Ad budgets divert to clean-up and CSR as Thailand floods worsen

Described as the worst in the country's history, the current floods have seen major industrial estates and housing areas severely impacted.

While government and local authorities do their best to curb the situation, the worst-case scenario, emerging even before the waters fully subside, is that, with manufacturing and supply chain halted, there will be few goods to sell and with the resulting unemployment, limited consumer spending.

Manufacturers, especially those in the automotive, electrical, consumer electronics and beverage sectors (the country's biggest advertisers) are unable to produce any goods due to the floods. While there are no products on the shelves and some 600,000 workers are estimated to have already lost their jobs, the purchasing power of the public is expected to drop tremendously.

The Advertising Association of Thailand (AAT) has forecast a drop in advertising expenditure this quarter. It initially estimated at least 10 per cent growth in advertising expenditure this year to US$3.6 billion (THB110 billion), from last year’s US$3.28 billion (THB100 billion).

Since the floods began, overall ad-spend growth has been revised down to between 5 and 6 per cent, to US$3.44 billion (THB105 billion).

Many corporations are expected to concentrate their spending on normalising operations and production. There is also an anticipated shift of ad budgets to corporate social responsibility activities.

Clint Easthorpe, chief executive at OMG Thailand, said CSR campaigns have been part of budgets in most major companies, but he sees increasing activity in this area given that these companies may have already been affected by the heavy flooding.

“Whether this will have a significant impact on overall advertising spending is questionable as this will depend upon the objectives of each campaign. We do foresee integrated campaigns that include traditional, paid for advertising placements,” he told Campaign.

He added that the agency’s current revenue and future projections may need to be reviewed and adjusted, given the circumstance. 

While the fourth quarter is usually the peak time each year for advertising expenditure as companies try to boost consumption through promotional campaigns, the advertising spend this quarter is expected to reduce.

Beyond the fourth quarter, Easthorpe noted that it depends upon the extent of the flood damage and the clean-up process, time and investment.

“We're revising our figures for 2012 but still see growth compared to 2011 of around 5 per cent to 8 per cent. We also believe that 2011 advertising spending will still grow between 7 per cent and 10 per cent,” he added.