Operating Profit 84.6 Billion KRW · Sales 971.4 Billion KRW
Expanding Digital Investment, Exploring New Overseas Markets
Management Policy Expected to Continue in Second Half
In the second quarter of this year, Cheil Worldwide focused on expanding its digital-centered workforce and attracting new overseas clients. As a result, it succeeded in expanding its client base beyond the traditional European market to non-affiliated companies in North America and China. However, operating profit slightly decreased due to increased selling and administrative expenses from expanded investments.
According to Cheil Worldwide on the 27th, operating profit for the second quarter recorded 84.6 billion KRW, a 3.79% decrease compared to the same period last year. During the same period, sales were 971.4 billion KRW, down 0.51% from 976.4 billion KRW in the previous year. Net profit for the period rose 6.37% to 65.2 billion KRW from 61.3 billion KRW in the same period last year.
Cheil Worldwide Photo by Cheil Worldwide
Industry insiders evaluate that Cheil Worldwide chose "one step back for two steps forward." Since the beginning of this year, Cheil Worldwide has aggressively expanded its overseas digital business in areas such as dot-com and e-commerce, focusing on acquiring new clients. As a result, digital business accounted for 54% of Cheil Worldwide’s gross profit in the first half of this year, an increase of 51.8% compared to 28% in 2015. Conversely, ATL (Above The Line) advertising through traditional platforms such as TV, radio, and newspapers decreased by nearly half, from 30% in 2015 to 16% in the first half of this year. While large corporate advertisers still tend to prefer traditional media like TV and radio, insiders explain that startups, which need to strategically increase awareness targeting specific ages and genders, tend to prefer digital platforms much more.
However, despite meaningful results, increased investment in digital-centered personnel led to higher selling and administrative expenses, resulting in a failure to defend operating profit. Cheil Worldwide’s labor costs in the second quarter rose 12% to 244.9 billion KRW from 218.2 billion KRW in the same period last year. This was due to a significant increase in domestic and overseas personnel focused on digital since the end of June last year.
In the second half of this year, Cheil Worldwide plans to maintain its management stance of expanding digital service areas while focusing on developing new advertisers. However, to strengthen internal management, it will work on streamlining selling and administrative expenses and reorganizing the organization to manage risks.
A Cheil Worldwide official said, "In the first half of this year, Cheil Worldwide invested generously in digital business to discover new overseas clients, and as a result, partnered with new growth companies in healthcare and leisure centered in North America and China," adding, "Despite the unfavorable business environment due to the global economic downturn, the internal consensus is that we 'held our ground' well."
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