Advertising
Clamping the Nigerian advertising market with AISOP
Prof. Martin Ike-Muonso
The business scenario in the advertising market is about to witness a tremendous inauspicious leftward shift following its new set of competition-limiting regulations. Ideally, sound market regulations drive, energize and reinforce competitive behaviour that sustainably creates maximum economic value. The reverse stifles the economy or harm the most vulnerable market participants. This principle has universal application and consequences, including regulating the market for advertising consultancy services. Unarguably, like similar consultancy services markets, there are always traces of inadequate transparency while the reputations of some participating firms, at least, seem quite resilient in the face of scandals, stigma and sometimes, work of questionable quality. However, the depths of knowledge involved in the practice of advertising agencies, their dynamism, commercial value and co-produced nature make it hard to assess them effectively. Curiously, therein lies regulatory success, which demands solid structures and systems for effectively assessing market participants capabilities, offerings, reputation, strengths and weaknesses.
Therefore, the advertising regulator is effective when it markedly identifies innovative ways of systemically evaluating agencies offerings necessary for informed market decisions rather than the market-hampering protectionist price fixation dotting its recently released rulebook.
By leveraging its incredible capacity to persuade, inform, and expand on consumer choices, advertising has consistently powered significant scale economies and upward demand shifts in goods and services. It taps into market freedom, particularly changing consumer preferences and imperfect information to create robust market competition and opportunities for new product innovation, lower prices, market growth and the prosperity of participants and stakeholders. The informative power of advertising generates rich product and service choices and other information, enabling consumers and producers to purchase and produce more.
Advertising, therefore, plays a critical role in job creation and real output growth. The advertising industry intervenes directly in the job market through the job opportunities within its value chains and indirectly through the increase in goods and services triggered by advertising-induced competition. In 2020, above-the-line advertising expenditure alone exceeded N110 billion based on the Media Fact publication estimates. In the same vein, Nairalytics also estimated that the advertising spending of mega-corporations was about N143.7 billion in 2020.
Across history, the free market model of organizing economic production is demonstrably superior in delivering consumer needs and expectations over other forms. Underlying this superiority is its capacity to seamlessly and without any central intelligence process magnitudes of information that enable market participants to make informed decisions. Such processed information comprises choice-making decision variables built on consumer preferences, private incentives, feedback, and informed choices in the advertising industry, enabling efficient determination of pitch fees, advertising rates, payment terms, etc. The success of the advertising industry within a free market economy depends substantially on the freedom of market participants to negotiate and agree to enforceable private contracts. For instance, advert suppliers that fail to keep their promises over time suffer reputation loss and will eventually leave the market. Their customers will have no other option than to penalize them by possibly seeking out alternative suppliers.
Despite its numerous advantages, advertising may also have a deleterious effect on the economy. Such economy-destroying consequences are possible when it impregnates the imperfect information system of the market with deceptive and fraudulent messages that accordingly undermine the capacity of the consumers of the advertised goods and services to make appropriate purchase decisions. Failures of the market based on such factors justify regulatory interference. However, such regulatory interventions should be limited to eliminating the causes of market distortion. In this respect, a good approach ensures efficient consumer information flows, such as setting the requirements for information disclosure and setting standards for goods and services evaluation where most consumers cannot do so. Beyond this limited intervention window, regulatory activities affecting or fixing prices and determining the contract terms between economic agents participating in the market ultimately upsets the balance of forces and harms all stakeholders.
In October 2021, the Advertising Practitioners Council of Nigeria [APCON] released the Advertising Industry Standard of Practice [AISOP], supposedly the industry’s rulebook, to protect stakeholders from unfair business practices. The expectation is that implementing the prescriptions in the rulebook would sanitize the industry and lead to increased growth. As an informed regulator, the AISOP document recognized the market-destabilizing effect of price [rate] fixing and warned against it. Unfortunately, in outright contradiction of the same international market best practice, it unilaterally dictated pitch fee range, specified additional pitch-fee largesse, and prescribed mandatory guidelines for determining media rates based on a thirty-day notice. It also proceeded to interfere in the contracting conditions by dictating the maximum time to settle contractual payments and debts. Undisputedly, APCON has the right to provide regulations that will make the industry progressive. However, dabbling into price-fixing, creating a double-charging condition and interjecting in contractual terms between market participants results in much more market-dampening consequences. Such unacceptable behaviour also cancels out its goals of improving mutual respect, eradicating unfair advantage, unethical competition and inequitable agreement terms between stakeholders in the industry.
APCON’s AISOP is demonstrably inclined to promote the anti-competition market environment in the industry by instituting a horizontal price-fixing and a rates-freeze behaviour. The document prescribes an anti-competition horizontal pitch-fee-fix of between N1 million and N2 million for advert market engagements between agencies and advertisers. The rulebook also mandates the payment of a fixed strategy pitch [rejection] fee of N500,000 and a creative pitch [rejection] fee of N750,000 if an agency invited to pitch does not win. Apart from this regulatory action interfering with competitors’ ability to set their prices within an informed market freedom context, it also unduly blows up the cost of advertising. All progressive societies frown at every market interference conducted either by fixing prices or defining price ranges, establishing a formula for rates of change in prices, and guidelines for competitors’ responses to changes in their cost structures. In a similar trajectory, APCON’s intended regulatory interference in payment contracts and conditions by fixing-by-fiat the number of days within which market participants must settle payments is an unacceptable attack on the foundational principle of freedom to compete in the marketplace.
Let us look closely at the pitch fee fixing. Unhampered, the pitch fee that the free market would dictate can range from N0.00 to N100 million based on the interaction of demand and supply forces. Therefore by fixing the pitch fee range, APCON inexorably orchestrates market distortions in participants subjective valuations as the fixed price range will most likely fall out of line with the constantly changing market-clearing values. The government’s fixed pitch-fee will either be too high or too low relative to their natural levels. This deviation from the market-clearing value always leads to challenges like depressed demand, retarded production, demand and supply glut, and all those consequences that misdirected the market into chaos and gross inefficiency.
Several assumptions seemingly underpin this competition-destroying regulation. First, APCON seems to have assumed that the cost of advert pitch to agencies cannot be lower than N1 million and not higher than N2 million. This assumption, if implemented, will automatically exclude agencies with brilliant innovation whose pitch costs would exceed N2 million. It also means that advertisers cannot shop for and engage agencies that ordinarily would have been comfortable to pitch at less than N1 million. This development will inevitably lead to ‘serial purchasing’, that limit advertisers’ engagement period or projects with a single or few agencies they are hitherto comfortable with and not exploring further expansions in advertising agency engagements. In the former situation, interfering in the competitive behaviour quashes entrepreneurial innovation by placing a wedge on the price [or fee] negotiating system. On the latter, the market excludes many small agencies with a low-cost structure that ordinarily would leverage the pitch opportunities. Second, by specifying additional rejection fees, APCON blatantly blows up advertising costs as agencies that fail the pitch still get rewarded with additional fees. This fee-fixing regulation further dampens innovation and competition. Firms know that the rule compels advert suppliers to take full responsibility for their costs regardless of their performance and possibly leave them with some financial surplus. Again, this unwarranted interference in pitch price determination naturally has restrictive effects on advertising projects’ supply. Such leftward shifts in the supply of advertising jobs can be vastly harmful to the industry. We estimate approximately 17.89% shrink in advert agency induced real national output in 2022 if this rule goes into effect.
Similarly, while contract enforcement is critical for market efficiency and ease of doing business, regulatory interference in this process by handing down contract or payment terms for buyer-seller transaction relationships is toxic. Advert
isers and agencies enjoy the protection of the law to negotiate and agree on the conditions of their business dealings without the encumbrances of a regulating third party. In this process, the regulator’s role is limited to ensuring that both parties keep the promises made in the originally agreed terms and conditions. Unfortunately, APCON seems to have assumed that market participants cannot enter into fair deals independently without a regulator as the third party. Yet, only the agreement mutually reached by two consenting parties can be authentically considered fair and equitable.
Consequently, APCON ought to focus its intervention on penalizing either agencies or advertisers who do not comply fully with the understanding reached in their agreement rather than discriminating and protecting a section of the market by determining ceilings on permissible credit days to the unfair advantage of others. Different organizations face different costs and credit conditions, which they usually apply in their engagement with contractors. This cash flow management process has a universal understanding in business. Contractors that are not comfortable with the job suppliers credits and cash flow requirements merely withdraw from participating rather than arm-twisting the other party using regulatory fiat. But interfering by pleasing the contractor and destabilizing or worsening the job supplier’s credit conditions lead to harmful market consequences.
Finally, four ideological errors underlie the AISOP document. The first error is that the achievement of fairness of market prices [or pitch rates] is majorly possible by a nonmarket regulating participant rather than the unencumbered negotiation between advertisers and agencies. This faulty foundation has given birth to APCON’s misguided interference and its launch of horizontal price-fixing in the market. Price-fixing is inconsistent with international best practices, particularly among market regulators who should place a reasonable premium on fairness. Price-fixing by market regulators is degenerating, anti-competition, market destroying, and capable of wiping a substantial share of the contribution of advertisers to Nigeria’s national economic output. The second error is the thinking that the achievement of lower market prices is most effectively through regulatory fiat. This faulty conceptual foundation again compliments the retrogressive price-fixing mentality. Quite the opposite, entrepreneurial innovation and competitive efficiency within the market lead to lowering prices. The third error is APCON’s seeming penchant for addressing the manifestation rather than the root problem in the market. Price inefficiency in the market depends a lot on the degree of information asymmetry and processing time lag, which determines market participants’ quality and effectiveness of decision-making. Accordingly, APCON should instead focus on substantially improving the quality, magnitude and speed of information availability necessary for market participants’ informed decision-making. The fourth error is the regulator’s belief that advertisers and agencies are not knowledgeable enough to work out agreeable terms of the contract and therefore may have to help them. This flawed consideration is market vandalizing as active participants ideally understand the market conditions much better than the regulators and should be able to fashion out more effective and mutually agreeable terms of payment than the one forced on them. Regulators are always on reactive catch-up modes and wield destructive controls such as the ones unleashed by APCON. These have to stop if the advertising industry will have adequate oxygen for sustained, meaningful growth.
In an exclusive interview, the President of the Association of Advertising Agencies of Nigeria (AAAN), Mr. Steve Babaeko, discusses the inspiration behind the Unity Song, the state of the nation, and future projections for Nigeria
What inspired the Unity Song by AAAN?
The confluence of the 50th anniversary of the Association of Advertising Agencies of Nigeria and the 63rd independence of our beloved nation, Nigeria, within the same year, presented a unique opportunity. The committee entrusted with the task of orchestrating a year-long celebration for the association conceived a multitude of exceptional ideas. Among these, the notion of crafting a theme song to honour Nigeria emerged. Encouraged by the overwhelmingly positive response received from citizens across the country, we take immense pride in having fulfilled our commitment to steadfastly support our nation. In pursuit of this aspiration, we joined forces with the legendary singer and songwriter, Cobhams Asuquo, in this endeavour.
The moment I initiated contact with him to introduce the project, his passion and unwavering enthusiasm proved to be nothing less than inspirational.
What informed the choice of Cobhams as the producer of the track?
Cobhams has been a steadfast collaborator of mine for well over 15 years. Over the course of our extensive partnership, we have undertaken numerous music projects on behalf of various clients. Whenever the need for a truly exceptional touch arises, Cobhams is my unequivocal go-to specialist. His multifaceted talents as a producer, songwriter, and singer equip him with the comprehensive skills required to consistently deliver excellence, a feat he never fails to achieve.
The remarkable quality of the “Naija No Dey Carry Last” song stands as irrefutable evidence that our decision to collaborate with him was indeed the right one.
What does the association hope to achieve with this song?
In the wake of the recent general elections, it is undeniable that our nation has experienced an exacerbated polarization, marked by an unsettling erosion of trust among its diverse regions. The concept behind this song was to craft a unifying anthem, one that can serve as a clarion call, compelling us all to embrace our collective responsibility in nation-building. Furthermore, this song aspires to serve as a poignant reminder of the common virtues that bind us together as a people, redirecting our focus away from our points of divergence.
What are the financial implications of producing and promoting this song?
Let’s begin by discussing the production cost. Given that it’s a Cobhams Asuquo production, it naturally carries a premium. Quality work of this caliber unquestionably comes at a price. It’s worth noting, however, that Cobhams enthusiastically committed to this project and commenced work even before discussing financial figures. We both shared a common understanding that this was a national assignment, driven by a sense of duty rather than a profit motive.
Moving on to promotion, we recognized the need to support the song with a well-structured promotional strategy. This is essential to ensure the song reaches a wide audience and resonates effectively.
How would you describe the current situation of the country?
To be perfectly candid, the state of our nation is in a precarious condition. The economic disparities between the rich and the poor, coupled with the devaluation of the Naira against major global currencies, have compounded the challenges faced by everyday Nigerians. Nevertheless, it is precisely during such trying times that we should find the motivation to transcend these adversities, lift ourselves up, and in doing so, elevate our nation as a whole.
The federal government has called for collaboration and support of the association. How do you think AAAN can contribute more to Nigeria’s socio-economic development?
The Association of Advertising Agencies of Nigeria stands ever-willing to engage and collaborate with the Federal Government when called upon. In this specific case, we took the initiative to proactively develop this project, firmly believing it to be a timely and vital contribution to our beloved nation.
Beyond the scope of this project, our ongoing efforts involve the generation of employment opportunities, with a particular focus on positively impacting the youth population in an area where unemployment rates are most pronounced. Advertising serves as the crucial catalyst that sustains and propels our nation’s economy, and candidly, it merits greater recognition for the role it plays.
What have been the highlights of your AAAN Presidency?
Despite our inauguration occurring during the height of the COVID-19 pandemic, my working relationship with the Executive Board of AAAN has been an immensely rewarding experience. Collectively, we have undertaken a series of innovative projects that have significantly enhanced the Association’s reputation.
Additionally, we have placed a concerted emphasis on addressing gender disparities. In a historic milestone, we appointed a female Director to lead the team, marking the first time in the Association’s 50-year history.
Furthermore, we’ve witnessed the emergence of new, vibrant agencies, predominantly led by a younger generation. In sum, I believe the Association’s trajectory is distinctly upward and promising.
What are your projections for Nigeria in the next four/five years?
I am an unwavering optimist, and my confidence in the future of our nation remains unshaken. Counting Nigeria out is a notion that has proven futile time and again. It’s during the moments that appear most challenging that the indomitable Nigerian spirit rises to the occasion.
My earnest hope is that our President succeeds because the destiny of this great nation rests upon his shoulders. While we may continue to grapple with immediate economic challenges, I firmly believe that, in the medium to long term, our country will navigate through these difficulties. The one indispensable asset we must safeguard now is hope. May God bless the Federal Republic of Nigeria.
Advertising
AAAN @ 50: FG Rally Advertising Industry Support For Renewed Hope Agenda
…As Ugbe, Akinwunmi task practitioners to share African stories, embrace AI
The Honourable Minister, Federal Ministry of Information & National Orientation, Alhaji Mohammed Idris, has urged advertising practitioners to support the Renewed Hope agenda of the President Bola Tinubu administration in a bid to drive sustainable development for Nigeria.
Alhaji Idris made the call while delivering the keynote address at the 50th anniversary conference of the Association of Advertising Agencies of Nigeria (AAAN) through his representative, the Director, Public Communications and National Orientation in the ministry, Mr. Sunny Baba.
In his address, the minister acknowledged the significant contributions of the advertising industry to the growth of the Nigerian economy,
adding that advertising agencies play critical roles in disseminating information which promote national unity and drive positive social change.
“While positive changes could present some challenges, we are encouraged by the knowledge that the outcome will be of immense benefit to the teeming populace. In this direction, we are soliciting for the cooperation of the AAAN in keying into the Renewed Hope Agenda of this Administration and support Government commitment to the value reorientation of citizens.
“We are forthright in our determination to set this nation on a path of growth. Your 50th Anniversary Conference therefore presents an opportunity for all of us to reflect on the past, celebrate our achievements, and chart a course for a brighter future in the advertising industry, viz-a-viz, Nigeria. I look forward to engaging in meaningful discussions, sharing insights, and collaborating with the esteemed members of this association as occasions demand,” the minister said.
Alhaji Idris, who reiterated the President Tinubu led Federal Government’s resolve to collaborate with change agents in the private sector, commended AAAN for spearheading the adoption of ethical and standard advertising practices in the country.
He said, “Over the past five decades, this association has consistently demonstrated a commitment to excellence, professionalism, and ethical standards in the field of advertising. Your dedication has not only propelled the industry forward but has also inspired countless individuals and organizations to strive for greatness.”
Also speaking at the event, the Chairman, House of Representatives Committee on Information, Hon. Olusola Fatoba, on behalf of the House, applauded advertising practitioners for shaping the country’s fortune with their profession. He assured AAAN that he would continue to engage with the leadership of the Advertising Regulatory Council of Nigeria (ARCON) to see to the full implementation of the local content requirements in its new Act.
“I recall, several years back, most of the trending advertisements on television in Nigeria were foreign adverts, with faces that did not look like us and voices that sounded very foreign, marketing products that were both made at home and abroad. This means that if an advert was not produced abroad, then it will not trend and it will not be impactful.
“However, I am impressed with the fight back that came from AAAN and its members. They stepped up their creativity, ingenuity, innovation and investment. Today, the story is different. I travel to some other African countries and I see Nigerian made adverts on their television, side by side, with our movies and our music” Fatoba stated.
In his address as a guest speaker at the event, the Chief Executive Officer at Multichoice Nigeria, Mr. John Ugbe harped on the importance of telling creative and authentic African stories.
Ugbe highlighted how the MultiChoice brand has been able to make significant exploits in marketing the African continent by using Africa Magic channels to share African stories with the world.
“African should learn to tell their own stories. Africans should try to create an enabling environment for its creatives to strengthen its propensity to thrive. Naming your creativity as the best in the world has an impact on the creative and the product of creativity. Also, I must add that localization of creativity helps the growth of a brand within and outside the continent,”
Another speaker, Prof. Mustapha Akinkunmi, a Senior Researcher, CIPS, Fordharm University, who spoke on the place of technology in today’s advertising industry, admonished advertising practitioners to embrace the innovativeness of Artificial intelligence (AI) in a bid to take their creativity to the next level.
The university don submitted that AI is the next advertisement tool. “AI will help improve the already existing advertisement models, making it more appealing to the African people and the rest of the world,” he stated.
In his opening address, the AAAN President, Steve Babaeko, had explained that the theme for the remarkable milestone “50 Years Young, Ready for More,” was chosen to reflect the dynamic changes the association has witnessed, especially the influx of young professionals and agencies into its fold, adding that the body has lived up to the theme.
“Our industry has confronted the dual challenges of macroeconomic headwinds and technological disruption, which have impacted not only our clients’ bottom lines but our own as well. However, even in the midst of these turbulent times, I firmly believe that the future of our industry holds promise. By standing united as members of the same family, we can navigate these challenges and emerge stronger,” Babaeko said.
Advertising
LASAA launches 2023 mobile advert stickers for branded vehicles
…promises improved and efficient process
Lagos, Nigeria, December 4th, 2022: Lagos State Signage and Advertisement Agency (LASAA), the agency saddled with the mandate to regulate advertisement displays in Lagos State, has announced the release of its 2023 mobile advert stickers for branded vehicles in the state.
Managing Director of LASAA, Prince Adedamola Docemo, in a statement in Ikeja yesterday, stated that the new and improved mobile advert e-sticker will be in force effective from the 1st of January 2023, a development that will render the 2022 sticker invalid.
He reiterated that, just like last year, the agency has fully deviated from the yearly tradition of launching the stickers with pomp and would rather focus on improving the efficiency of the new process.
He explained that the new e-sticker, which was introduced last year, has attracted a lot of commendation from stakeholders. He said LASAA has continuously reviewed and improved the mobile advert e-sticker product throughout the year to assess the process and fix all barriers for better and efficient performance.
Prince Docemo disclosed that the 2023 e-sticker continues to experience constant upgrades with a Quick Response (QR) code scanner application, which is readable with a simple smartphone.
He said, “The e-sticker has been enhanced with internal control mechanism, which comes with specialised bar codes and embedded details, including vehicle particulars and serial numbers for authentication.”
He explained that the new e-sticker comes with new improved security features such as anti-counterfeit properties and authentication system against fraud.
Prince Docemo emphasised that the level of security implemented for ease of confirmation has improved the process of compliance for the agency’s clients. He stressed that all branded vehicles state-wide will be effectively captured on a mobile advert database, thereby making the agency’s ability to monitor compliance and enforcement to work efficiently.
He noted that the incidence of fraud has been hugely minimised, adding that non-compliant vehicles will be impounded and grounded. He assured clients that upon registration, the e-stickers will be available to them within 48 hours.
According to him, LASAA continues to monitor the activities of unscrupulous persons parading themselves as staff of the Agency as well as those working to frustrate it’s efforts by selling mobile advert stickers belonging to other States. This act LASAA believes is an attempt to cause confusion and conflict within Lagos territory. He added that LASAA has already taken bold steps to reverse this anomaly.
He, however, assured that LASAA is always a step ahead in ensuring that all vehicles branded with logos and adverts are properly registered in Lagos State. He warned that the agency would arrest those who fail to comply.
He also warned clients and customers who are in the habit of patronising touts to desist from such act because LASAA’s operation is fully automated and any forged registration will be easily detected.
He urged all registered clients to install the LASAA verifier app on their smart devices to verify the status of registration of their branded vehicles.
The LASAA e-sticker Verification App is a reliable platform that allows LASAA field officers or law enforcement agencies to verify the authenticity of brand publications on automobiles in the state.
With the verifier app, all information regarding the organisation or individual name, plate number (where applicable), brand type, vehicle type and branding type will be displayed seamlessly to verify the authenticity of the sticker.
The platform has been developed to ensure that branded automobiles have authorised stickers and to eradicate any occurrence of falsified brand information
Prince Docemo expressed appreciation to Governor Babajide Sanwo-Olu for his immense support towards the agency’s initiatives while also stressing that clients’ satisfaction is at the heart of the agency’s business.
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