“We are talking about restoring order” – Newspaper Kommersant No. 144 (7345) of 08/10/2022
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In Russia, it is planned to create a single operator of digital advertising structures and announcements, the relevant amendments to the federal law “On Advertising” have already been adopted by the State Duma in the first reading. Like any initiative of this magnitude, it caused a huge resonance both in the professional society and among ordinary citizens, including those employed in the outdoor advertising industry. Of course, there are both supporters of the idea of creating a single operator, and opponents, whose arguments often take society into an openly speculative plane. The most common of them is that the bill destroys the outdoor advertising industry through monopolization. In fact, we are talking about restoring order, bringing the industry out of the gray zone and legalizing all its participants, primarily in the regions.
The current situation in the outdoor advertising market is somewhat reminiscent of 2012, when the Moscow Department of Media and Advertising, under the leadership of Vladimir Chernikov (and then Ivan Shubin), adopted new rules for outdoor advertising in order to rid the city of banner banners and advertising on construction nets. At that time, outdoor advertising operators also perceived the reform of the industry with hostility, but the further transformation of the appearance of the capital only confirmed the correctness of the measures taken.
During this time, the industry has continued its development. According to the Association of Communication Agencies of Russia, the volume of the Russian advertising market in 2021 reached 578 billion rubles, with a year-on-year growth of 22%. At the same time, the growth dynamics of digital advertising media in the OOH (Out-of-Home) segment compared to 2020 amounted to a record 69%.
But if in the capitals and largest regional centers the digital advertising business is structured and more or less transparent, then real chaos is happening on the periphery. Advertising structures are used without permission for installation and operation, the state does not receive income in the form of taxes. Responsibility for the content lies with the supervisory authorities, but, in fact, there is no operational control mechanism to prevent the dissemination of illegal content on digital advertising structures. It was from these considerations that the idea of creating a single operator was born. In fact, we are talking about creating a new product: on a solid foundation and with coverage throughout Russia. A single portal will be created based on best practices, based on modern software, it will become a super-inclusive media resource with a potential audience of 80 million citizens. Contact with the audience will be simple, convenient (the principle of one window) and safe, because it will be controlled by the state. Fraudulent schemes and the participation of legal entities from unfriendly countries will be excluded. In addition, the creation of a single operator stimulates the transition from analog to digital designs.
What is the misunderstanding of the essence of the bill based on? Let’s take a look at specific examples.
Monopoly will not
Outdoor-operators assure that the adoption of this bill “will cause the bankruptcy of several thousand small businesses and the dismissal, according to various sources, from 20 thousand to 150 thousand highly qualified employees”, but these figures are deliberately overestimated. No more than 11-12 thousand people work in the outdoor advertising industry. At the same time, about 2 thousand people work at Russ Outdoor, about 900 at Gallery, these are key players, their market shares for 2021 are 40% and 17%, respectively. Combining digital structures into a single infrastructure will increase the effectiveness of advertising, the convenience of its placement and the volume of the audience covered, will allow you to quickly track the content posted and, on the contrary, can become an excellent tool for the development of small and medium-sized businesses.
One of the biggest fears of the opponents of the bill is that it will lead to the destruction of the outdoor advertising market in Russia through monopolization. But the creation of a single operator does not at all exclude the possibility of direct interaction between distributors, customers and advertisers, which destroys the widespread myth about the redistribution of the market. All contracts for the installation and operation of advertising structures in the field of outdoor advertising are urgent (that is, they are concluded for a certain period), and bidding will continue to be held.
Municipal authorities will be able to replenish budgets and receive additional profit by installing single operator structures in addition to previously concluded contracts, under which they will continue to receive payments. Also, the authorities will be able to bid for the conclusion of contracts for the installation and operation of both static and digital advertising structures with other operators. The bill does not change the existing regulation, but only defines a separate legal regime for the placement of advertising structures of a single operator, which does not affect the rights of municipalities. Advertisers and owners of advertising structures will be able to work as before, and the software for broadcasting digital outdoor advertising will now be completely free for them.
A single operator will install new structures on the streets and in transport without affecting the positions of current players: municipalities have rules for installing advertising structures that determine the distance between them – from 50 m to 150 m. Billboards and city boards will appear even in those regions where they used to be It never happened. This again guarantees new revenues to the budget.
Opponents of the bill ignore the fact that a non-state company will become a single operator and its activities will be closely monitored by the Ministry of Digital Development and the Federal Antimonopoly Service. And also the fact that what enormous financial costs fall on the shoulders of this company, how much work remains to create infrastructure in the regions, to develop and maintain a media platform and ensure the information security of this resource and all digital media. Now 25-30 cities are economically attractive for the digital outdoor advertising market. The task that the unified operator will face is to cover all the constituent entities of the Russian Federation, even those where there is currently no digital outdoor advertising, to install structures there without violating the requirements of local municipalities and the interests of players operating in the region.
As already mentioned, there are a number of cities where the vast majority of structures are used without contracts for installation and operation, and therefore without proper control. Among them are Barnaul, Irkutsk, Sevastopol. In Astrakhan alone, about 1,500 illegal advertising structures have been dismantled since the beginning of the year. In many cities of the country, the proportion of such structures ranges from 30% to 90%. The creation of a single operator will force all market participants to pass verification. There will be no anonymous or shim companies left, which will balance the industry by pushing out numerous illegal schemes from it, which will ultimately lead to lower prices for placement, and will also allow to nip the problem of the appearance of advertising in the style of “pull out the eye” by simply preventing such layouts for installation. Finally, the adoption of the draft law will balance the social advertising market, which is currently operating on a residual basis. Combining advertising digital structures into a single infrastructure will increase the effectiveness of social advertising, the convenience of its placement and the volume of the audience covered throughout the country.
Information security is paramount
Another key task of a single operator is to prevent the leakage of personal data from the platform, protect inventory from cyber attacks and ensure compliance with the law. The Russian market for digital advertising services has become dangerously dependent on Western technological influence. This problem has become especially acute in the context of the ongoing sanctions pressure.
In this sense, it is extremely important that the legally unified operator will be a 100% Russian company. In addition, it will work on domestic software, the security requirements of which will be developed and established by the Ministry of Digital Development. This reduces the risks of hacker attacks and the consequences of endless bans and departures of foreign IT giants. Thus, one of the most authoritative English-language publications on digital marketing, Sixteen:Nine, published an open letter calling on hackers to hack into the IT systems of Russian billboard owners and display appeals in support of Ukraine on them.
In the regions themselves, there is already a reasonable fear of hacking the security systems of outdoor advertising operators. For example, on Victory Day in Rostov-on-Don, operators turned off all advertising structures with electronic image change. With the creation of a single operator, the state will have a mechanism for controlling the object of advertising, that is, the content that goes to the mass consumer. Now there are no guarantees that, for example, extremist appeals will not appear on the screen.
It should be noted that the bill affects not only digital advertising media, but also portals with ads, such as Avito or Yula. A single ad portal is needed to get rid of various kinds of fraudulent schemes. Often a potential buyer or seller becomes a victim of fraud, and not everyone goes to the police. In addition, on these sites you can often find frankly counterfeit or stolen products. There are over 200 groups operating on the black market that steal money from users through websites with ads. Not only funds from electronic wallets, but also other personal data can be lost.
It should be noted that, according to a recent study by VTsIOM among citizens aged 18 and older, the initiative to create a single Russian service for placing ads on Internet services is positively assessed by 54% of Russians. According to 62% of citizens, the state needs to control such a resource.
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