South Korea

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The first modern Korean advertisement, a newspaper ad, appeared in a government gazette in 1886 and was placed by Edward Meyer & Co. (Sechang Yanghaeng in Korean), a German trading company active in Korea. The ad, entirely in Chinese characters, appeared in Hansung Chubo, a government weekly, and consisted of a list of the goods Edward Meyer & Co. imported to and exported from Korea.

It took another 10 years for Korean advertising to really develop. Phillip Jaisohn, a Korean-born medical doctor who had become a U.S. citizen, returned to Korea and established the newspaper Independent (Tongnip Shinmun in Korean) in 1896. It was the first commercial newspaper in Korea and was published in Korean and English three times a week with a few ads in both languages.

Another bilingual newspaper was Korea Daily News, established in 1904 and published until 1910, when Japan annexed Korea. By that time, more than 50% of the total space per issue was taken up by ads, predominantly for pharmaceutical products, books and schools.

The period from 1886 to 1910 saw tremendous development not only in the volume but also in the sophistication of advertising in Korea, and Western ad practices prevailed as far as the rate structure was concerned.

Japanese annexation

On Aug. 29, 1910, Japan annexed Korea. After that, a host of Japanese-language dailies and magazines prospered. Modern printing facilities were introduced, and the size of newspapers was standardized to that of the present day.

Following the nationwide uprising against Japanese colonial rule in 1919, Japan adopted what was called the "cultural policy." Two Korean-language newspapers—Chosun Ilbo and Dong-A Ilbo—were given permission to publish in Seoul, and these became the major venue for advertising. From 1920 to 1945, Korea enjoyed a period of growth and expansion.

Classified ads were introduced in 1921. Not only did the rate structure follow the Japanese style, but so did advertising practices. Each advertiser had a secretly arranged rate with the media, and this became an accepted practice. During the 1920s, Dentsu, the leading Japanese advertising agency, began to emerge as a leader on the Korean media scene. By 1925, Japanese ads exceeded 50% of the total space of the two vernacular dailies, reaching around 65% by 1935. Reliance on Japanese ads became so complete that the newspapers established branches in both Osaka and Tokyo.

Advertising in Korea reached a peak by the mid-1930s, however, and revenue declined after Japan invaded China in 1937. The two Korean-language dailies were forced to close in 1940, leaving only the government organ and a host of Japanese-language dailies.

South Korea in partition

Korea was liberated in 1945 and the occupying powers—the U.S. and the Soviet Union—began the work of creating an independent and united Korea under United Nations supervision.

The powers agreed on troop withdrawal, but the Soviet Union opposed UN involvement in elections. United Nations-sponsored elections were held in the south in 1947 and resulted in the formation of the Republic of Korea, with legal (but not de facto) authority over all of Korea. The U.S.S.R. then formed the People's Republic of Korea in the north, dividing Korea under two different economic systems, with a controlled economy in the north and a regulated capitalistic system in the south.

The Korean War broke out in 1950 and lasted until 1953. With recovery from the war, what was then South Korea saw the birth of a commercial TV station in 1957 along with the introduction of TV spots, although those consisted only of slides. Commercial radio arrived in Korea in 1959, but its impact was minimal.

Ad agencies were not widely accepted by Korean advertisers, which had become accustomed to dealing directly with the media in the Japanese colonial period. In 1958, the Korea Public Relations Institute was established to perform agency functions, but the media were slow to recognize agencies. In the mid-1960s, two Americans, Karl L. Bruce and John C. Stickler, established agencies in Korea. The agencies were Impact and S/K Associates, respectively, and their major clients were foreign advertisers such as Bank of America, Shell Oil, SAS, Thai Airways, Pepsi-Cola and Japan Airlines.

For practical purposes, however, there was no viable agency business in Korea until 1968, when Coca-Cola and Pepsi-Cola entered the market. With Coke and Pepsi, Korea saw the arrival of such marketing tools as route sales, ad campaigns, ad agencies and research.

Manbosa Advertising was established the following year with investments from Dong-A Ilbo and Oriental Brewery. It was the first modern ad agency in terms of organization, staff and billing. In 1975, Manbosa merged with Hapdong Advertising to become Oricom, a house shop for Oriental Brewery. Cheil Communications, financed by Samsung Business Group, was founded in 1973.

In the 1980s, Korean conglomerates rushed to form in-house agencies. The dominance of in-house agencies is one of the unique characteristics of the Korean ad business. The practice lured the media into providing Korean agencies with financial backing in return for equity.

Phenomenal growth

A phenomenal growth in the economy and in advertising began in 1968, when ad expenditures were a meager $32.7 million; by 1987, the figure had risen to $1.2 billion. Advertising as a percentage of the gross national product doubled to around 1%.

Two dramatic media changes occurred in 1980 and '81: the switch from to color TV from black-and-white TV and a series of mergers and consolidation.

After a series of forced mergers and closures, Korea Broadcasting Advertising Corp., a government regulatory agency, was established in 1981 to handle ad sales and agency recognition for the broadcast media.

Of the eight agencies fully recognized by Kobaco since 1982, only two were independent. The remaining six were launched either as spinoffs from in-house ad departments or were previously house agencies. Total billings of the 12 agencies in 1987 were around 60% of all ad expenditures in Korea.

Political liberalization characterized Korea after mid-1987. Freedom of the press was re-established, and the advertising market was also liberalized, prompting the entry of multinational agencies into Korea. A trend toward mass media deregulation continued to stimulate the advertising industry.

Seoul hosted the Summer Olympics in 1988, and Korean agencies actively participated in the Olympic-related promotions. Imported cigarettes were allowed to advertise, under certain restrictions. Color TV sets dominated around 80% of the market by 1988 and provided a boost to the local economy.

Also that year, foreign agencies for the first time were allowed to establish joint ventures with Korean shops by acquiring equity. Backer Spielvogel Bates Worldwide and Ogilvy & Mather entered the market by forming joint ventures with Diamond, owned by Hyundai Group, and Korad, owned by Haitai Group.

On Jan. 1, 1991, the Korean advertising market was completely liberalized, allowing foreign agencies to do business in Korea. J. Walter Thompson Co., DY&R (a Dentsu- Young & Rubicam joint venture), Bozell, D'Arcy Masius Benton & Bowles, Saatchi & Saatchi and Burson-Marsteller established offices in Seoul.

The 1992 presidential election was another bonanza for the industry; although the number of broadcast spots was limited, Korean election law permitted campaign-related spots on TV for the first time.

With continuing liberalization of Korean investment and trade regulations, Korea became one of the fastest-growing markets in the world, presenting tremendous opportunities to international marketers. The role of international products in the Korean market increased substantially. The 1995 opening of Korea's retail market further boosted the presence of foreign advertisers.

The South Korean economy experienced a foreign currency crisis late in 1997, and, as a result, came under the supervision of the International Monetary Fund. However, due to the rapid recovery of domestic production, consumer spending was robust.

PDS Media, the first media agency in Korea, was established in July 1999 through joint ventures with Starcom (a unit of Leo Burnett Co.), Phoenix Communications and Dentsu. In November 2000, McCann-Erickson announced that its worldwide media unit, Universal McCann, under the name Universal McCann Korea, would commence operating in Korea.

In 2001, Cheil Communications was the leading agency in South Korea with gross income of $142 million and billings of $796 million. It was followed by LG Ad with gross income of $67.6 million and billings of $492.4 million; Diamond Ad, $36.7 million and $339.2 million; Daehong Communications, $30.1 million and $238.4 million; and TBWA/Korea, $24.9 million and $206.3 million.

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