When Bruce Macdonald went to Moscow in 1989 to set up an office for BBDO Worldwide Inc., advertising was in its infancy in Russia. Western companies were just beginning to adapt their ads for the Russian audience, while local companies hardly advertised at all. Now, advertising is a billion-dollar business in Russia, and local agencies are fighting fiercely for market share with the likes of BBDO. Indeed, Macdonald himself recently quit the U.S. agency to join its leading Russian competitor, Premier SV, as a consultant. "I sniffed the air and sensed the tide turning," he says.
As consumer spending has boomed over the past few years, Russian ad agencies have hustled to catch up with their powerful Western rivals. They have upgraded their technology, adopted Western market research techniques, poached talent from their competitors, and sometimes sold cheap to attract clients. Three local companies now rank among the top five in Russia. "We've come a long way," says Vladimir Evstafiev, president of the Russian Association of Advertising Agencies and director of Maksima, the fifth-largest ad agency, whose clients include Panasonic, DHL Worldwide Express, and Pfizer.
"CREATIVE." Local agencies are trying to cash in on a growing anti-Western mood among Russians. Many resent recycled Western ads with Russian voice-overs or subtitles. "The Marlboro Man has nothing to do with Russia. Why should we respond to it?" snaps novelist Victor Pelevin. By contrast, Russian agencies come up with dark or humorous ads that appeal to native sensibilities. And they promise clients better placement than Western rivals can provide. Says Victoria Pavlova, public-relations manager for Volvo in Moscow: "Russians are more creative and have better connections with local media."
Such advantages have spurred some Western companies to switch to Russian agencies. Volvo canceled its contract with U.S. agency Friedmann & Rose Inc. last summer and signed with Maksima. Siemens and Samsung Group have also turned to local agencies, citing their grasp of the elusive "Russian soul."
But more conservative companies, such as Mars Inc. and Procter & Gamble Co., have been reluctant to abandon experienced Western agencies. "We prefer to stick with our international partners; they're more reliable," says Mars's Moscow corporate-affairs director, Alexander Shalnif. Some Westerners complain that Russian ad agencies are lax about deadlines. Others worry about corruption and possible mafia infiltration of the industry. Both Russian and Western clients were rattled by the murder of journalist Vladislav Listyev in March, 1995, after his appointment to the top slot at ORT state television, where he vowed to end suspected corruption.
The battle for market share has been toughest in TV. In the early 1990s, foreign and Russian agencies launched a vicious battle to control sales of ad time on Russia's six main TV stations. The two biggest Russian agencies, Premier and Video International, now control 90% of the $500 million market. Besides cozying up to TV bosses, media analysts say, the agencies were the first to receive exclusive rights to sell airtime for cash-strapped channels. The two agencies are also tight with the Kremlin elite, having masterminded President Boris N. Yeltsin's reelection campaign last summer.
To regain some of their lost market share, Western agencies such as Young & Rubicam Inc. and DMB&B are fighting back. DMB&B's Moscow operation is now headed by a Russian, Sergey Koptev, who was trained in the agency's London office. Young & Rubicam has replaced 80% of its Western staff with Russians. The Westerners are also working hard at wooing blue-chip Russian clients. DMB&B, for example, recently wrestled the account of a unit of Alfa Group, a financial-industrial conglomerate, from Video International.
These moves may be enough to keep Western companies in the business. But the industry will likely take on an increasingly Russian accent as the competition between local and Western agencies intensifies. The stakes are high. If Russia's economy begins to grow next year or in 1998, some industry sources think Russian advertising could explode into a $3 billion business by early next century. By then, Russian agencies may be opening offices on Madison Avenue.