Controversy in Outdoor Advertising Is Nothing New in Unorthodox Russia

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News that a Russian outdoor-advertising company formerly owned by Rupert Murdoch might have paid bribes to obtain favorable contracts brought me back to when I was in Moscow five years ago and had a front-row seat to how deals are done over there.

Well before the current scandal, JC Decaux had riled up local outdoor players in Moscow.
Well before the current scandal, JC Decaux had riled up local outdoor players in Moscow. Credit: Harry Engel/Getty Images
I went to Russia to cover the Worldwide Advertising Forum, which attracted more than 3,000 ad people, academicians, students and foreigners over the course of five days. The nonstop sessions covered broad international advertising issues but kept returning to Russia's love-hate relationship with ad persuasion.

As the head of the Russian chapter of the International Advertising Association explained it, today's Russians are influenced by two great traditions: the czars of the 18th century and communism. They both operated under the assumption that "your confusion is my victory." So yes is no and black is white, he told me.

I should have realized that black was white when I accompanied Russian advertising leaders to thank Moscow Mayor Yury Luzhkov for his support of the ad forum. We were all seated around a long table when suddenly and without preamble the French outdoor mogul Jean Francois Decaux offered the mayor $200 million to provide free toilets and bicycles to the city in exchange for prime outdoor signs in downtown Moscow.

The offer, along the lines of the one already up and running in Paris, I now realize didn't make sense for Russia, yet it created an uproar from the local outdoor firms. Moscow was already overrun with billboards. (As part of the deal, Mr. Decaux said he'd clean them up, but why did Moscow authorities need him for that ?) And the city's long winters and heavy snow wouldn't leave much time for bike riding, as the mayor himself observed.

But a bigger question was why did Mr. Decaux explode his bombshell in a forum attended by local outdoor execs? A French colleague of Mr. Decaux said he had planned to make his pitch to the mayor in private but because of the mayor's busy schedule he impulsively decided to make his proposal at the gathering.

The Russians are a dramatic people, and the bicycles-for-billboards offer plunged the outdoor people into despair. They considered the lavish proposal, at least at first glance, to be preemptive, and one outdoor man told me, "For most companies here there is no reason to continue. We don't have a private plane, we don't have villas in Europe, we can't promote ourselves in front of officials in city hall," the executive lamented.

He and other Russians in the outdoor industry suspected that Vladimir Makarov, then chairman of the committee for advertising, information and design for the city of Moscow and head of the organizing committee for the advertising forum, had greased the wheels for Mr. Decaux to make his pitch. Mr. Makarov said he knew in advance that Mr. Decaux was going to make his offer to the mayor, but he added that he thought the proposal was "inappropriate."

Mr. Makarov asserted that there would be "fair bidding" for the billboard deal, with not only Russian outdoor companies but also larger, well-heeled Russian firms without ties to outdoor. He indicated that Mr. Decaux's chances in such a bid would not be good, even though the Decaux company had bought a Russian outdoor firm called Big Board.

I met with Mr. Makarov the next year at the IAA conference in Washington, and he told me the competition would include Mr. Decaux's firm, JC Decaux; the Russian operations of two U.S. companies, Clear Channel and News Outdoor of Russia; and companies with no outdoor experience, such as Gazprom Media, part of the huge Russian energy company. But at the same time, he said, the Moscow government was moving ahead with plans to reduce the number of billboards in the city center -- the location that Mr. Decaux was most interested in. He added that News Outdoor had pledged to match Decaux's $200 million offer so there was "no problem" in financing the project, especially with Gazprom in the mix.

Since then, however, several events have transpired that make the project go from "no problem" to highly problematic -- Rupert Murdoch's News Corp.sold off its 79% stake in News Outdoor of Russia; Vladimir Makarov, the man who arranged for Mr. Decaux to make his presentation to the mayor of Moscow, was fired from his job as Moscow ad boss, arrested and sent to jail (he has since been released); and the mayor, Yury Luzhkov, was fired.

These developments were seemingly unrelated to billboards-for-bicycles (but who really knows?).

If JC Decaux's plan was to put the Russian billboard market up for grabs by boldly announcing its $200 million offer, it certainly succeeded -- even if the scheme itself failed. And now the FBI is said to be investigating the former Murdoch unit, News Outdoor of Russia, for possible bribery, as part of a broader probe into the U.K. News of the World hacking scandal and how that might affect its U.S. business.

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