There was a time, not too far back, when South Africa’s primary advertisers weren’t all that interested in placing spend on minibus taxis. Their argument was that the medium had a negative effect on brand image. “If it wasn’t for that,” says ComutaNet managing director Ken Varejes, “taxi advertising would be a lot bigger than it is today.”
The remark begs an obvious question. Exactly how big is taxi advertising today, then? Although the medium has matured fast Unilever and other brand leaders have subsequently recognised an inherent ‘awareness’ value in the offering [see graph] in pure adspend terms it remains one of the most enigmatic in the media industry. Neither ComutaNet, the dominant owner in the space, nor GMR Transit Media, their major competitor, currently submit revenue figures to AC Nielsen’s Ad Index. And neither will Varejes or Jason Druian, CE of GMR’s parent Altmedia, get specific on stuff like income, expenses or margins. The best one can do is the Primedia 2002 Annual Report, where the only information available is that operating profit before depreciation for the conglomerate’s commuter media division came in at R11 million (the figure includes ComutaNet as well as “recently launched” Rank TV and Rank Branding).
Speculatively, there could be a simple reason for such reticence. This is a market with plenty of scope. There are around 5,000 branded taxis in the country, which accounts for less than 6 percent of the Department of Transport’s estimate on the entire minibus taxi fleet (130,000). So, if the numbers became widely known, wouldn’t a whole lot more media owners be clamouring for a slice of the cake?
As far as Varejes is concerned, the observation is ‘interesting’ but not entirely accurate. He intends to submit his figures to Ad Index within the next six months. The upside, he says, is that “marketers would then see how much their own competitors are spending on taxis.” He also knows that the barriers to entry belie the opportunities.
By all accounts, the minibus taxi industry is still struggling to uproot itself from its home in the ‘wild west’ badlands of South African transport. It has a history of violence and under-regulation, is characterised by over-supply, and contributes inordinately to the country’ s road-death statistics. The Department of Transport’s taxi recapitalisation programme, first envisaged in 1999 as a project to replace 85,000 decaying minibuses with safer 18-35 seater vehicles, is now only scheduled to kick off later this year. One of the major delays was caused by the rival taxi organisations, who spent the whole of 2001 forming a coherent voice with which the government could negotiate. These, of course, are the same organisations with which media owners must negotiate for advertising rights.
Evidently, relationships with the relevant authorities are an important part of success in this sector. ComutaNet have been at it since 1987, when Allan Prentice resigned as managing director of Gallo Music to form Star Taxi Music, a legal tape pirate system that pays royalties to musicians and distributes through national and regional taxi networks.
Varejes joined Prentice in 1993, the year the company started selling external advertising on minibuses and changed their name to TaxiNet. By 1994 they were offering a full external branding service (achieving good results with Coca-Cola), and in 1996 were bought out by Primedia. A year later having secured the right from Metrorail to sell advertising on trains, which brought about the second name change to the current ComutaNet they met their first competitor in the taxi arena.
Incidentally, for a few years up until the abovementioned events in ’97, the GMR boys had the monopoly on train advertising. The loss thereof gave GMR the impetus to break ComutaNet’s own monopoly on taxis.
“We had exclusive concessions with Metrorail,” explains Druian. “When it expired and went out to tender the concession was given to an additional party. If that hadn’t happened, I don’t think we would have been as aggressive about pursuing [taxis]. In that threat we saw an opportunity, and we took it.”
GMR didn’t waste any time getting into the taxi market. Within three months of making the decision, they had sold their first campaign to Nestle brand XXX mints, an existing client in their train portfolio. But neither did they waste any time running into credibility problems.
“Our competition at the time had no qualms about questioning our infrastructure,” says Druian. “In fact, they still do.”
To overcome the concern, a deal was signed with Corpcom in 1998 for 49.9 percent of the company (subsequently taken over by Clear Channel Independent in 2001). Druian says the operational significance was that GMR had the luxury of developing its own network while leveraging off the infrastructure of the biggest outdoor company in the country.
Addressing any credibility issues that might remain, divisional managing director Andrew Kramer says: “The market is not stupid. Either we’ve hoodwinked the whole industry, or something is wrong with their claims. How come massive multinationals like Nike, Nestle, Unilever and Siemens are giving us their budget and, in many instances, have been doing so for years?”
Fair enough. So what about market share? GMR maintain they have 35 percent of the available taxis and 45 percent of the campaigns. Varejes says he has 3,800 taxis (out of the total of 5,000) and 95 percent of the broader ‘commuter’ market, which includes products like Star Taxi Music, Commuter FM and Rank TV. Given the uniqueness of the latter, he also insists he has no “real competitors” in the space. (Naturally GMR dispute this, given their broader commuter market products in the form of rank and station promotions and branding).
Suppose all the bickering is to be expected. These guys are in taxis, after all. But it’s also a bit irrelevant. Underneath the secrecy on the numbers, the negotiations with taxi owners, the carping about credibility, infrastructure and market share, there’s a strong sense that both companies have put back more than their share.
Amongst other social responsibility projects, ComutaNet have paid R30 million since 1993 to various taxi associations (monies earmarked for upliftment of the associations), they are involved in an AIDS information initiative across 20 ranks, their Rank TV product carries important public service announcements to sectors that don’t have access to traditional media. Similarly, GMR have a taxi upliftment fund that allocates a portion of adspend directly to the associations and the community, they have a Code of Conduct that undertakes to clean up the industry wherever possible, and they have proven (through donations) their seriousness about road safety and driver education.
As for the advertisers, it’s a matter of appreciating the inherent value of a medium that can reach around 18 million consumers in a week [see graph]. It seems the initial reluctance is fading. Like Varejes asks: “If a Coca-Cola taxi cuts you off on the road, would you never buy Coke again?”