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31 Dec 2014 - 09:31:50 pm

Reach more than one billion Chinese

Generally, China’s advertising market performed well in 2009, increasing by 9.8 percent year on year. In 2010, the Chinese media market benefited from the Shanghai World Expo and the Asian Games in Guangzhou, Guangdong, as well as from accelerating economic growth. China’s advertising expenditures likely grew by 12.8 percent in 2010, according to GroupM China’s estimates. For many advertisers, China remains a key market with a promising future.

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Four main elements influenced the development of the Chinese media market in 2010 and will continue to do so in 2011.

The rising number of stores and other retail distribution points is taking brands to more lower-tier cities. Advertisers must invest to reach and appeal to new consumers in second- and third-tier cities, which are set to expand faster than more developed cities such as Beijing, Guangzhou, and Shanghai (see the CBR, November-December 2010, Reaching China’s Next 600 Cities).

Longer TV viewing times in rural markets will be a key driving force in the development of the TV industry, especially when combined with advertisers’ continued expansion into second- and third-tier cities. In 2009, the average TV viewing time per capita increased 10 minutes per day in rural markets, but the average decreased 1 minute per day in urban markets.

China’s e-commerce market was the best performing online sector in 2009, with usage rising 68 percent year on year. Of all e-commerce applications (including online shopping, online payment, and online travel booking), online payment experienced the fastest growth, with usage up 81 percent over 2008-boosted by the rising population of online shoppers.

With Internet penetration growth and the adoption of more online applications, netizens are extending their real-life relationships to online society (see Social Media in China: The Same, but Different). As a result, many social networking websites are emerging. Nearly 50 percent (210 million) of China’s Internet users had visited social networking websites by June 2010. Advertisers should consider social networking websites along with traditional online display ads, especially when communicating with a young target audience. Advertising on these websites will likely expand significantly in the next couple of years and will require a more interactive and engaging communications strategy.

With accelerating economic growth, big events such as the 2010 Shanghai Expo and World Cup in South Africa, and the skyrocketing popularity of online videos and social networking websites, GroupM predicts that China’s annual Internet advertising revenue may rise by 30 percent in 2011. The Internet will attract more advertisers and gain a larger share of advertising spending in the near future as Internet coverage expands, content improves, and advertisers understand how to better leverage the data garnered from online campaigns. The Internet will dominate advertisers’ marketing strategy, if not spending, in 2011 and 2012. The biggest growth areas will likely be display advertising, sponsorship, joint promotion, and original content.

The key factor behind this growth is the rising affluence of Chinese consumers. Wealthy consumers have more lifestyle and leisure choices. Magazines that appeal to wealthy consumers have a small but loyal readership and offer value to brand-building advertisers. For example, Bazaar Men, HisLife, Leon Mr. Modern, and L’Officiel Hommes have all launched in China in the past two years as publishers identified an opportunity for male fashion magazines in the China market. China surpassed the United States as the second-largest global luxury market in 2009, and its magazine advertising industry’s future is bright.

As with other traditional media, however, magazines face a threat from digital media. The release of, Inc.’s Kindle in 2007 heralded the coming of the tablet era. Other companies such as Axus Technology, LLC; BenQ Corp.; Fujitsu Ltd.; Google Inc.; Hanvon Technology, Though the performance of China’s out-of-home (OOH) market-which advertises to consumers in public places such as on billboards or in transit systems-remained flat from 2008 to 2009, the outlook for OOH advertising remains positive. GroupM projects that OOH advertising expenditure rose roughly 16 percent in 2010, mainly from advances in OOH digital advertising.

Three key factors influenced the development of the OOH market in 2010:

The PRC government took great efforts to regulate the OOH market before and during the Shanghai Expo and Asian Games Guangzhou, in particular by removing certain traditional OOH billboards. This left more space for digital OOH media such as mega light-emitting diode billboards.

In the longer term, because of OOH supply restrictions in certain cities and government limitations on OOH advertising formats for major events, there may be fewer opportunities for traditional OOH advertising formats such as billboards. OOH will survive in the cities only if it can become a part of city life and integrate with city planning and infrastructure.

Though TV remains the dominant advertising medium in the short term, the future of new media looks bright. In China’s fast-changing and complex advertising market, options will multiply, especially in digital media, events, sponsorship, and other branded content. Each platform offers new ways to reach and engage with consumers. Moreover, companies must develop interactive and engaging communications strategies to reach and maintain consumers.

China’s macro-level growth indicators are positive for future ad spending. Although annual growth rates are slowing, there is a direct correlation between gross domestic product (GDP) and ad spending buoyancy. Even with a lower annual GDP forecast, ad spending will continue to grow. Ad spending as a percentage of GDP, a key indicator of the advertising market’s maturity, is only half the global average, suggesting that ad spending has plenty of room to expand. Even at slower growth rates, China will overtake Japan as the second-largest global ad spending market by 2015.

The main consumer product categories underpinning China’s advertising market make it less susceptible than other countries to economic downturns. More than 50 percent of total ad spending is generated from just three product categories: pharmaceuticals (including Chinese tonics), toiletries, and retail, the first two of which combined account for 37 percent of total ad spending. China’s ad spending on mass consumer, daily-use products as a percentage of total ad spending is much higher than that of most other countries.

Key media

Given the strength of mass consumer products in China’s market, it is not surprising that ad spending is heavily concentrated in mass media. Advertisers are communicating their messages to broad consumer groups to support a deep product-distribution network across China. Of the main media, television-which takes 40 percent of total ad spending-is the most intrusive and cost efficient way to reach mass audiences. The TV market is complex and multi-layered, with channels administered at city, provincial, regional, and national levels. CMCG forecasts that television will maintain a stable market share of about 38 percent for the next five years and retain its strong position as the most efficient and effective way to reach mass audiences across a large geographic area. The audiovisual commercial opportunities will be further enhanced by full conversion from analog to digital broadcasts by 2015 in China, which will enable greater interactivity and convergence with other digital platforms.

Media challenges for MNC advertisers

Given China’s unique media buying context, advertisers in China need to track and benchmark their media costs and buying delivery with the same methodical detail they use to monitor sales and market share, because in most categories they are closely correlated. As China’s contribution to MNC global businesses grows, and advertisers’ media investment expands more quickly there than in other key markets, benchmarking media ROI will be vital to maximize short- and long-term business growth.

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