MOSCOW -- Russia has emerged as the world's fastest growing advertising market, with ad spending increasing by more than 50% last year while it stayed flat or fell in most Western countries.
The growth reflects the buoyancy of an economy that grew by 4% in 2002, helped by the high price of oil, Russia's staple export. With much of the rest of the world in recession, Russia has seen a big uptick in equity prices, corporate profits and consumer spending, and advertisers have been quick to exploit the new affluence. Cities such as Moscow now are awash with billboards, neon signs and even video clips on roadside screens selling everything from mobile phones and cars to vodka.
According to the Russian Advertising Agencies Association, a trade group, ad spending in 2002 rose by 51% to $2.68 billion (€2.49 billion) from a year earlier. Spending on television ads had the biggest surge, rising 76% to $900 million.
But the total budget is still small. Ad spending in Russia is $19 per capita, compared with about $500 in the U.S. "Russia has seen the fastest growth of any market in dollar terms," says Jonathan Barnard, an analyst at ZenithOptimedia. "But ad spending is only 0.6% of [gross domestic product] -- about half of what you'd expect in a developed industrial country."
The increase is still impressive compared with Europe's slump. ZenithOptimedia says ad spending fell in Germany by 5% last year and by 1% in Britain and France, though it grew 1.3% in the U.S. The Russian ad trade group predicts the Russian market will grow by another 50% this year to $4 billion, boosted by political advertising in the run-up to December's parliamentary elections. ZenithOptimedia forecasts growth of 41% for Russia this year.
An important factor in the surge has been the increasing dominance of home-grown Russian firms, whose ad budgets now compare with those of big-spending multinationals. Consumer-oods companies such as Procter & Gamble and Unilever still figure prominently, but the Russian ad trade group says Russia's biggest advertiser now is Wimm-Bill-Dann, a Moscow-based dairy and juice group. Russian companies accounted for more than 60% of the market last year.
"Russia is now among the top 10 biggest advertising markets in Europe," says Vladimir Yevstafyev, the president of the Russian Advertising Agencies Association.
Analysts say another factor has been the popularity of billboards, which are relatively cheap and not subject to the kind of tough regulations found in the West. Mr. Yevstafyev estimates a third of billboards in Russia are erected illegally. Outdoor advertising now makes up a fifth of the total Russian market, while the world average is about 5%.
"Billboards are popular because they provide simple messages that are good for brand-building," says ZenithOptimedia's Mr. Barnard. "And that's a stage a lot of Russian companies are at right now."