Until last year, he ran Zenith Media in China, and the Swiss native has held senior management roles at ZenithOptimedia and Carat in Asia over the past decade. This week, he spoke with AdAgeChina Editor Normandy Madden about China's murky media environment.
AdAgeChina: ZenithOptimedia recently predicted advertising expenditure in China will reach $14 billion this year, and in 2008, the increase in spending will accelerate above 22.6%, to $17.2 billion. Do you think these figures are accurate or are they inflated because they don’t take into account enormous discounts? In other words, is China’s media market really as big as everyone thinks?
Alex Abplanalp: There are many different estimates, most of them based on monitored adspend data at rate card value, which is hugely exaggerated. The ZenithOptimedia numbers are probably closer to reality since it’s based on SAIC data that is actual media owner revenue that is reported into the government, but doesn’t fully represent out-of-home and online [media]. This ranks China within the top five largest adspend markets globally, which is reflective of the relative scale and position of the Chinese economy. I have seen estimates that rank China as the second-largest adspend market after the U.S. and ahead of Japan, which we believe to be overstated.
AdAgeChina: China is very fragmented with thousands of print titles and hundreds of TV stations and data isn't always available, so it’s hard for advertisers to assess the return of their media investment. Some independent companies, including CMCG, are setting up offices in the mainland to help them, but how long will it take China to catch up to western standards?
Mr. Abplanalp: From my experience, the return-on-investment (ROI) tracking mechanisms and procedures that have been put into place by the major multinationals for most aspects of marketing communications in China are some of the best anywhere. You cannot successfully market products in such a fast-changing, diverse consumer environment as China without sophisticated ROI measurement and tracking.
Media is becoming much more closely scrutinized, with advertisers looking for greater accountability and measurability in terms of its effectiveness and efficiency. Such is the scale of media investment and the challenge of managing escalating media costs in China that multinationals' focus on media value measurement is now being driven from the top levels of management, marketing and increasingly, purchasing functions.
AdAgeChina: When you talk to advertisers in Europe or the U.S., what is usually the biggest misunderstanding about China that you hear from them?
Mr. Abplanalp: The most common misunderstanding is [foreigners' belief] that China media costs are cheap. China TV media costs are in many cases exceeding so-called mature market levels. Annual media cost inflation across all media are still some of the highest in the world and pushing up prices to levels where ROI needs to be carefully quantified not just within China but also relative to other countries.
The other misconception is that there is limited media research. There is actually more syndicated media research data available than any other country and in most cases more sophisticated. Just in television audience measurement alone there is peoplemeter or diary coverage of over 100 different markets.
AdAgeChina: What are the biggest mistakes advertisers make in China in buying media?
Mr. Abplanalp: I would say that it’s not focusing enough attention on how to best manage the media process and optimize the investment that goes behind it. In China, this is critical. Media responsibility and accountability has in many multinationals been historically delegated downwards to relatively junior levels. In communications, China is as much a media delivery as creative message-driven environment. It’s no coincidence that many of the most successful multinationals in China are those who have proactively driven the media value process at the most senior level.
AdAgeChina: How can marketers improve their media buying practices?
Mr. Abplanalp: Invariably, the most successful multinationals are those who at an early stage have understood the pervasive influence of media in China. In particular, how it can be leveraged to best effect to persuade consumers to buy their products and how to secure the inventory at the most competitive terms.
Underpinning all of this has been senior management focus locally and globally, in driving China media performance by assiduously tracking the effectiveness and cost efficiency over a period of years across all key cities. Maximizing media ROI in a market as unique and complex as China is all about measurement and benchmarking systems.
AdAgeChina: I often hear rumors in China about media buyers, both on the client side and at media agencies, stealing from ad budgets, such as pocketing discounts and kickbacks. In your view, just how big of a problem is corruption?
Mr. Abplanalp: What you are referring to simply relates to the transparent management of volume rebates which are one of the cost elements related to media negotiations and buying in China. As multinationals scrutinize media buying value more closely, there is an obligation to itemize and quantify all media cost components. China media buying is highly complex and historically more opaque because of fragmented media inventory ownership underpinned by a media broking heritage.
That’s why it’s critical for the clients and media buying agencies to agree the buying parameters and the cost benchmarks upfront. So it’s 100% clear, transparent and covered in the service agreement. There is less opportunity now to deviate from very strict transparency requirements because they are so much clearer.
AdAgeChina: What steps can marketers take to better protect their companies in a country that doesn't always allow for transparency?
Mr. Abplanalp: Most multinational companies now have stringent checks and controls in place internally and externally, to ensure that the highest standards of integrity are enforced. This is not just for media but all areas of company capital expenditure. The level of auditing in China has increased significantly not simply as a protective measure but to ensure optimal performance. This will continue as media investment levels increase.
AdAgeChina: But it is still an issue today....
Mr. Abplanalp: The realities are that the processes, the disciplines and controls that multinationals have in place in China are way ahead of most other markets. From my experience, media delivery is now more closely scrutinized in China than any other country in the world.
AdAgeChina: Because they’ve had problems here?
Mr. Abplanalp: Because too much is at stake in China from a business point of view, short and long term. Multinationals such as Procter & Gamble, who have set the highest standards, are sending their best management people to China on long-term contracts. Multinationals, in most cases, have learned from bad experiences on distribution, counterfeiting, negative PR and media-related issues over the years and have put significant resource in place to try and pre-empt future occurrences as well as stringent checks and controls.
But look at the TV audience measurement availability in China. It makes the U.S. look as though it's in the dark ages. The only problem is there is not a single measurement system with AGB [AGB Nielsen Media Research] & CSM [a joint venture between CTR Market Research and TNS Group in China] slugging it out. Also, the challenge for the agencies [is] having to productively manage and use so much TV data across 100+ cities. It's not easy to manage China but the marketing and media techniques that are in place are at an impressive level.