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| Home > News & events > 2005 feature stories > Russian admen build billboard business | ||||||||||
Russian admen build billboard business |
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The Soviet leadership was big on advertising – even if it only wanted its outdoor billboards to show the Communist texts that legitimised its existence until 1991. Then life changed. The billboards went capitalist along with everything else. In the heady days of the early 1990s, when post-Soviet advertising lost the phrase ‘Bread Is Our Wealth!’ and gained ‘Buy Borodinsky Bread!’, student Anatoly Mostovoy was one of the young entrepreneurs pasting the first commercial ads on walls and roadsides. “Step by step,” he says now, “it became an industry.” Fourteen years on, and 11 since his Gallery Group was formally founded, CEO Mostovoy has just seen another big change in his working environment. Last summer, the EBRD signed a deal for $23 million in equity and debt in the company; in September, Baring Vostok Capital Partners also became a shareholder. In the past decade, Gallery has become the second biggest outdoor advertiser in the Russian regions after Rupert Murdoch’s News Outdoor. “Once our competitor, News Outdoor, got international funding to expand” (also from the EBRD), “we realised that we, too, needed to think about how to raise money,” Mr Mostovoy said. “We chose the EBRD because of its mandate to foster, develop and encourage competition in the market.” “We started to work with my uncle Yuri, who for more than 20 years had been a Wall Street investment banker. He said what we had to do was become transparent – to audit, to change our way of thinking to meet the standard required by an international investor.” Gallery has been working on changing its culture and mentality since 2002 and now has two or three years of Western-style accounts, as well as a clearer vision of how it wants to develop in future. The group controls nearly 10,000 advertising panels (of which half are their own and half are subcontracted). Mr Mostovoy and Salim Tharani, the group’s chief financial officer who moved to Gallery from News Outdoor, are planning further expansion. “We believe we are comparable to operators in central and eastern Europe now,” Mr Tharani says. “In five to ten years’ time, we’d like to be one of the biggest companies in Russia and the Commonwealth of Independent States.” Any future move elsewhere in the CIS would begin in neighbouring Ukraine. The Baltic States, Mostovoy said, are nearby but too separate to build a business from a Russian base. For now, Gallery has a presence in 26 Russian cities from Arkhangelsk to Vladivostok – focusing on the regions beyond Moscow and St Petersburg. “We’re developing in the cities where we are,” Mr Mostovoy adds. “And we’re moving into new cities: buying new billboards and surfaces and acquiring existing companies.” These days Russia can seem one giant bristle of roadside billboards advertising everything from mobile phones to tampons to luxury cars to silk underwear to beer to banks to mobile phones again (all scowled at by the kind of old men who feel ambivalent about the invasion of consumerism into the countryside, on to the nation’s TV screens and into every mind, but enjoyed by most other people). So it’s no surprise to hear that outdoor advertising is a far bigger component of the Russian ad sector than it is in the West. Eighteen per cent of Russian advertising is on billboards, compared with 7-8 per cent in central and eastern Europe, 13 per cent in France and only 3 per cent in the United States. Billboard advertising in Russia costs only a quarter of radio advertising and an eighth of a TV advert. Gallery’s most important clients are the international ad and marketing agencies that have moved into Russia and account for about 70 per cent of the company’s orders, Mr Tharani adds. “The rest are local retail sales, which represent a growing component of total revenues.” “The media market is growing dynamically,” he added. “Last year the outdoor market was $710 million out of a total of $4 billion; in a couple of years we’ll see levels of $1 billion for outdoor advertising. In 2003-2004 alone the outdoor market grew by 35 per cent. It’s like a raging bull.” Asked whether Gallery comes up against bureaucratic obstacles or is worried about the way the business environment in Russia is evolving, Mr Mostovoy said calmly: “The central government makes more demands; the GAI traffic police are more demanding than they were. We are prepared to participate and become a benchmark for the market, because Russia is still developing.” For now, there is little to wrinkle the foreheads of Gallery bosses, except possibly reining in the imagination of the creatives who dream up the ads in their spaces. Russian advertising, not unlike British, depends for effect on visual and verbal gags that can be subtle, dark or deadpan. At least one of the jokes Mr Mostovoy has put up on boards has been so intriguing that it literally stopped traffic. “In 1996, we ran a cigarette ad campaign,” he recalls. “The idea was puzzles on billboards. One picture had black and white spots and the question, ‘How many dalmations are here?’ In Vladivostok, this caused a car accident when somebody cut across the car in front. As the driver explained to the police, he was counting the spots on the dalmations.” Written by EBRD Press Officer Vanora Bennett
Contact: 2 December 2005 |
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