2007 Report on the Romanian online advertising industry

Bad Boys

Before things get better, things are going to get worse. The Romanian online advertising industry has four challenges to overcome before it will overcome the lackluster revenue performance and mistrust- two problems that have made foreign investors and advertisers hesitant to make big moves. Unfortunately, we will not see much headway until a challenger comes to Bucharest with 20 million and takes the bad boys by surprise. That may be just enough to flush out the rats.

As bad as it is in Bucharest, the opportunity for a take over of the Romanian online advertising industry has never been more interesting to European investors. As long as the bad boys are running the show, the industry remains open to challengers who can bring integrity and best practices. Advertisers want to exploit the opportunities and reach of Romanian networks, but they need to work with agencies and publishers that have integrity and offer value.

Optimistic reports from Gemius and others about the state of Romanian online advertising are to be ignored. Gemius’ 2006 report, for example, was based on information provided by Vodanet, an online publisher and agency founded by Vlad Stan. Vodanet’s risky practices, copyright infringement and other questionable activities are widely known about Bucharest- and especially to me as I have discussed these issues with several former employees from Vodanet including managers, sales persons, programmers, and copy writers.

Lack of observable results

Advertisers complain that online advertising in Romania is not providing observable results. I agree. However, lack of observable results is more often a consequence of inadequate budget, reach, and online strategy. Most advertisers don’t understand this because Romanian online advertising agencies don’t know enough themselves. Unfortunately for the advertisers, Bucharest agencies are just trying to sell inventory without the intelligence, capacity or talent to create or support an effective online strategy.

Unfair pricing

It’s also true that prices in Romanian online advertising do not reflect the value of the inventory bought or sold. Pricing for online inventory is arbitrary and lacks any basis in fact. Currently, online inventory that has an estimated CPM value of 25 cents is sold for 5 Euro or more. Bucharest agencies don’t see any problem with this pricing scheme and most advertisers don’t know any better.

Unreliable reporting

According to IAB Romania’s undercover survey of industry leaders, there may be no online agency in Bucharest that provides accurate and reliable reporting to it’s customers. Although some refer to Trafic.ro for online traffic reports, trafic.ro has long been known to be unreliable and, perhaps as some industry insiders suggest, it is merely an instrument for the questionable promotion of those online properties controlled by New Century, Orlando Nicoara, Vlad Stan and other online profiteers.

Risky practices

Although software piracy is a widely known problem in Romania, profitable companies seem to have no problem using pirated software. Online and offline advertising agencies and design studios are creating websites, banner ads, print ads, billboards, etc. with pirated software from Adobe, Macromedia, Microsoft and others. Advertisers are right to hesitate to pursue campaigns which make them liable for such indiscretions.

IAB Romania

It’s a tough job that we have at IAB Romania. The road ahead is rough. It is uncertain too that IAB Europe and IAB US can support us in our endeavor to clean up things in Romania. There is also the possibility that IAB Europe and IAB US might prefer to sweep Romania’s online industry problems under the carpet because these problems are not only Romanian problems- they happen elsewhere as well.

Yet, I have great hope that we can make change happen here in Bucharest. And not just here. This is ground zero.

Big Picture

Myself, I believe 20 Million is a small price to pay for a market that is valued about the same this year. This value will double every two years for the next six years- if it is handled correctly. On the other hand, I don’t recommend making acquisitions. The online agencies aren’t worth much as acquisitions; most of the owners lack business sense and plan, their only plan was to get bought out so they can finally buy a fancy German car. Or their first apartment. The problem being that some still live with their parents.

The challenges of doing business in Romania, of course, are not insignificant. Procedures, time, costs, recruitment and management present difficulties that require guidance and experience with the same. Taxes and property management remain tricky. The World Banks’ report on Romania remain overly optimistic. Doing online business presents additional challenges.  However the brute force of significant investments will open doors, dishearten competition, and command cooperation.

My recommendation to advertisers is to minimize investments in a Romanian online strategy for the next two years – banner ads and rich media ads on Romanian networks continue to represent extremely poor value. Social media and search advertising would be interesting channels to jump on but no one at the online agencies knows anything about this things. Bottom line: don’t throw good money away. You’ll need it when things take a downturn in 2009.

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Stan Faryna
June 23, 2007
Bucharest, Romania

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About Stan Faryna

Stan Faryna is a member of the IAB European Leadership Council and National Director of the Interactive Advertising Bureau Romania. He is the founder and co-founder of several technology, design and communication companies in the United States and Europe including Faryna & Associates, Inc., Halo Interactive, and others.

His political, scholarly, social and technical opinions have appeared in The Chicago Defender, Jurnalul National, The Washington Times, Sagar, Saptamana Financiara, Social Justice Review, and other publications. Mr. Faryna is editor-in-chief of Black and Right (Praeger Press, 1996), a landmark collection of socio-political essays by important American thinkers including U.S. Supreme Court Justice Clarence Thomas.

Copyright

Copyright 1996 to 2008 by Stan Faryna. Here’s my fair use policy for my content: If you want to share my content with your own audience, you may quote a brief excerpt, if and only if, you provide proper attribution (Source: The unofficial blog of Stan Faryna) with a direct link to the source. You may not republish or translate the entire article without my written permission. Send your request for permission by inmail through the linkedin professional network at www.linkedin.com.

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