Crisis spurs ad agency growth

Bullish on Bouncing Back,” says a Malaysian campaign in international media aiming to woo back investors. “On the Road to Recovery” claims an international campaign from Thailand’s Board of Investment. Asia’s battered tigers are hoping advertising can help pull in the investments necessary to restore their economies.

While it is doubtful Asia can simply advertise its way out of crisis, devalued currencies, economic uncertainty, and frugal patterns of spending are certainly creating new opportunities in the ad industry.

Miles Young, Ogilvy’s Asia/ Pacific president, has opened “adfactories” in Thailand and Malaysia. “These are studio-based, low overhead agencies geared to recession-hit clients with communication needs.” Called Design Direct, the new shops use shift labour, and freelances – now readily available.

In Bangkok, Design Direct has attracted over 40 new clients to the Ogilvy stable. It does non-strategic work for companies such as Bristol Myers Squibb and KFC, which use other mainstream agencies. And it has collected projects from Jim Thompson Silk and the American International Assurance Company, among others, attracted by its no-frills service.

For agencies less well entren-ched in Asia, the investments necessary to build a network have never been more affordable. Publicis, for example, is expanding its Asian network from 11 agencies to 18 by the end of 1998 with acquisitions planned for Taiwan, Malaysia, Pakistan and Japan.

TBWA, also rapidly expanding in Asia, recently bought Thompson Worldwide Partners in Hong Kong, which it will merge into the existing TBWA/Lee Davis operation. It is also eyeing Japanese agencies and may involve Hakuhodo in the deal. The two already work together for Nissan in Europe. Bozell, too, is looking to grow and has launched a second agency in Hong Kong, Grant Advertising; FCB hopes to take an equity share in its Korean affiliate agency; and DMB&B is negotiating an acquisition in Thailand.

Japan, the one Asian market where international agencies other than McCann have made little headway, is where some surprising opportunities exist. Omnicom has bought a 20 per cent stake in eighth ranked I&S Corporation, and may gain management control within two years.

Third ranked Asatsu Inc is on the look out for new international partnerships to replace or supplement its current tie to BBDO.

South Korea, where ad budgets this year are expected to plunge 50 per cent and staff numbers at least 20 per cent, is another country where agencies are hanging up the “for sale” sign. But in both countries, prospective suitors have one hurdle to overcome – agencies are often over-valued by Western financial criteria, so establishing a rational purchase price can take months.

While Asia’s downturn is good news for agencies building networks, life is not so rosy at some of the established shops. Leo Burnett, Batey Ads, DMB&B, Ammirati Puris Lintas, and JWT are among the agencies reducing headcounts in Asia, which eases recruitment problems for those in an investment mode.

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