in the world."
Owing to its headstart over TV, out-of-home in Eastern Europe commands a healthy share of the adspend cake. Cupples says outdoor in the region takes roughly a 10 per cent media share, ahead of the 6-7 per cent more typical in Western Europe.
But despite its success and healthy growth prospects, Cupples feels there are issues that need to be addressed. He would like to see a new measurement system introduced that is less skewed towards the interests of the media owners and he is also critical of the overall standard of media product.
"One of the biggest problems is that there have been a huge number of hoardings rather than sites," Cupples observes. "There's a lot of stuff on the side of building work at ground level where it's susceptible to graffiti, muck and rubbish. There's quantity but not always enough quality."
The German media group Stroer has built up a strong position in the Polish outdoor market with its Stroer Polska subsidiary and claims to be benefiting from the dynamic development of the country and its ad market. But, on the whole, it has been wary of expanding too fast and has been consolidating back home after acquiring Germany's huge state-owned outdoor group, Deutsche Stadte Medien, last year.
"Countries further east, such as Russia or Ukraine, offer opportunities for media owners," a spokeswoman for Stroer says. "On the other hand, one must be mindful of the considerable risks business is exposed to in these countries, such as corruption or a lack of legal security. Therefore, our Eastern Europe focus will stay on Poland."
A common mistake is looking at Eastern Europe as a homogeneous market.
There are the well-developed countries with large populations, such as Poland, and the smaller, less mature markets, such as Bulgaria. Generalisations verge on the meaningless. Still, no-one doubts there are opportunities for established international media groups to develop strong regional businesses. After all, demand from global brands eager to sell to the region's fledgling consumerist societies shows no sign of slowing.
OUTDOOR ADSPEND IN EASTERN EUROPE Market Estimated outdoor Predicted growth adspend 2005 (dollars m) 2005 v 2004 (%) Russia 650.0 4.8 Hungary 141.1 9.8 Ukraine 120.5 35.0 Poland 84.3 -5.4 Czech Republic 46.1 1.7 Croatia 23.2 4.3 Romania 19.1 15.6 Lithuania 7.9 13.0 Latvia 6.4 17.9 Estonia 5.7 13.9 Total (Eastern Europe) 1,104.3 11.1 Total (EMEA) 7,249.2 2.6 Source: Initiative; no data for Slovakia, Belarus, Bosnia-Herzegovina and Bulgaria.
This article was first published on campaignlive.co.uk