The white-hot growth powering Indonesia’s TV ad market is shifting down a gear, as intense competition between FMCG brands – the biggest spenders on TV – starts to ease.

While television inflation levels – estimated at 16% this year by media agency Mindshare, remain higher than advertisers would like, they are significantly cooler than the 25-35% rates they endured over the last three years, when space on the most popular channels frequently sold out.

“2010, 2011 and 2012 were exceptionally great years for broadcasters,” says Himanshu Shekhar, CEO of Mindshare Indonesia

“2013 will be a good year, but not an exceptional one,” he adds, speaking to Media Business Asia.

Growth trajectories for Indonesia’s ad market are among the highest in Asia, supported by solid underlying economic trends.

In 2010 however, media inflation rates for TV picked up significantly, thanks to sharp spikes in spend by multinational advertisers across multiple FMCG categories, shaking up sectors where there had been relatively little brand competition before.

From reach to awareness

Those category battles are starting to subside, Shekhar notes, and brand managers are recalibrating their prior focus on reach and awareness, which favors TV, in favor of a broader marketing strategy.

In a similar vein, telecoms brands – another significant inflation driver, although a smaller spender than FMCG as a whole – had already started to spend less on TV over the past one to two years, as mobile markets became increasingly saturated.

This prompted telcos to reconfigure media plans around user loyalty rather than reach, to sustain revenue momentum.

As a result, the category’s share of TV ratings sank by a third from 2010 to 2012.

“New players were entering the market, telecom was exploding and FMCG was really going through the roof,” Shekhar says.

“Now, over the last six to nine months we have seen those trends where FMCG has become normalized.

"Telecom has completely gone down. That’s bad news for broadcasters.”

Moderating competition

Ongoing global uncertainty has instilled a degree of caution among multinational brands region-wide, and there are some signs that competitive intensity in Indonesia’s FMCG sector started to moderate last year, when Procter & Gamble’s ratings share went down for the first time in five years.

Unilever however, the biggest advertiser in the market, continued to grow its overall share of voice. Nielsen figures show FMCG’s overall share of TV ad spend scaling up from 63% in 2010 to 66% in 2011, and to 71% in 2012.

TV remains an integral part of people’s lives in Indonesia, ensuring its place on the media plan and the vitality of the broadcast sector as a whole.

Nonetheless, pressure for guaranteed ratings measures in ad deals is starting to grow again, while TV ratings targets are becoming harder to meet.

Reach among younger viewers, a key target for advertisers, is declining according to Nielsen: from 64.5% in 2010 to 60% in 2012 for 15 to 24 year-olds; and from 67.5% to 63% for 25 to 34 year-olds.

Provincial channels, in Bandung and Banjarmasin in particular, are also nibbling at audience share, claiming a 3.2% of TV viewing in 2012, edging up from 2.5% in 2010.

Broadcast power

Broadcasters, however, remain in a strong position.

Average daily viewing time remains high, at four hours and forty minutes.

At the same time, ratings data shows that viewer loyalty to particular programs is rising, including some with low ratings overall.

This trend reflects increased investment in content and production values as broadcast groups reinvest the rewards of recent bumper years.

It also provides another measure to demonstrate audience value, especially for sponsorship and product placement deals, for channels that have carved out distinct offerings.

“Competition is becoming very steep,” notes Irawati Pratignyo, MD of media for Nielsen Indonesia.

“You get more loyal audiences if your differentiation is clear. That is becoming more important for broadcasters, to define who they are.”