Koreans look to a global future

Advertising spend in Korea dropped at least 30 per cent last year, according to initial agency estimates. Agency staff numbers dropped about 20 per cent, while nearly 50 smaller agencies went to the wall. Now, as the industry enters its second year of deep recession, some of the global forces of change familiar to Western agencies are starting to reshape Korea’s ad industry in ways that may prove significant for agencies elsewhere.

The Daewoo Group, one of South Korea’s largest conglomerates, or chaebol, announced on January 13 it would be consolidating all its $80m – $100m (48m – 66m) domestic business into a single agency, Korad Advertising, and severing ties with four others, including Welcomm, South Korea’s most creative shop. Daewoo Group’s main subsidiaries are Daewoo Corporation, Daewoo Motor Co, Daewoo Electronics, and Daewoo Heavy Industries.

A Daewoo spokesman says: “This move is aimed at promoting integration and consistency for the corporate identity of the group’s subsidiaries. Daewoo also expects it will improve the quality of their subsidiaries’ advertising campaigns, as well as promoting more synergy within the Daewoo brand portfolio.”

Daewoo also intends to work with Korad outside Korea to achieve similar goals. However, the details have yet to be worked out.

Daewoo’s consolidation will add to the pressures on the losing agencies. Of these, Welcomm is now expected to sell a sizeable minority share to Publicis, giving it access to the Kor ean market.

Cheil Communications, Korea’s largest agency, is under severe pressure to perform from Samsung, its owner and largest client. It’s a simple problem. Samsung’s factories are churning out products that too few people are buying. And the desired solution is just as simple – better advertising and marketing.

Cheil hopes international connections can bring it some new insights into how to build brands. The agency has a joint venture with Bozell which has proved a disappointment, as Bozell, despite holding 30 per cent equity, has been unable to develop much business from its clients. According to one senior Cheil executive, Bozell is under pressure to deliver value to the relationship; if not clients, then know-how.

But contingency plans are already in preparation. Cheil is toying with the idea of forming a new joint venture, of which it would hold less than 20 per cent, with a new foreign partner holding the balance. It would provide no more than 20 per cent of the billing by transferring some of its Samsung business to the venture.

With Cheil holding less than 20 per cent equity, the new agency would not be officially counted as a Samsung subsidiary or affiliate. Therefore, it wouldn’t fall foul of laws limiting the numbers of subsidiaries a chaebol can have and the number of companies it can own in the same industry.

There’s also talk within the Samsung group of achieving a greater degree of co-ordination between the hitherto independent initiatives which many of its subsidiaries take around the world.

While it will be some years before either Samsung or Daewoo becomes a globally-aligned advertising brand, both are nudging themselves in that direction.