Why Spending on Digital Remains Very Small in Indonesia

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Indonesia is undoubtedly at the forefront of digital possibilities. The population is dominated by millennials, Internet connectivity is primarily mobile, technology oriented entrepreneurship and jobs are growing, and there is insatiable appetite for anything online from e-commerce to social. The country is full of potentials and opportunities abound in the digital space. So why don’t Indonesian brands spend a lot on digital media?

To illustrate, Indonesian expenditure on digital is 7.3% out of a total US$11.39 billion advertising spend. More mature markets are spending greater proportions on digital with Singapore at 12% and Australia at 38%. Given the size of the Indonesian population and the rate at which consumers are shifting towards digital, that 7% is tiny. Why are brands reluctant to take the plunge to meet their customers online? Are they not convinced by the trend or is the market simply not as progressive as people thought?

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[Graphic from Statista]

Former digital advisor at Carat, Quenten Smith, observed that while the market is seemingly moving towards the increase of digital spending, the facts, however, are pointing in the other direction. Brands in Indonesia are not investing in digital as fast as the users are.

“The Internet media (as of last year) is the second largest touch point to consumers but if we’re to look at every single brand in the market in every single agency, are they spending their budget in digital the same as based on the media touch point, so meaning behind television, is the second budget allocation digital? No, it’s not. It’s still the poor cousin,” he said.

Smith, who left Carat in July, highlighted the likelihood of market inability to grasp the effectiveness of capitalizing digital potential. “I think a lot of [companies] still have very traditional minded people running the brand and they do inevitably what everyone else does and those are TV adverts, print, and radio because it’s easy and that is where they’ve always perceived the audience is”.

He also believes that the supply of skilled professionals contribute significantly in driving the market. It could either propel the market or hold it back. It is something that Indonesia is believed to be lacking and that it may cause the slow growth of digital spending. ”There is a huge shortage, massive shortage in digital talent in the market and I think that it’s another reason holding the market back”, Smith said.

This theory is seemingly spot-on if we look at how lofty digital marketing professionals are being valued, which can be an indication of the scarce supply. Smith pointed out the situation where brands and agencies are vying for these professionals and racing to get them, which explained the over exaggerated value.

“Brands are looking for digital marketers and agencies are looking for seasoned professionals or mid management level digital people. They just don’t exist and what happens is when they do exist, agencies are literally outbidding each other for that talent and paying an exorbitant rate for someone that has a very limited talent, so it’s becoming a cycle now where people with limited talent are getting paid more than they should,” said Smith.

Head of Digital VML Qais Indonesia, Piotr Jakubowski, on the other hand, doesn’t think that the slow growth is caused by lack of digital talents and aptitude in the market. Instead, he attributes the relatively small spending to the lack of definitive metrics to measure tangible returns on investments in digital.

“The biggest challenge isn’t in the question of ‘should we do digital’ but more ‘what tangible return do we get from digital investment“, he said. “How does a brand justify spending $500,000 on a TVC? They see sales and brand health uplift. We need to take the same thinking into digital”, Jakubowski elaborated further.

“It really comes down to return on investments and being able to tangibly justify spending through objective-specific metrics. At a C-suite level, brands don’t care how many fans, or likes, or re-grams received, what’s more critical is, “I invest X and this gives me Y return”, he added.

He also pointed out that digital is a fast-changing environment, which may make it harder to grasp. “The digital ecosystem is amorphous, it takes a new shape almost every day. Yesterday it was Twitter, today it’s Instagram, tomorrow we don’t even know. It is the responsibility of agencies as digital partners to our brands to provide this knowledge and aptitude to the teams that we work with”, he said.

This, ironically, points out to the very fact that Smith argued in the first place. The fact that brands are have yet to fully grasp what marketing digitally is all about and what yield it should deliver. Also that there are not enough digital talents who could comfortably decipher digital into a working marketing strategy.

This lack of understanding often lands agencies in situations where they are forced to adapt steps and strategies to fit the brands’ comfortable go-to space; that is measuring ROI by an outdated set of expectations.

Jakubowski agrees that there may be rooms for improvement in terms of brand aptitude and understanding of digital marketing. Both Smith and Jakubowski saw that it is ultimately the responsibility of agencies as digital partners to mentor their clients and provide knowledge to improve their understanding of the growing and inevitable shift towards digital.

Fonnyta Amran is formerly a travel editor at Female Daily Network. With a passion in traveling and marketing, she previously held a marketing position with Hard Rock Cafe and also at the Singapore Tourism Board in charge of marketing and communication strategies for Indonesia as well as being the editor of STB’s portal, singasik.com.

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[correction: a quote from Piotr Jakubowski cited $5,000,000 TVC figure that’s supposed to be $500,000. This has been corrected]