China's Ad Industry Remains Strong Based on CCTV's Annual Auction

CCTV Sold TV Spots For 2009 Worth $1.355 Billion, a 15.4% Increase Over Last Year

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P&G's associate director-media, Greater China, Alfonso De Dios, is still the 'king' of the CCTV auction this year
P&G's associate director-media, Greater China, Alfonso De Dios, is still the 'king' of the CCTV auction this year Credit: Normandy Madden
BEIJING ( -- There were few signs of the recession that has struck financial markets and ad budgets around the world this week at the annual auction for prime-time advertising slots next year on China Central Television (CCTV).

China's state-run national broadcaster, which operates 18 channels, raked in 9.256 billion RMB ($1.355 billion) at the auction on Tuesday. In Nov. 2007, the auction generated 8.028 billion RMB, topping $1 billion for the first time, for ads running in 2008.

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 GroupM.

Advertisers spent 441.5 billion RMB ($64.6 billion) in China in 2007, according to Nielsen Media Research. Television took the lion's share attracting 82% of total ad spend over the year, while newspapers and magazines accounted for 16% and 2%, respectively.

A small increase in spending was anticipated, since multinational and local companies are eager to expand in China, but 15.4% growth "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," Mr. Brosenne added. "Rate card rates continue to rise for TV, driven by the investment that TV stations and program producers have input into content areas."

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.

"In effect, product quality is on the rise and there is a natural reciprocal increase in the costs that must be covered. The arrival of a downturn does not mitigate these costs for anyone," Mr. Brosenne said.

The CCTV auction starts every year at 8:18 am 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 about 9:00 pm. 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 Procter & Gamble Co. is believed to be the biggest spender for the fifth consecutive year. That status that has earned its Guangzhou-based associate director-media, Greater China, Alfonso De Dios, the nickname "king of the auction." P&G won't disclose how much it spent this year, but auction observers say it spent roughly 500 million RMB ($73 million), about the same amount it spent last year. P&G advertises several brands nationally such as Rejoice and Safeguard.

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 ( MPG) in Beijing.

The growth this year "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," Mr. McNeill said.

Zhejiang-based Nice Group was a top spender, investing 305 million RMB ($44.63 million) to advertise its detergents, hair care and oral care products during prime time on the broadcaster's TV drama channel.

Other local companies competing for sizable chunks of airtime included the China Mengniu Dairy Co., Langjiu Liquor Group and Kweichow Moutai Distillery Group.

Companies in China's financial sector and insurance companies saw a particularly strong surge. Advertising from categories with a close connection to consumers, such as foods, beverages, pharmaceuticals, dairy products and accessories also increased.

With China's seeming resilience so far in this economic crisis, local companies "appear to remain confident for 2009," Mr. Brosenne said.

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 J.P. Morgan 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.

The "real test" for the strength of China's ad industry will take place at the CCTV auction next year on Nov. 18, 2009, 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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