Carat Raises China's 2010 Adspend Forecast to 16.1% Growth

Advertisers Move Into New Markets and TV Inflation Forces Budget Increases

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SHANGHAI ( -- China will continue to be the world's best-performing major ad market in 2010, with 16.1% growth, according to Carat's latest spending forecast.

Seth Grossman
Seth Grossman
The impact of the financial crisis in China has been much less severe than expected, and global marketers see China as a key growth market as they push into less developed cities and ante up to pay soaring TV ad rates.

The Aegis Group media agency's forecast of 16.1% growth this year is a big jump from the 9.0% growth predicted for 2010 in Carat's last spending forecast, issued in October 2009. Carat expects China to keep up the pace, with 16.6% growth in 2011 adspend.

That's better than 2009, when China's ad market grew 12.2%.

Western countries would have celebrated that kind of double-digit increase, but 2009 ended with "easily the lowest year-on-year growth rate we have seen in the last 15 years," said Seth Grossman, Carat's managing director, China in Shanghai. "Even China was not immune, as the key buzzword for advertisers everywhere was efficiency."

Both TV and digital media are benefiting from an uncertain economy.

"When times get tough, the market looks to its old friend, the 30" spot, as the tried-and-true method to deliver the brand message," Mr. Grossman said.

Television's share of the market actually grew from 70.7% to 71.9% from in 2009, an increase of 14.1% year-on-year.

The other clear winner in 2009 was online spending, which surged 21% over the previous year. While its share of total spending remains small -- about 3% -- online media's ability to grow in the face of economic turmoil is at least in part because digital is the most measurable and accountable channel available.

Advertisers are more confident
Looking ahead to 2010, "there can be no doubt" that advertisers are much more confident today than they were mere months ago," said Mr. Grossman. He attributes the shift to three key areas:

First, the global headquarters of major advertisers are more focused on China's growing importance, and how much they need to invest to succeed there. Some of the biggest budget increases are coming from multinational advertisers funneling additional money into China, even at the expense of other markets.

Second, advertisers are accelerating efforts to grow sales beyond China's first and second-tier cities into less developed markets, and that expansion into the lower tiers requires bigger media investment. This week McDonald's Corp. opened its first McDonald's Hamburger University for China, and announced plans to almost double the number of outlets in China to 2,000 by the end of 2013. Two of China's top five advertisers, Unilever and L'Oreal, have also substantially increased their spending in China during the past year. TV inflation is driving budget increases
Third, new regulations from China's broadcast regulator, the State Administration of Radio, Film & Television (SARFT) are driving significant media inflation for TV.

"Airtime restrictions alone would drive a price increase but decreased supply coupled with increased demand is driving media inflation upwards from 15% in some places to over 100% in other channels," Mr. Grossman said.

How much more individual marketers have to spend on TV will depend mostly on the markets and programs they choose, but he estimates China's TV market "will grow by nearly 19% in 2010, buoyed by high demand and rampant inflation, and its share will rise even higher to 73.2%, its highest share in a decade."

For digital media, Carat forecasts growth of 30% to 40% for seach, and 20% or more for other digital ads.

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