World: Media Analysis - Asia-Pacific media agencies ride out the recession

Asking agencies to declare their billings puts figures in doubt, Sebastian Tong says

Trust the facts but mind the figures - this seems to be the attitude media agency networks in Asia are adopting towards the latest Recma report on worldwide billings.

While industry participants agree that networks in Asia-Pacific have proved resilient despite a difficult year, many dispute the billings estimates provided by the Paris-based research outfit.

"I believe there is strong growth right now in Asia - especially in China, India, Singapore and Thailand. The problem is that in some countries the reported spend is so grossly wrong," Blaise D'Sylva, Starcom MediaVest Group's chief executive, north-east Asia, says.

According to Recma, media networks agencies in Asia (including Japan) chalked up $14.8 billion in billings during 2003 and the first three months of this year, an impressive year-on-year increase of 14.3 per cent. This trumps the reported global average of 7.2 per cent.

Although Asia-Pacific's total billings account for just over 9 per cent of the global figure, the region's performance is impressive considering that 2003 was such a tumultuous year.

Although the report captures Asia's characteristically upbeat mood, many in the industry are sceptical of Recma's research methodology. Some also suspect that the figures are inflated because of network hype.

"I am taking their estimates with a big pinch of salt. I think Recma's methodology is unscientific, since it involves the company getting billings data from the agencies themselves. In other words, there is no independent source of information and what you get are agencies exaggerating their billings," one Asia-Pacific chief complains.

Some say the growth rates for regional advertising expenditure are probably in the high single digits, instead of the remarkable 14.3 per cent. By comparison, a recent report on 2003 global adspend by Initiative Futures showed that Asia-Pacific chalked up a 7.4 per cent year-on-year growth - this figure excludes Japan's 2 per cent increase, which would otherwise pull down the regional average in terms of global adspend.

Recma has admitted that obtaining data from network agencies was more difficult with the passing of the Sarbanes-Oxley Act in the US. Aimed at tightening corporate governance, legislation had "led the publicly held networks to stop disclosing billings", it said in its report.

In order to fill the information gap, it has turned to "more than 100 contacts in the trade press and media agencies" to provide "details on account moves", as well as the support of ad monitoring agencies such as TNS Media Intelligence/CMR in the US.

"The fact that Recma bases its ranking tables on questionable methodology implies the very great risk that its results do not reflect the reality. A number of holding groups do not permit their group companies to release figures, although many companies have continued to provide data. Where this is not the case, Recma is forced to rely on third-party sources and a great deal of subjective criteria for evaluation purposes," a spokesperson for Initiative Worldwide says.

John Steedman, the MindShare Asia-Pacific chairman, remains supportive of Recma: "We firmly believe it is important to have an independent third party providing an objective opinion and informed point of view regarding the agency networks. Clearly, there are areas where we believe Recma can improve its methodology and reporting and we are co-operating with it by providing constructive comments and suggestions."

Recma's estimate of a 24 per cent year-on-year expansion in MindShare's billings during the 2003 and first quarter 2004 period were "more or less accurate", though Steedman disagrees with projections for some of MindShare's markets, including Japan.

D'Sylva has also acknowledged that Recma's task is "not an easy one" but adds: "Its numbers are flawed and I get really pissed off when I see some of my competitors' numbers so highly inflated."

The numbers cited for Hong Kong spend are "probably three times too high - just look at the billings to staff ratio there", while Japan and South Korea are "kind of wastelands" for almost everybody. Recma's estimate of 14.3 per cent growth for the region is likely to be "close" to the actual figure, even if the tally for total billings is "15 to 20 per cent too high".

Still, D'Sylva concedes, the agency's number-four regional ranking is justified, given its weakness in Japan and Australia compared with Interpublic's Universal McCann, the agency in third place.

Despite the cynicism towards Recma's numbers, industry participants share the view that the region's prospects remain robust with advertising spend likely to be further fuelled by the upcoming Olympics Games and the Euro 2004 football tournament.

"All markets, with the exception of Singapore and Hong Kong, are growing at double digit and marketers continue to invest - we cannot see signs of this moderating," Steedman says.

All eyes remained fixed on China, where players say there is no sign of a slowdown in investment by multinationals. Instead, adspend for the market will continue to rise as the country ascends the priority list of aspiring global companies.

According to the Futures report, China has become the world's third-largest advertising market after the US and Japan, growing at an estimated 14.9 per cent last year. As an indication of how fast its position has changed, just three years ago, China ranked sixth in terms of global adspend.

MEDIA NETWORKS' ESTIMATED BILLINGS FOR 2003

Rank Rank Media network Total worldwide Asia-Pacific

world- Asia owner groups dollars m dollars m

wide

1 5= OMD 19,335 1,385

Omnicom +7.9% +15.9%

2 1 MindShare 19,160 2,905

WPP/Group M +11.1% +23.5%

3 4 Starcom MediaVest 18,865 1,540

Publicis Groupe +6.9% +12.6%

4 5= Carat (without Vizeum) 17,765 1,385

Aegis +4.3% +52.2%

5 2 ZenithOptimedia 15,530 2,380

Publicis Groupe +2.1% -1.9%

6 3 Universal McCann 15,140 2,070

Interpublic +3.3% +1.1%

7 7 Mediaedge:cia 14,625 1,215

WPP/Group M +8.8% +24.5%

8 9 MediaCom 13,555 600

Grey Global Group +7.2% +2.2%

9 8 Initiative 12,545 1,145

Interpublic -2.4% +20.1%

10 10 Media Planning Group 8,625 110

Havas +10.7% +22.0%

11 - PHD 4,920 -

Omnicom +5.1%

12 11 Vizeum 1,870 15

Total for the 12 networks 161,935 14,750

+7.2% +14.3%

Source: Recma. Notes First line: Recma billings estimates (2003+Q1 2004)

Second line: 12 months growth rates: 2003(+Q1 2004)/2002 (+Q1 2003)

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