In 1999, Georgian companies were still skeptical about whether they needed advertising. But economic growth and increased marketing produced its results and triggered a stable growth in advertising market. It began climbing from GEL 27m in 2005 to USD 151m just two years later. But the global financial crisis and the August war is affecting everything, including the burgeoning advertising market.

ZenithOptimedia, part of a global media services group, predicted the Georgian advertising market would swell to USD 171m in 2008. Though the actual figures are as yet unavailable, it is known that company companies cut advertising budgets by two-thirds last year.

According to ZenithOptimedia’s research, TV advertising remains the most popular and absorbs 79% of all advertising. The slice for print media is rather slim at 8.9%, but ranks second. Outdoor advertising trails in third with 6.6% of the market share, and radio advertising comes in at a close fourth with 5.7%. Online advertising’s share is less than 1 % and does not make a presence on the list.

Some 1,000 advertising companies provide advertising services, but there are really only six major players: Media House, Sarke, TBC TV, McCann Erickson, TV Internationale, and Outdoor.ge.

company insiders say that 2007 was dynamic as more advertisements were placed; however, this does not mean that the customer base grew. Insiders explain that advertisers are stable customers and companies increase their budgets for marketing services as their revenues increase.

Trading, communications, banking, and construction industries were thriving, thus advertisements came mostly from these sectors.

A Sarke representative told GBW that in 2007, Procter & Gamble was the leading advertiser and placed all types of advertisements. Colgate Palmolive was the second largest, followed by Magti GSM, Coca Cola, and Geocell. Among the top 25 companies that used advertising, three were commercial banks.

But advertising began to dwindle in the second half of 2008.

According to Sarke, companies paid over USD 4m for commercials at the beginning of 2008. The figure doubled in April and hit a record high of USD 9m in May.

By June 2008, advertising began its decline and fell to USD 8m for the month. The dramatic decrease came in August when the conflict with Russia brought a 65% drop in advertising from USD 7m to USD 3m. In fact, in August and September, advertising agencies did not receive a single order.
For Outdoor.ge, an outdoor advertiser, the most difficult period was January 2009. By early March, the company reported that only 60% of their 480 advertising boards in Tbilisi were used. Launched in June 2008, the company holds 17,000 square meters of outdoor advertising space nationwide. The price of a square meter ranges from USD 35 to USD 45.
The advertising market is not showing any signs of recovery yet. According to advertising companies, larger industries curtailed their marketing budgets since they expect that the crisis will get worse before it gets better.
Banks and mobile companies mainly continue producing advertising videos and promotional articles; however, development companies have almost pulled all their presence from TV.
Soso Gamulashvili, a senior consultant at GEPRA, a public relations and marketing communications company, believes that Colgate Palmolive, Procter & Gamble, Mars, Wrigley’s, and other transnational companies, are still containing the fall.

“The company is now operating in an anti-crisis regime. The first response under these circumstances is to reduce marketing budgets, and this is taking its toll on the advertising market,” Galumashvili said. “The crisis is going to climax in April and May. These months were productive for the advertising company before, but not this year. Budgets of advertising companies will further decrease during this peak.”

Advertising companies, he told GBW, had to cut their workforce by 50%, most of which were the “highly qualified and intellectual staff.”

Although the customer base is shrinking, prices for advertisements have not changed much. Prices for print and TV remain the same, while prices on outdoor advertising only reduced by 10% last month. But radios were the first to respond to the financial crisis, and Georgian radio channels cut their advertising fees by approximately 60% and offered some special packages to entice customers.

According to Galumashvili, advertising companies will have to join forces, and only those companies that begin to offer diversified services will survive.

Changes in this direction began in 2008 when new player, Outdoor.ge, appeared on the market. It bought advertisement constructions from six large companies and immediately emerged as a leader on the market.

BlackStyle Management Inc., a UK based company, provided USD 6m in initial capital for the venture.

Experts are skeptical about the future of the advertising market. This year revenues in the advertising company are likely to double in losses. Companies are also likely to change their advertising policies and demand lower-priced, yet more creative and effective advertising, as well as searching for alternative means of advertising, such as direct marketing, direct mailing, and an online presence. In general, Georgian advertising policies will become more personalized and target a narrower audience.

But the question is how effective will these measures be in tackling the crisis in the long-term. Experts predict that the downturn will continue in 2010. Advertising companies have only provided data and refuse to confirm or deny forecasts future trends.

GEPRA, which has been on the market since 2003, says that the crisis will mainly shake smaller companies.

“Forty percent of the advertising companies will go bust,” Galumashvili said. “Only those companies that offer diversified services will survive. Media organizations will also have to reconsider their prices. They will not be able to work with these prices in the next three months.”