Advertising Sector: No Competition, Much Nepotism
22 December, 2011
Advertising Sector: No Competition, Much Nepotism

The Georgian advertising sector is characterized by the lack of competition and strong market concentration, with large parts of the sector under control of a network of close friends and relatives with ties to former Defense Minister Davit Kezerashvili -  this is the key message Transparency International Georgia (TI Georgia), part of global non-governmental network, presented on December 13, 2011 as part of its research of Georgian advertising market. 

According to the TI Georgia report, the TV advertising sales body ‘General

Media’ commands a de-facto monopoly on national TV ad-slots and ‘Outdoor.ge’ has a dominant position in outdoor advertising in Tbilisi.

Little data on the reach and audience of media outlets is available, with the exception of TV ratings for several national TVs (Imedi TV, Rustavi 2, 1st Channel, Adjara) and a few smaller Tbilisi-based channels (Enki-Benki, Evrika, Kavkasia, Maestro, Mze, Real TV, Region TV, Sakartvelo, TV Music Box).

No independently verified numbers are available for printed media, samples for existing radio and TV monitoring mechanisms are too small to provide a representative picture of the audience of most media outlets operating in the regions. This lack of hard audience data makes it even more difficult for independent outlets to attract advertisers.

In the private sector, a climate of self-censorship persists and advertisers remain reluctant to cooperate with outlets that are known for their critical views, fearing negative consequences for their businesses.

Net advertising in 2010 was between USD 43 and 46.5 million. Television has a more dominant role in Georgia than in most other countries in the region. The largest share of advertising spending in Georgia, an estimated 78%, goes to television, most importantly the two national private channels Imedi TV and Rustavi 2 [which have a combined audience market share of about 60%] while in Central and Eastern Europe (CEE), television accounts for about 55.7% of all gross advertising spending, according to the estimates by ZenithOptimedia for the year 2009.

Radio accounts for about 7% of gross advertising spending, outdoor for about 6% and newspapers and magazines each for about 4% of total advertising spending. The share of online advertising remains around one percent and thus below USD 1 million.

The Georgian government has taken a 70% share in a chain of newspaper kiosks that are also used as outdoor advertising sights. The Georgian Public Registry has, by tailoring a tender for classified housing ads to the “24 Hours” newspaper worth more than GEL 120 thousand interfered in and potentially distorted the market for classified ads. Government controlled entities keep providing targeted financial support to specific media outlets through advertisements.

TI Georgia found that a small but closely interlinked network of friends and business partners control a large part of the Georgian advertising sector and thus have high leverage over the development and sustainability of the Georgian media sector. A large part of the advertising sector lacks transparency, a number of companies seem to be run by front men and dominant actors such as General Media and Outdoor.ge do not even have operational websites. Analyzing the ownership structure of the advertising sector, TI Georgia found numerous off-shore shell companies registered in Panama and the British Virgin Islands to conceal ownership and financial flows, as well as a suspiciously high number of changes in ownership structures of single companies.

The fact that a number of key companies are controlled by relatives or close friends of current government officials or former high-level government/ruling party members raises not only questions about conflicts of interest, but also about competitiveness and political independence, potentially posing a major burden on the development of Georgia’s creative industry and media sector.

Davit Kezerashvili, who served as Georgia’s Defense Minister from 2006 to 2008, with the help of a network of close friends and family members, is widely believed to have taken control over large parts of the Georgian advertising sector. Dimitri Chikovani, Kezerashvili’s brother-in-law, has become a key player in the advertising sector, company records show.

“The lack of a free and competitive advertising sector could also further exacerbate an uneven playing field ahead of the 2012 Parliamentary elections, if opposition parties are not granted the same access and conditions to advertising as the ruling party”, the non-governmental watchdog warns.

The Georgian advertising sector has significant growth potential, although a number of individuals in the media and advertising sector, especially those working with independent outlets, painted a fairly bleak picture in talks with TI Georgia, showing low expectations for the sector’s mid-term development. Monopolization of the advertising sector, a lack of competition in several key sectors of the economy and political involvement and pressure on potential advertisers are undermining growth, several observers told TI Georgia.

However, if TV ad-prices were allowed to rise gradually and economic growth in Georgia remains consistent, a real growth rate of advertising expenditure of 15 or 20 percent per year seems achievable. Online, radio and print are likely to see significant growth if reliable audience data on these sectors becomes available. This would also contribute to further professionalization of the advertising sector, with Georgian companies using a data-based approach to reach their target audiences rather than gut feeling and intuition.

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