RUSSIAN ADVERTISING MARKET

 

DATE OFREPORT:           990707     

 

AUTHOR:           LUBOV SAVCHENKO     

 

INTERNATIONALCOPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND THE U.S. DEPARTMENT OFSTATE, 1999.  ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

 

I.             SUMMARY

 

Advertising had norole in the planned Soviet economy.  However, in post-Soviet Russia,advertising rapidly developed as a leader in the services sector.  In the1990s, market reforms prompted an advertising boom in Russia, and it quicklybecame a thriving business. While Russia’s advertising market is small (lessthen three billion dollars in 1997, before the crisis) relative to westernmarkets, advertising business increased significantly in recent years andgained a reputation as one of the most profitable and trendy businesses in Russia.

 

However,the August 1998 financial crisis has dramatically changed the advertisingmarket in Russia. Its market volume, which nearly doubled in each of the pasttwo years (1997, 1998), was severely affected by the crisis, and, according tomarket sources, dropped some 70 percent in dollar terms since August 1998.

 

Western companieswere the major consumers and accounted for two thirds of total advertisingsales in Russia.  However, many large foreign companies that had beenspending hundreds of thousands of dollars on local advertising put theircampaigns on hold after the August 17th ruble devaluation. Foreignexporters saw their Russian sales nosedive because Russian distributors lack hardcurrency to pay for imports.  Multinationals, mid-size and smallcompanies, manufacturers, exporters, as well as local and domestic producerswere forced to revise their marketing strategies. 

 

Nevertheless, noneof the companies that were aggressively advertising in Russia has officiallyannounced their complete pull out from the market.  Instead they workedout post-crisis strategies and charted new courses to support theirbrands.  Prior to the crisis many multinationals, in order to promotesales and build their brand image, ran wide scale advertising year round. Today many advertisers have switched to seasonal promotions (e.g. aspirin infall and winter when colds are more common; antiperspirants in warmerseasons).  Once advertisers overcame the initial market shock and adaptedto the situation, they started developing new approaches to the market withdownscaled advertising campaigns. Advertisers turned to less costly advertisingtechniques, such as public relations which in some cases (e.g. servicespromotion) is most effective. Many companies have abandoned direct advertisingin favor of promotional campaigns such as point-of-sale promotions anddisplays, and free samples.  Rapidly developing and cost saving internetadvertising is gaining a larger share of the market, as well.

 

## II   MARKET PROFILE

 

Advertising hasevolved from its early days when it was barely known and not welldeveloped.  As more and more Western-made commodities appeared in theRussian market, western style advertising became more common on television,radio, print media, billboards, and web sites.  Professional advertisingagencies and advertising research centers appeared, and Western manuals onadvertising and marketing became very popular.

 

The Russianpre-crisis advertising market was quite diversified and relativelymature.  According to various estimates, from 1,000 to 2,000 advertisingagencies were operating in Moscow alone and 4,500 in Russia overall.  Inresponse to growing demand on the part of advertisers, segments of theadvertising business such as outdoor advertising and transportadvertising  developed at a faster pace.  

 

According to theirspecialization, advertising agencies in Russia can be broken into three maingroups. 

 

The first grouprepresents net advertising agencies (i.e. international agencies with branchoffices worldwide, Russia included). These agencies work with their foreignadvertisers or, in other words, Western producers simply work with their samead agencies which now cover Russia.  Most major Western advertisingagencies are represented in the Russian market, among them areAdventa/Initiative, DMB&B, BBDO Marketing, Euro RSCY, Young & Rubicam,McCann-Erickson, R & R Advertising, Friedmann & Rose, and others. These agencies offer a complete cycle of advertising services.  

 

The second grouprepresents major Russian advertising companies which carry out the entireprocess of advertising from the development of a creative idea to themanufacturing of an advertisement and its ultimate placement.  The onlydifference is that being relatively young these agencies have not yet been ableto develop their networks.  Major Russian advertising companies includeMaxima, Avrora, Video International, Art-Mobile, and Blick-Communication.

 

The third and mostcommon group unites numerous mid-size and small advertising agencies whichspecialize in different services.  This group also includes buyingcompanies and  various monitoring and market research companies.

 

International netadvertising agencies have survived the crisis with the least losses, becausetheir major clients, large multinationals, continue to advertise since manyhave local production.  

 

Beyond Moscow, inregional centers throughout Russia, the advertising services market is typicallydominated by two or three well known domestic companies, which are largely incontrol of the market.  Other companies in Russia’s regions combineadvertising with other services such as publishing, printing, education,etc.  

  

Advertising agenciesoperating in Russia typically offer the following services:

 

-      advertising research and mediaplanning

-      mass media advertising

-      outdoor advertising

-      transport advertising

-      business-to-business advertising

-      advertising via Internet

-      direct mail advertising

-      gifts/promotional advertising

-      point-of-sale advertising. 

 

Unsubscribedmedia now plays a bigger role in consumers’ lives since the crisis. Mostadvertising sales are being directed toward unsubscribed media such astelevision, outdoor advertising, and radio.  Mass media advertising isstill considered to be the most effective in Russia due to its availability,wide choice, diversification, and ability to reach target audiences. 

 

Asstated earlier, the rapid growth of the Russian advertising market of recentyears came to a halt in August 1998.  The financial crisis cost theadvertising sector $927 million in lost revenues in 1998.  Total revenuesfell to $1.8 billion in 1998 from $2.7 billion in 1997. According to theRussian Association of Advertising Agencies, expenditures of the biggestadvertisers on national media fell eightfold in 1998 compared to 1997. The largest part of these losses came as multinational and foreign companiesdownsized their activities in Russia market.  

 

### To adjust to the economic crisis,many Russian and foreign advertisers have started to combine efforts andorganize cross-promotional activities.  This trend has grownsignificantly.  Even the most active advertisers such as Procter &Gamble and Panasonic have found partners with whom to co-advertise. Representatives of companies using co-advertising state that cross-promotionremains one of the most effective cost-saving tools in light of reduced marketingbudgets.  Over 30 companies have combined their efforts on major RussianTV channels since the crisis, and some advertisers claim that their jointefforts have resulted in increased sales.  Among the companies usingco-advertising in Russia are Procter & Gamble, General Motors, Coca-Cola,Kodak, Panasonic, Merloni Elettrodomestici, the Red Star Modeling Agency,Russian banks (Bank of Moscow and Mosbusinessbank), Soyus Music Studio, severalmonthly magazines, Rosinter restaurant chain, AltopCart gas stationn network,and radio stations.  Panasonic stated that its proportion of jointcommercials increased from approximately 10 percent of all ads before thecrisis to almost 20 percent.  One of the best successes was conducted byMerloni and Procter & Gamble. The buyers of Merloni’s Indesit washingmachines received Tide detergent free.  Merloni doubled its sales as aresult of this cross-promotion.  Proctor & Gamble reported that as aresult of this action the consumer’s endorsement of Tide detergent increasedsignificantly.  This success encouraged the two companies to sign anagreement for further cooperation.

 

Priorto the crisis, importing companies, as compared to local manufacturersaccounted for a relatively high share of the advertising market.  They havebeen hit harder by the ruble devaluation than domestic manufactures and havereduced their advertising expenses significantly.

###  

### StatisticalData

####  

######  

###### RussianAdvertising Volume in 1997-1998 

###### (million ofdollars)

 

1997      1998                 

 

## Medium

 

BroadcastTV            540-560                470-490

 

Printmedia             580-600                610-630

 

Radio                  65-75                 70-80

 

Outdoor                190-210                160-180

 

Directmail             55-65                 60-70

 

Other                  340-360                340-360

 

Total                  1170-1870             1700-1800

 

Source: RussianAssociation of Advertising Agencies               

 

The economic crisispresented unique opportunities for domestic producers to promote their brands.Before the crisis, advertising rates were too high for many Russian companiesand very few, if any, Russian producers could have dreamed of putting their adsnext to their Western rivals.

 

The media launched acampaign appealing to consumers to buy Russian-made goods. By late fall 1998, afive to 10 percent increase of Russian advertisers in TV broadcasting wasrecorded.  However, Russian advertisers have not necessarily becomeserious and effective advertisers.  They have not yet learned how to buildan advertising strategy and have little understanding of what a powerfulmarketing tool advertising can be.  

 

Russianadvertising agencies expected that the crisis would increase the number ofRussian advertisers. It was anticipated that Russian companies would take thespace abandoned by foreign advertisers when ad rates went down.  ManyRussian advertising agencies may not survive if they can not lure new Russianadvertisers as clients. 

 

Experts say thattelecommunications companies such as MTS, Moscow Cellular and VimpelCom hadbeen expected to be among leading Russian advertisers. But it is doubtful thatthey will be able to gain a larger market share than their foreign rivals.

 

Russian companiessuch as Cherkizovsky meat plant, Svoboda cosmetics maker, Ochakovo brewery, andMegagroup bottler are Video International ad agency clients. These companiesare leaders among those Russian companies that are successfully building brandawareness via advertising in the Russian market.     

##  

## According to some analysts, the advertisingmarket should revive in the second half of 1999, spurred in part by paidpolitical advertising in advance of the December 1999 Duma elections. Russian political figures are taking advantage of the services of advertisingand public relations agencies to polish their public images.  According toVladimir Yevstafiev, President of the Russian Association of AdvertisingAgencies, this political campaign may bring $500 million to the advertisingmarket.  Since about only 30 advertising agencies would be involved instaging this political show, this may separate the profitable from theunprofitable.  On the other hand, because of the crisis, this year’spolitical advertising budgets may be less lucrative compared to the previousyears. 

 

## B.  COMPETITIVE ANALYSIS

 

Thebulk of 1999 advertising revenue is expected to come from the same sources asprevious years.  These are the large Western companies producing goods inRussia: Procter & Gamble, Nestle, Unilever, Cadbury’s, Coca-Cola, andtobacco companies which have not cut back on advertising as much as importershave. The Western companies that produce locally seem likely to maintain theiradvertising budgets in line with sales, which have generally fallen 70 percentof pre-crisis levels. The overall amount spent on advertising will dropfurther, however, as importing companies, which have been harder hit by thedevaluation than local manufacturers and which accounted for a relatively highadvertising market share, reduce their advertising budgets by 50 to 70 percent.This will certainly affect many smaller Russian advertising agencies, some ofwhich might be forced to close or merge with larger companies. According toPremier SV’s president, Western advertising agencies with greater liquidity attheir disposal may try to take advantage of the situation by attracting someRussia advertising agencies’ clients.  Alternatively, some Westerncompanies may seek to buy some of the surviving Russian advertising agencies.

 

Westernadvertising companies initially fueled the advertising boom in Russia. Russianadvertising firms have either adopted or copied not only Western productionpatterns and technologies, but also their style and psychology. Quite often,ready-made Western advertisements are dubbed for use in Russian televisionads.  

 

Ingeneral, only a few years ago advertising services were little known to Russianproducers. The approach of many Russian companies to advertising was fragmentedand inconsistent.  However, in recent years they have gradually becomemore sophisticated.  In 1998, Russian advertisers accounted for 30 percentof all advertising revenues; in 1999 this may reach 50-60 percent.

  

Accordingto the Russian Association of Advertising Agencies, they see one of threepossible scenarios for the sector in the next few years. If the economycontinues on the same track, the Russian advertising market will amount to $925million. In the worst case, if the ruble falls sharply and inflation spirals,advertising revenues will reach only $725 million.  If the economyimproves, about $1.25 billion may be routed into advertising.

 

Theforecast for 1999 is far from optimistic. In 1999 the volume of advertising isnot expected to exceed $500 million. 

 

Forecast for RussianAdvertising Volume for 1999

(millions of dollars)

 

 

                 Forecast(-)     Forecast(0)        Forecast(+)

                 

Medium

 

BroadcastTV      180-200        230-250            300-320

 

Printmedia      250-270        330-350            450-470

 

Radio            30-40            40-50            50-60

 

Outdoor         60-80           80-100             110-130

 

Direct          20-30           30-40              40-50

Marketing

 

Other*           120-140        160-180            210-230

 

*Includes manufacturing of advertising products

 

Forecast(-)- pessimistic scenario

Forecast(0)- 1998 levels

Forecast(+)- optimistic scenario

 

Thesituation in which small and mid-size domestic advertising agencies foundthemselves after the crisis forced them to review their range of services inorder to better adjust to the needs and means of their customers.  Marketanalysts have pointed out three new major trends in Russian advertisingagencies’ specialization: marketing and consulting, PR, and foreign printingcompanies which cooperate with domestic printing houses.

 

Thepost-crisis market has brought a new attitude towards advertising among Russianproducers who previously were not using much advertising.  There has beenregistered growing demand for such services as consulting, PR, inexpensivelocal printing services and inexpensive outdoor advertising.

 

## TV Advertising  

##  

## TV advertising makes up one third of thetotal advertising market.  In 1998, the major advertisers on Russiancentral TV channels were Procter & Gamble, Unilever, Nestle, L’Oreal, Mars,Coca-Cola, Wringley, Johnson & Johnson, Dandy (Stimorol and Dirol brands),and Sony.  In general, the share of the 30 leading TV advertisers was 53percent in the pre-crisis period.  After major importers (Rowenta/Tefal,Samsung Electronics, Philips, Electrolux, Bosch/Siemens) stopped advertisingand their space was not taken by new advertisers, the leaders’ share grew to 66percent.  

##  

## Leading advertising agencies operating in TVadvertising are: Adventa/Initiative (Nestle, Unilever, Dandy, Rowenta/Tefal),DMB&B (Procter & Gamble, Mars, Coca-Cola), BBDO (Wringley, Gillette,PepsiCo, Wella), and Video International (Coty, Sony, Roche).  Theseagencies will most likely remain as leaders in the next few years.

 

Central TV channelssuffered severely from the crisis.  Many major advertisers (Westerncompanies) either suspended advertising or reduced their advertisingbudgets.  However, major multinational corporations (Procter & Gamble,Unilever, Nestle, Mars) which invested in local manufacturing activelyincreased their advertising. Even though these companies also reduced theiradvertising budgets, they remain the leaders.  Consequently, advertisingnet agencies that render advertising services to these companies havestrengthened their market positions.  They now control the lion’s share ofTV advertising.  

 

Multinationalcorporations dominated the pre-crisis TV  advertising market.  In1997 they bought 80 percent of total TV advertising time. This tendency willmost likely continue.   Multinationals such as Procter & Gamble,Mars, Coca-Cola/Schweppes, Nestle, Cadburry and other foreign producers whichhave local production will continue to invest in advertising and thus guaranteerelative stability of the advertising market.  On the other hand, thesharp reduction of the number of TV advertising players allows them todictate  rules and control TV advertising rates. 

 

The market volumedecrease, growing competition, and falling revenues forced advertising agenciesto undertake additional anti-crisis measures.  Two major tendencies havebeen observed:  downsizing and mergers.  These two steps are beingtaken by both domestic and Western advertising agencies in Russia.  

 

The reduction of TV advertisingrates (by 80 percent on average) created very tough competition amongadvertising companies.  Before the crisis advertising companies werecompeting for the advertisers with $500,000 to $1 million monthly advertisingbudgets. Today even major advertising agencies hunt for so-called medium sizeadvertisers with advertising budgets up to $200 million.  In general, thedisposition of forces in the advertising market has reversed, and theadvertisers now have the upper hand.  They seized the initiative and havebetter choices for less money.  Quite often advertising price policy isbased on an advertiser’s availability and means.    

 

According toAdvertising Age estimates, the Russian advertising market will contract 38.5percent in 1999.  Local observers’ estimates are more pessimistic; somepredict a 75 percent decline in the TV advertising market. 

   

TV Channels Rating(according to advertising budget)

Period: October 1998

 

Channel                Percent Share

 

ORT                    55.88

NTV                    14.49

TV6                   12.21

RTR                    10.66

TVCenter              3.95

STS                    1.21

31 Channel             0.79

TNT                    0.28

Ren-TV                 0.22

MTV                    0.18

Muz-TV                 0.14

Kultura                0.001

 

## TV Advertising Rates per minute (prime time)

 

TV Channel Monday-Thursday          Weekend

 

ORT             $40,000-$60,000          same

 

RTR              $16,800-$38,400        $26,400-$38,400

 

NTV              $14,000-$36,000        $18,000-$36,000

 

RENTV           $2,400-$3,600           $2,400-$3,500

 

TV6             $3,000-$8,000            $4,000-$16,000

 

TVCenter        $6,000-$13,200            same

#  

# Radio Advertising

 

Arather controversial point of view exists that the radio advertising marketsuffered less than other mass media advertising.  According to marketanalysts, radio offers more affordable rates and is the only mass media segmentthat provides free information to its vast audience.  Radio advertising inRussia was strengthened with the development of a cable radio network and thevigorous development of FM band broadcasting. FM radio is becoming very popularamong the younger generation and business people, thus making FM radio stationsmore attractive for advertisers.  

 

In1998, 2,000 advertisers broadcasted ads on radio.  Total radio advertisingrevenues were estimated at $75-80 million in 1998. The volume of radio adsbroadcasting in Russia is 3-4 percent of the gross radio broadcast, compared to6-8 percent in the U.S.A., and 5 percent in Germany.  Among major radioadvertisers were telecommunications companies whose radio advertising budgetsmade up 25 percent of total radio advertising revenues.  All majoradvertisers were broadcasting their ads monthly, and the majority of them rantheir ads on several stations simultaneously.

 

Thevolume of ads placed correlates with radio stations’ ratings.  Thenational rating leaders are “Russkoye Radio”, “Hit FM”, “Europa Plus”, “Station106.8”, and “Ekho Moskvy”.  Advertisers with medium and large advertisingbudgets made up 36 percent of total radio advertising revenues.  Thesecompanies had a 89 percent share of the gross advertising budget.  Theseadvertisers include companies offering telecommunications services, automotiveproducts and services, medical equipment/instruments and pharmaceuticalproducts. 

 

Basedon pessimistic estimates, radio advertising revenues will bearly exceed $20 millionin 1999; more moderate estimates forecast a 50 percent revenue reduction of tothe $70-80 million in 1998.

 

Radioadvertising rates have always been relatively low, and production of radio adsis very inexpensive.  Many domestic producers and small companies, as wellas service providers, quite often turn to it.  It is cheaper compared toTV, more expeditious then print media, and it enables them to reach a widerspectrum of their target audience.   

 

Radio AdvertisingRates per 30 seconds:

 

“Radio Rossii” -              $330-$510

 

“Radio RossiiNostalgie” -    $180-$210 

 

“Ekho Moskvy” -               $170-$220

 

“Russkoye Radio” -            $420-$600

#  

## “Europa Plus” -               $450-570

#  

# Print Media

 

Thereare three basic groups of publications in the Russian market considered byadvertisers.  These are newspapers, magazines, and specialized advertisingpublications.  Only a few of these publications have significantadvertising budgets. 

 

Theprint media share of the 1998 advertising pie was 32 percent, and totalrevenues were $610-630 million. Specialized advertising publications accountedfor almost 50 percent of the

totalnumber of advertisements placed in print media; magazines for over 20 percent;and newspapers for less then 30 percent.

 

Sufferingworst of all were new publications launched in the last year and a half as wellas magazines focused on image advertising whose clients were major foreignadvertisers.  In 1998, advertisers bought only 27 percent of total printmedia advertising space compared to 40 percent in 1997. 

 

Forbusiness and political weekly publications the situation was less painful, andmany of them even strengthened their positions. Featuring many analyticalarticles about the crisis they attracted a large audience and snatchedadvertisers from monthly editions.

 

In general, printingservices were of very low quality in Russia, and by the mid-nineties there wereabout 30-35 publications with the potential to attract advertisers. Thanks to the 1996-1997 magazine boom, the number of publications increased. However, many of the leading Russian publications  are printed abroad, andthey are Russian language versions of well-known foreign brands.

 

Among glossy Russianlanguage monthly magazines published by Independent Media (Dutch controlledcompany), such magazines as Elle, Burda Modern, and Cosmopolitan are in betterpositions.  According to Independent Media, in order to meet theirclients’ (advertisers) needs they concentrated most of their sales in Moscowand other larger Russian cities where their target readership is. Forced by thecrisis, Independent Media reduced advertising rates, had to postpone thelaunching of Paris Match in Russia, and in some cases had to changepublications schedules.  According to the Interfax News Agency, glossyspecialized magazines, which traditionally received the lion’s share ofadvertising, have at most just 40 percent of previous advertising.

 

Moscow specializedadvertising publications accounted for 35 percent of overall print mediarevenues in 1997. Extra-M, Metro, Tovary I Tseny (Goods and Prices), and TovarySo Sklada (Goods from Warehouses) are extremely popular among small andmid-size  companies and individual entrepreneurs.

 

Inorder to cut costs and attract advertisers many advertising agencies shiftedfrom expensive TV projects to designing more attractive labels andpackages.  They have also focused more on researching consumer opinion andpromoting new brands in specialized publications.  

 

## The circulation of some paid media ispicking up.  Publications like Kommersant Daily and Itogi (weekly) reporta growing readership.

 

## Moscow has about 50 general business andindustry specific telephone directories.  Small and mid-size companiesthat can not afford to run large scale advertising campaigns may consider alisting in one of them.

 

Most generaltelephone and address directories provide basic listings for free and gatherinformation themselves.  These include: Adres-Moskva (circulation250,000), Moscow City Telephone System’s Directory (circulation 200,000),Yellow Pages-Moscow (circulation 250,000), and The Moscow Business TelephoneGuide, which is published 10 times a year with 30,000 copies per edition. TheMoscow Business Telephone Guide is distributed free of charge and is one of themost popular directories designed for the business community.

 

## Advertising Budgets of the Ten LeadingPublications (Period: October 1998)

 

Publication                 Budget ($, million)

 

Cosmopolitan                 $ 2.8

Elle                        $ 1.86

Zarulyem                   $ 1.16

Vogue                       $ 1.13

KommersantDaily              $ 1.03

DomashniiOchag               $ 0.96

(GoodHouskeeping)                 

Sem’ Dnei (SevenDays)        $ 0.93

KomsomolskayaPravda          $ 0.9

MoskovskyKomsomolets         $ 0.82

Argumenty IFakty             $ 0.75

 

# Outdoor Advertising

 

Outdoor advertisinghas developed into a relatively stable and promising business. It has becomeone of the most popular and effective advertising tools.  Outdooradvertising totaled $190-200 million in 1997. Outdoor advertising was boomingin Moscow and accounted for 60 percent of total advertising revenues prior tothe crisis.  

 

Thecrisis hit outdoor advertising business very hard, and it   was cut inhalf.  Rates for renting space for outdoor advertising are established andcontrolled by the municipal authorities.  Pre-crisis rates were fixed indollar value, and cash-strapped municipalities have no intention of reducingthem. For this reason outdoor advertising companies could not afford to be morecost flexible like their colleagues working in other segments of theadvertising market, such as TV, print media, and radio.

 

Nevertheless,consultants point to the scores of colorful billboards that still line majorstreets in downtown Moscow as a sign of the growing demand for outdooradvertising.

 

OutdoorAdvertising Rates

 

Banners hung overstreets (1 piece/month)- $500

 

Billboards aroundtown (1 piece/month)- $500-$750

 

InternetAdvertising

 

Asanywhere else in the world, internet advertising is becoming a significantmedium for distribution of information and for many commercial transactions inRussia.  If anything, the economic crisis energized the emerging Internetadvertising market in Russia.  Though the Internet advertising market isvery young and small in Russia, it has potential.  According to expertestimates, Russia’s economic crisis stimulated a considerable growth in demandof Internet advertising among advertisers seeking a less expensivemedium.  In 1998, the entire Russian Internet advertising market was worth$500,000, a 200 increase percent from 1997.  This compares to $1.4 billionof Internet advertising in the U.S.   

 

Aconsiderable number of advertisers turned to the Internet within a few monthsafter the crisis.  Among the major factors that stimulated the growth ofthe Russian Internet advertising market are well-developed Internet resources,decreased advertising budgets, change of attitude of the budget-strapped advertiserstowards Internet, as well as mass media promotion of Internet as a powerful andhandy tool of contemporary business. 

 

RussianInternet advertising, which was originally dominated by computer companies, nowhas as clients multinational corporations, agencies providing/advertisingtourism, financial and fitness services, and electronic media companies (EkhoMoskvy, a popular radio station).  Firms dealing with luxury/expensivegoods and services (Volkswagen, World Class Fitness Club) run advertising campaignson the Internet due to its low cost and ability to target specific segments ofconsumers.  

 

Internetmarketing companies offer low price advertising services.  An Internet adcosts from $3 to $140 per 1,000 viewings.  According to a Moscow Times expert,for minimal results, an advertiser needs to run at least 15,000 shows.  Tohave an effective campaign; 500,000 shows are needed, which cost from $4,000 to$5,000 with volume discounts.  The current market leaders are:

InterReklama(www.bizlink.ru/ir), Reklama.Ru (www.reklama.ru), Russian LinkExchange(www.aha.ru/~stream_d/wwwboard/wwwboard.html), 

Flamingo(www.flamingo.promote.ru).  

 

AlthoughInternet advertising agencies sell and place the majority of ads in Russia,some servers, the sellers of addresses and sites, also sell space on their homepages. Two major Russian servers offering space for ads and providingdescription of banner prices are: 

Yandex (http://www.yandex.ru/advert_engl.html) and 

InfoArt(http://www.agency.inforart.ru/misc/infowwwe.htm).

 

Alist of Russian Internet sites which place effective banner ads is available atwww.list.techno.ru/banner.

 

Developmentof Internet marketing offers good advertising opportunities for U.S. firms thatare interested in trade with Russia.

 

OtherAdvertising Media

 

## Many Russian manufacturing and tradingcompanies which previously avoided advertising now turn to public relations anddirect mail/marketing to promote their goods and services.  They usebusiness-to-business advertising to re-establish hard hit regional distributornetworks and to grab market niches resulting from the crisis.   

##  

## Product promotion such as point-of-saleadvertising has become very common in Russia. Producers find these displays tobe an excellent alternative to more expensive television and magazineadvertising.  This approach is also widely practiced by provincialmanufacturers and especially by alcohol distilleries.  According to theR.I.M. Public Relations Agency, the share of orders from Russian producersincreased from 15 percent pre-crisis to 50 percent post-crisis.  TheMarketing Matters Agency  reported that their clients started working withtarget groups.

 

PR services aregaining popularity, as a noticeable shift to PR from advertising has beenobserved. Roundtables, press conferences, and seminars are becoming more and morepopular. The Partners PR Agency reported that the number of tenders in PRservices has doubled since August 1998, and all tenders are conducted by bigforeign companies.

 

Direct marketing isalso gaining a larger share of the market.   

This type of advertisingis establishing itself rather slowly due to national mentality (Russians arevery reluctant to disclose their private contact information to strangers) andunreliable postal services. 

 

AdvertisingBusiness Regulations

 

Theadvertising business is regulated by:

-       Federal Law on Advertisingof July 18, 1995 

-       Russian Federal Civil Code

-       Consumers Rights ProtectionLaw, 1996 edition

-       Federal Law on Mass Media ofDecember 27, 1991, 1995 edition.

 

Accordingto the “Decree on Advertising”, the State Committee on Antimonopoly Policy andPromotion of New Economic Entities and its territorial branches are authorizedto control observance of the Russian federal legislation on advertising.

 

The StateAntimonopoly Committee is authorized to investigate facts of infringement ofthe Law on Advertising. The rule of investigation of facts of infringement wasset by the State Antimonopoly Committee Decree No.147, November 13, 1995.

##  

Ingeneral, Russia’s advertising laws stimulate development of the advertisingbusiness in Russia.  The Russian advertising market has been built onworld-tested models and has a well-developed professional infrastructure,self-regulatory bodies, and a proper pricing policy.

 

Market Prospects

 

Overall, expertsanticipate a drop in advertising by Western firms in 1999.  Companies werecharting their advertising budgets when the crisis struck and many companiesdramatically reduced their advertising budgets.  

 

Advertising service providersstill hope that domestic manufacturers for the majority of which pre-crisisrates were too expensive will take advantage of the lower advertisingrates.  

 

Thesmall number of domestic advertisers in the advertising services market may beexplained not only by economic factors, such as a production slump and theruble devaluation, but also by the Russian mentality.  In fact, Russianadvertisers are in a disadvantageous position compared to their Westerncounterparts.  According to Russian law, only two percent of a company’sannual turnover spent on advertising may be attributed to production cost, andwhere the expenditures are larger, they have to be included in profit, withpayment of appropriate taxes.  These circumstances reduce the ability ofRussian companies to use advertising services.  Should this law bechanged, the volume of domestic advertising could increase twofold. Unfortunately, at present no steps have been taken to improve this. 

** **

The most cost effectivemethod of advertising for small and medium-size new-to-market U.S. companies inRussia is to advertise in one of the popular weekly, bi-weekly or monthly magazines.  They can also advertise in one of the national daily or weeklynewspapers and trade journals, or the specialized advertising publications.

 

Trade shows arerecognized as a very important tool in the marketing mix in Russia.  Theseevents are attended by decision makers and are a good way to meet potentialbuyers and clients.  Exhibiting shows commitment to the market, andconsumers notice this.  Exhibition and trade shows in the large Russiancities are well established and usually attract a large number of visitors.

 

According toVladimir Yevstafiev, President of the Russian Association of AdvertisingAgencies, today’s Russian advertising market is so weak and small that anyinterested media or advertising magnate can buy all of the TV advertising timeon all of the central TV channels a year in advance.  Rumors abound that apopular Western media magnate may take strategic positions in the Russianadvertising and media markets.

     

Advertisingservices depend, first and foremost, on the state of the economy. According to the Boston Consulting Group, demand (in dollar value) for consumergoods and durable appliances compared to pre-crisis 1997 will be just 50percent in 1999, rise to 70 percent in 2000, and 80 percent in 2001, and willreach pre-crisis levels no earlier than 2002.

 

Theevents of 1998 changed Russian consumer behavior significantly: purchasingcapacity went down, the gap in income levels between the poor and richincreased, and the emerging middle class was demolished.  These factorsobviously hamper growth in the advertising market.  

 

However,U.S. companies should be aware that at the time of the crisis many Russiansconverted their ruble savings into dollars (several billion dollars’worth).  A share of these cash monies will be spent on purchases, and thisis where advertisers could step in.

 

Inaddition to an economic improvement there are other factors capable ofre-energizing the advertising market.  The parliamentary and presidentialelections (June 2000) could well  turn out to be the source.

 

##  

## Key Contacts:

** **

## State Committee for Antimonopoly Policy 

## and Promotion of New Economic Entities 

## 11, Sadovaya Kudrinskaya Ul.

123231, Moscow,Russia

Tel: 7-095-252-7181

## Fax: 7-095-254-2218

 

## Russian Association of Advertising Agencies

5/2, OrdjonikidzeUl. 

117419, Moscow,Russia

Tel: 7-095-952-4417

Fax: 7-095-952-0200

## Contact: Vladimir Yevstafiev

 

## Russian National Advertising Association

8, Neglinnaya Ul.

103031, Moscow,Russia

Tel: 7-095-921-3529,928-3901

Fax: 7-095-923-7057

Contact: Boris A.Shkolnikov

 

Adventa/Initiative

Malyi ZnamenskyPer., 8

121019, Moscow,Russia

Tel: 7-095-203-2214

Fax: 7-095-203-4135

Email: [email protected]

 

BBDO Marketing

Staromonetny Per.,31

109017, Moscow,Russia

Tel: 7-095-290-9770

Fax: 7-095-290-9771,959-3441

 

DMB&B (D’ArcyMasius Benton & Bowles)

Usievicha 20/1,Bldg.1,

125190, Moscow,Russia

Tel: 7-095-969-2000

Fax: 7-095-969-2001

Email: [email protected]

 

Friedmann & Rose

1stKrasnogvardeisky Proeyezd, 9, Floor 3

123100, Moscow,Russia

Tel:7-095-256-1688/89/90, 956-7885

Fax: 7-095-956-7882

Email: [email protected]

 

McCann-EricksonRussia

Gazetny per. 17/9

103009, Moscow,Russia

Tel: 7-095-755-5500

Fax: 7-095-755-5501

 

R & RAdvertising

Chistoprudny Blvd.3, Floor 3

Moscow, Russia

Tel: 7-095-258-4409,921-0991

Fax: 7-095-258-4454

Email: [email protected]

 

Young & RubicamEurope

Krasnopresnenskaya Nab.,12, Entrance. 3, Floor 8, Rm. 809

Tel:7-095-258-2185/86

Fax: 7-095-258-1348

 

AMG PropagandaAdvertising Company

Art-Mobile

Obrucheva Ul., 30

117342, Moscow,Russia

Tel: 7-095-913-3989,334-7157/8652

Fax:7-095-913-3989/3990. 334-7157

Email: [email protected]

 

Avrora AdvertisingAgency

Novy Arbat 18, 

121069, Moscow,Russia

Tel: 7-095-202-5959,956-9099

Fax: 7-095-956-9215

Email: [email protected]

www.avrora.ru

 

Blick Communications

Bolshoy CherkasskyPer., 13/14, Bldg. ABV

Moscow, Russia

Email: [email protected]

 

Gallup AdFact

Bolshoi KoptevskyProeyzd, 6, 3rd Floor

Tel: 7-095-956-3550,151-2691

Fax: 7-095-742-7098

 

Farbis (OutdoorAdvertising)

VerkhnayaKrasnoselskaya, 2

107140, Moscow,Russia

Tel: 7-095-264-9875

Fax: 7-095-264-7410

Website: www.farbis.ru

 

## Grace Media, Advertising Agency

1stTverskaya-Yamskaya, 29/3

124036, Moscow,Russia

Tel: 7-095-251-8190,251-8114, 251-7974

Fax: 7-095-251-8334

Email:[email protected]

 

Imageland, Publicrelations agency

Marksistskaya Ul.,34, Bldg. 7

109147, Moscow,Russia

Tel: 7-095-792-5720,911-6855/6767

Fax: 7-095-912-0004

Email:[email protected]

 

Krug, AdvertisingGifts and Promotion

Rozhdestvenka Ul.,27

103031, Moscow,Russia

Tel/fax:7-095-208-4895/4582

   7-95-921-5805

 

MAXIMA

SheremetyevskayaUl., 2

129594, Moscow,Russia

Tel:7-095-971-6093/0302

Fax: 7-095-971-6986

 

R.I.M Agency

Spiridonyevsky Per.,2/22, Entrance 1, Floor 9

103001, Moscow,Russia

Tel:7-095-202-6694/7784/6418

Fax: 7-095-202-7512

Email: [email protected]

 

Video International

Acad. Pavlov Ul., 25

121359, Moscow,Russia

Tel: 7-095-956-1267

Fax: 7-095-956-1267

##  

** **

## Publications and Other Sources ofInformation

 

## Reklamny Mir (Advertising World), Monthly

## Petroverigsky Per., 24-4, Bldg.4/5

10100, Moscow,Russia

Tel: 7-095-921-7781,928-4746

Fax: 7-095-921-7781

 

## Praktika Reklamy (Advertising Practices),Monthly

## Kashirskoye Shosse 12, Office 9

115230, Moscow,Russia

Tel: 7-095-111-6260;111-5051

Fax: 7-095-111-3048

Email: [email protected]

www.si-am.ru

 

RegionalAdvertising, Quarterly

Kashirskoye Shosse12,

115230, Moscow,Russia

Tel: 7-095-111-5051,111-6260

Fax: 7-095-111-6260

 

Moscow BusinessTelephone Guide Inc.

Producer:

3511 Silver rd.,Suite 105

Wilmington, Delaware19810

Tel: 914-362-4778

Fax: 914-362-4288

E-mail: [email protected]

Publisher:

Inforcom Izdat

12, Oktyabsky Per.

127018, Moscow,Russia

Tel: 7-095-956-9419

Fax: 7-095-288-4086

E-mail: [email protected]

 

Advertising Guide(Reklamny Gid)

9, Krutitskaya Ul.,1st Floor

129221, Moscow,Russia

Tel: 7-095-722-8798

Fax: 7-095-276-2995

E-mail:[email protected]

 

Vsya Reklama

Internet AdvertisingMagazine

www.advert.ru

 

# Trade PromotionOpportunities

** **

## Advertising-99,   

## Date: November 1-5,1999                

## Advertising and Advertising Technologies

6thInternational Exhibition

Site: Expocenter,Moscow

ZAO Expocentr

Tel: 7-095-255-3739

Fax: 7-095-205-6055

 

Show SpecialtyAdvertising’99

Date: September,1999

Site: Moscow

Organizer: Instituteof Professionals in Specialty Advertising

Tel: 7-095-250-3010,

Fax: 7-095-250-8678E-mail: [email protected]

Website: www.ipsa.ru

 

Advertising andDesign’2000Date: April 2000

Site: Moscow,Central House of Painters

Organizer: EXPO-PARK

Tel: 7-095-932-9023

Fax: 7-095-932-9006

 

Pressa’2000

Date: October 27,1999-November 1, 1999 

Site: Moscow, VVC

Organizer:Soyuzpetchat Agency

Soyzpetchat Agency

Tel: 7-095-921-2132,921-2253, 921-0048

 

Marketing. ModernAdvertising Technologies’99

4th InternationalSpecialized Trade Show  & Conference

Date: September 20-23,1999

Site: St.Petersburg

Organizer: RESTEK

Tel: 7-812-112-2681

Fax: 7-812-112-2348

 

Polygraphiya. Advertising and Information

Site: St.Petersburg, Lenexpo

Organizer: Lenexpo

OAO Lenexpo

Bolshoy Prospect,103 

199106,St.Petersburg, Russia

Tel: 7-812-119-5213

Fax: 7-812-119-5226

Email: [email protected]

http://www.lenexpo.ru

 

AdvertisingTechnologies’2000

Date: March, 2000Site: Moscow, VVC, Pavilion 20

Organizer:Servicefintrade

Tel: 7-095-973-4489

Fax: 7-095-973-4499

 

9thMoscow International Advertising Festival

Date: November, 1999

Site: Moscow,Sovincenter

Organizer: FestivalDirectorate

Tel: 7-095-216-8806

Fax: 7-095-216-8806

 

Reklama IInformatsiya’99

(Advertising and Information’99)

7th InternationalSpecialized Exhibition

Date: May, 2000

Organizer: Lenexpo

Bolshoy Prospect,103

199106,St.Petersburg, Russia

Tel: 7-812-355-1908

Fax: 7-812-355-1909

Email: [email protected]

http://www.lenexpo.ru

 

##  

The ForeignCommercial Service will be pleased to assist interested U.S. companies in theirefforts to tap Russia’s advertising services market.  For furtherinformation please contact:

 

U.S. & ForeignCommercial Service

23/38, BolshayaMolchanovka, Entrance #2

121069, Moscow,Russia

Tel: 7-095-737-5028

Fax: 7—095-737-5033

E-mail: [email protected]

 

 

 

ISA CustomerSatisfaction Survey

 

                       U.S. Department of Commerce

                  * International Trade Administration*

                         The Commercial Service

-----------------------------------------------------------------

The U.S. Departmentof Commerce would appreciate input from U.S.

businesses that haveused this ISA report in conducting export

marketresearch.  Please take a few moments to complete the

attached survey andfax it to 202/482-0973, mail it to QAS,

Rm. 2002, U.S.Department of Commerce, Washington, D.C. 20230, or

Email:Internet[[email protected]]. 

-----------------------------------------------------------------

 

                      * * * About Our Service * * *

 

1. Country coveredby report: _______________________________   

Commerce domesticoffice that assisted you (if applicable):     

________________________________________________________

2. How did you findout about the ISA service?

  __Direct mail

  __Recommended by another firm

  __Recommended by Commerce staff

   __Tradepress

  __State/private newsletter 

  __Department of Commerce newsletter  

   __Other(specify): _______________________________

 

3. Please indicatethe extent to which your objectives were

  satisfied:

   1-Verysatisfied   2-Satisfied   

   3-Neithersatisfied nor dissatisfied   

   4-Dissatisfied  5-Very dissatisfied  

   6-Notapplicable

 

  __Overall objectives

  __Accuracy of information

  __Completeness of information

  __Clarity of information

  __Relevance of information

  __Delivery when promised

   __Follow-upby Commerce representative

 

4. In your opinion,did using the ISA service facilitate any of   

 

   thefollowing?

  __Decided to enter or increase presence in market

  __Developed an export marketing plan

   __Addedto knowledge of country/industry

  __Corroborated market data from other sources

  __Decided to bypass or reduce presence in market

   __Other(specify): _______________________________

  

5. How likely wouldyou be to use the ISA service again?

  __Definitely would

  __Probably would

  __Unsure

  __Probably would not

  __Definitely would not

  

6. Comments: 

 

 

 

 

 

 

 

                   * * * About Your Firm * * * 

              

1. Number ofemployees:  __1-99   __100-249   __250-499

                        __500-999   __1,000+

 

2. Location(abbreviation of your state only):______

 

3. Business activity(check one):

  __Manufacturing

  __Service

  __Agent, broker, manufacturer's representative

  __Export management or trading company

   __Other(specify):_______________________________

 

4. Export shipmentsover the past 12 months:

   __0-1  __2-12   __13-50   __51-99   __100+

 

 

May we call youabout your experience with the ISA service?   

Company name:_______________________________________________   

Contact name:_______________________________________________   

Phone:______________________________________________________ 

 

 

                   Thank you we value your input!  

 

----------------------------------------------------------------

 

This report isauthorized by law (15 U.S.C. 1512 et seq., 15 U.S.C. 171 et seq.).  Whileyou are not required to respond, your

cooperation isneeded to make the results of this evaluation comprehensive, accurate, andtimely.  Public reporting burden for this collection of information isestimated to average ten minutes per response, including the time for reviewinginstructions, searching existing data sources, gathering and maintaining thedata needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of thiscollection of information, including suggestions for reducing the burden, toReports

Clearance Officer,International Trade Administration, Rm. 4001, U.S. Dept. of Commerce,Washington, D.C. 20230, and to the Office of Information and RegulatoryAffairs, Office of Management and Budget, Paperwork Reduction Project (0625-0217),Washington, D.C.

20503.  

-----------------------------------------------------------

FORM ITA 4130P-I(rev. 5/95)      

OMB. No. 0625-0217;Expires 12/31/02