The Russian Advertising Market
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The document provides an analysis of the Russian advertising market at the macro, industry, and consumer levels. At the macro level, it notes that the Russian media market is one of the fastest growing in the world, with TV and internet advertising expected to double by 2015. The total advertising market was worth €7.4 billion in 2012. At the industry level, it describes high competition among thousands of agencies and notes bargaining powers of suppliers and buyers. At the consumer level, it outlines differences between regions and generations of Russian consumers and attitudes towards domestic vs international brands.
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The Russian Advertising Market
- 1. 1 International markets assessment The Russian advertising market 1 Arseny Veber, in cooperation with the Full Service Advertising Agency “ArtDirection”, Munich, Germany Kufstein, Austria September 2013
- 2. Agenda + Macro Level + Industry Level + Consumer audience analysis 2The Russian advertising market
- 3. Russian media market is one of the fastest growing in the world Almost all the segments of the Russian media market are growing faster than their counterparts in the global market Source: PricewaterhouseCoopers, 2011 3 Macro Level The Russian advertising market Growth rate by segment, 2011-2015, %
- 4. 4 Macro Level TV advertising as well as the Internet access will double their size by 2015 in comparison with 2010 The Internet advertising and TV subscriptions will also rise significantly The Russian advertising market Growth rate by segment, 2011-2015, bn € Source: PricewaterhouseCoopers, 2011
- 5. 5 Macro Level The total value of the Russian advertising market in 2012 was about €7,4 bn The rate of growth is 13% that is lower than in 2011 (21%) The Russian advertising market The growth rate of Internet advertising is almost three times higher than the advertising market as a whole Source: DigitalTVEurope, 2013, AKAR, 2013 Revenue, bn € Growth Rate 2012 January – March 2013 TV advertising 3,40 9% 13% Internet advertising 1,35 35% 32% Print media advertising 1,00 2% -5% Radio advertising 0,34 23% 18% Outdoor advertising 0,89 10% 13%
- 6. 6 Macro Level The development of modern communication technologies leads to the structural changes of the market and the ways of advertising The Internet can be considered as a replacement of the TV campaign for those who are not watching TV at all The Russian advertising market Source: Public Opinion Foundation, cited in Upi.com, 2013, Synthesion, 2013, eMarketer, 2013, Statista, 2013 Use the Internet every day 13,1% 44,3 mio | 50,1 mio 2011 2012 + YouTube audience stands at 25 mio users on the site itself and 51 mio in other websites + Russian spend more time on social networks than in any other country + Vkontakte – 40 mio visitors per day + Odnoklassniki – 33 mio visitors per day + Twitter – 21% of online population + 45% of population will be active in social media by 2014
- 7. 7 Macro Level What has really changed with the development of digital technologies? The Russian advertising market Source: AKAR, 2012a People‘s mindset, motivation and behavior People need to be in network Impact on people‘s memory Brand recall is sinking immediately after the cessation of the marketing campaign Consumption patterns have changed
- 8. 8 Macro Level The market of digital content: mobile is a leader The market is expected to grow by more than twice by 2015 in comparison with 2012 The Russian advertising market Source: Json & Partners Consulting, 2012 Russian market of digital content Market size of mobile marketing in Russia in 2012 and 2015, mio €
- 9. 9 Macro Level Mobile advertising, loyalty programs and SMS-marketing are taking the leading positions The Russian advertising market Source: Json & Partners Consulting, 2012 The market structure of mobile marketing in 2012 + Popularity of App advertising + Development of mobile networks + Emergence of mobile loyalty programs + Growing population of the location-based services + Growing impact of social networks Trends in the Russian mobile marketing Limitations in the Russian mobile marketing + Limitations and challenges of SMS marketing + Lack of market statistics + Lack of experience in use of mobile marketing tools
- 10. Agenda + Macro Level + Industry Level + Consumer audience analysis 10The Russian advertising market
- 11. The Russian advertising market 11 Industry Level Five Competitive Forces reflect an industry competition which goes well beyond buyers, suppliers, substitutes and new entrants
- 12. The Russian advertising market 12 Industry Level Very high competitive intensity: there are thousands of communication agencies in Russia International Ad Networks Local companies “Symbiotic” collaboration The head is a large international company which controls and support the local partner The local Russian partner which perfectly deals in the national market
- 13. The Russian advertising market 13 Industry Level Threats of new market entrance - low Newcomers must understand that the other companies who entered the market before will never give up their clients and are always ready to fight for the new ones In spite of the high competition, there are 3 main factors which may determine company’s success Experience and market awareness Long-term relations with existing clients Reputation and solid portfolio
- 14. The Russian advertising market 14 Industry Level Bargaining power of Suppliers- high SMEs do not have in-house photographers , production crews, software developers, etc. They have to rely on independent contractors Bargaining power of Buyers- high Clients with big budgets have strong bargaining power Clients with smaller budgets can be more flexible Identity of big companies adds more prestige to the list of customers
- 15. The Russian advertising market 15 Industry Level Threats of new substituting products - low There are no absolute substitutes for an advertising campaign Ongoing evolution of technology, such as e-commerce, social media tools, mobile applications, etc. offers just new channels which can be integrated into creative concepts with relatively low switching costs
- 16. Agenda + Macro Level + Industry Level + Consumer audience analysis 16The Russian advertising market
- 17. The Russian advertising market 17 Consumer audience analysis In order to understand the Russian buyer today and make a forecast for tomorrow, we have to know what happened yesterday 20th century 1990s 2000s 2012 • Civil war • Two world wars • Famine • Socio-political changes Abrupt transformation of the society from one socio-economic system to another The way of transformation and business development influenced the consumption patterns A purchase activity burst Almost all the markets began to grow again
- 18. The Russian advertising market 18 Consumer audience analysis Russia is a multinational Eurasian country where significant differences exist from region to region + Especially, there are vast differences in consumer behavior between the centers such as Moscow, St.Petersburg, Rostov, Krasnodar, etc. and Russia’s provinces + When entering the Russian market, a multifaceted plan has to be prepared Half of Russians live in rural areas and small towns (less than 100.000 inhabitants) They are in a condition of market infantilism The second part of the population was able to adapt to the market deveopment Socially active citizens of middle age The third part is the new generation that was born in the market economy Warmly welcome new technologies 1 2 3
- 19. The Russian advertising market 19 Consumer audience analysis In order to adapt an international advertisement, specifics of Russian advertising message perception should be considered An advertising appeal has to be more informative + Russian customers make their purchase decisions impulsively, impressed by immediate circumstance A lot of attention to the product’s brand name + They are willing to overpay for it Emotionality during the purchasing process + They cannot pass by promotion
- 20. The Russian advertising market 20 Consumer audience analysis Russian consumers have different attitude towards domestic and international brands Driving forces to buy a Russian brand Driving forces to buy an international brand + Price Local brands can be much cheaper than their foreign counterparts + Perceived image Can be perceived to be healthier Feeling of patriotism + Brand name + Better representation Increases customer’s prestige in the eyes of others
- 21. References Advantage Austria (2011). Fresh view on architecture, design, film and music [PDF]. Retrieved from http://www.advantageaustria.org/zentral/publikationen/ae/148_Architecture_Design_Film_and_Music.pdf, accessed on 09.06.2013 Advertising Industry (2013). Развитие рынка рекламы [Advertising industry development] [HTML]. Retrieved from http://www.adindustry.ru/doc/1159, accessed on 02.06.2013 AKAR (2012a). Digital marketing outlook Russia [PDF]. Retrieved from http://www.akarussia.ru/files/docs/digital_marketing_outlook_russia_2012.pdf, accessed on 03.06.2013 AKAR (2012b). Стоимость креативных услуг в рекламных агентствах в 2009-2011 [Pricing for creative services in advertising agencies in 2009-2011] [XLS]. Retrieved from http://www.akarussia.ru/files/docs/stoimost_kreativnyh_uslug_2009-2011.xlsx, accessed on 06.06.2013 AKAR (2013). Объем рынка маркетинговых коммуникаций России по итогам 2012 года [The size of the Russian market of marketing communications in 2012] [HTML]. Retrieved from http://www.akarussia.ru/knowledge/market_size/id2990, accessed on 04.06.2013 Creativ wirtschaft austria (2013). Der Fünfte Österreichische Kreativwirtschaftsbericht [The fifth Austrian report on creative industries] [PDF]. Retrieved from http://www.creativwirtschaft.at/document/5KWB-web_2.pdf, accessed on 09.06.2013 DigitalTVEurope (2013). Russian advertising market growth slows in 2012 [HTML]. Retrieved from http://www.digitaltveurope.net/32229/russian-advertising-market-growth-slows-in-2012/, accessed on 03.06.2013 ECCO International (2010). Social Media in Austria [PDF]. Retrieved from http://www.ecco-network.com/wp-content/uploads/2011/08/austria.pdf, accessed on 09.06.2013 Ernst&Young (n.d.). Making it work in Russia: middle class consumer profile [HTML]. Retrieved from http://www.ey.com/GL/en/Industries/Consumer-Products/Making-it-work-in-Russia---Middle-class-consumer-profile, accessed on 08.06.2013 European Travel Commission (2013). New Media Trend Watch: Austria [HTML]. Retrieved from http://www.newmediatrendwatch.com/markets-by-country/10-europe/36-austria, accessed on 09.06.2013 Goldbach Audience (2013). Werbemarkt Österreich [Advertising market Austria] [HTML]. Retrieved from http://www.goldbachaustria.at/research-de/werbemarkt-oesterreich, accessed on 09.06.2013 Google (2012). Our mobile planet: Austria. Understanding the mobile consumer [PDF]. Retrieved from http://www.thinkwithgoogle.com/insights/library/studies/our-mobile-planet-Austria/, accessed on 12.06.2013 Internet World Stats (2012). Internet users penetration in Europe [HTML]. Retrieved from http://www.internetworldstats.com/stats4.htm#europe, accessed on 08.06.2013 Json & Partners Consulting (2012). The market of digital content in Russia and the world, 2009-2013 [HTML]. Retrieved from http://www.json.ru/en/poleznye_materialy/free_market_watches/analytics/rynok_cifrovogo_kontenta_v_rossii_i_mire_2009-2013/, accessed on 03.06.2013 Json & Partners Consulting (2013). Mobile Internet market review. Use of mobile Internet through smartphones and tablet PCs [HTML]. Retrieved from http://www.json.ru/en/poleznye_materialy/free_market_watches/analytics/obzor_rossijskogo_rynka_mobilnogo_internet-dostupa_ispolzovanie_mobilnogo_interneta_na_smar , accessed on 03.06.2013 Kalinicheva, D. (2010). Situational approach for foreign advertising adaptation on the Russian market (Master Thesis, University of Amsterdam, 2010). Retrieved from http://dare.uva.nl/document/202708, access on 08.06.2013 21International markets assessment
- 22. References Mediascope Europe (2012). Austria Launch Presentation Summary [PDF]. Retrieved from http://www.iabeurope.eu/files/6413/7182/9251/MEDIASCOPE_2012_AUSTRIA_SUMMARY_LAUNCH_PRESENTATION.pdf, accessed on 12.06.2013 Milehin, A. (2013). Российский потребитель: вчера, сегодня, завтра [Russian consumer: yesterday, today, tomorrow] [HTML]. Retrieved from http://www.marketologi.ru/publikatsii/stati/rossijjskijj-potrebitel-vchera-segodnja-zavtra/, accessed on 07.06.2013 Mobile Marketing Association Austria (2012). Mobile communication report 2012 [PDF]. Retrieved from http://startmobile.mmaaustria.at/html/img/pool/2012_MMA_Communication_Report_kostenfreie_Praesentation.pdf, accessed on 11.06.2013 PwC (2011). Media market in Russia: a future full of potential [PDF]. Retrieved from http://www.pwc.com/gx/en/entertainment-media/publications/pwc-outlook- on-russia.pdf, accessed on 01.06.2013 Region-Media (n.d.). Consumer behavior in Russia: highlights on consumer segments, brand perception, advertising and channels [HTML]. Retrieved from http://www.region-media.ru/behavior.php, accessed on 08.06.2013 Russian Marketing & Advertising Agency (n.d.). Russian consumers and Russian advertising agencies [HTML]. Retrieved from http://russia- promo.com/features-russian-consumers-and-russian-advertising-agencies, accessed on 08.06.2013 Statista (2013). Twitter penetration in selected EMEA countries as of 4th quarter 2012 [HTML]. Retrieved from http://www.statista.com/statistics/254799/twitter- penetration-in-selected-emea-countries/, accessed on 03.06.2013 Statista (2013a). Einsatz von Social Media im Corporate Publishing 2012 [Social Media usage in corporate publishing in 2012] [HTML]. Retrieved from http://de.statista.com/statistik/daten/studie/246019/umfrage/einsatz-von-social-media-im-corporate-publishing-nach-segmenten/, accessed on 10.06.2013 Statista (2013b). Umfrage zur Bedeutung Sozialer Netzwerke im Corporate Pubishing 2012 [The importance of Social Networks in corporate publishing in 2012] [HTML]. Retrieved from http://de.statista.com/statistik/daten/studie/246026/umfrage/bedeutung-sozialer-netzwerke-im-corporate-publishing/, accessed on 10.06.2013 Statista (2013c). Internetnutzung in Deutschland, Österreich und Schweiz 2012 [Internet usage in Germany, Austria and Switzerland in 2012] [HTML]. Retrieved from http://de.statista.com/statistik/daten/studie/245079/umfrage/internetnutzung-in-deutschland-oesterreich-schweiz-nach-endgeraeten/, accessed on 10.06.2013 Synthesio (2013). 4 fascinating facts on the Social Media landscape in Russia [HTML]. Retrieved from http://synthesio.com/corporate/en/2013/uncategorized/4-fascinating-facts-on-the-social-media-landscape-in-russia/, accessed on 03.06.2013 22International marketa sassessment
Editor's Notes
- In 2010, the Russian media market grew by 13% and was worth €15.4bn ($20.4bn), while the global market increased by only 4.6% (PwC, 2011). In 2010, Russia’s media market was the thirteenth largest in the world, and PricewaterhouseCoopers (2011) predicts it to maintain this position over the next five years. Moreover, already by 2014, it may become the fourth largest market in EMEA.
- The communication market in Russia is heterogeneous; its segments have their own dynamic of development. As we can see, in recent years, the fastest growing segment is the Internet: the growth rate of Internet advertising is almost three times higher than the advertising market as a whole. At the same time, print media advertising reduces its dynamic which is already close to zero.
- All these trends create a positive environment for marketing campaigns in the digital world. At the same time, digital is not just a new media channel. It is an environment which is substantially very similar to the natural human environment (AKAR, 2012a). Working online, it is necessary to use experience of traditional media. Therefore, marketing communications in digital and Above-the-line channels (ATL) should not be separated in order to build brand awareness and drive sales. Thus, a communication process should start with the identification of the target audiences, then thinking about how to talk to each of them, formulating one big idea and one big strategy, and only then dividing it into channels.
- It is necessary to perceive the digital world not as a new tool, but as a new environment closely connected with traditional media channels and live communication.
- Mobile Internet access penetration in Russia is approximately 2 times higher than the world average indication. According to Json & Partners Consulting (2013), the total audience of mobile Internet access was about 40 million users at the end of 2012.
- Modern trends of the Russian advertising market encourage a strong competition not only among local SMEs, but also from large international groups which want to strengthen their positions in the growing Russian market. Many international giants are trying to capture the most perspective niche – Internet and digital advertising. Smaller Russian agencies also see their benefits in collaboration with big international companies in order to use their support, experience and brand name, as well as to get international customers.
- Until a company has built a large customer base and proved itself on the positive side, it is difficult to get big orders. Moreover, attracting creative talents can be an additional challenge for a new agency. People who come up with interesting ideas, concepts and design want their skills to get very well paid.
- Agencies which have a broad base of regular customers with large budgets have bargaining power with these suppliers and can negotiate better deals for their clients, thus enhancing their reputation in the market and establishing long-term relationships with suppliers.
- Table: Average price for creative services in Russia – difference between Russian local agencies and advertising networks.
- Today, it seems that the adaptation period has already ended and the consumer has become reasonable, because they satisfied their basic needs. However, in 2012, we could observe a purchase activity burst. Almost all the markets began to grow again. At the same time, one of the main things that we have to keep in mind is the heterogeneity of the Russian consumer.
- Some businesses report that there are greater differences between neighboring regions in Russia than between neighboring European countries. Accordingly, the perception of advertising campaigns may also vary in different parts of Russia. Today, almost 70 million Russians are online (Internet World Stats, 2012). Mobile internet penetration, in turn, is 55% ( Json & Partners Consulting, 2013) which is already almost in line with the European average.
- 65% of Russians are buying something else in addition to the planned products and 57% are buying products under the influence of promotion.
- While considering the characteristics and features of Russian consumers, it is important to keep in mind that the Russian market is rapidly expanding, borders become more transparent, Russian citizens travel a lot to other countries and become more knowledgeable and qualified in their brand experience. These processes provoke constant changes of brand equity in Russia.