The G-MEDIA Program is made possible by support from the American people
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Report on the Media and Advertising Industry Research in Georgia
Executive Summary
The content and opinions expressed herein belong to the authors and do not
reflect the views of the U.S. Government, USAID, or IREX.
Prepared by GMCG
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Executive Summary
Research Purpose and Methodology
Main purpose of the industry research is to assess current condition of media industry, identify main problems and development opportunities from business sustainability viewpoint.
Research focuses on:
General problems, cause-effect relations and recommendations;
Description of advertisers, their perceptions and attitude towards advertising, decision making process, development stage of advertising market, educational level of advertisers in terms of advertising tools and media they use;
How is advertising perceived by general public and business;
Key players of the industry and their interaction, value chain, regulation; Opportunities for development.
Data for research was obtained through:
1. Analysis of secondary data– laws that regulate media, country statistics, world advertising market statistics, local advertising market statistics, basic databases listing media and businesses with contact information.
2. In-depth interviews–in-depth interviews were conducted with following parties:
Representatives of advertisers;
Representatives of media outlets in each media platform (TV, radio, print media and new
media);
Representatives of value chain players for each media platform; Regulatory authorities;
Industry experts and consultants;
3. Focus groups – focus groups were conducted with following segments:
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Individuals possessing businesses (basis for segmentation was age and field of specialization). The charts below indicate the sample sizes covered throughout the research:
Sample of advertisers:
Companies Tbilisi Regions Total
Large 20 - 20
Medium 20 3 23
Small 40 17 57
Total 80 20 100
Sample of intermediaries:
Intermediary Sample Total
Advertising agency 11 17 Regulation 1 1 Media Seller 1 1 TV Audience Measurement 1 1 Total 13 19 0 50 100 150 200 250
Print Media Radio Television New Media
Sample 32 19 22 11 Total amount 203 32 51 20 32 19 22 11 203 32 51 20
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Major Findings
Advertisers
Marketing Function in Advertisers
Marketing knowledge is low. Most of the companies do not have marketing strategy.
Decisions in terms of advertising are made by owners of the business and/or general managers due to two reasons: 1) low qualification of the marketing managers; 2) autocratic management style in subject companies.
Senior managers, owners and marketing managers are very conservative. New initiatives are
very rare.
Most of the marketing managers make decisions based on the stereotype thinking and are not able to explain the reasoning behind their point of view.
TV advertisement is perceived as the most effective tool.
It is difficult for companies to reach specific segment through media. Georgian media market is not well presented by specialized media that is focused just on specific group of people united by the same interest, hobby or business.
Different types of companies approach advertising budget planning and expenditure differently:
o Foreign based (importing) companies – have annual budgets, prepared in the
headquarters of the company, changes at local level are not accepted;
o Locally based large scale companies – have annual budgets planned at the beginning of operational year. Small changes in the budget in terms of value and type of expenditure are possible
o Locally based medium/small companies – Environment is not stable, level of uncertainty is very high, and therefore such companies do not have long term plans or budgets. Decisions are made spontaneously on ad hoc basis.
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Result Assessment: One of the reasons that TV advertising is massively perceived as the “best” advertising media is the fact that TV ratings are measured and also such research is conducted regularly.
As there are almost no researches conducted to measure reach of radios and print media, companies usually have no ability to assess effectiveness of advertisements placed in these media platforms.
Despite the fact that reach of internet advertisement is easily assessed, the measurement tool is not well exploited.
The table below shows result assessment tools and opportunities by different media platforms.
Advertising Media Result Assessment Opportunity Tools& Source
Television Strong Audience Measurement's official TVMRGE Nielsen Television licensee
Radio Weak Independent research
Print Media Weak Independent research
Internet (New Media) Strong Google analytics, web page
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Description of Advertisers (Attitude, Perceptions and Knowledge)Large Scale Companies:
Most of the large scale companies don’t perceive press as an effective tool for advertising, but still advertise because of low cost and already established partnerships.
Large scale companies do not perceive internet as a powerful tool for increasing sales even taking into consideration its low cost.
According to our observation there is a strong correlation between price of the advertisement and perception towards its effectiveness, because
the more expensive the advertisement is
more effective it is considered
.Medium Scale Companies:
Medium scale companies wish to advertise, but encounter financial and organizational problems. As a result they are not able to focus on marketing issues with adequate resources.
0% 20% 40% 60% 80% 100% TV Radio Print New Media Yes No 0% 20% 40% 60% 80% 100% TV Radio Print New Media Yes No
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Small Scale Companies:
Usually small scale companies are not addressed with offers by media organizations’ sales
people, as these companies are not visible.
Small companies usually don’t have marketing strategy and do not plan advertising
campaigns. Their marketing and advertising efforts are impulsive and depend on their current financial condition.
How business at large perceives (values) advertising as means to generating revenue?
Large and Medium Scale Companies:
Large and medium businesses have positive attitude toward advertising.
Large businesses are the main spenders.
Medium businesses are more cautious, than large businesses, and spend far less.
Small Scale Companies:
Small Business Owner (SBO) has very superficial knowledge about advertising.
Generally SBO does not have experience of advertising.
SBO perceives advertising as very costly activity because only TV advertising is perceived as effective source while all other types are considered ineffective.
SBO could name number of activities other than advertising that increase sales. SBO does not think about advertising as a cure for poor sales.
SBO will not take loan to invest in advertising campaign.
0% 20% 40% 60% 80% 100% TV Radio Print New Media Yes No
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“Georgian businessmen would better borrow money for office repair, rather than for advertising in order to boost sales.” – Advertising Agency
Public at Large
Attitude towards Advertising - How public at large perceives advertising as means for generating revenue
Ordinary people have controversial viewpoints regarding advertising.
In general, advertising is perceived as means for generating revenue, but most of people personally would not place advertisement.
People would rather use other sources to disseminate information, such as personal contacts, intermediaries or free announcements.
It is remarkable, that some of the middle aged people, on subconscious level, perceive advertising the same as news.
Majority of interviewed stated their negative attitude towards advertising, as low quality product and waste of time.
Same people noted that when making purchasing decision in a supermarket they would choose advertised product over unknown.
Most of the interviewed could describe and recall advertisements shown on TV.
Advertisement articles printed in press often are regarded as plain articles.
Most of the interviewed could not remember radio advertisements.
Internet advertisements are mostly initiated and placed by younger people. Best place to advertise on the internet is Facebook;
Advertisement banners placed on the internet are not noticeable for general public. Public in regions shares the same general attitudes but is more conservative.
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Advertising Agencies
General Findings:
According to experts’ opinions, about 80% of revenues in advertising agencies in terms of media planning are generated by two largest agencies: Media Art and Magi Style Media.
Leading agencies have loyal and stable clients with big advertising budgets.
Most of the advertising agencies perceive TV as the first priority in making decisions about media mix, and then come radio, print media and new media in terms of efficiency. Accordingly, advertising budgets are distributed based on this assumption.
According to some experts’ opinions, the most profitable for advertising agencies is to direct budgets to TV advertisements because prices are high compared to other media platforms.
Advertising agency is a significant opinion former in terms of working out advertising
budgets and directing them to the biggest advertisers on the market.
Advertising agencies plan fewer ads for regional media outlets, while some agencies do not consider regional media outlets at all.
Advertising agencies prefer to direct advertising budgets to more established media outlets, which have organized business activities or have several channels and media platforms and are able to measure results.
New Media is not considered as a significant tool by advertising agencies.
There are very few advertising agencies in the regions that plan media and the market is not developed.
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Media
Media as Business:
In most cases, media is perceived as a powerful tool for social activity, rather than as a profitable business. Such media outlets as a rule exist at the expense of external financing (grants from different international organizations or donations from interested parties).
As a rule, management professionalism level is low in media outlets. Often managers come from different backgrounds or have soviet and post-soviet union education.
Most media outlets have not formed objectives and strategy.
The initiative and decisions of creating a new project/program often are coming from higher level managers rather than from the producers/creative group/journalists.
Most of the grants from donor organizations do not serve long-term organizational
development.
Product Development and Segmentation:
Most of the media managers create content based on their own opinions and past experience and do not conduct any research beforehand. Often content is not segment oriented. They almost never use any objective tool for measuring the success of any particular activity/project.
Media outlets do not provide big variety of products in terms of target segment focus. Based on our observation there are many groups in society, that are not accounted for in terms of production and delivery of media products.
As a rule, managers of different media outlets cannot understand the concept of target
segmentation. Sales Efforts:
Shortage of professional sales agents.
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Political Influences: Most of media outlets that cover public affairs are highly polarized and are perceived as either pro-governmental or oppositional.
Most of the oppositional media outlets claim that their potential clients (advertisers) are afraid to cooperate with them, because of expected oppression from the governmental entities. Several examples were provided, showing that advertisers stopped cooperation indicating above mentioned reason. These perceptions may be subjective and based on self censorship.
As a rule, getting public information from the state agencies is a very problematic issue,
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Television
Sources of Financing:
Investors of TV broadcasters may be categorized in several groups according to their interests:
o Foreign investors having commercial interests;
o Local investors having commercial interests;
o Local investors having political or self realization interests.
International investors as usual do not invest in Georgian TV broadcasters because of relatively small market.
Local investors having commercial interest will not invest in medium or small size Georgian TV broadcaster because existing media outlets can not generate sufficient income and at the same do not have perspective to do so due to composition of market, distribution of power in the value chain, etc. Detailed reasoning is provided in the main part of the report.
It should be noted, that there are no local investors with journalistic or public interest desiring to invest in existing TV broadcasters in Georgia.
National TV broadcasters have strong position on the market and do not seek for new investors.
Management Issues:
Sales function in most TV broadcasters is underestimated, so general director does not trust and consider critical opinions from sales point of view.
When decisions about launching new programs are made, profitability issues are not
considered adequately in most TV broadcasters.
In medium and large TV broadcasters with highly centralized organizational structure
decisions are made by several persons, without considering organizational needs.
Some heads of TV broadcasters do not possess and do not value information about environment in which they operate.
Problems concerning management professionalism is the most actual in TV broadcasters operating in regions.
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Some regional TV broadcasters do not have any human resources specialized in sales, but those broadcasters who have, cannot employ highly competent staff.
Product Development and Segmentation:
Most of the televisions do not conduct any kind of research on the possible success of a program that needs to be approved for broadcasting.
Relatively small televisions that are created for noncommercial goals almost never use any tools for objectively measuring the success of any particular show.
Usually there are three main criteria used to evaluate the success of the program. They are:
past experience, the quality (both in terms of content and technical aspect) and ratings provided by TVMRGE Nielsen Television Audience Measurement's official licensee (TVMRGE).
Ratings provided by TVMRGE often play a role of a substitute to the post-production research.
There is a stereotype on the market that a television that does not broadcast politics is not perceived as significant player.
Regional televisions hardly find local news for the News programs.
Filling the airtime is a problematic issue for small (especially for regional) televisions.
Most of the televisions do not create segment targeted programs.
Most of the television broadcasters are highly inflexible when it comes to changing broadcasting schedule.
Creating a live program is difficult for regional televisions. Sales Efforts:
Televisions rarely use any media type except for TV to advertise their channel.
Competition between the televisions is unequal because only part of them is TVMRGE’s clients, therefore only part of them can compare themselves to each other using ratings.
Becoming a client of TVMRGE for most of the small televisions (especially for regional ones) is impossible because of the service price and mostly senseless, because TVMRGE’s system does not provide meaningful information for small players, as most of small towns and settlements covered by regional televisions are not included in the measurement.
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Those regional televisions who see the need for sales personnel, find it hard to hire qualified sales agents.
There are three most common reasons for regional organizations for not advertising from regional TV broadcasters’ point of view: low budget; advertising will not affect sales; fear of tax penalties and friends, who will ask them to lend some money.
Because of the fact that “everyone knows everything” in regions, TV broadcasters think that audience measurement system is of low importance.
The personalization level at regional televisions is much higher than at national ones. Local
TV station is able to broadcast personal information and news about local settlers.
At most of the regional broadcasters up to 75% of the total income comes from
announcements of personal kind and creeping line.
A lot of regional organizations mentioned that regional cable operators violate broadcasting rules by transmitting popular channels without having licenses. At the same time they do not have right to change content of transmitted program, which they do by adding creeping lines. (Law on Communications, Clause 2, Article H45). By these actions they create unfair
competition, in terms of content and advertising placement. Local TV station can not compete with world known programs, audience does not watch local TV, and advertisers prefer cable TV to place ads.
Almost all televisions cooperate with advertising agencies in order to attract companies with big and medium-size marketing budgets.
Influence on TV broadcasters and advertising market:
TV broadcasting and advertising market is the most influenced by political parties.
Financing TV broadcasters in Georgia is the most common way to influence and direct TV broadcasters’ activities according to political interests.
TV broadcasters that do not assist government’s or state’s interests hold significantly smaller share of advertising market and accordingly lack of opportunity for development.
One commonly shared assumption about influence on advertising market is that governmental or state organizations can influence commercial organizations when choosing TV broadcasters for advertising.
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Entry Barriers and Regulation: Obtaining TV broadcasting license is quite expensive for a TV broadcaster.
There are almost no free frequencies for new license seekers.
GNCC regulation principles are not fair. Representatives of TV broadcasters and cable operators base this assumption on the fact that GNCC does not strictly follow law regulating TV broadcasting industry. There are several problems:
o Legislation is not definite and there is ambiguity.
o All TV broadcasters are not treated using same tools in terms of penalties and
forgiveness.
o Some experts assume that GNCC favors those TV broadcasters, that are clients of
General Media and oppresses other TV broadcasters and cable operators.
GNCC sometimes has to ignore cases of law abrogation because most of the TV broadcasters and cable operators do not follow the rules, especially in regions. Because of significantly low incomes, regional televisions do not have firm financial background; therefore they often transmit programs and movies without license.
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Radio
Radio as Business
Majority of the radios do not perceive their activities as a business.
Majority of the radios do not represent independent businesses and cannot support themselves without the external financial sources.
Being a part of a larger holding is a success factor for the radio. Rating Measurement:
Radio rating measurement system does not exist.
In the absence of rating measurement system, radio stations are not able to convince advertisers in its effectiveness and subsequently attract advertising and sponsorship.
Product Development and Segmentation:
Mostly radio stations are not aware of the target market they serve;
Creative group or marketing managers are not able to decide independently all the features of the program. Director is directly involved in the process of program creation.
Management and Personnel Issues:
Management professionalism problems - lack of business education.
Lack of professional staff (journalists).
Lack of technical staff. Attitudes towards Advertising:
Radio stations find it hard to attract advertising, mainly because:
o Businesses in general are not aware of the need of advertising, as majority of executive
officers lack business knowledge.
o Advertising agencies as intermediaries have already formulated schemes according to
which they ignore some small radio stations due to following facts: Small radios are not well organized;
Their own preferences; Governmental intervention.
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In case of regions, regional branches are not able to decide independently upon ad placements in local radio stations without communicating and discussing plans with central head offices. Generally central offices make decisions about marketing strategy.
Sales Efforts:
Most radios have sales agents, but because of low incomes they can not attract high level professionals.
Organizations have not formed sales strategy. Political Influence:
“Syndrome of Fear”.
“Self-censorship” by advertisers.
Entry Barriers and Regulation:
Radio frequencies are hardly available; this prevents new players from entering the market.
GNCC does not seem to be interested in development of Radio media, media representatives do not receive proper attention.
Bureaucracy in GNCC - slow flow of information.
Tbilisi TV Tower is perceived as a monopolistic organization.
Fees set by TV Tower are considered to be irrational and unequal. Copyright Protection:
The copyright protection company is unable to make radios follow their obligations.
The overall legitimacy of the copyright protection company is not proved.
The working process of the copyright protection company is not transparent. Future Trends:
Introduction and use of new media: new media is mainly used as a tool to promote radio activities, but it is not perceived as an independent source of income.
Transition to digital media is associated with expenses; radio stations probably will not be able to handle independently without the external financial sources.
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Print Media
Industry Characteristics:
Print media has no special regulation, any individual or legal entity can start publishing without special license and admissions.
In order to start print media business quite small start-up capital is needed.
Although a lot of new players appear on the market every year, only few of the start-ups manage to survive and become a self-sustainable business.
Nowadays the industry is facing a decreasing trend in terms of overall revenue and total circulation.
Product Development and Segmentation:
There is a lack of professional journalists in print media market, especially in case of young
journalists. Main problems are:
o Independent way of thinking;
o Collection of information;
o Analysis and writing style;
o Lack of curiosity.
Print media market is characterized by high mobility of staff. The most important factor is that, in most cases, journalists are not paid well, besides there is a stereotype that TV journalism is more prestigious than press.
There are a lot of copyright violation facts.
Sales Efforts:
The largest advertisers on print media market are banks. Mobile operators and insurance
companies were also named as active clients.
Until 2008 attracting advertising was much easier task and the amount of ads was significantly higher, after the war a sharp decrease began.
A price of advertising depends on the following factors: circulation, printing quality, content.
Though the circulations of high quality “glamour” magazines are significantly less than the circulations of low quality tabloids (even 3-4 times less) advertising prices, on the other hand, are much higher.
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Printing and Distribution: There are quite many players on printing market. Tough competition leads to diversification of prices and quality.
When choosing printing house, as a rule, price is the most important criteria for press outlets.
Due to poorly designed networks and inefficient working systems, distribution is the most problematic issue for print media market.
Print Media Industry in Regions:
Regional papers are printed in Tbilisi; the only exemption is Batumi as there is a local printing
house.
Almost half of regional publishers are printed in less than 1,000 copies.
Distribution remains problematic issue for regions as well. The big distributor companies have not well developed infrastructure, they are mostly presented only in municipality centers. Besides, they are more focused to sell Tbilisi papers. There are several local distribution companies, but they have small networks.
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New Media
Internet Access:
Internet access is low throughout Georgia. Only 30-33% of the total population has access to the Internet, 86% of them are from Tbilisi. There is almost no internet access in small cities and villages.
We can see the dramatic growth in percentage of internet penetration in the country. If we assume that growth rate is the same in 2011 year as it was in 2010 (27% annual rate), Internet access by the end of the current year would be under 36% (28%*1,27= 35,9%).
Georgian society lacks internet literacy. Most of the users browse internet to chat and entertain and are not gathering information.
Internet users are not interested in social-political issues.
Attitude towards New Media:
New media in Georgia is considered as a substitute for old media.
Traditional media outlets do not always use new media to reach synergic effect for transmitting content. It also means that some portion of information is not found online.
Internet users in general do not exchange or disseminate socially or politically important information. Mainly private information and entertainment is exchanged through net.
Advertisers do not consider New Media seriously.
Organizations are not acknowledged of the benefits of online advertising and of the efficiency measurement tools it provides. Advertising companies and media planners also tend to ignore internet ad opportunities despite the highest efficiency/price ratio and easiest measurement tools of the online advertising.
New Media as a business:
New media entities do not pursue active sales strategy.
Only 1-2% of the total advertising market is held by ads in new media outlets.
New media units can have several income sources:
o Banners on web-page
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o Memberships o AdSense o Paid articles o Video Ads o Donations As for expenses, new media outlets have only following expenses:
o Domain name
o Hosting o Salaries
It is very simple to become content creator in New Media. In order to create New Media unit
one should:
*On average domain name cost is 30 GEL per year **On average hosting cost is 70-100 GEL per year
Maintaining New media unit costs on average 10 GEL per month
Due to low Internet Literacy, caused by low Internet access, following chain reaction takes place: Get a Domain Name* Buy a Hosting** Create Content Share
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Gap analysis
1. Gap between advertisers’ expectations in terms of what results should be reached by advertising campaign and really achieved results.
The table below summarizes some findings from researches focusing on advertisers and advertising agencies: Findings: R esear ch of ad ve rtis ers
Marketing knowledge is low. Good proof is the fact that most of the companies do not have marketing strategy and probably are not able to develop it.
Mostly because of the low qualification of the marketing managers and autocratic management style, decisions are made by business owners and/or general directors. Senior managers, owners and marketing managers are very conservative. New
initiatives are very rare.
Most of the marketing managers make decisions based on the stereotype thinking and are not able to explain the reasoning behind their point of view.
Georgian media market is not well presented by specialized media that is focused just on specific group of people united by the same interest, hobby or business. Therefore it is difficult for companies to reach specific segment through media.
Shortage of audience for media New media is not attractive for advertisers Without income media units are not
viable Shortage of
Content creators in New Media
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R esear ch of ad ve rtis ing ag encies Advertising agencies prefer to direct advertising budgets to more established media
outlets, which have organized business activities or have several channels and media platforms and are able to measure results.
When advertising agencies plan media mix they take responsibility on achieving advertisers’ objectives in terms of audience reach.
According to some experts’ opinions, the most profitable for advertising agencies is to direct budgets to TV advertisements because they are able to receive high commission without much effort.
Accordingly, when it comes to planning advertising campaign, most companies turn to advertising agencies in order to refine marketing strategy together with professionals. As far as knowledge in marketing and advertising is low in advertisers they usually are not able to set proper advertisement campaign goals, monitor the overall process of planning and evaluate effectiveness of advertising campaign in terms of marketing objectives, for example, in terms of awareness, product knowledge, attitude or sales growth. However, usually growth of sales is the only goal organizations in Georgia have when applying for advertising campaign.
TV advertisement is perceived as the most effective tool. One of the reasons that TV advertising is massively perceived as the “best” advertising media is the fact that TV ratings and research data are available for companies. Companies perceive “best” advertising as the tool and possibility of raising sales. In case advertising campaign fails to bring desired results expressed in sales growth, they perceive it as a fail and simply loss of resources. On the other hand, advertising companies try to maintain their customers and mainly use channels providing high ratings (expressed by the number of people watching, reading or listening to a particular media channel). In case client companies are disappointed with final results, advertising companies have TV ratings and statistics showing that reach of the advertisements was high. Thus advertising company, on its own, did everything in the right way. As far as majority of the companies cannot independently assess results of their advertising campaign, they have no other options except accepting TV ratings as an efficiency evaluator. Again: one of the reasons that TV advertising is massively perceived as the “best” advertising media is the fact that TV ratings and research data are available for companies. That’s why TV is so appreciated by both advertising and advertiser companies.
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In conclusion, advertisers have some expectations based on their objectives; however these objectives may be set incorrectly. When advertising campaign is completed, the only tool for assessing results is TV ratings; however these ratings cannot tell whether the campaign achieved the objectives stated in the beginning. A good case is if sales rise after an advertising campaign. However if they do not, the company may be dissatisfied and refuse advertising in the future; the problem is that the company does not consider the probability that its awareness or other parameter had raised that has not reflected on sales yet.As there are almost no researches conducted on radios and print media, companies usually have no ability to assess effectiveness of advertisement placed in these media types. That’s the crucial reason why neither advertisers nor advertising companies can evaluate radio or press capabilities properly. Despite the fact that reach of internet advertisement is easily assessed, the tool is not well exploited.
2. Gap between perceptions of small businesses as advertisers and advertising agencies in terms of availability, affordability and effectiveness of ads when making decisions to advertise.
Findings: R esear ch of ad ve rtis ers
When considering advertising, large business is main spender; medium business is more cautious, than large business and spends far less.
When considering small business:
o Small business owner (SBO) has very superficial knowledge about advertising; o Generally SBO does not have experience of advertising;
o SBO perceives advertising as very costly activity, because only TV advertising is perceived as effective, all other types are considered ineffective;
o SBO could name number of activities, other than advertising, that increase sales; o SBO does not think about advertising as a cure to poor sales;
o SBO will not take loan to invest in advertising campaign.
Usually small scale companies are not addressed with offers by media organizations’ sales people, as these companies are not visible.
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Their marketing activities and advertising campaigns are impulsive and depend on their current financial condition.R esear ch of ad ve rtis ing ag en ci
es Advertising companies state that in case a company is eager to spend money on
advertising, it knows whom and where to apply.
Analysis of these findings reveals obvious disagreement of agencies’ and smaller advertisers’ perceptions. In other words: advertiser should apply to advertising agency independently. While in reality advertiser is not aware of advertising options; advertiser perceives advertising as a costly activity it cannot afford while this perception might not be true at all. Advertiser needs attention from the side of advertising agencies. Advertising agents should work closely with potential advertisers in order to increase awareness and the meaning of the advertising.
3. Gap in concept creation
Findings: Research of media
outlets Mostly media companies are not aware of the target market they serve.
When the media outlet cannot define the size and characteristics of its target audience, it cannot develop “quality” programs to satisfy its audience; consequently its rating falls behind and it becomes hard to attract advertisers.
Media outlets can not afford market researches, as they are quite expensive. The worst part is that some of media representatives do not see the necessity of conducting media research. It is also hard to undertake researches independently, as media platforms have neither enough experience nor necessary resources. Besides, even though they undertake researches themselves, the results of the research won’t be reliable and trustworthy for advertisers. Advertisers need researches provided by well-established survey companies who demand greater compensations than average media company can afford.
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In short, although media companies can define the portrait of their customers according to the programs they offer, actually they are not aware who their customers are. Their assumptions are based on the feedback they receive during running the programs (especially in case of radio broadcasting). The rating of the programs is mainly defined by the feedback the program will have. The normal process must be of this sequence: defining target market, defining target market need, preparing program, starting program and measuring results via researches: was the program success or failure?In reality, the process looks like this: preparing program (generally already adopted programs are “created” by managers who direct creative team or marketing managers what sort of program media is going to prepare and not vice versa as it should be); launching program and measuring results via feedback of incoming calls and messages or special surveys (in case of television, press) during programs. Company managers ignore customer needs; they create programs according to their own perceptions and past experience. Somehow it turns out that customers have different needs and wants.
Distribution of the Existing Advertising Budget
To estimate the total advertising budget and its distribution by media types, two methods were used:
Interviews with media experts
Analysis of secondary statistical data1
Based on information gathered from different sources, total amount of revenues generated by media outlets (TV, Radio, Press, and New Media) was estimated to equal 45,995 million US Dollars in year 2010. This budget is distributed by media types as follows:
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In our calculations, revenue for each media outlet considers that it is generated from broadcasting activities and does not relate to other profitable activities of media outlet.With 85% of share, television was the leader of the market. Radio outlets generated more than USD 3.6 million that equaled to 8% of market share. 6% of market share and respectively USD 2.9 million were generated by magazines and newspapers. New Media outlets gathered only 1% of the total amount.
About 98% of total budget is spent on media outlets situated in Tbilisi and only 2% is generated by regional media outlets.
$38,985,000 85% $3,639,000 8% $479,000 1% $2,892,000 6%
Advertising Budget Distribution By Media Types (2010)
Television Radio New Media Print Media 98% 2%
Distribution of Advertising Budget Nation-wide (2010)
Tbilisi Regions
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TV Advertising Market
Distribution of advertising revenues among TV broadcasters is as follows:
Note: The data is not precise and is calculated using Advertisement Duration on Georgian TV channels and Advertising Prices on each channel.
Source: TVMR Georgia, AGB Nielsen Television Audience Measurement’s Official License) and General media (media seller).
Market leaders were Rustavi 2 and Imedi with 45% and 36% market shares respectively. Amounts of revenues generated by other TV outlets were significantly smaller. TV Sakartvelo holds 7% market share, Region TV - 4%, Mze – 2.4%, Kavkasia and I Stereo less than 1%. Only 4% came on other broadcasting companies (including regional broadcasters).
Radio Advertising Market
Distribution of advertising budgets among Radio outlets is following:
45%
36% 7%
4%
2% 1% 1% 4%
Distribution of advertising revenues between TV
Rustavi 2 Imedi Sakartvelo Region TV Mze Kavkasia I Stereo Other
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Note: The data is not precise and is calculated using Advertisement Duration on Radio channels, Advertising Prices on each channel and in-depth interviews with the representatives of the radio stations.Holding Radio Sakartvelo (Including Fortuna, Fortuna+, Autoradio and ArDaidardo) was the market leader having 47% market share, followed by Radio Imedi with 21% market share, Green Wave - 8%, Voice of Georgia - 5%, Utsnobi - 4.3% and Kommersant - 3.9%. Other radio outlets had less than USD 100,000 in total.
Print Media Advertising Market
Total amount of budget spent for advertisement in print media was estimated based on in-depth interviews with representatives of print media outlets and print media experts. Amount of revenues generated by magazines and newspapers in year 2010 composed approximately 2.9 million dollars. Leader on the market was Palitra Holding, which includes number of popular newspapers and magazines. Relatively big players are Sarke, Tbiliselebi, Rezonansi, Alia, KvirisKronika, Prime Time, etc.
Only 100,000 USD is generated by regional print media. Distribution of revenues in Tbilisi and regions is shown on chart below:
47% 21% 8% 5% 4% 4% 3% 2% 1% 1% 4%
Distribution of advertising revenues between Radio
Radio Sakartvelo Imedi Green Wave Voice of Georgia Utsnobi Kommersant Georgian Radio Radio Art Ninth Wave Hereti Other
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97%3%
Distribution of Print Media Advertising Budgets
Nation-wide
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New Media Advertising Market
According to opinions provided by New Media experts, new media advertising is underestimated by advertisers. The market is not well developed. The research shows that in year 2010 less than 0.5 million dollars were spent on advertisements in new media. Leader on the market was video portal myvideo.ge and social forum forum.ge.
Growth Trends
Advertising market growth trends were estimated based on the attitudes and opinions revealed through interviews with media and advertising experts.
Due to military conflict between Russia and Georgia, in 2008-09 years advertisement market fell rapidly in terms of quantity and value. Since 2009 year market growth is steady and it is forecasted that growth will continue during next decades. Good example is raising prices on TV advertisement space – two times a year prices rise by 20% since 2010. Such increase is explained partly by inflation and partly by increasing demand. Distribution between different media types is changing very slightly for several years. Many experts think that TV advertisement is overvalued in Georgia and this trend will impact the market for about next 5 years. Print media is losing its positions and it will be replaced by new media. However new media experts have mentioned, that this process may take about 10-20 years. Radio advertisement market remains steady and tends to maintain its market share.
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Estimation of the Potential Advertising Market
In this chapter we will provide analysis of media revenues and their correlation to macro-economic factors and forecast of media revenues for next two years. After analysis of the primary and secondary data collected during the research, several assumptions have been made, in order to estimate potential advertising market.
We assume that budget distribution by media types will not change or change will be insignificant. Distribution of revenues between different media in 2010 is represented graphically:
The assumption is based on current situation in media and perceptions and attitudes of the advertisers towards different mediums. Research findings will be described in detail in following chapters.
85% 8% 1% 6%
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Historical GDP values, media revenues and corresponding growth rates are provided in the table below: 2007 2008 2009 2010 GDP2 10,171.9 12,800.5 10,767.1 11,663.4 growth 25.84% -15.89% 8.32% Media Revenues3 44.928 64.332 54.034 45.995 growth 75.49% 43.19% -15.99% -14.89% Adspent/GDP 0.44% 0.50% 0.50% 0.39% Mill.US$Media revenues (advertising expenditure) are correlated with GDP. It is remarkable that, media revenues and Adspent/GDP index increased from 2007 to 2008, as a result of stable economic growth during previous years. Advertisers became more confident and were ready to spend more on advertising in exchange of growing revenues. August war was unexpected and dramatic turn for the most businesses. Despite the fact, 2008 was still fruitful, and financial results at the end of the year were not significantly decreased. 2009 proved to be much harder, because of post war condition and influence of world crisis on financial sector of Georgia. In general, society and companies adopted cost cutting and saving strategy. Even very large companies became cautious. In these circumstances, advertising lost its attractiveness; it could not bring expected results, because of generally worsened economic condition. This situation is reflected by downfall of media revenues, and Adspent/GDP index. We have to keep in mind that advertisers plan advertising budget in the beginning of the year and base their decisions on the previous year’s financial results. Accordingly, years 2009 and 2010 were characterized by decline of total media revenues by 16% and 15% respectively. What is worse, Adspent/GDP index also fell, reflecting pessimistic expectations.
2Source: National Statistics Office of Georgia
3Source: Reports of Georgian National Communications Commission for TV and Radio Media, Print and New Media are expert estimations.
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In order to prepare media revenue forecast, it is essential to identify major advertisers by product type. Table below provides list of top 10 products advertised during 2010.As we have already seen, advertising expenditure trend is correlated with GDP trend. For detailed analysis, we have separated contribution of major advertisers from the total GDP.
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The table below is a breakdown of industries with representation of major advertisers and their shares in GDP.Sector 2006 2007 Growth 2008 Growth 2009 Growth 2010 Growth
Industries with need to advertise
Production of mineral waters and soft drinks 58.8 84.5 43.76% 99.4 17.71% 55.2 -44.45% 68 23.13% Electricity, gas and water supply 211.1 245.8 16.44% 291.4 18.54% 293.8 0.82% 299.5 1.94% General construction of buildings and civil engineering works 410.7 479.8 16.84% 516.1 7.55% 416.3 -19.32% 418.9 0.62% Hotels; camping sites and other provision of short-stay
accommodation 45.2 55.6 23.00% 60.3 8.41% 37.2 -38.34% 49.8 33.94%
Restaurants; bars; canteens and catering 133.5 155.6 16.62% 205.3 31.91% 170.2 -17.10% 194.4 14.21%
Air transport 28.7 32.4 12.99% 45.7 41.23% 36.1 -20.96% 34.4 -4.82%
Activities of travel agencies and tour operators; tourist assistance
activities n.e.c. 89.8 102.9 14.54% 105.1 2.15% 122.9 16.92% 150.9 22.78%
Industries with major advertisers
Retail trade of motor fuel 81.2 63 -22.39% 95 50.77% 76.5 -19.50% 91.8 20.04% Post and telecommunications 276.8 319.8 15.53% 436.5 36.53% 364.1 -16.59% 374.8 2.93% Financial intermediation 164.8 220.4 33.73% 296.6 34.59% 271 -8.64% 267.4 -1.33% Health and social work 336.3 412.2 22.55% 560.5 35.98% 611.4 9.10% 672.8 10.04% Retail trade, including trade of motor vehicles and motorcycles 540.4 769.2 42.35% 1107.6 44.00% 760.9 -31.31% 853.2 12.14% Other community, social and personal service activities 253.3 375.6 48.24% 502.2 33.73% 361.9 -27.94% 413.3 14.19% Total of All Industries with need to advertise 2630.5 3316.7 26.09% 4321.8 30.30% 3577.6 -17.22% 3889.2 8.71% Total of Industries with major advertisers 1399.4 1784.5 27.52% 2496.2 39.89% 2083.9 -16.52% 2260 8.45% Mill.US$
Source: National Statistics Office of Georgia
Above table provides information on industries where companies are already advertising heavily and those that have needs and potential for advertising.
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Growth rates of industries with major advertisers, all industries with need to advertise and media revenues are provided in the table below:2007 2008 2009 2010
Total of Industries with major advertisers 27.52% 39.89% -16.52% 8.45% Total of All Industries with need to advertise 26.09% 30.30% -17.52% 8.71%
Media Revenues 75.49% 43.19% -15.99% -14.89%
Above table shows that after downfall in 2009, all industries with need to advertise have growth, but media revenues are still falling. This condition is explained by inertness of advertising spending. In 2009 growth rate in major sectors was – 16,52% and it is basically caused by economic crisis and political instability occurred at the end of 2008. Thus its consequences reflected in 2009. It should be noted, that growth of media revenues in 2009 is almost the same as major sectors’ growth rates and equals –15,99%. It is mainly caused by advertisers’ pessimistic expectations and conservative approaches used by advertisers. Advertisers based their budgets on weak figures of 2009, but 2010 proved to be better than expected. Therefore in the beginning of 2011 advertisers should have had more optimistic plans.
Growth rates in 2010 are 8.45% and 8.71%. It is logical to assume that media revenues in 2011 shall follow the same pattern and growth rate shall be close to industry trends. As revealed during research, advertisers have different attitudes towards mediums. Based on the research findings and our experience we assume that in 2011 interest toward TV advertising is steady, while radio and print are losing positions. On the other hand, interest towards New Media is growing. Year 2012 shall be fruitful for all media types, because of expected economic growth and elections. While in 2013 market and growth dynamics shall stabilize. Therefore growth rates and distribution between different media will be as follows:
Medium 2011 2012 2013 Television 10% 15% 10% Radio 0% 10% 10% Print media 0% 10% 10% New media 15% 15% 15% Total 9% 14% 10%
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Forecast of media revenues in USD for 2011, 2012, 2013:Medium 2011 2012 2013 Television 42,883,500 49,316,025 54,247,628 Radio 3,639,000 4,002,900 4,403,190 Print media 2,892,000 3,181,200 3,499,320 New media 550,850 633,478 728,499 Total 49,965,350 57,133,603 62,878,637
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Recommendations
1. Establishment of measurement tools for radio and print media will enable these media, especially radio, to prove its effectiveness and provide reliable information to advertisers, consequently attract advertising budget.
2. Aid media outlets to focus on target segments and develop marketing and sales strategy. As a result media will be able to attract target customers and spend resources efficiently.
3. Strengthen role of regional media associations in development of regional media. Regional associations shall have capacity and ability to represent interests of small regional media. 4. Trainings in:
– Media management
