China Telecom picks Burnett to invigorate its Shanghai business

And other news in Greater China

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SHANGHAI--The largest telecommunications provider in the mainland, China Telecom, has appointed Leo Burnett and its direct marketing arm Arc Worldwide to handle advertising for its Shanghai Telecom subsidiary, which operates fixed lines, broadband, long distance, business-to-business and mobile services.

The win, worth an estimated $8 million, follows a three-way pitch against Euro RSCG and Ogilvy & Mather. Previously, the account was handled by a local agency, Shanghai AdCorp. Leo Burnett will develop strategy and creative with event marketing and retail promotions provided by Arc.

China Telecom faces “constant challenges” from competitions such as internet service providers, long distance service resellers and mobile networks, said Donald Chan, national managing director, China at Leo Burnett and Arc in Shanghai. To compete, he said Shanghai Telecom is stepping up its marketing “with unprecedented emphasis on branding” and creative solutions in multiple channels “to drive brand preferences and purchase motivations.”

China Telecom also retained MindShare, Beijing to handle media buying in provincial TV stations and national print titles, worth about $26 million. The WPP media company pitched against Starcom, OMD and two local agencies, Guangdong Advertising and Shanghai Advertising, last January.

"China Telecom is a very demanding client that is well informed on local media conditions," said Rob Hughes, MindShare's managing director in Beijing. "This is a tremendously interesting sector, China Telecom is a key player and we expect to see continuing innovation, especially in the lead up to the 2008 Olympics and deployment of high-speed wireless in the next year."

Lowe relaunches in China without local partner
SHANGHAI--The Interpublic Group of Cos.' agency Lowe Worldwide has relaunched its Chinese operation. The process began last September, with the appointment of Kitty Lun as chairman-CEO, China. Ms Lun previously ran Havas-owned Arnold Worldwide in China.

Most notably, Lowe and its local joint venture partner, Guangming Daily Group, have agreed to restructure their relationship into two independent operating entities--Lowe and Lintas. Lowe will be an IPG wholly-owned subsidiary in China. Lintas will be 80% owned by Guangming, with IPG holding the remaining 20% stake. The local partner is using a name historically associated with the global network, and which is still registered in China. IPG merged Ammirati Puris Lintas with Lowe Group to form Lowe Lintas & Partners Worldwide in 1999. The name was changed again to Lowe & Partners in 2001, and later to Lowe Worldwide.

For several years, Lowe has had a troubled relationship with Guangming, turning the joint venture into a cautionary tale for agencies looking to enter the Chinese market. Starting last year, foreign advertising companies could apply for a license to operate as a wholly-owned business in China, as part of the country's entry into the World Trade Organization, which has allowed Lowe to part ways with Guangming Daily Group on a day-to-day operating basis.

Lowe's new office in Shanghai has an open floor plan and has no departments, said Ms. Lun. "People work together and sit together in communities to allow maximum transparency and communication. To encourage teamwork and demonstrate the power of idea-sharing, the agency recently completed a collaborative project called ROOM8, in which everyone in Lowe China contributed to the theme and decoration of eight creativity and leisure spaces."

No new internet cafes in China
BEIJING--China will not issue new business licenses for internet cafes in 2007, according to a statement made by the country's Culture Ministry in Beijing. China has 113,000 internet cafes already in operation, which are often filled with teens playing online games. The decision was made to curb internet gaming addiction, which is becoming a rampant problem in the mainland, as well as to crack down on online gambling.

Focus Media acquires China's leading internet advertising company
SHANGHAI--Focus Media, which operates the largest out-of- home advertising network in China using audiovisual flat-panel displays, is entering the mainland’s growing internet advertising market by acquiring Allyes Information Technology Co. Focus will pay $70 million in cash and $155 million in stock to take control of the mainland’s largest internet advertising company.

Internet adspend in China is expected to reach $1.2 billion in 2007, and grow by more than 30% a year for the next eight years, according to iResearch.

The combination is “very complementary, as Allyes brings its proven online advertising offerings and a large network of affiliate websites. On the other hand, Focus Media brings strong relationships with 3,000-plus advertisers and an experienced sales organization,” said James Lee, a Boston-based research analyst at WR Hambrecht + Co. who covers China’s internet market.

“We believe the trends for online advertising remain very favorable. Multinational companies are finding ways to connect brand campaigns with the Olympic Games, sponsoring Chinese national teams to increase their exposure. On the other hand, domestic firms have become more aggressive, realizing the importance of branding ahead of further deregulation in key verticals. With a greater emphasis on targeted advertising, the internet has become the third largest medium behind TV and newspaper.”

Allyes’ proprietary AdForward software covers all aspects of online ad publishing, creative production, tracking, targeting, and performance analysis. AdForward is used by over 80% of independent commercial web sites and ad agencies in China, including the Sina and Taobao sites.

The deal “extends our lifestyle media platform to one of the fastest-growing media segments in China, the internet, reaching the high-end of urban consumers,” said Focus Media’s chairman-CEO in Shanghai, Jason Jiang, “while adding a new channel for us to reach Chinese urban consumers based on their lifestyle and consumer behavior.”

By the end of last year, Focus Media had approximately 85,300 display units in its commercial location network, 38,700 display units in its instore network, 99,700 advertising poster frames installed throughout China and 200 outdoor LED displays in Shanghai.

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