Fall by at least a third: what awaits the advertising market in Russia

Industry experts talk about what awaits the advertising market in Russia in the new conditions of 2022

The advertising business is already feeling the consequences of the crisis caused by Western sanctions. The departure of large foreign clients and the blocking of social networks are forcing agencies to look for new sites and rebuild strategies. Industry experts spoke about the forecasts, prospects and trends of the advertising market in Russia in the new conditions at a round table in April. RBC Trends has collected the most striking statements from experts.

Market contraction forecasts

The advertising market in Russia has not returned to the pre-crisis levels of 2008, stated Sergey Piskarev, President of the Association of Communication Agencies of Russia (ACAR). Now the situation is very unstable and while the hot phase continues, it is difficult to make any forecasts. According to preliminary estimates, the decline in the advertising market this year may range from 30% to 70%. The departure of foreign firms from Russia plays one of the key roles in this, since foreigners make up the majority of clients for a number of advertising companies. At the same time, in 2020, the share of Russian companies in the advertising budget still exceeded the share of foreign ones, Piskarev noted.

According to Nadezhda Mereshchenko, operational performance director of OMD OM Group, advertising budget losses could amount to 40-50%, and "every month of prolongation of a special military operation gives minus 5%." So far, she estimates a possible fall in the advertising market at 20-25%.

The difficult situation on the market may lead to a significant reduction in staff - by 25-30% by mid-2022. In total, according to various estimates, about 100 thousand people are involved in the work of advertising agencies across the country, Mereshchenko noted.

A similar forecast for the advertising sector was given by the COO of Dentsu Russia Daria Kurkina: “We see at least a 30% reduction in the market, according to everyone who said they were leaving our market.”

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Exit of foreign companies

The advertising market has been hit hard by the withdrawal of foreign brands from Russia. Some foreign clients left completely, some reduced their activity due to problems with logistics, packaging, and the search for new suppliers, reminded Elena Leonova, President of the Russian Marketing Services Association (RAMU). There are Indian and Chinese clients, but one should not expect active financial injections from them: business in conditions of instability will not invest, she is sure. At the same time, Russian companies have no “fat” left after the pandemic.

At the same time, “one cannot say that there is no life,” Leonova stressed. “As long as there are market relations, marketing will be in demand. Some segments feel better, for example, trade. Digital promotion does not feel very good, but there are new platforms,” she said. However, in conditions of limited resources, advertisers want a guaranteed result, and in the case of new sites, it is impossible to guarantee something.

Leonova also highlighted the positive aspect of this crisis: in the context of sanctions isolation, the ideas of the international industry will no longer be attractive to Russian consumers. “Thus, agencies are freed from the task of adapting strategies developed in global offices, which will give an additional impetus to the development of the creative potential of the country's industry,” she explained.

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Blocking social networks and searching for new sites

The business has objectively reduced the volume of tools, platforms where you can place ads, said Boris Omelnitsky, President of the Association for the Development of Interactive Advertising (ARIR). Thus, the advertising opportunities of Google and YouTube were closed, as well as the outlawed Facebook and Instagram (since the end of March, social networks have been banned in Russia by a court decision).

“Familiar media tools have become either unavailable or more expensive. The advertiser is faced with the task of finding new sites that are comparable in terms of cost, coverage, and engagement,” said Snezhana Chernogortseva, Deputy General Director for Marketing and Sales of the pharmaceutical company Valenta Pharm. Now the audience of blocked social networks is migrating to other sites, dispersed over available resources. Against the background of this migration, according to Chernogortseva, one gets the feeling that Telegram is becoming a “transit port”, in which fragments of the audience gather until bloggers understand where to stop. At the same time, the resource remains very fragmented, which does not allow building a single blogging activation, she noted.

Chernogortseva recalled that launches of new social networks have been announced in Russia, but time will tell whether they will be successful. “Today, none of these platforms provides a clear system of interaction with the audience. We look at all these stories with cautious optimism,” she said.

According to CEO of Bloggerbase, Chairman of the ARIR Committee on Influencer Marketing Anton Petukhov, after blocking foreign social networks, advertisers and bloggers are switching to other available platforms - VK, RuTube and Telegram. According to his forecast, 30-40% of influencers may leave the information field altogether. “Perestroika will last for a long period of time, it was very easy and simple, now it is difficult and you need to get used to it,” he noted.

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Advertising strategies and requests

The media faced an increasing difficulty in the distribution of advertising content and a crisis of confidence. “We are seeing a monstrous crisis of confidence, radicalization and polarization. If earlier you could choose some kind of understandable speaker, influencer or expert, now you are starting to think about what associations this expert evokes in your target audience,” said Andrey Sikorsky, RBC Marketing Director, Trends Project Manager.

At the same time, the media sees a request for long-term content projects, and with an eye to the future. “There are brands that have suspended their activities in Russia and come out with absolutely social stories – volunteering, the ESG agenda, equality, diversity. In a recession, people may not have the money to buy now, but you need to stay in their head so that they spend the money when they have it,” Sikorsky explained. In addition, according to him, the demand for long-term native projects is growing.

The advertising business now needs to reorient itself towards cooperation with domestic brands, emphasized Elena Dybova, Vice President of the Chamber of Commerce and Industry. She is convinced that small and medium-sized businesses in Russia "have new ideas to fill the vacated markets and use their potential." However, Russian businesses are not used to spending as much money on advertising as they really need, Dybova said. In this regard, "we need to think about what steps to take to show entrepreneurs the potential for development in advertising."

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In the current economic situation, the effectiveness of advertising will be very important, each ruble will have to conditionally generate two rubles, said Nadezhda Mereshchenko from OMD OM Group. She also predicts a surge in reach media advertising for brands that have now gone on hiatus as they need to announce they are coming back.

The market structure is changing in terms of demand for communications, said Daria Kurkina from Dentsu Russia. Large international companies have formed the industry standard, now it must be somehow finalized in the current realities.

According to Kurkina, clients are now not ready to spend money exclusively on image campaigns without using performance mechanics. In the context of a limited budget, the branformance approach acquires a special role, which implies brand communications, at the same time aimed at sales. “We promote the brand and drive sales at the same time. From the point of view of agencies, this is what will be in demand for the next 12-18 months,” said Kurkina.