Awaiting reforms, advertisement business mired in aberrations

Kathmandu, Oct. 7

An advertising agency held the payment made by a client company to the media that published the advertisement for more than six months. Later, the media came to know that the agency had paid about two thirds of the money it received from the advertiser.

A reputed advertisement professional said that a significant number of advertisers have resorted to content placement in the media instead of publishing advertisement due to unnecessary pressure, and sometimes threatening, from online news media and newly established television channels.

Hoarding boards are loosely managed by the local governments but they are losing a significant amount in revenue as they contract out the management and the money they receive is peanuts. Meanwhile, the contractor and a few concerned staff churn out 'good money', said an advertisement professional.

These cases tell that the advertising industry in Nepal lacks transparency and needs policy as well as technological interventions to make it transparent and vibrant.

Until the Advertisement Board (AB) was established in December 2020, advertising industry was largely an unregulated sector and the actual statistics about the size of the market and its contribution to media and government revenue were not available.

In the past three years since its formation, the AB has taken some major steps to regulate and monitor the advertising industry in Nepal. It issued standards for the public welfare advertisement in print and electronic media, advertisement agency listing and monitoring, and advertisement broadcast testing.

 

Transparent market

Recently, the Board has issued a notice asking the government offices and agencies to make payments on the basis of an invoice issued by the media even though they publish the advertisement through an advertising agency. If they published the advertisement directly contacting the media, payment should be made as per the media invoice and if it is published through an agency, the latter should issue its invoice adding its commission to the media invoice.

The invoice issued by the media should be attached with the invoice issued by the agency.

Last year, the AB issued code of conduct for the industry to make its conducts more ethical, transparent and business-friendly. The Ministry of Communications and Information Technology (MoCIT) had been trying to formulate and implement the Advertising Code of Conduct since more than a decade ago. A draft had been prepared and the Ministry had also held multiple rounds of discussions on it but due to the lack of support from the advertising agencies, it couldn't be implemented then.

"The code of conduct will ensure fair-play environment. As some of the issues in it have been included in the advertising regulations, it has been more effective," said Chairperson of the AB, Laxman Humagain. The regulations have provisions to punish with a fine of up to Rs. 500,000 in case of the violation of the code of conduct.

The listing of advertising agency has kept the regulator updated about the industry and made the monitoring of the market and evaluation easy. The Board has barred the media to work with the advertising agencies not listed with it.

 

Regulating outdoor advertising

Of late, the AB has shifted its focus to the management of outdoor advertisement which is one of the major components of advertising in Nepal along with mass media, digital and social media, and theatre and events.

There is no rule or standard to regulate or operate outdoor advertising.

Local Self-Governance Act has a clause to raise tax from the outdoor advertising but there is confusion about who should raise that tax. The Advertisement (Regulation) Act, 2019 has assigned the Advertisement Board with the regulation and necessary arrangement to regulate and manage the outdoor advertising.

However, although the board can set standards for the whole country the implementation of the standards and raising tax should be done by the local governments, said Humagain. The collected tax would be divided at 60:40 ratio between the local and provincial governments.

Godawari Municipality in Lalitpur has recently issued a notice asking the stakeholders to remove the hoarding boards displayed without permission. According to the AB, about 56 per cent outdoor advertising is being done without obtaining permission from the federal or local bodies.

"The Board is setting standards for the hoarding boards. Distance and design of board at the national highways, inside roads and junctions would be set. All the boards displayed without permission would be removed or brought under regulation," according to the AB. The board will also decide the appropriateness of the advertisement space as well.

The Board is in the stage of finalising the standards for the hoarding boards. It would be okayed after the discussion with the local governments. The Ministry of Federal Affairs and General Administration has also been roped in in the process.

"We are also developing a model law for the local bodies to manage the outdoor advertising to facilitate them without which the new instrument will be ineffective," said Humagain.

President of Signage Association Nepal, Kiran Panta, said that the new standards would help the businesses to grow in a competitive way. According to him, there was a problem in tax system and individuals instead of companies have been managing the markets.

No one should be allowed to advertise or manage outdoor advertising without getting approval from the regulator, said Panta.

 

Digital and social media

The AB is also set to create regulatory environment for the digital and social media. A draft of guidelines is being framed in collaboration with the MoCIT. Hopefully, the guidelines will be passed by the Cabinet soon, said Humagain.

The Board is also conducting research to know the size and expansion of digital and social media advertising. It aims to conclude the entire regulatory framework by next year.

Likewise, cinema halls and event spaces will also soon have guidelines to publish advertising.

 

Size of advertising market

"Across the country, only Rs. 2.5 billion revenue is collected from the outdoor advertisement (technically known as the Below-the-Line or BTL advertising) while its total market size is estimated at about Rs. 18 billion," Humagain stated. Likewise, size of traditional media advertising is estimated at about Rs. 14 billion which is quite contrary to the size estimated by the market.

The Advertising Association of Nepal (AAN) estimates the advertisement market of mass media at about Rs. 7 billion which was forecast to grow by approximately Rs. 2 billion to make the total size Rs. 9 billion.

But the recent economic slowdown has badly hit the advertising and media market. "The economic recession, market contraction and court decision to ban liquor companies to advertise their products in mass media have a detrimental impact on the advertising industry," said Rabindra Rijal Shashi, Immediate Past President of AAN.

However, the implementation of the clean feed policy in 2020 has forced the multinational companies to create their advertisement locally in Nepal. Since the advertisements produced in other countries and 'dubbed' in Nepali have also been banned from broadcast, Nepali advertising agencies have got additional business, said Shashi.

 

Ban on liquor ad impacts seriously

Advertising professionals said that the ban on liquor ad had serious repercussions on the advertising market. "Although the economic slowdown is the major cause behind the current distress in business, ban on liquor advertising has inculcated further damage," said Sashi.

He said that the issue of allowing any product to advertise should be with the government, not with the court.

G.P. Timalsena, Managing Director of Promoters Nepal, an advertising agency, demanded a review of the court decision on imposing ban on liquor ad. "Complete ban is not a solution. The government can charge additional fees or the like on liquor ad but it should be allowed in the mass media," he said.

Meanwhile, lack of standards to provide advertisement for media has also troubled the advertisers and agencies equally.

Agencies said that there was a massive pressure from media, especially online ones, to provide them advertisement although most of them have poor or no audience and have zero impact in terms of marketing or promotion.

Advertisement is an investment, not a charity, said one ad professional. He also said that the reduced advertisement supply has forced the media to seek source of income other than advertising revenue which is not good for the business as well as the country.

Shashi also said that advertising in media without good presence in the market is a misuse of resources. 

Published in The Rising Nepal on 8 October 2023.