Global trends to impact on Malaysia

Worldwide advertising trends are showing a definite shift in focus,

and much of this will have an impact on the future of the advertising

and communications industry in Malaysia, said Association of Accredited

Advertising Agents (4As) Malaysia president, Tony Lee.

A key indicator, he said, was the change in how worldwide agency groups

like WPP, Interpublic, B(com3 and Omnicomm were deriving their

revenue.

"Worldwide trends show that all communication disciplines - advertising,

media planning, buying and research, public relations and public

affairs, branding and identity, healthcare and specialist communications

are growing, but with greater growth outside of advertising, so much so

that advertising activities now account for only half of agencies'

revenues."

Agencies will therefore place more emphasis on revenue growth from

non-core businesses, including moving to acquire strategically

important, small-to-medium sized businesses that meet specialist skills

training and development.

In addition to the change in revenue streams, Mr Lee said that other

patterns were also starting to emerge as the industry moved forward.

As companies and networks grow in size, new technologies are enabling

agencies to enjoy the benefits to both size and scale, with the

responsiveness and energy of smaller firms. This would prevent networks

from becoming sluggish, and allow them to respond quickly to

opportunities in different markets.

Geographically, North America, the United Kingdom and continental Europe

are all enjoying double-digit growth. Growth in the Asia-Pacific, Latin

America, Africa and the Middle East is much slower, largely due to

economic problems.

Worldwide, operating margins are up, from an average of 13-14 per cent

previously, closer to 20 per cent now.

Productivity and efficiency were also up, partly a result of investments

in technology, partly as a response to increased pressure to deliver

margins and increase shareholder value.

Year 2000 started very well for most agency networks, and the year

should see improvements in all business areas.

Having studied these trends, the Malaysian 4As was predicting some

definite changes to the local advertising and communications scene, said

Mr Lee.

First of these changes will be in service offerings, with agencies

striving to increase the depth and breath of their expertise.

Already, many of the international networks were offering the full range

of communications consulting services in Malaysia, by acquiring small

local specialist businesses, aligning with specialist agencies or

investing in developing their own. Information and consultancy, public

relations and public affairs, and specialist communications will grow

rapidly, accounting for close to two-thirds of revenues.

This bodes well for the industry, said Mr Lee, which needs to see some

consolidation as the Malaysian economy moves into recovery. Smaller

agencies that invest in better people, stronger alignments, better

technology and global partnerships will continue to reap the benefits,

while retaining their flexibility and individualism. Agencies will also

increase investment in technology, much of which had seen a freeze

during the past 18-24 months.

While upgrading hardware would be important, the critical investment

would be in IT skills, especially in the areas of digital, direct and

interactive communications.

Thirdly, while agencies will invest in development, they will also keep

a closer eye on margins to meet the expected pressure from worldwide

networks.

This included putting a cap on spiralling costs, especially in payroll,

which has seen significant leaps as agencies rushed to beef up human

resource after severe cutbacks during the recession.

"But all this will not be at the expense of creativity, which is still

the major differentiator in the advertising and communications

industry," said Mr Lee.

"Clients will look for creativity not just in advertising, but across

all communications. We therefore see a move towards companies developing

and training talent, and perhaps recruiting from creative hotshops

around the region to bring new blood to the market."

He said this would lead to more performance-related remuneration, with

agencies celebrating and rewarding talent and ideas across

disciplines.

"Agencies that continue to enjoy growth and profits will be the ones who

take note of what is happening in our industry around the world, and who

make changes that keep them in tandem with these trends," Mr Lee

said.

"Borderless trade is also reaching our business, and clients will choose

to buy their services within one agency network, but not necessarily in

one market. Connectivity, shared resources and creativity across borders

will be the most efficient and effective ways for agencies to stay ahead

of the pack."