Agencies See Opportunity Amid Asia Crisis

Despite the economic slowdown looming over Asia, some of the world’s leading advertising agencies are poised to ride out the unrest, possibly even expanding their presence in the region over the next few years.

Fred J. Meyer, chief financial officer of Omnicom Group Inc., a New York-based advertising conglomerate, expects business to be sluggish next year, particularly in countries such as Thailand, Indonesia and South Korea. But he also sees strong takeover opportunities as smaller agencies struggle amid the area’s devalued currencies.

“We may see this as an opportunity to expand by making acquisitions,” Meyer said, adding that only about 5% of Omnicom’s total $3 billion in revenue came from Asia this year. Omnicom agencies include BBDO, DDB Needham and TBWA Chiat/Day.

Meyer expects Omnicom’s revenue from Asia to be flat next year. If the region’s economies were not in turmoil, the agency would have projected a 15% to 20% growth for the region in 1998, he said.

“A few companies, particularly those selling luxury goods in Asia, might be a little cautious,” Meyer said. “But companies like McDonald’s or Mars won’t slow down.”

Bates Worldwide, with roughly 10% of its roughly $6.3 billion in revenue coming from Asia, has more to lose from the fiscal turmoil. But Michael Bungey, Bates’ chief executive, also is confident in Asia’s long-term prospects, particularly in China, Hong Kong and Taiwan.

“We haven’t had clients rapidly canceling their budgets, but we’re adopting a cautious attitude,” said Bungey, whose agency is being spun off from Saatchi & Saatchi. “Hopefully, we’ll weather the storm without much trouble. Our view is that it’s still the place we’re very happy to be the No. 1 network in.”

Like other top executives, Bungey sees opportunity amid the chaos.

The company this week announced that it has been awarded the Shanghai General Motors account, potentially worth between $20 million and $30 million.

“I see this as a time to build market share in the area because many multinational clients traditionally try to develop their presence in a region when it becomes cheaper,” he said. “Our views on acquisitions are pretty much the same as our competitors. We have acquisition plans of our own.”

Another global advertising giant, Interpublic Group of Cos., is equally unfazed by recent events in Asia. About $250 million of the agency’s $3 billion in revenue is generated from Asia, excluding Japan. Interpublic is a holding company whose agencies include McCann-Erickson, Martin Agency and Dailey & Associates.

“All of the major companies are there for the long haul,” said Thomas J. Volpe, the company’s senior vice president of financial operations. “We’re going to be doing business as normal.”

In his annual forecast of advertising spending, John Perriss, chairman and chief executive of Zenith Media Worldwide, predicted that Asian advertising spending will continue growing, but at a slower pace than had been previously thought.

“The banking and currency crisis which hit Southeast Asia in mid-1997 is expected to impact the region’s consumer confidence more than its economic fundamentals,” Perriss said in his report, released earlier this week.

But because of lagging confidence, Perriss downgraded the region’s medium-term prospects. In July, he predicted that Asia-Pacific would account for 27% of the world advertising market by 2000, the same projection for Europe. He now believes the Asia-Pacific figure will be closer to 25%.

Still, he sees advertising spending in Asia-Pacific growing faster than in either Europe or North America over the next three years. For instance, Perriss estimated a 7.1% ad spending increase next year in Asia, while Europe’s projected growth will reach 5.4% and North America’s will hit 5%.

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Ad Growth

Advertising spending is expected to continue rising worldwide through 2000. However, the recent economic crisis in Asia is expected to slow the growth in the region. Here is a world-advertising expenditure summary for major media (print, TV, radio, cinema, outdoor). Dollar amounts are in billions.

1997

North America: $111.6

Europe: $84.1

Asia-Pacific*: $73.7

Latin America: $23.4

Africa/Middle East: $5.9

Total: $298.8

*

1998

North America: $117.3

Europe: $88.6

Asia-Pacific*: $78.9

Latin America: $26.4

Africa/Middle East: $6.6

Total: $317.8

*

% change

North America: +5.0%

Europe: +5.4%

Asia-Pacific*: +7.1%

Latin America: +12.8%

Africa/Middle East: +11.2%

Total: +6.4%

*

1999

North America: $122.7

Europe: $93.1

*Asia/Pacific: $84.4

Latin America: $29.4

Africa/Middle East: $7.3

Total: $336.8

*

% change

North America: +4.6%

Europe: +5.1%

Asia-Pacific*: +6.9%

Latin America: +11.1%

Africa/Middle East: +11.0%

Total: +6.0%

*

2000

North America: $128.2

Europe: $97.7

Asia-Pacific*: $90.8

Latin America: $32.7

Africa/Middle East: $8.1

Total: $357.5

*

% change

North America: +4.5%

Europe: +4.9%

Asia-Pacific*: +7.6%

Latin America: +11.5%

Africa/Middle East: +10.5%

Total: +6.1%

*Includes Australia

Note: Numbers may not add up to 100% due to rounding.

Source: John Perriss, chairman and chief executive of Zenith Media Worldwide. Figures are from his annual forecast of advertising spending.