Advertising industry optimistic about 2010

The multi-media advertisement sector is increasing spending on new services offered by the digital world. CFP

On a chilly November day in Beijing, Chinese entrepreneurs and their representatives braved freezing temperatures, swarming China Central Television (CCTV) headquarters to spend tens of billions of yuan for prime-time advertising slots next year.

Several CCTV celebrity presenters helped announce the auction results. Near the end of the day, one auctioneer nearly lost his voice, but still he kept shouting for higher bids.

The national broadcast giant raised bids totaling 10.97 billion yuan in about 13 hours. This year's bids were the highest in 16 years, up 18.5 percent over last year's 9.26 billion yuan.

Industry insiders said the 2010 CCTV Prime Advertising Resource Bidding results were not only a strong sign for the country's economic recovery, but also good news for China's advertising industry.

Economic meltdown

"Advertising budgets really suffered last year because of the financial crisis," said Nick Brien, president and CEO of advertising giant Interpublic Group's Mediabrands.

He said the sharp pullback in consumer spending internationally had forced companies to adjust by cutting global advertising expenditures by 10 percent to 15 percent this year.

However, a survey conducted by Beijing-based CTR Market Research showed that advertising spending in China grew by 15 percent in 2008, reaching 441.3 billion yuan.

CTR predicted a 5 percent to 8 percent rise in 2009.

Since early this year, companies have tightened their purse strings due to the global economic meltdown.

A survey by ACNielsen showed that most advertising clients the company surveyed in Asia would curtail their expenditures in 2009, and that one-fourth would slash their budgets by more than 20 percent compared with 2008.

But Brien said some sectors seem to be robust, such as value-based retailers and food companies.

Xia Hongbo, director of CCTV's advertising department, said household products and construction materials are the fastest-growing sectors in terms of advertising expenditures.

The value of bids by each of those sectors for prime time TV slots in 2010 increased 200 percent year-on-year. Bids from the home appliance segment increased by 80 percent, and auto industry sector bids increased by 70 percent, he said.

Companies that aggressively bid for airtime are mainly from sectors closely related to people's livelihoods, such as home appliances, healthcare, and food and beverages, said Yao Jinyuan, chief economist of the National Bureau of Statistics.

Li Guangdou, an advertising industry expert, explained that, psychologically, consumers' decisions on purchases of household products are easily influenced by advertising, so advertising effectiveness for these products is relatively higher.

"But that doesn't apply to products such as real properties, for example," Li said.

Optimism

International advertising agencies are optimistic about China, regardless of the state of the global economy.

Buoyed by government stimulus measures, Chinese consumers keep shelling out large sums of money on showy purchases.

The National Bureau of Statistics reported that China's retail sales increased in real terms by 15.3 percent in the first 10 months of 2009, year-on-year, which is at least 2 percent higher than that in the previous nine-month period.

According to a recent survey by ACNielsen, consumer confidence in China in the last quarter reached its highest level since mid-2007, driven by a strong improvement in local job prospects in western China and second-tier cities, as well as personal income increases across the country.

"China is a growth engine for many advertising companies domestically and internationally for the long term, so there is tremendous optimism here," Brien said.

"As increasing numbers of international clients are making China their priority and expanding their business in China, numerous opportunities are being created for advertising agencies like Mediabrands, which makes China our priority, as well," he said.

But Brien added that he does not see signs of recovery in the advertising market globally.

"I feel like we hit bottom by the middle of 2009, but I don't think ad budgets will come back right away," he said.

A digital world

Brien said the financial downturn has put pressure on all advertising agencies to demonstrate better value to their clients. "In that way, the professional standards of the advertisement industry have improved, which is a good thing," he said.

Zha Wei, vice president of FilMore Media, said technology has also transformed the advertising industry. Consumers have experienced tremendous lifestyle changes, as they spend more time with the Internet than with television and newspapers.

With the continuous growth of digital media and emerging technologies, consumers, especially younger generations, are changing the way they think about the media, Brien said.

Brien said companies will take their advertising money out of traditional TV commercials and direct their spending to website advertisements. Or they will abandon a newspaper ad campaign to spend on targeted text ads on mobile phones, he said.

Neil Ducray, managing director of Touchmedia, China's largest in-taxi interactive media company, said there are fewer advertising dollars in the market, and most advertisers are looking for a measurable return on investment (ROI).

"It is a huge opportunity for Touchmedia, since everything consumers do with their screens can be precisely measured," Ducray said.

In Beijing, Shanghai, Guangzhou and Shenzhen, cities in which Touchmedia operates, there are more than 10 million taxi passengers a day. About 89 percent of those passengers are interested in their backseat screens, according to the company's surveys.

"So in tough times, when advertisers were feeling harder hit and reducing their budgets, we had more clients, and they were spending a higher percentage of their budget with us," Ducray said.

The new media landscape is going to redefine marketing, Brien said, adding that with booming business from the Internet search engines and social media, advertising agencies are embracing a digital world.

Analysts estimated that the digital media market in China will grow between 30 percent and 40 percent during each of the next three years to surpass 300 billion yuan by 2012.

Since 2008, companies like Coca-Cola, Procter & Gamble (P&G) and China Mobile have been investing more advertising money in digital media advertising platforms, said Zhou Haiquan, a senior analyst with Analysys International.

"We're striving to invest in new technologies, because this is where you will find our clients and also where our clients can find consumers," Brien of Mediabrands said.

"The key for advertising agencies to survive or succeed depends on how they operate in a digital world," he said.

In February, subway digital media operator Digital Media Group attracted $30 million in investments from the Shanghai-based Gobi Fund and the international investment group Oaktree Capital Management LLC. In April, ToWoNa, the country's largest bus digital media operator, successfully attracted a third round of investments from private equity firms.

Xu Weifeng, president of PPS, the world's largest Interactive Personality TV provider, said that PPS's advertising income is expected to increase fivefold this year.

Additionally, "62 percent of Internet users are actively involved in social networks", Brien said.

"The power of social media and social marketing must be understood and should be integrated into the branding strategies we provide to our clients."

The digital world also has changed clients' demands for content, Brien said.

"The information channel has become more personal with the emergence of social media. The way promotion and advertising works is going to be more about a conversation. So we require our advertising products to be more engaging and create a relationship with the consumers," he said.

"We are also developing activities, including promotional concerts, fashion shows and sports events, to ensure the brands or products we promote can be represented in a surprising and creative way," Brien said.

Li Yifei, chairwoman of Vivaki of Publicis Groupe Greater China, predicted that China's advertising spending will maintain 10 percent year-on-year growth in 2010, exceeding the average growth rate internationally.

Li said she believes that advertising investments in television will increase 10 percent, and that there will be an 8 percent increase in spending on outdoor media.

(China Daily 12/14/2009 page12)