This is based on the market trend of growth in advertising budgets while reducing the total fleet of advertising constructions in Ukraine andincreasing in direct costs of operators'services.
- Updating the forecast for the development of the media market of Ukraine until the end of 2016, All-Ukrainian Advertising Coalition shows for the outdoor advertising growth of +28% in comparison with 2015 The demand for our media from advertisers is growing: in the 1st half of 2016 the total demand of ad networks is not less than 70 %, and if we talk about popular formats, 3x6 and 1,8x1,2 m— 90% demand and sold-out.
- Increase in demand takes place against the background of processes started in the outdoor advertising of Ukraine about 5 years ago and have just entered the most active phase, namely: the adoption by cities of Ukraine and start practical implementation of new Concepts and procedures of placing of advertising media. Kyiv, Odesa, Dnipro, Lutsk, Rivne, Kamianske (ex. Dniprodzerzhynsk), I.-Frankivsk, Kropyvnitskyi (ex. Kirovograd), Mykolaiv, Zaporozhia — it is not a complete list of Ukrainian cities that actively changing their outdoor advertising. Within these processes there is a reduction of the total number of advertising carriers from 20 to 50 % in the Central areas of cities; the replacement of carriers on modern expensive ones with smaller advertising surfaces.
- These processes entail additional investments from operator for the purchase of new equipment, reconstruction of sites of territories of the city, for work on the production of permits and installation work. At the most general assessments of our company, the cost of upgrading the network according to the requirements of the municipalities in Ukraine amount to tens of millionsUAH per year. The cost of implementing improvement projects at the request of the cities and return on investments are budgeted for in the company and show a need to increase the cost of our services.
- Reducing the amount of advertising inventory, cities, however, do not want to lose payment for the lease of public land for advertising carriers (Uzhgorod, Cherkasy, Kyiv). In this context, from the beginning of 2016 the number of municipalities raised the cost of renting, these figures fluctuate in the range of 20 to 70 % on various formats and in different cities of Ukraine.
- Higher prices for petrol, oil and lubricants (POL) and the growth of utility tariffs directly affect the increase in the cost of servicing advertising campaigns. Fuel for vehicles, electricity for lighting of advertising structures and for dynamic designs such as prisms, scrolling billboards, water, heating — all necessary elements to ensure exposure and advertising campaigns.
- Despite some stability in the exchange rate during 2016, we have to note that almost all manufacturers and suppliers of consumables have raised prices for their products in 2016. To provide Customer the highest quality accommodation, we purchase part of imported materials, and in the cost of advertising campaigns we have to to take into account the increasing prices of necessary products, as well as inflation laid by manufacturers in the cost of the goods.
These and various other components (for example, the rising cost of research and monitoring of outdoor advertising) do not leave OOH operators any choice except to increase the value of their services to change budgets of companies from deficit to profitable.