Russia’s advertising industry is in a state of chaos, its stature tarnished by criminal activities, and its freedom hampered by Boris Yeltsin’s decrees on what can be advertised. But thousands of agencies are still prepared to gamble for a sta

SBHD: Russia’s advertising industry is in a state of chaos, its stature tarnished by criminal activities, and its freedom hampered by Boris Yeltsin’s decrees on what can be advertised. But thousands of agencies are still prepared to gamble for a stake in this lucrative market.

It is difficult to imagine John Hegarty or Maurice Saatchi being bundled into the back of a car by gun-wielding minders when on a client visit; or a reception area lined with heavies bristling with ill-concealed weaponry. But for agency bosses in Russia, advertising is a dangerous business.

Vladimir Evstafiev, chairman of Maxima, one of Russia’s top-ten independent agencies, says: “It’s like Chicago in the Thirties. We have to have protection.” Evstafiev knows what he is talking about. He has been on the receiving end.

“When we won part of the business to promote Russia’s privatisation programme there was a lot of media coverage about the account being worth $10m (ú6.6m),” he explains. “Bandits with guns came to our agency thinking that the money was here and not in the bank. They didn’t understand that the $10m was the advertising budget and not our money.”

According to Evstafiev, the situation was resolved “through negotiation” although he will not discuss exactly what that “negotiation” involved.

Allegations that advertising, like many other Russian businesses, is dominated by the “Mafia” and other criminal elements is dismissed by many in the industry as a fallacy. Others suggested during my visit to Moscow that “it is best not to talk about it”.

But advertising is in a state of chaos, its reputation tarnished by suggestions of criminality and its freedom hampered by a series of peremptory decrees issued by President Yeltsin in a bid to impose some control over the industry.

The image of the advertising industry has been further tarnished by the murder on March 1 of Vladislav Listyev, the country’s best-known and most admired television personality who fronted a range of programmes from current affairs to game shows. But it wasn’t Listyev’s investigative reporting that got him killed – it was his business activities.

Listyev’s task was to reorganise the former state television channel Ostankino (now called Russian Public Television – RPT) as part of its move from a state-owned channel to a partially privatised one.

Advertising on the channel was, until March, controlled by Reklama Holdings – a joint share company owned by the channel and five of Russia’s top advertising agencies, including Premier SV and Video International. However, it is suggested that Reklama Holdings was in dispute with a new group of big Russian investors who were given a 49 per cent stake in the company last year.

To further complicate the situation, Ostankino announced that it would stop running ads from April 1 because they were causing “too much social disruption”. Advertising would only re-appear when a set of advertising regulations were in place. The suggestion is that Listyev got in the way of middle men creaming off enormous ad sales revenues who feared they would be badly hit by the advertising ban.

There is no doubt that huge sums of money can be made from media buying in Russia. It is said that one media company alone makes $50m a month from media buying at greatly inflated margins. Despite protestations from Yeltsin and public outcry, Listyev’s killer or killers have not been caught and the ad industry says that it is being discredited by speculation that it was involved in his murder.

Vladimir Philippov, president of advertising agency Avrora, says: “Listyev was a friend of mine and many others in the industry. We in advertising have been blamed for his murder. The ad industry is being used as a scapegoat.”

The RPT ban and the furore surrounding Listyev’s death are not the only problems the industry has to contend with. Yeltsin has outlawed tobacco and alcohol advertising as well as ads for unlicensed medicines, faith healers and fortune tellers – an enormous growth business as Russians seek reassurance in a turbulent world.

He has also issued a decree aimed at protecting consumers from the effects of misleading advertising. This follows the collapse last year of the MMM investment fund in which millions of Russians lost their savings. Prior to the collapse, the advertising was claimed to be the most successful Russian campaign ever as consumers rushed to invest in the fund, which promised up to 1,000 per cent annual interest to those who joined the scheme.

According to Yeltsin, the restrictions on advertising have been brought in to protect the people – a sort of Slavic version of Virginia Bottomley’s Health of the Nation initiative. But cynics say Yeltsin is getting his own back on television stations for their less than favourable coverage of the war in Chechnya.

Sergei Feofanov, who has worked in advertising under both the old Soviet regime and democracy, says: “There is an old Russian proverb – `a man doesn’t make a sign of the cross until it thunders’. The thunder burst out when MMM collapsed. Hence the new decrees.”

Evstafiev adds: “All these decrees look like they have been prepared personally by Yeltsin, but the alcohol and tobacco ban for example, is impossible to interpret. Does it mean just television or all mass media? Does alcohol mean just spirits or does it include beer as well? At the moment there are commercials on air for beer. It’s a mess.”

Evstafiev, along with the rest of the Russian advertising industry, has decided that the safest course of action is just to ignore the decrees and keep on advertising alcohol and tobacco until there is a government clampdown. Western agencies with offices in Moscow, in a half-hearted attempt at toeing the line, have removed shots of people smoking from ads.

While agencies may be wrapped up in shady business practices and their work hampered by Yeltsin’s strictures, it is a business many people want to get into. There are more than 3,000 companies in Moscow alone which claim to be full-service agencies. And advertising is everywhere – on television, radio, in the hallowed pages of Izvestia, poster sites, on banners strung across the streets and (badly) handpainted on the sides of buses and trams. Much of it is for foreign brands, particularly Sony, Toshiba, Daewoo, Picnic, M&Ms and Smirnoff manufactured in London.

Creativity is flourishing. There remain some Soviet-style ads for air-conditioning units, tractor factories and cement but there are far more ads for clothing, upmarket jewellery, financial services, soft drinks and food. Some are adaptations of international ads, farmed out to either native agencies or the Moscow office of international agencies such as Grey or BBDO. All these international ads include frequent, large product shots, as Evstafiev says: “Many Russians are only able to read Cyrillic script so don’t understand English names.”

But some Russian-produced ads would not look out of place on British television. They have good creative ideas and fairly high production standards and as a result Russia has just won its first EPICA advertising award for work created by Avrora for the Russian Society of the Blind.

At a recent Russian advertising festival hosted by the advertising magazine Reklamny Mir and EPICA, much was made of the fact that Russia has a great creative tradition. It is certainly true that there are some highly creative people involved in advertising in Russia – Boris Goldman president of the agency New Found Quality is an ex-professor of literature and Igor Yankovsky creative director of Maxima is also a famous actor – a sort of Alan Rickman figure who after a hard day at the agency was off to star in Harold Pinter’s “The Caretaker”.

Russian agencies claim that they are now harnessing the cinematography, graphic design, literature and drama skills honed under the Soviet system and putting them to commercial use, adding that they expect to start winning plenty more prizes at international advertising festivals soon. Let’s see.