The WPP media division predicts ad spending in China will grow to RMB 339 billion ($49.9 billion) in 2011, up 11% over estimated spending in 2010.
GroupM has based the revised estimate partly on a 16% hike in projected spending on television advertising, which was forecast to increase from RMB 165 billion ($24.3 billion) in 2009 to RMB 192 billion ($28.3 billion) this year.
The largest percentage gain, however, will come from ads placed on the internet. Online ad spending is expected to rise from almost RMB 21 billion ($3.1 billion) in 2009 to RMB 27 billion ($4.0 billion) in 2010, a 30% hike.
Several other factors have also contributed to higher ad spending in China, said Lucy Zhang, GroupM's future director for China in Shanghai.
Rising consumer income
Per capita disposable income in China grew by 173% in urban areas between 2000 and 2009, from RMB 6,280 ($924) to RMB 17,175 ($2,528), and retail sales volume nearly tripled during the same period.
"A continuation of the consumer spending boom is anticipated to play a key role in sparking future ad spending increases," Ms. Zhang said.
Better retail distribution
Improvements in retail distribution networks have allowed marketers to increase their presence in China's lower-tier cities. That means advertisers must invest to reach and appeal to new consumers in secondary and tertiary cities, which are set to grow more quickly than the developed cities of Shanghai, Guangzhou and Beijing.
"Retail sales grew 15% in 2009, double the rate of nominal GDP," said GroupM Futures Director Adam Smith in London. "Advertising serves this rising urban consumer and increasingly the rural consumer as well. Advertising investment could well run ahead of GDP for years to come."
Media inflation will force advertising budgets up as the cost of communicating with customers increases. Television especially remains a seller's medium in China, where major channels like China Central Television (CCTV), Beijing TV and Shanghai Media Group (SMG) have tremendous power and influence. Demand for airtime far exceeds supply on these channels, where stringent airtime restrictions also apply.
"The Chinese advertising marketplace is a collection of evolving, complex and fragmented markets and advertiser options will need to multiply accordingly," Ms. Zhang said, especially in digital, events, sponsorship and branded content.
China's media market is "about to begin an era of hyper fragmentation, offering media agencies and advertisers a massive degree of choice when formulating media plans," Ms. Zhang said. "This may come as a surprise to western advertisers who might not normally associate choice with China. The key challenge for advertisers in China is how agencies manage and evaluate this choice while striving for further media effectiveness and higher returns from media."
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