Vibrant Bidding at the CCTV Auction Indicates Healthy Economy -- and Media Inflation

Annual TV Sales Event is a Barometer for China's Economy, Say Media Buyers Attending the Epic, Colorful Auction

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CCTV's annual auction is part-business, and part-variety show
CCTV's annual auction is part-business, and part-variety show Credit: Derek Kwok
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BEIJING (AdAgeChina.com) -- Media owners in China are about to find out just how profitable next year is going to be.

China's only national TV broadcaster, China Central Television (CCTV), held its annual auction today for ad spots during 2010 prime-time programming as well as title sponsorships for key programs like CCTV's Chinese New Year gala, nightly weather reports and special events like World Cup coverage.

The full results will not be made public until tomorrow, but media buyers who took part in the frenzied auction today at CCTV's Media Center in Beijing said trade was brisk and new records were set. Some experts estimate TV ad rates will go up by 15% in 2010.

At the November 2008 auction, CCTV raked in 9.256 billion RMB ($1.355 billion), up from 8.028 billion RMB in 2007, the first time revenue topped $1 billion.

"The overall bidding this morning was more aggressive than I have seen in previous years," said Bessie Lee, GroupM's Shanghai-based CEO, China.

(Read first-hand reports by media buyers in "Live From the CCTV Auction.")

Advertisers in China should be prepared to open their wallets a little wider next year. The CCTV auction is a barometer for China's media market, and the country in general. The strong performance at today's auction means China's economic juggernaut is still rolling along.

After warming up the crowd by selling a dinner with the auction's hostess, CCTV picked up $5 million from liquor marketer Lang Jiu to sponsor a World Cup show and $10 million from another liquor company to sponsor CCTV's Young Singer contest. Lang Jiu came back with another winning bid, for $16 million, for the CCTV Chinese New Year gala watched by most of China.

This year the winning bids were flashed electronically within seconds, making it easier for the audience to keep track as well as energizing the whole group, said K.F. Lee, Aegis Media's CEO, Greater China.

"For years, the advertising income of CCTV's prime time programs has been considered an important indicator of the overall Chinese economy," said CCTV during a news program it ran earlier today about the auction.

"The atmosphere continued like crazy"
Although CCTV is China's only national broadcaster, and rakes in billions in ad sales, it accounts for just 12% of total TV ad revenue in China. The rest goes to local TV channels (35%), provincial satellite channels (25%) and provincial TV stations (29%), according to AC Nielsen.

Those other channels hold off setting their own rates until CCTV's annual auction, which always starts at 8:18 am on Nov. 18, capitalizing on the auspiciousness of the number eight in Chinese culture. Based on the high level of interest in CCTV's airtime today, media buyers predict some inflation across the board, but say increases will be manageable.

"Although the bid is relatively more vibrant vis-a-vis last year's, the pricing and the bid result is up to expectation and within a reasonable amount versus 2009," said Joanne Law, OMD's Beijing-based deputy managing director, China.

"We think it will end up at 15% year-on-year inflation which just shows how strong the belief in the Chinese economy remains," said Aegis Media's Ms. Lee.

The colorful, noisy, crowded event attended by thousands of marketers and media buyers is part talent show, too.

CCTV parades its top stars during breaks in the bidding, which can easily last more than 18 hours, since CCTV has over 20 channels airing nationally and overseas. There are no breaks either. Boxed meals are passed around every few hours for weary, hungry bidders.

"The atmosphere continued like crazy," said Derek Kwok, Zenith Media's Beijing-based managing director, China.

"We think it will end up at 15% year-on-year inflation"
Procter & Gamble is traditionally the biggest advertiser at the auction, earning the U.S. consumer goods giant seats in the front row for a coterie of executives from P&G and Starcom MediaVest, its media agency in China. In each of the last two years, P&G spent roughly 500 million RMB ($73 million) at the auction.

P&G, with an array of brands sold nationally in China, is one of the few multinational companies that has a major presence at the auction. Most foreign advertisers prefer running spots on local and regional stations in China, because their brands are too expensive to be sold nationally, or simply aren't distributed outside of the key first- and second-tier cities.

"P&G may not be the biggest bidder this year, pending final calculation from CCTV. Local advertisers are more active and aggressive in bidding their desired program and time slots. Mengniu, after the crisis about their ingredients last year, was especially active this time," said one media executive at the auction, who asked not to be identified.

Mengniu was one of many China's dairy companies hurt by a melamine scandal last year in China.

Historically, most major advertisers at the auction are local companies. Some are national marketers in competitive industries, leading to fierce bidding wars between rivals like China Mengniu Dairy Co. and Inner Mongolia Yili Industrial Group, leading marketers of milk and yogurt drinks.

Local advertisers with a regional presence in China's massive market also use CCTV, however. As a state-run broadcaster, CCTV gives such players clout and status back in their home provinces and provide a stepping-stone to building national brands. Spending heavily on CCTV is also seen as a way to curry favor with politicians in Beijing.

The variety of companies and agendas at the packed auction lends to the atmosphere and a sense each year that history is being made.

UPDATE: Advertisers spent RMB 10.97 billion ($1.6 billion) yesterday at an auction for prime-time airtime on China's state-run national broadcaster, according to CCTV, an 18.5% increase over last year's RMB 9.26 billion ($1.36 billion).

CCTV said 50 foreign advertisers took part in the auction and their spending increased 28% over last year.

The biggest spenders included Langjiu Group, an alcohol marketer, which spent RMB 400 million ($58.6 million) and China Mengniu Dairy, which spent RMB 343.34 million ($50.3 million). Marketers of household products, construction materials, household electrical appliances and car companies all dramatically increased spending this year.


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