Ad firms scrambling for small pieces of the cake

Previously, to install a billboard at a cross-road in HCM City, enterprises only had to pay 100 million dong a year. Recently, the fee has soared to 700 million dong.

Competition pushing fees up

As such, the space leasing fee for installing billboards has increased by 5-7 times. In many cases, the leasing fee for advantageous positions may reach one billion dong a year, while enterprises have to pay money for three years in advance.

As enterprises have been scrambling for good positions to install billboards, it is easy for landlords to follow up their advantage and raise the lease. In the stiff competition for premises, only landlords can get benefits, while the sufferers are not only the advertisement service users, but the advertisement service providers as well.

Tran Van Nghiep, Chair of the Saigon Advertisement Company, noted that outdoors services have entered the “hot development” stage, when thousands of Vietnamese enterprises are sharing the “cake” of the outdoors advertisement market.

According to Dinh Quang Ngu, Chair of the Vietnam Advertisement Association, the total turnover of the advertisement market was about one billion dollars in 2010, of which outdoors advertisement brought 200 million dollars, or 20 percent. Though the outdoors advertisement just accounts for a modest proportion in the total turnover, this is the sector which has the biggest number of ads.

Believing that advertisement is a lucrative business, investors have been rushing to set up ad firms. According to the Vietnam Advertisement Association, there are about 5000 ad firms now in Vietnam, while HCM City alone has 2500 enterprises. In order to compete with each other, ad firms have to lower service fees to scramble for clients.

Meanwhile, unhealthy competition has also been occurring in the advertisement on mass media which can bring 80 percent of the total turnover. According to Nguyen Minh Huong, General Director of Golden Group, in accordance with international practice, the service fee is equal to 17 percent of the contracts’ values. However, many Vietnamese firms accept the low fee at three percent. As enterprises have to slash service fee, their service quality cannot be good.

Huong has also complained about the stealing of creative ideas of ad firms. “It is not a surprise at all if one day, you see your ideas appear at other advertisement programs to be run by other enterprises,” she said.

“With the stealing, plus the rushing to slash service fee to scramble for clients, ad firms are killing each other,” Huong said. “Meanwhile, foreign groups, which are holding a big market share, still keep their service fees at high levels”.

The dream of cooperating with each other

Experts believe that the ad market would bring the turnover of two or three billion dollars in the time to come, with the booming of new ad forms like online ads and ads on mobile phone. Businessmen believe that when the market becomes bigger, the pieces of the market cake will also be bigger for every ad firm.

However, the experts have pointed out that the unhealthy competition would bring no “bread” to domestic enterprises.

They said that the lack of transparency in advertisement programming has led to an unhealthy competition. Under the current laws, agencies at district level can also make advertisement programming. As a result, only the ad firms which have “close relations” with the state agencies can gain the advantageous positions.

Ad firms say that they want to compete in a healthy environment and that ad firms need to cooperate with each other to develop. Many of the firms suggested at the second advertisement conference in HCM City, that ad firms need to discuss the service fees in order to effectively compete with foreign firms.

Trinh Bich Dung, Director of Bac Dau Production, said that most big projects have been “falling into the hands of foreign groups”, while domestic enterprises only undertake some works of the projects, or do the outsourcing for foreign companies.

The thing that domestic enterprises need to strive for, according to Dung, is to provide services from A to Z and to regain the market from foreigners.- TBKTSG

Tags: Vietnam advertising market