VietNamNet Bridge – The ad market is being dominated by foreigners. Vietnamese firms have been earning their living by acting as the second class agents and collecting “small change” every day.
Online ad – the gold mine for foreign ad firms
The ad industry, which has born 20 years ago, has been growing rapidly with the turnover increasing steadily year after year. In 2005, the total turnover of the industry was 5 trillion dong, while the figure jumped to 20 trillion dong in 2011.
It is estimated that 70-80 percent of the total turnover comes from the advertisements on television and newspapers.
Foreigners dominating domestic market
The lucrative ad market has attracted more and more businesses. About 5000 businesses have been operating in the field, of which only 30 firms are foreign invested. However, the small number of foreign ad firms are holding the biggest market share.
Of the above said 5000 ad firms, only several hundreds of businesses have been operating truly as ad firms and earning their money from outdoors ad services (which accounts for four percent of the total turnover of the industry), outsourcing and other kinds of ad services.
Meanwhile, the majority of the remaining firms have been focusing on other types of business, including event organization and public relations.
According to Do Kim Dung, Deputy Chair of the Vietnam Advertisement Association (VAA), analysts have their reasons to believe that foreign ad firms are holding up to 75 percent of the market share.
However, Dung said, in fact, foreign ad firms just develop advertisement campaigns for clients – big enterprises, especially foreign invested ones – and enjoy 10-15 percent of the total expenses for the ad campaigns. After that, they would outsource to Vietnamese ad firms.
In general, foreign economic groups in Vietnam have their loyal ad firms to cooperate already. The five big ad groups in the world, namely WPP, Omnicom, Dentsu, Publics and Interpublic have been present in Vietnam, which now serve as the partners of the foreign invested groups.
Dung said that some Vietnamese firms also can draw up advertisement strategies, but in general, they are not capable enough to satisfy all the requirements set up by foreign groups.
Robbing Peter to pay Paul
According to Nguyen Quy Cap, Chair of VAA, who is also President of Tre Ad Firm, since Vietnamese firms remain fledglings, while their capability and capital remain limited, they cannot compete with foreign firms. As such, they have to compete with each other to survive.
The competition has become stiffer recently, since most clients have cut down the budget for ad campaigns by 20 percent in the economic downturn. Therefore, Vietnamese firms have to scramble for small pieces of the market cake.
Cap said that the biggest problem now for the Vietnamese ad industry is the unhealthy competition among Vietnamese firms. In order to be able to lease the premises for billboards, ad firms have to offer high premises rents. As a result, the premises leasing fee has increased by 10 percent at least recently. Meanwhile, a lot of them try to slash service fees to scramble for clients.
Director of a big ad firm said that the unhealthy competition is also occurring in the segment of advertising on mass media. In general, ad firms enjoy 17 percent of the value of the contracts in accordance with international practice. Meanwhile, some ad firms only offer the low service fee of several percent only. Therefore, they have to cut down expenses, provide low quality services in order to make profits.
He said that by slashing service fee, domestic firms are killing each other. Meanwhile, foreign ad firms keep raising service fees and developing well.