Global viewpoint from Moscow
A view from Valeriy Kaygorodov

Global viewpoint from Moscow

What started off as the year of the Sochi Winter Olympics, an important year for Russia, is closing as the year of uncertainty about the future. No expert can accurately predict the consequences of rivalry between Russia and its largest foreign investors, but our forecast is that the local advertising market will be hit severely.

Sanctions, counter-measures, new waves of sanctions, retaliation… Whoever started the fight, and for whatever reason, is not important for Russian businesses and the ad market. Rather, the question is: which is more detrimental, sanctions or countermeasures? Should we stay alert to the sanctions being imposed or the Russian limitations on foreign organisations – from equity ownership in local media to foreign brands on the supermarket shelves to information security vetting?

Sanctions need time to take their toll. The figures for 2013/14 still look promising: the ad market grew by 10.1 per cent in 2013, generating total revenues of 328 billion rubles (£5.68 billion), after growth of 13 per cent in 2012 and 18 per cent in 2011, according to the Association of Communication Agencies of Russia. Results for January to June 2014 show an additional increase of about 6 per cent, compared with the same period in 2013.  

Russia is poised to become the fifth-biggest TV advertising market in the world by 2015, behind the US, Japan, China and Brazil. Online advertising is catching up, largely thanks to contextual advertising’s blistering 34 per cent growth in 2013, and 28 per cent in January to June 2014. The new rising sector is mobile advertising: in 2010, investment in mobile advertising in Russia totalled £7.4 million and, according to experts, it will hit £48 million in 2014 and £84.5 million in 2016.

Whoever started the fight, and for whatever reason, is not important for the Russian ad market

Other growth areas include business tourism, commercial real-estate marketing, business modelling and gamification. And Moscow is becoming the hub for companies from both Russia and the Commonwealth of Independent States that are eager to penetrate the global marketplace. Although this might be hampered by rivalry with the West, we will see Russian businesses reaching eastwards to penetrate South and South-East Asia. Inter-Bric collaboration is also gaining importance.

Moscow still enjoys its "nation within a nation" status: by 2020, 30 per cent of Russia’s GDP will be produced here and 20 per cent of the population will live here.  Moscow is an economic force, a global city with a diverse social-economic mix and huge, country-wide influence.

Another interesting trend is the efforts of advertising and PR agencies to reposition themselves into modern-sounding businesses, such as "intangible asset management" companies. In times of turmoil and uncertainty, creativity in forging new interdisciplinary products and services becomes a necessity.

Valeriy Kaygorodov is the brand development director at M&C Saatchi Russia