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Publishers explore vast Chinese market

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Nov. 11 marked the one-year anniversary of the People’s Republic of China’s entry into the World Trade Organization, and the economic possibilities in that nation of 1.3 billion people have never seemed so alluring.

Despite a confusing array of regulations regarding foreign investment, China is attracting a host of b-to-b marketers. As these marketers strive to communicate with potential customers, U.S. media companies have launched publications designed to reach a business audience in China.

Leading the way has been International Data Group, which entered the market in 1980 with Computerworld China and now publishes 27 titles in the country. Other b-to-b publishers in the market include media giants such as AOL Time Warner, Dow Jones & Co. and small trade publishers such as Watt Publishing Co.

"Ad spending [in magazines] over the past 15 years has grown 30% annually," said Tom Gorman, chairman of CCI Asia-Pacific Ltd., Hong Kong, which publishes AOL Time Warner’s Fortune China. "It’s unbelievable. Magazines, though, are only a sliver of the spending, around 2%."

Regional reach

One of the key reasons for magazines’ small share of the overall media advertising market is the regional nature of the Chinese economy, which makes it difficult for a national magazine to thrive. Some marketers, such as Oracle Corp., have found they can reach their target market more effectively through local newspapers serving Beijing or Shanghai. Others, such as GE Plastics, a unit of General Electric Co., have found trade shows, which generally cater to a specific region, to be a better way to reach their prospects.

Nonetheless, ad spending in magazines is growing, and at a faster rate than television, newspapers and radio, according to the U.S.-China Business Council.

In the magazine arena in China, IDG is a key foreign publisher. This month, IDG debuted Electronic Design & Application World, a monthly with a controlled circulation of 30,000 engineers in China. In October, IDG announced the launch of Hi Tech Entrepreneur, a publication aimed at managers of Chinese tech start-ups. And IDG recently announced a deal in which it will license editorial from ECN and Electronic News Online, published by Reed Business Information-U.S. The content will be used in IDG’s Electronic Engineering & Product World, which reaches engineering managers and design engineers in China.

The deal with Reed brings Hugo Shong, managing director of IDG China, full circle. Shong, a Chinese national who attended college in the U.S., helped launch Electronic Business China for Cahners (now Reed Business Information-U.S.) in 1988. Cahners, however, abandoned the publication shortly after the Tiananmen Square uprising in 1989.

Shong eventually went to work for IDG, which, under the guidance of Chairman Patrick McGovern, continued to publish after the Tiananmen Square incident. McGovern, Shong said, reasoned that tech publications such as Computerworld and PC World were essentially apolitical.

McGovern’s instincts proved prescient—and lucrative. Today, Computerworld China generates about 12,000 advertising pages a year. IDG’s publications in China reported 30% annual growth, and the publisher’s revenues in China now total about $130 million annually, making it IDG’s largest market outside the U.S.

A great fan of China, McGovern has visited the country more than 80 times since 1978. The Chinese, he said, "have a Confucian respect for learning. It’s a great publishing market."

IDG has benefited from a Chinese government decision in 1992 that essentially prohibited foreign investment in the media sector. IDG has been allowed to continue publishing, however, through its various joint ventures, which typically feature Chinese editorial and sales staffs creating publications written in Chinese, McGovern said.

Because of its strong presence in the market, IDG has helped consumer publishers, such as Hearst Corp., enter China. The two publishing companies joined with government-owned Trend Communications to publish Cosmopolitan in China.

Joint ventures with the Chinese government aren’t the only way to get a foreign publication into the country. AOL Time Warner worked with Hong Kong-based CCI Asia-Pacific Ltd. to launch Fortune China. "The Hong Kong model can be valuable for certain publications," CCI Asia-Pacific’s Gorman said.

Distribution of most Chinese publications is either through newsstand sales or paid subscriptions, which are tightly controlled by the Chinese post office. Subscription information is private, so it is difficult to cull demographic information for advertisers. This lack of demographic information proved a difficult hurdle for media buyers.

Fortune China opted for a controlled circulation model that would enable it to gain important data on its readers. Gorman said the model has been successful, and he expects ad revenue to grow 40% this year compared with last.

Not every venture meets with such positive growth for sustained periods. For example, Watt Publishing, a publisher of agricultural magazines, launched a joint venture with CCI Asia-Pacific in the Chinese market in the early 1980s, but the venture was shuttered last year

While Watt still reaches Chinese farmers with Poultry International, it no longer produces publications specifically for the Chinese market. Jim Watt, president of the company, complained that Chinese competitors were sometimes able to charge ad page rates that were 10% of those charged by his company.

Following a different model

Like Fortune, The Asian Wall Street Journal enters China via Hong Kong, but the newspaper doesn’t target China specifically. It is a pan-Asian publication published in English.

"Our actual circulation among red-blooded Chinese living in China is relatively small," said Phil Revzin, VP-international for The Wall Street Journal. The Asian edition has a circulation of 85,000, with slightly more than 2,000 of that in China.

Many multinational marketers reach a pan-Asian market through The Asian Wall Street Journal, but the publication found that China as a target market is currently far down the list for advertisers, behind Japan, Singapore, Taiwan and other countries.

This year, the Journal began publishing wsj.com in Chinese, and Dow Jones Newswires made its content available in Chinese. What the Journal has its eye on, however, is publishing in China in Chinese, although government regulations currently prohibit that.

"I’m convinced that will happen," Revzin said. "I don’t know whether it will be [accomplished by] me or my daughter or my granddaughter. I don’t know what generation will do that, but it will be done."

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