Advertisers facing creative challenge

Strong local partnerships vital to help cross the cultural divide

It is a long-held myth that when fast-food chain KFC arrived in China and translated its signature "finger-lickin' good" slogan it ended up actually telling customers to "eat their own fingers".

It is an advertising pitfall often cited as a warning to Western brands wanting to launch their products in the world's fastest-growing consumer market.

Catchphrases lost in translation are just one obstacle faced by advertisers trying to help businesses carry their corporate message across oceans, but for those willing to take the risk, the possibilities are endless in a market where revenues have reached an excess of 343 billion yuan ($54.6 billion).

"You can't have stars in your eyes when you come to China - you have to come here very cool-headed, with a keen eye and you need to make sure you have the right resources within your agency to succeed," said Tom Doctoroff, CEO in China for the US-based advertising firm JWT and author of What Chinese Consumers Want.

As Chinese are set to make up the largest population of consumers globally by 2015, foreign advertising firms are racing to establish or consolidate a foothold in China's fast developing advertising market by acquiring local firms to help cross the cultural divide.

Advertising sales have seen a jump of more than 1,000 percent in a little more than two decades with estimated sales of 120 million yuan when the industry was first established in the early 1980s, soaring to 234 billion yuan in 2010, according to a report by China-focused investment banking and asset management company My Decker Capital, released earlier this year.

Currently, the industry is enjoying an annual growth rate of about 15 percent - more than twice the rate of China's GDP.

Veteran ad gurus say foreign advertising agencies must forge strong local partnerships in the changing landscape of advertising.

Experts suggest brands must learn to judiciously use a combination of digital and traditional media platforms to succeed in China, and to navigating the maze. Foreign advertising agencies must forge closer understanding of local business culture to stay in the game.

Still, the advertising landscape is quite young and the numbers are often hard to pin down.

"In many ways the Chinese market is still quite unsophisticated," Doctoroff said.

With local advertising companies working in TV, print and digital media often using their connections to get discounts on advertisements, it is hard to tell exactly how much actual money the advertising industry is worth, he said.

But one thing is certain - the industry is growing fast and opportunities for foreign firms are flourishing.

While foreign advertising firms traditionally catered to multinational corporations and China's largest companies seek to tap into Chinese consumers' penchant for buying foreign brands, an increasing number of domestic businesses are turning to the Big Six advertising agencies to take their brands global.

The Big Six in terms of size in the world are the US-based Omicom, London-based WPP Group, New York-based Interpublic Group, Paris-based Publicis Groupe, Tokyo-based Dentsu and France-based Havas Suresnes.

"Local Chinese brands are slowly starting to look to multinational agencies for more and more support," said David Hunt, general manager for the Shanghai operations of AKQA's, a New York-based advertising firm and a Chinese advertising industry veteran.

"In order to do that, they are going to have to work with multinational agencies because a lot of the local agencies don't have support overseas."

Merger mantras

Even as Chinese companies are looking increasingly to large advertising firms for overseas support, large holding companies like Publicis have made huge efforts to increase their presence in the Chinese market by acquiring domestic ad agencies.

Over the past five months, Publicis has purchased three Chinese advertising companies - UBS in February, King Harvests and Luminous in March, and Longtuo in May. The purchases are part of the company's long-term strategy to double its China presence by 2015.

Though the company's move is viewed by some industry experts as a late attempt to expand into China's promising ad market - many of its competitors have been present in China since the late 1980s - the recent flurry of acquisitions by the French firm indicates the crucial significance of the China market for the global advertising industry amid slow growth in Europe.

Acquisitions by Publicis may have been the most recent effort by companies to be in the limelight, but expansion efforts from multinational companies are something that have been going on steadily for years.

WPP, currently the largest foreign advertising agency in China with annual revenues of $1.3 billion, has acquired majority stakes in more than a dozen Asian advertisers during the past eight years.

"The reasons for increased interest, whenever it actually occurred, is the dawning realization that China is the second-largest advertising market in the world and growing at twice the rate of Chinese GDP growth," said Martin Sorrell, chief executive of WPP.

"China will surpass the US in terms of GDP eventually and it will be back to the future in the sense that some 200 years ago China and India accounted for 40 percent of world GDP, and they will do so again in a few years from now.

"Some believe the last couple of hundred years have been a blip in Chinese history and the country will return to supremacy, as before. I would agree."

While China may be a future source of fuel for global advertising revenue, the practice is nothing new.

There is evidence that advertising has been around in China since the Song Dynasty (960-1279), when basic inked paper messages would offer services such as acupuncture treatment. But China's real foray into the world of modern advertising began during the late 1970s when economic reforms began transforming the way goods were bought and sold.

But even then advertisements were basic, touting single line messages in a style that resembled the official slogans that were so common throughout China during that era.

Throughout much of the early 1980s, the presence of foreign advertisers was minimal. Those that took the risk to become pioneers were required by law to partner with Chinese companies.

Despite the stringent industry regulations, some of the bigger foreign advertising agencies were more than convinced about the early potential in the land of more than 1.3 billion.

Often hailed as the father of modern advertising in China, T.B. Song, chairman in China of Ogilvy & Mather and WPP, the world's largest advertising company, was among the first to establish a modern advertising practice when he helped launch a joint venture with Ogilvy & Mather and Shanghai Advertising Agency in 1991.

Despite the opening of the advertising industry in the 1980s, it was not until the 1990s that both businesses and consumers began to see any form of promotions in any form of media, he says.

"All the agencies were government owned," Song said, describing the advertising landscape when he first began working in Shanghai.

"At that time, advertising was very simple. It was just about brand awareness and direct."

Perhaps the biggest change for foreign ad firms looking to expand in China came seven years ago, after a policy shift allowed outside agencies to establish wholly owned foreign enterprises in 2005.

The importance of the advertising industry in China is more than emphasized in the nation's 12th Five-Year Plan (2011-15), which has laid out plans to develop the industry that currently accounts for over 1 percent of China's GDP. The new focus is an important component of China's blueprint for moving on to a modern service-based economy.

Despite the robust growth rates and a promising future, there are still several challenges for both foreign and domestic advertising firms.

With television making up 77 percent of the advertising market share, according to a report released by Chinese market research company CTR, restrictions on media have created a barrier for foreign advertising firms operating without a Chinese partner seeking to engage in the largest portion of the market.

"This is the biggest challenge facing foreign firms," said Wang Guoji, a professor of advertising at Peking University's School of Journalism and Communication.

Twin advantages

In addition to the restrictions on media, different business practices, language and cultural barriers also present hurdles in an industry whose sole foundations are centered on communication.

It is for this reason that many of the largest companies find pairing with a local agency crucial. With a better grasp of how local businesses operate, individuals familiar with China's advertising practices can often lend an advantage when working with multinational firms.

"They are able to respond to and reassure the local business leaders who often lack global vision. This is something that is difficult to have within a multinational agency, not even in the highest tier of multinational companies," Doctoroff said.

"Even then, the relationship management is always a challenge for multinational agencies."

But, while there are many advantages to pairing with local clients, it is also crucial for companies to maintain the standard of business practices that allowed many of the multinational firms to become the global successes they have.

Crunch time

According to Wang, there are over 1 million people working in the advertising industry of some 100,000 small, medium-sized and large advertising agencies. Logically with such big numbers finding talent should not be an issue at all for the industry. But that is far from the truth.

Lured by prestigious titles and pay rises, China's top advertising talent are able to set their own terms when it comes to their employers. The result is a big strain on the market

"It's a developing industry. It's only been around for 15 to 20 years, whereas in the US or Europe it has been around for 100 years, so the experience in the talent pool is quite small."

The relative youth of the industry in China has left many Chinese graduates seeking more traditionally profitable careers like law or medicine, Hunt said.

The result is an increasing number of young Chinese workers holding onto titles that would normally take decades to earn if they were working in the US or Europe.

"They're not really aware of the advertising industry, so they don't see it as an opportunity," he said.

Companies, however, are making efforts to address the talent drain.

Working with the Ministry of Education and Shanghai Art and Design Academy, the WPP School of Marketing and Communications enrolled its first class at the start of the 2011 school year. Selecting 50 out of more than 1,300 applicants, the school is designed to nurture the next generation of top advertising talent.

Despite there being a lack of numbers, the past 10 years has seen an impressive increase in the quality of creative works imagined by China talents has gone up considerably.

In June this year, Ogilvy and Mather Shanghai won gold in the outdoor advertising category at the internationally renowned Cannes Lion advertising competition for its Coca-Cola advertisement depicting two hands sharing a bottle of Coke.

It marks the second year in a row that China-based advertising talent has earned top marks at the prestigious global event. JWT won a gold last year for an advertisement created for Samsung.

Graham Fink, chief creative director for Ogilvy and Mather, who oversaw the creation of the award-winning Coke ad, said the victory indicates a significant benchmark for the nation's creativity.

Though Fink's team can comply with stricter deadlines, he said the increased pressure for results can detract from the final product.

"I think clients need to be educated to understand the fact that if we had a bit longer, you would get more effective advertising," he said.

"When I was working in London you could be quite subtle, you don't have to tell them everything. Here in China the main thing is, because the advertising agency is younger, the target market is less sophisticated and you just have to be a little bit more informative, you have to tell them everything."

The need for a direct message is not the only difference when it comes to Chinese ads.

In China, there is an increased emphasis on using celebrities and famous faces to sell everything from dumplings to toothpaste. In the past, Chinese advertisements also lacked the ability to stir emotions though this is changing.

"Already I can see a little bit more emotional advertising, even compared to a year ago," he said.

Even as China makes its mark in the print and outdoor fields, digital and Internet advertising are quickly becoming the future for marketers looking to peddle their brands to China's next generation of consumers.

In a country of more than 500 million Internet users, taking to the Internet to push products has seen the biggest boost over the past two years with brands trying to tap into social marketing phenomena such as Weibo, China's Twitter-like micro-blogging service.

Internet advertising revenues in China hit $6 billion in 2011, with revenues growing at a significantly higher 26 percent compared with the overall advertising earnings. By 2013, the figure is expected to climb to $9.6 billion.

Chinese-born American Micky Fung, founder and executive chairman of Touchmedia, was one of the early foreign advertising minds to take advantage of the growing thirst for digital advertising in China by launching a campaign to install touch screens in taxis throughout Beijing and Shanghai.

With big-ticket clients ranging from Coca-Cola to Disney, Fung's interactive screens have been more than a success. He said the popularity is an indicator of just how eager companies in China are to take to digital media. "In China and globally also there is a shift from conventional media to digital," Fung said.

"From the client perspective, it always struck me that conventional media such as newspapers and TV have huge reach but no ability to interact, measure or respond."

He attributes part of Touchmedia's success to the effectiveness of outdoor and interactive advertising found in China.

"Different things work here at different levels," he said.

"If you look around a Chinese city, you will notice that China has much more outdoor advertising than any European or American city. The population density is dramatically higher. A good billboard in Chicago might be seen by 20,000 people a day compared with 500,000 in Shanghai."

Though China's advertising industry still has a long way to go before it meets the level of sophistication of its Western counterparts, the relative youth of the industry is allowing it to adapt to cutting edge advertising techniques.

Xu Yun contributed to this story.

toddbalazovic@chinadaily.com.cn

(China Daily 09/08/2012 page10)