Nepali Advertising: Looking for Brighter Days
KATHMANDU: No doubt, advertising has emerged as a prominent business in the country. A major reason behind this is the rapid proliferation in both local and foreign brands and their ever increasing competition to stay ahead of the curve. “There has been the growing entrance of these brands related to FMCG, automobile, hospitality, banking and finance, consumer electronics, telecommunications, real estate, education and construction in the Nepali market,” says JB Bista, CEO, Everest Ad and Event Management Pvt Ltd.
“And, at the same time, they are increasingly leveraging promotion and publicity campaigns to beat the competition. As a result, the advertising sector is steadily gaining steam.”
Other crucial factors that have helped in augmenting the business volume of the sector include increased presence of media outlets (related to print, television, radio and lately digital platforms) growth in consumers’ awareness, and impacts of globalization.
For the last 20/25 years, it has been registering an annual growth of 10 to 15 on an average, according to Som Dhital, President of the Advertising Association of Nepal (AAN). With such growth, its total arithmetic size is now estimated to stand at around Rs 14 billion. The total number of advertising agencies operating across the country has reached more than 700. Similarly, the ad sector directly employs 52 thousand people whereas other 60 thousand are indirectly engaged with it.
There are 250 advertising agencies operating actively in the country, among which 150 are registered with it. Likewise, the ad business contributes Rs 3 billion annually as revenue to the state coffer.
Despite all this, the ad business is being also dogged by various anomalies. This is something that is inhibiting it from realizing its full potential.
Serious Challenges
The prime obstacles facing advertising industry are the Covid-19 pandemic, dog-eat-dog competition between the agencies, dearth of trained human resources, absence of adequate data, etc.
Covid-19 pandemic
The most serious problem hitting the ad industry is the ongoing COVID-19 pandemic that erupted two years back. “Because of the pandemic and the subsequent lockdowns, the industry lost the total of a whopping Rs 7.5-8 billion,” says Dhital. Such a loss pertains to basically two factors.
The first one is ineffectiveness of the clean feed policy to generate the expected revenue of Rs 8 billion in total . The policy, implementation on October 23, 2020, not only bars foreign television channels from airing foreign advertisements in the Nepali skies, but also prohibits Nepali channels from screening foreign television commercials dubbed in Nepali language.
In this context, it was expected to ensure the said amount of revenue after one year of its implementation by impelling the multinational companies/brands in the country to spend significantly in making Nepali adverts. But, unfortunately, this could not happen and the policy generates as low as Rs 2 billion. It means the industry witnessed the loss of Rs 6 billion from the inefficacy of the policy.
The second factor contributing to to the total pandemic-induced loss of the industry is a massive downturn in the advertising especially in the traditional media channels like print and televisions. According to the AAN, the print advertisement went down by a shocking 80 to 82 percent, while the television commercials (TVCs) declined by around 40 percent.
With such declines, the business volume of ad agencies also nosedived by 30 to 50 percent. That is why, such agencies have not been able to pay total monthly salary to their staffers. Similarly, some of them even have resorted to furloughs and layoffs as a cost-cutting measure.
Certainly, over the last 5/6 months, the ad scenario has been improving in line with the significant downturn in the coronavirus cases and the resultant lifting of strict prohibitions. Nevertheless, the pandemic is yet to be fully eradicated with a the onset of a newly mutated virus like omicron. And, this continues to pose a threat to the overall financial well-being of the industry
Dog-eat-dog competition
Advertising agencies operating in the country offer various kinds advertising services to the clients. Such services pertain to the print media (newspapers and magazines) electronic media (TV and radio), outdoor media (billboard, banner, point- of- sale, etc), digital media (online news portals, social networking sites, etc), event management (press meet, exhibition, product launch, etc), audio-visual production (documentary, social message, etc) and DTA (screening advertisement in the theaters), among others.
It is often found that the agencies indulge themselves in unhealthy competition in course of serving their clients. For providing the same kind of service, different agencies charge different rates. Santos Shrestha, CEO of MARS Advertising ascribes this anomaly to basically two factors.
Unethical manipulation of the rates by agencies for their own petty benefits may debilitate the the entire ad industry in the long run.
Dearth of skilled human resources
To be sure, the ad industry seriously lacks skilled workforce. According to Pankaj Pradhan, CEO, Prismark Advertising, one of the major reasons behind this is the inability of agencies to develop advertising as a sustainable career option. “We have not yet been able to attract and retain talented/creative manpower for the long-term.”
Shrestha of MARS also echoes the same view. “Like other corporate/business sectors like banking and finance, the ad sector does provide employee-centric schemes/benefits related to provident fund, retirement and other relates social security. So, the number of the best and bright people willing to carve a long-term career in the sector has been strictly low.”
Agencies are also facing the short-supply of quality employees due to the unavailability of proper training and enough specialized courses on advertising. The Tribhuwan University and Kathmandu University have adverting courses in their MBA and BBA curriculum and few collages like WLC Nepal are also conducting ad-related classes. But, still, such initiatives are not adequate enough to produce the workforce needed to effectively drive the industry ahead.
Misunderstanding between ABN and AAN
The vibes between the ABN and the AAN seem cold on some critical issues. For instance, the former’s recent decision to prohibit the advertising on liquor and tobacco-relatedproducts has been termed by the latter as a unilateral move which could cause huge losses to the ad industry.
The public welfare advertisements worth Rs 3.5 billion is another major topic over which the two sides are at odds. The owners of the agencies claim that the board, in the name of one-window system, is distributing such adverts in a non-transparent way. But the board flatly denies such charges.
Beside the above-mentioned challenges, the advertising business is also somewhat hampered by the lack of analytical date and below-the-mark creativity, among others.
"The absence of statistical analysis on the markets pertaining to the Nepali advertising, media and consumers is deterring a number of domestic and multinational companies from adequately spending in communication campaigns. Similarly, the run-of-the mill creativity of Nepali adverts has failed to attract the Nepali consumers who are accustomed to the relatively appealing foreign commercially especially the Indian ones," admits Pradhan of Prismark.
The absence of statistical analysis on the markets pertaining to the Nepali advertising, media and consumers is deterring a number of domestic and multinational companies from adequately spending in communication campaigns.
Promising Opportunities
There are various promising opportunities that can be exploited to bolster the ad industry. Such opportunities pertain to the adoption of clean feed system, rise of digital platforms, and legal initiatives, among others.
Clean feed
Adopted in line with the Advertising Regulation Act, 2019 , the policy of clean feed offers vast potentials to help turnaround the ad industry. “ The policy might not have produced the expected results within one year of its implementation owing to the menace of coronavirus. But , it can generate at least Rs 4 to Rs 6 billion additional revenue in 2022 provided the magnitude of such menace continues to mitigate like in the recent months. “The gradual improvement in the situation indicates at the possibility of multinational brands raising their ad budget by 30 to 40 percent. And this could well translate into arithmetic expansion of the industry.”
On the other side, the Advertising Board of Nepal (ABN) is focused on the full implementation of the clean feed policy in the country “So far, 95 percent of the total television channels aired in the country have been broadcasting their contents sans foreign commercials,” informs Laxman Humagain, Chairman, ABN.
According to him, the board’s taskforce constituted under his coordination is taking concrete steps for the full implementation of the policy. For instance, it making formal request to those TV channels not following the policy. Such channels could face the penalty up to Rs 500 thousand if they continue to do so.
Similarly, the board is focused on regulating the Internet Protocol Television and Mobile Over-The-Top (OTT) apps through the needed amendment in the related broadcasting acts. “Through these apps, one can easily downlink the foreign channels with foreign ads. So, they will be strictly regulated so as to fully implement the clean feed policy,” Humagain revealed.
The board is focused on regulating the Internet Protocol Television and Mobile Over-The-Top (OTT) apps through the needed amendment in the related broadcasting acts
Rise of digital ad
Unlike the print and television adverts, the digital ads have remained immune to the negative repercussions of the Covid-19 pandemic. More interestingly, the volume of the advertising in online news portals and social networking sites seems quite unaffected. In fact, such volume is swelling even in the current critical times. According to the AAN, the ads in the news portals and social media have been growing by 15 to 20 percent and almost 100 percent respectively since the onset of the pandemic.
According to the official figures of the AAN, the total size of the internet advertising stands at a huge Rs 4.92 billion. Of the very amount, the news portals account for Rs 2.55 billion while the remaining Rs 2.37 billion is occupied by social media.
“The growth of digital ads is impressive, to say the least. This can be ascribed to a paradigm shift in the ad sector taking place after the coronavirus crisis hit the country,” says Shrestha of Mars adding, ”The very shift is that many advertisers are now treating digital channels as primary media and traditional mass media channels as secondary one. The case was quite opposite in the past.”
Pradhan of Prismark also echoes the same views. “In simpler terms, the internet advertising is relatively cost-effective, and ensures wider reach. Thus, the companies, hit by the pandemic-induced financial crisis, are increasing opting for digital platforms to appeal more customers in less cost.”
Compared to other traditional media channels, the digital ad ensures more efficient and unique features for the advertisers. For example, it is more targeted as Search Engine Optimisation (SEO) and Pay-Per-Click (PPC) help put one’s brand name and content marketing at every stage of the buying cycle. Likewise, the very mode of communication offers mobile engagement, thus enabling the advertisers to reach the target customers every time they are online. Such features just seem to be facilitating its growth.
Compared to other traditional media channels, the digital ad ensures more efficient and unique features for the advertisers. For example, it is more targeted as Search Engine Optimisation (SEO) and Pay-Per-Click (PPC) help put one’s brand name and content marketing at every stage of the buying cycle.
The number of the internet users in the country is rapidly growing and has now reached some 92 percent (around 28 million) of the total population. This is also something that has bolstered the trend of internet advertising.
Legal/Regulatory Initiatives
Some crucial legal/regulatory measures are being adopted by the related stakeholders for a professional and healthy growth of the ad industry.
For instance, the draft of the code of conduct relating to the industry has been recently published by the the ABN in close coordination with the AAN. “The draft primly aims to make the entire production, publication, broadcasting and distribution process of advertising systematic, transparent and ethical,” informs Humagain of the ABN.
In order fulfill this objective, it, among others, has proposed for a separate price mechanism on the ad transactions. And this could discourage the current malpractice of manipulating ad related rates by both agencies and media outlets. It may be noted that such an unprofessional conduct is one of the prime problems stymieing the healthy expansion of the ad market.
Similarly, the ABN along with the AAN and other experts is taking the initiative to formulate a national adverting policy in 2022. The proposed policy will also incorporate certain provisions to spur more investment in the country’s ad market by offering tax rebate. They might make the foreign brands to spend at least 5 percent of their total income and the local brands at least 1 percent of their total sales in advertisement and promotion.
(1)_DaADmCjuZO_mwfozlacndropdlcu6zvj4g8ky385pjejblhzobs315n39y582xptffmjdt7_OAqMFLGFvv_rnjx1aobehbw1darthitzszof8pmg5no3lnxbkoevsh33zsi8wy1oyd7impm.jpg.370x245_q70_crop.jpg
)
