Wider reach: Spend on adverts driven by broader economic expansion

Strong consumer demand and a broadening range of media outlets with wider audiences are driving Mongolia’s advertising market. Traditional media like newspapers and television continue to be the focus of most advertising, though the indoor segment is a developing niche. The sector is forecast to see double-digit economic growth in 2011 and 2012, and a sustained expansion thereafter, with incomes set to rise and demand for imported goods likely to increase. The 2012 election is also expected to boost advertising revenues as parties look to broadcast their campaign messages.

Many of the biggest advertisers are foreign-owned companies operating in fast-moving consumer goods or telecommunications, or their Mongolian distributors. As many leading media outlets are owned by business groups, some favour advertisements from related enterprises – those offering discounted spots to sister companies in other sectors, for example.

TELEVISION COMMERCIALS: With television reaching all but a tiny minority of Mongolian homes, and most households tuning in at least once a day, it is arguably the single most important medium for advertisers.

The recent proliferation of broadcasters indicates that there are enough advertising revenues to keep a relatively large number of stations afloat for such a small country, with the caveat that some stations are rather low budget and others may actually be losing money.

Advertising costs vary but are generally low by international standards, due both to advertising budgets and fierce competition between TV stations. In its Mongolian Media Today report of 2011, the Press Institute (PI), a non-governmental organisation, reports a price of MNT1000 ($0.78) per second on TV8 and TV1 and up to MNT5000 ($4) on UBS and NTV. O. Ganbold, the marketing manager of broadcaster SBN, told OBG that while prices can go as high as MNT60,000 ($47) per second for prime-time programmes on UBS, MNT2500 ($2) to MNT5000 ($4) is more typical.

Some advertisements are produced on behalf of advertisers by the stations’ in-house studios, though many are made by independent studios or in foreign countries and dubbed into Mongolian. Making advertisements can be costly, creating a barrier to TV commercials for many Mongolian companies, who opt for newspaper or radio advertising instead.

IN PRINT: Mongolian newspapers may not reach as many as its television stations, but more than two-fifths of the population read one at least once a week, making print another important outlet for advertisers. The segment endured a difficult period during the economic crisis of 2009, during which subscriptions fell and advertisers cut spending due to the drop in readership and because companies tightened their budgets. But driven by economic growth it has now returned to robust health, leading to a rise in advertising and demand for vacancy and tender notices.

By far the biggest advertiser in major Mongolian daily newspapers in 2010 in terms of area was mobile operator Mobicom Corporation, which bought 61,186 sq cm of space, according to the PI. It was followed by Unitel Group (38,981 sq cm); Tenger, a financial group (26,883 sq cm); Khan Bank (23,291 sq cm); and XacBank (21,812 sq cm). The rest of the top 10 consisted of beverage producer APU; Bridge Group, which owns companies including car dealerships and supermarkets; MAX Group, another multi-faceted holding company with retail, leisure and manufacturing interests; MIAT Mongolian Airlines; and Rapid Kharsh, a development by construction and engineering firm EEC.

In terms of units purchased, the leading purchasers of advertising in major dailies came from the telecoms sector (310 units), followed by construction and real estate (290), financial services (261), food (182) and automotive – including petrol and services (167).

RATES: B. Indra, the editor-in-chief of the Mongol Messenger, an English-language newspaper, told OBG that typical prices for a whole page in a major newspaper are MNT300,000 ($234) to MNT500,000 ($390), with the paper earning MNT3m ($2340) to MNT5m ($3900) and even above from advertisements per issue.

At election time, when parties saturate the media with their messages, full-page fees can climb to MNT1m ($780), so newspapers, like other media, can look forward to a payday in 2012, with unofficial campaigning likely to start some time before the poll itself is called.

OUTDOOR: Mongolia’s outdoor advertising market is defined in part by site size: large, medium and small. The country has only 400 or so giant billboards, mostly on the same sites as 20 or even 30 years ago, U. Khurelsukh, the CEO of advertising company Monad, told OBG. They are predominantly government-owned and have yet to attract international investors. At the other end of the market are many thousands of “lamppost” advertisements attached to streetlights and signs, a substantial but fragmented market. Most are displayed by individuals or small businesses.

The mid-sized outdoor market in Ulaanbaatar is dominated by Monad, part of the Iveel Group, a trading company with interests in a range of sectors. Monad owns 1000 billboards across the capital, averaging 1x1.5 metres, for which it charges MNT2000 ($1.56) to MNT5000 ($3.90) per day, though this can be discounted to MNT1000 ($0.78) to MNT3500 ($2.70). Important client sectors include food and beverage manufacturers, electronics firms and the ubiquitous mobile operators. Spending patterns are affected by seasonal events, particularly the Naadam summer festival, New Year and the autumn wedding season, when gifts and traditional celebration foods are purchased.

A fourth sub-segment of the outdoor market, LED advertising boards, is an area of some interest. Monad experimented with some LED sites, but found that Mongolia’s harsh climate made them impractical. However, one Mongolian company, Ikh Kharanga, has cornered the LED market with outdoor screens and, most notably, LED banners over main roads in Ulaanbaatar.

Khurelsukh said Mongolia’s mining-driven economic expansion has yet to have a significant impact on the outdoor segment, though the long-term effects of income growth could increase business. “In general the mining boom hasn’t really positively impacted the billboard sector, partly as mining companies themselves aren’t advertising,” he told OBG. “But one would expect there to be increasing competition between foreign companies trying to increase sales in Mongolia. And perhaps local companies that become distributors for international brands will spend more money on advertising – but nothing drastic is happening yet.”

SCREEN STARS: While the billboard segment evolves incrementally, indoor, on-screen advertising is making waves. Indoor screen advertising is dominated by one firm, Broadband. Broadband has around 120 screens in 100 locations in Ulaanbaatar. Having obtained the city’s best sites, it crowds out the competition. Its sites include shopping malls, top hotels, the airport, bars, cinemas and office buildings – places that appeal to middle- and upper-income people. Thus they tend to attract the higher-value advertisers.

Some competitors may be deterred by the capital expenditure involved in electronic advertising, but Broadband general director J. Enkhjargalan asserts that the investment pays off. The firm has invested around $4m-$5m on technology for its Ulaanbaatar sites, which earn between MNT60,000 ($47) and MNT200,000 ($156) per day. A maximum of 25 advertisements per day are run on each screen, a limit Broadband itself imposes to ensure each advertiser gets enough exposure. Each advertisement tends to run 40 to 60 times per day during the average 10-hour working period. Enkhjargalan estimates that 80-90% notice the advertisement screens by chance while the remainder actively go to them to watch advertisements. He argues that the idea that indoor screens are an expensive form of advertising is another misconception, noting that persecond advertising costs are around MNT100 ($0.08) to MNT150 ($0.10), much lower than on television – though of course there tend to be fewer viewers.

Over the next two to three years, Broadband expects to expand its presence to regional centres such as Erdenet and Darkhan, where currently opportunities are limited due to a lack of suitable locations, a substantially lower population density and security concerns. As regional economies grow, particularly in mining and tourism centres, Enkhjargalan expects the opportunities for indoor advertising to grow. Broadband also wants to develop outdoor screens. The firm believes it can overcome climate issues to expand a segment that has been greatly successful elsewhere in Asia. This would give the opportunity for Broadband to diversify, as outdoor screens tend to be seen by more people than indoor sites, and a wider range of the population.

OUTLOOK: The advertising market is at an interesting stage of development. The opportunities presented by consumer demand and other economic activity – including recruitment and official tenders – are likely to drive advertising growth through 2012 and beyond.

Nonetheless, tough competition between outlets in the mainstream media is keeping fees low by global standards. The most successful advertising firms may be those that can use growing niches, including indoor, online and public relations to deliver the best results.

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The Report: Mongolia 2012

Media and Advertising chapter from The Report: Mongolia 2012

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