Cheil, Innocean need World Cup than Olympics for boost

By Park Hyong-ki

Will the 2018 PyeongChang Olympics revitalize two local advertising titans?

Word on the street says Cheil Worldwide and Innocean Worldwide are not going to feel the Olympic spirit as much as hoped.

Cheil and Innocean are two of Korea’s biggest ad agencies. They got their owners back to do some pretty creative ad campaigns for a variety of corporate clients, including their biggest shareholders.

Samsung Electronics owns Cheil, whose biggest ad account is Samsung’s Galaxy smartphones. Cheil’s notable clients also include KT, which is promoting its 5G technology for the Olympics.

Hyundai Motor Group Chairman Chung Mong-koo’s children, Sung-yi and Eui-sun, are the biggest shareholders of Innocean. This makes Hyundai Motor Innocean’s biggest client. Eui-sun is Hyundai Motor vice chairman, and his sister Sung-yi serves as an adviser to Innocean.

The two ad giants have been highlighted on and off as beneficiaries of the Olympics since the countdown to the international sporting gala began.

The growing need to promote PyeongChang in the public and private sectors would offset some of the slowdown the two have faced over the past year, some analysts said.

However, broadcasting networks’ protests against executives with close ties to the former Park Geun-hye and Lee Myung-bak administrations, the candlelit protests against former President Park, the political scandal and social conflicts had not been too favorable for companies and ad agencies to promote their products.

Companies are seemingly trying to distance themselves from the PyeongChang Olympics, which have been mired in controversy as the scandal involving former President Park and her close associate unfolded.

Also, the ongoing social unease is too much for the public to care about the Olympics, which have become a political rather than sporting affair between the two Koreas to negotiate terms for Pyongyang to participate in the Games.

Given the circumstances, the two ad agencies of Samsung and Hyundai are expected to perform below expectations in the fourth quarter of 2017. Both will disclose their results soon.

It looks like Innocean’s operating profit will fall 5 percent year-on-year, and Cheil 4 percent.

Analysts suggest Cheil and Innocean are clinging to hope for a revival with the 2018 Russia World Cup.

“Expectations for the Olympics have fallen with the likelihood remaining low for the sentiment in the ad market improving,” said Lee Nam-joon, an analyst at KTB Investment & Securities.

The ad agencies will need a Plan B in case the Olympics fall short of expectations.

And that Plan B would be the 2018 World Cup in Russia.

Innocean has been hit by Hyundai Motor Group’s management-labor dispute.

However, the World Cup and Hyundai’s new cars this year could help the agency’s comeback. Hyundai Motor and Kia Motors usually provide vehicles for the national football team.

“The World Cup and Hyundai’s cars would be a positive factor,” said Lee Seung-hoon, an analyst at BNK Securities.

As the market here tightens, the two giants are aggressively pursuing deals to acquire ad companies with a digital niche.

Last year, Innocean acquired David & Goliath (D&G) in the United States.

D&G is a creative agency that worked on ad campaigns for Universal Studios, HBO and Jack in the Box, according to Innocean.