JAKARTA, KOMPAS — The allocation of advertising spending continues to shift from conventional to digital media. However, a number of parties have questioned unequal treatment regarding tax matters, which mostly favor the platforms belonging to digital technology companies abroad.
Advertising has become one of the sectors affected by the change in the digital economic landscape. The platform, content and business model of advertising has grown and become complicated following the rapid development of over the top (OTT) internet application services.
Existing regulations have not adequately accommodated such developments. Several sources who were asked for comments last week said there was possibility for tax evasion, especially by OTT companies abroad. Transactions on online platforms continue even though several platforms have established a permanent business entity (BUT), which is actually a requirement before running profitable activities here.
Several apps and services categorized as OTT include messaging applications (such as WhatsApp, WeChat, Line and Facebook Messenger), social networks (Facebook, Twitter, LinkedIn) and video/TV streaming services (Netflix, Youtube).
Indonesian Advertising Companies Association (P3I) chairman Janoe Arijanto said that advertising spending in digital media platforms is growing 15 to 20 percent per year. In general, there are three types of mechanisms to advertise on digital media platforms, namely programmed ads (programmatic buying ads), paid sponsors usually on social media and native ads that use influencers.
According to Indonesian E-Commerce Association (IDEA) chairman Ignatius Untung, in the direct selling business model through advertising services, the OTT companies apply transactions like any other ad publishers. The difference is that there are technological features that allow the ads to be distributed to more segmented consumers. Some OTT companies earn revenue through product-subscription models, such as Spotify Premium and Google Bisnisku.
Regarding tax matters, IDEA encourages equal treatment. There are a few foreign OTT companies that have not been taxed because the transaction is digital and the company is not in Indonesia.
Keep growing
Amir Suherlan, lead of Indonesian operations for Mindshare, a global advertising company, said advertisements on digital media platforms, both OTT and online mass media, is highly segmented. That means the content and platforms are varied.
Media agents or advertising agencies play a role in managing their client’s advertising budgets. They usually have accounts that are connected to the publisher\'s system, especially OTT companies, thus facilitating the release of text ads on Google search engines or video ads on Youtube.
Regarding the “costs per number of targeted people”, television advertising is still the first choice of the advertisers, then digital ads in second place. However, according to Amir, the costs per number of targeted people through digital media is more efficient and affordable. The results are even more measurable and segmented.
"With their [OTT’s] technology, the media agencies or advertising agencies can choose to have ad content displayed across countries or only in certain cities. As with other media publishers, the brand owner clients pay to us, then we pay to them [OTT]. The transaction process is normal," he said.
Advertising spending on television, print and radio continued to grow positively in the past three years despite slowing growth. Media Business Nielsen Indonesia executive director Hellen Katherina said that advertising spending on television, print and radio grew by around 8 percent in 2016 to 2017, while from 2017 to 2018 it grew by around 4 percent.
Based on Nielsen Indonesia data, the total national advertising expenditure for commercial goods reached around Rp 136.99 trillion in 2016, then rose to Rp 148.07 trillion in 2017 and increased to Rp 153.41 trillion in 2018.
"This situation shows that advertisers are still actively advertising in the conventional mass media. Advertising expenditure on television is the biggest contributor to total ad expenditure on the national level," he said.
During 2016-2018, there were several categories of goods or services with the highest expenditure value to conventional media, namely government agencies and political organizations, online services, hair care products, cigarettes and facial care products. (MED/KRN/JUD)