Andris Blaka: Advertising is not sexy anymore

Andris Blaka
Andris Blaka (45) is one of the owners of Age Com, the biggest holding group of communication agencies in the Baltic countries. Age Com owns dozens of advertising, media and PR agencies in the Baltics, Ukraine and Belarus. He is actively engaged in sports marketing, running his beach volleyball center Brazilija. He has an MBA degree from Riga Business School, has been the President of Latvian Advertising Association (LRA) and is the founder of Golden Hammer festival.

Let’s start with you. Who are you? How do you identify yourself in advertising world today? And what exactly do you do?

It’s a good question. Hard to say who I am. I don’t promote myself in the advertising world anymore.

What we have is a group of agencies, and we’ve had it for a long time now. Sometimes we buy somebody and sometimes we sell something, but overall it’s still the same group (AGE Com) that was started in Estonia in 1992. And we are still active in the same markets we’ve been in for many years, which is mainly Baltics plus Belarus and Ukraine. We also have few other businesses, but advertising is still the core business.

I’m personally sitting in the board of several agencies and I’m probably more involved in creative, digital & PR part than some of my other partners who are looking more after the media stuff. I’m also responsible for network-related things – it’s my job to coordinate the regional things with worldwide networks of WPP Group.

6 years ago you said in an interview to Best Marketing that maybe WPP Group would be interested in buying Age Com operations, but you also said that you are not sure that you would want to sell. What has changed since then?

We haven’t sold anything yet, but I think a lot has changed in last 6 years. And it isn’t getting any better. We have seen that markets are becoming tougher and they’re not growing a lot. Latvian market, for example, was +2% last year.

How is Age Com business doing, how big is the growth?

The competitors are very different – sometimes something goes up, then again something goes down. And competition is very different in every Baltic market.
But in general, for us it’s stable. We win some business and we lose some business. I cannot talk about big growth numbers. The business grows, but it grows slowly. I mean in revenue-wise – I wouldn’t be so sure about profits. There’s also a lot of pressure on the pricing. To be honest, I think the advertising business is perhaps in the lowest point within these past six years.

I don’t see a lot of good campaigns or smart solutions. What we see is that advertisers mostly care about price. There’s a lot of push on putting the prices down. So there’s no money to make incredibly unique, beautiful and successful campaigns. It’s a bit depressing right now in this industry.

What is interesting, at least in Estonia, is that if you look at all kind of rankings, then you don’t see those good old famous agencies at the top. Instead there are small or quite unknown agencies. For example in Estonia, the agency of the year at Kuldmuna was Tabasco which had 4 employees. You only see the big well-known agencies in rankings which are based on financial numbers. It seems that they are like factories creating some products, but not much creative excellence. It seems that the glamour has faded away a bit?

Yes, totally.

However I don’t see a lot of new unknown agencies in Latvia or Lithuania. At the pitches where our agencies compete, I mostly see the same old competitors. I don’t see many new faces or companies that have suddenly entered the market and have quickly gained market shares.

Ok, the glamour has faded away, the business has stagnated, the profits are going down – this is happening everywhere in the world. And if you go to Cannes or any of those big events, you see agencies talking about some new exciting opportunities that mainly come from the startup world.

Yes, startups are very sexy. And advertising is not sexy anymore.

But I don’t quite see this as the "new black". Sometimes people come to us with some good ideas and we’ve also invested in few new companies. But it’s not like we will be switching away from our marcom industry to become a business angel.

Startup things are very tricky and risky and I have seen many times that our employees go participate in some kind of startup thing, they win an award or diploma, and then they leave the agency to do their startup, because all they think is the Silicon Valley dream. And then three or six months later they come back and say that it didn’t really work out.

Another trend what everybody’s talking about is that money is increasingly going from local media owners to Facebook and Google. Some skeptics say that it’s only hype, people are still watching television and don’t worry about money going to Facebook or Google. But do you feel that there’s a major threat to the local media owners? That their share of this media pie is getting smaller and Facebook’s and Google’s share is getting bigger?

Yes, it is a threat. But maybe it isn’t a lethal threat. Local media are also developing, they too have new products on the table and they still have quite significant revenues and some of them have quite good growth numbers.

Money is indeed moving into Facebook and Google, but there is still lot of money in local media. Television is still main channel but the thing with the television is that there are so many TV channels and more coming up. And there are not only TV channels acting in this market – we also have telecom companies who have ambitions to provide content. So there are new players, more competition and it’s become a very segmented discipline.

In the beginning you said that you don’t see a lot of creative work these days anymore and you mentioned that one reason is the tight budget. But opponents might say that it’s vice versa – limited budgets should boost creativity and all great artists are starving, etc. What do think of that? And what are the other reasons why the creativity is not blossoming at the moment?

Creatives might be very creative and starving, but you still need a decent amount of money for production budgets. If you have a great idea, you still need to execute it in a nice way. You need to shoot a nice commercial, hire good director or have enough time for an AD to work on the layout, so it would look good. But the pressure is so high that the agencies can’t invest enough time that is needed for a good work. It is also difficult to hire good people, to invest in training or in R&D. And I’m afraid the quality is going even more down if this trend of cost-cutting still continues.

Actually it surprises me a lot because if you look at the business world in general or financial sector, you see that the money’s all there. People don’t know what to do with it. The banks are going to charge us for keeping our money. The money is out there, but the same time there’s a lot of pressure on still cutting all the costs. It’s just wrong. The cost-cutting is not supporting any development.

Another thing is that due to all the consolidations there are less advertisers. Big multinational corporations are buying local companies and consolidating them into one. Like Orkla, for example, buying local food and FMCG companies. There isn’t as many advertisers as there used to be.

Plus, what has always been our biggest problem – the small size of the market. And we can’t do anything about it. Many companies have moved their headquarters out of Baltics, into Poland, for example. So Baltic market is being seen as one (instead of three) and it’s being seen as an add-on to Polish market. It isn’t helping.

But many Scandinavian or Dutch agencies are working with global clients and doing global campaigns. They say it doesn’t matter where are you based. So one might ask that maybe there’s lack of ambition in the Baltics and we should dream bigger? Maybe with a super good creativity you could still serve P&G or any other big global client from here?

The dream is there and I’ve seen guys trying to do that, but it hasn’t work out. I’ve seen a lot of unsuccessful examples.

How about digital? It seems to be a possibility for us because it became massive just few years ago and we might say that here we are in the same starting position with the rest of the world. Is that maybe an opportunity to make the gap smaller between Baltic and Western Europe advertising?

It might be. But still, digital agencies in Netherlands or Germany have budget and digital agencies in Tallinn or Riga have another budget. And these two are not comparable. So you can do some creative things but you don’t have the scope as much as agencies from the bigger markets.

But we do have quite few examples of agencies here who are doing things for other markets, particularly for Russia. And these projects have been very interesting and they’ve even won some awards there. So yes, in digital we have a bigger chance to look outside of Baltics.

Finally, what do you think are the main trends to watch out for the second half of this year and 2017 in marketing and advertising world here? What are those things that everybody who are involved in the industry should carefully watch and be aware of?

Well, this year is quite clear. There will be Olympics in August and lots of people watching it on TV and other devices, so this probably means a lot of marketing around this event. By the way, TV seems to be sold out in Latvia, so booking your campaign on TV is not easy.

We’ll also see some more experimenting in digital for sure. This of course depends a bit on legislation, though. Because some major players are changing the rules. For example Google recently announced that they no longer accept fast loan advertising. Legislation also changes around political advertising, at least here in Latvia.

Also, Latvian national television will most probably leave advertising market. This will also change the playground. So, few things are happening here.
And also what I said before – the consolidations of companies and new mergers will also change the market. In some way it can also be a good thing, because if two companies merge, they often make rebranding campaigns, etc. But after a while you still realize that instead of 2 advertisers you now have 1 advertiser.

Any optimistic note?

We do get more CVs from people who are from eastern markets and who want to come and work for us in the Baltics. So that’s a positive trend which hopefully continues. So that we’ll have some talent injections from other markets.

Interviewed by Hando Sinisalu, Best Marketing International, June 2016


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