China Ad-Spending Forecast to Grow 12% or More

Due to Lesser Impact by Recession, ZenithOptimedia, Carat Predict Country Will Shoot Ahead of Other Markets

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SHANGHAI (AdAgeChina.com) -- As ad spending recovers slowly around the world, China will shoot ahead in 2010 with double-digit growth.

According to new forecasts by ZenithOptimedia and Carat, China's ad market will grow by 12.1% this year (ZenithOptimedia) or up to 16% (Carat). Previously, ZenithOptimedia was predicting 9.5% growth in ad spending this year in China, and Carat expected 9%.

Last October, ZenithOptimedia said spending in China's ad market would reach $19.966 billion in 2009, up 5.7% from the previous year. This month, the Publicis Groupe agency raised its estimate for 2009 spending to $20.291 billion, and its prediction for 2010 spending to $22.755 billion.

WPP's GroupM division won't issue its 2010 forecast revisions until June, but Carat has also come out with bullish predictions for China's ad market recently.

Confidence is growing
Both agencies say the global financial crisis has had a smaller-than-expected impact on China's economy and global marketers clearly see the country as a key market to invest in as they seek to sustain global growth.

China is "not immune" to global economic problems, said Seth Grossman, Carat's managing director, China in Shanghai. "The key buzzword for advertisers everywhere was efficiency [but] there can be no doubt" that advertisers are much more confident today than they were mere months ago.

At the same time, stricter access to prime-time ad slots on TV decreed last year by China's broadcast regulator, the State Administration of Radio, Film & Television (SARFT), and restrictions on outdoor inventory in Shanghai, home of the 2010 World Expo, have led to media inflation.

"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.

Current events and China's uneven media market explain ZenithOptimedia's lower estimate.

The World Expo, a six-month fair starting on May 1, will "help momentum," but it's "not as commercial" as other events such as the Summer Olympics or the World Cup, said Steven Chang, ZenithOptimedia's CEO, Greater China in Shanghai.

The World Cup taking place this year in South Africa is "hot," Mr. Chang said, but China isn't a participant and live broadcasts won't be readily watched because of time zone factors.

Television remains powerful in China, with spending likely to increase 16% this year, and use of the internet is growing fast in China, Mr. Chang said, particularly for social media, videos and microblogs. Online media spending will increase 30% this year.

But growth in magazine spending will rise just 2% this year, according to ZenithOptimedia, with increases limited to women's magazines, niche youth titles and business magazines. With newspaper publishers finding it tough to attract new readers, spending will fall 3%. Advertisers investing more in China
Both agencies believe the global headquarters of major advertisers have increased both their appreciation for China's growing importance and their understanding of the investments required to succeed in China.

Some of the biggest budget increases have been from multinational advertisers like Unilever and L'Oreal, both of which are funneling additional money into China.

Advertisers have accelerated efforts to grow sales beyond China's first and second tier cities into smaller markets, and expansion into those lower tiers requires greater media investment.

Major manufacturers like Lenovo Group and Procter & Gamble Co. have already moved into these markets, and now they are being followed by marketers of beverages, sportswear, luxury goods and skin care and cosmetics as well as retailers like Carrefour and Walmart.


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