China TV Auction Shows Little Sign of Economic Meltdown

P&G Is Largest Buyer, as Ad Spending Overall Surges to New Highs at Annual Event

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BEIJING (AdAge.com) -- Despite China's slowing economy, there were few signs of recession at last week's annual auction for prime-time advertising slots on China Central Television, where the tally hit a record $1.35 billion and Procter & Gamble was the largest buyer, sources said.
P&G's Guangzhou-based associate director-media, Greater China, Alfonso de Dios (seen here at the 2006 auction), has earned the nickname 'king of the auction' for being the biggest spender for several consecutive years.
P&G's Guangzhou-based associate director-media, Greater China, Alfonso de Dios (seen here at the 2006 auction), has earned the nickname 'king of the auction' for being the biggest spender for several consecutive years.

The auction total jumped 15.4% -- even without the Olympics that buoyed last year and allowed China's state-run national broadcaster, which operates 18 channels, to rake in more than $1 billion for the first time.

A small increase in spending was anticipated, because multinational and local companies are eager to expand in China, but 15.4% "was more than expected, considering there is no Olympics to drive prices up" in 2009, said Matt Brosenne, international business director at CSM Media Research in Beijing. "It's a large year-on-year increase considering the recent turn of events."

Ad rates up
Ad rates went up about 10%. In the last year, CCTV has improved its content in the face of tough competition from smaller, more nimble and more creative provincial broadcasters, such as Hunan Satellite Television, which have nearly national reach through cable and satellite systems.

The CCTV auction starts every year at 8:18 a.m. on Nov. 18, capitalizing on the auspiciousness of the number eight in Chinese culture. It's an epic, exhausting event for thousands of representatives from major marketers and media agencies who crowd into a hot, noisy hall at CCTV's headquarters in Beijing.

The auction can easily last as long as 18 hours, although this year's event ended at about 9 p.m. The action doesn't even stop for a lunch break in that food-obsessed country; lunch boxes are distributed to participants to eat at their seats.

CCTV has not released spending information from this year's auction yet, but P&G is said by those close to the situation to be the biggest spender for the fifth consecutive year. That status has earned its Guangzhou-based associate director-media, Greater China, Alfonso de Dios, the nickname "king of the auction." Auction observers estimate P&G spent roughly $75.4 million, up 6% from last year. P&G advertises several brands nationally such as Rejoice and Safeguard.

Top spenders not pinched yet
Aside from P&G, the top-spending advertisers are local marketers with a broad retail distribution base and products that have mass appeal. "The key products were beverages, including alcohol, dairy and of course the ubiquitous local pharmaceutical companies," said Paul McNeill, CEO, Greater China of Havas-owned Media Planning Group in Beijing. The growth "surprised quite a few people as it very much continues in the same vein as previous years. [But] the actual crunch has not hit through to actual wallets yet, and these broadly based and in many cases cheaper local brands will be less affected, as they are generally staples of daily life."

Companies in China's financial sector and insurance companies also boosted spending. While advertisers are generally cautiously optimistic about the 2009 outlook, the auction results "suggest consensus is more optimistic than cautious," said Dick Wei, an analyst in the technology research unit of JPMorgan Chase & Co. in Hong Kong.

With the CCTV auction setting a positive tone, Mr. Wei predicts published ad rates for leading sites such as Sohu and Sina "are highly likely to achieve 20% growth next year."

Is China really immune to the global crisis? Not based on its recent gross domestic product figures. China's fourth-quarter GDP growth is likely to be less than 9%, and could easily fall below 8% next year.

China roars ahead
Last year, China replaced Germany as the world's third largest advertising market, behind the U.S. and Japan, and is expected to overtake Japan and gain second place in 2010, according to Group M. Advertisers spent $64.6 billion in China in 2007, according to Nielsen Media Research. Television took the lion's share, attracting 82% of total ad spending over the year, while newspapers and magazines accounted for 16% and 2%, respectively.

The "real test" for the strength of China's ad industry will take place at the CCTV auction next year on Nov. 18, said Quinn Taw, a partner at Mustang Ventures in Beijing and a former senior executive at MindShare and Zenith Media in China.
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