For the third consecutive year, Procter & Gamble was the biggest spender, earning its Guangzhou-based associate director-media, Greater China, Alfonso De Dios, the nickname "king of the auction." (See "People" profile on Mr. De Dios, Nov. 29, 2006)
This year, Mr. De Dios allowed AdAgeChina to join his group for a front-row view of the event, which sometimes looks more like a variety show or perhaps a game show. It is hosted by CCTV's celebrity actors and news presenters, applause prompters pump up the cheering, and the tapping of the gavel by the auctioneer is preceded by a drum roll.
“It's really a spectacle, but I guess it takes a media company to blend entertainment and business like this,” said Amy Ballis, as she gazed around the crowded room. She is relocating to Guangzhou in January as Starcom's agency-of-record director for P&G from Chicago, where she has a global Phillip Morris role at Leo Burnett.
If a bit corny, the auction, which is officially called the CCTV Prime Resource Bidding, represents enormous business for the broadcaster, through a mixture of silent paper and open bids for time slots like weather sponsorship or naming rights for special programs. In the silent bids, representatives place sealed paper bids into a red box on the stage. In practice, however, the entries aren't sealed and the paper bids are ceremoniously held up to cameras before they are dropped into the box, to allow each marketer a few moments in the spotlight.
Culture stamped on auction traditions
That isn't the only aspect of the auction that is uniquely Chinese. Characteristic of any celebration in the mainland, superstition is evident everywhere in the sales event. The stage is decorated lavishly in gold and red, colors representing wealth and prosperity in Chinese culture. It always starts at 8:18am on November 18 (or 8:18, 11/18), because “eight” is the luckiest number. The allocated bidding numbers also contain lucky digits for the largest companies, like eight, three and six--but never four, a very unlucky number. P&G's number this year was 863 (which Mr. De Dios vastly preferred to last year's number, 069), while the computer giant Lenovo had “666.”
While the noise, sardine-like congestion and, of course, the ubiquitous cigarette smoke in the hallways outside the auction room can be slightly overwhelming, a day at a CCTV auction is peppered with genuinely exciting moments. For instance, delegates loved heated bids for coveted time slots between the owners of China's two leading dairy brands, Yili and Meng Niu. The latter has grown considerably in the past couple years through the success of its sponsorship of the wildly popular "Supergirl" singing contest on rival broadcaster, Hunan Satellite TV, and is now a tough challenger on CCTV's channels as well.
Any packages that passed the 100 million RMB ($13 million) mark also drove the crowd wild. One of the most sought-after packages, for instance, was for a 15” spot during a popular drama time slot for the first six months of 2007, including the Chinese New Year period, which sold for about $13 million.
P&G top spender for third time
Committing $53.6 million to CCTV over the coming year, P&G again spent more than any other advertiser, even though Mr. De Dios prefers the low-key silent paper bids and deliberately avoids high-profile packages likely to spiral into a bidding war. P&G was followed by some of China's largest domestic companies, Wang Lao Ji, Meng Niu and Mingshen. Colgate-Palmolive, the only other non-Chinese advertiser at the auction, spent just over $6 million.
The CCTV auction system is radically different from the way advertisers buy airtime on media in other countries, said Jack Klues, chairman of Publicis Groupe's media division, as he witnessed his first CCTV auction. In the U.S., “there are several TV networks that are more or less equally strong, so advertisers pit sellers against each other. But in China, CCTV has the power, so the system pits advertisers against each other.”
Although Mr. De Dios complains that the system does not let advertisers plan media more than 18 months in advance, it has advantages. The results are transparent and reshuffling the process this year allowed CCTV to trim about six hours from the length, so it finished at 6pm.
“They have really improved the length and pace,” said Mr. De Dios with visible relief. He and his team only escape the harsh stage lights, noise and buzz of the auction room for bathroom breaks and even eat in the front row. At lunchtime, delegates receive boxes with lackluster ham sandwiches and fruit. Mid-afternoon, bags of KFC chicken sandwiches, wings and corn-on-the-cob are passed out.
CCTV takes in $866m in 10 hours
Improvements in China's financial industry have also streamlined the process. Advertisers sign invoices immediately after winning a bid, and pay the following day by wire transfer. In the early days, however, executives would turn up with suitcases full of cash and an entourage of armed guards.
While transparent, much of the auction clearly is carefully managed by CCTV. The first bid, for instance, is never left to chance. This year, round one--naming rights for an Olympic-countdown package--went to Lenovo, the only Chinese company that is a global sponsor of the Olympic Games in Beijing, for about $4 million.
“That was a good start for CCTV and set the tone for the day. They'll definitely make more this year than last year,” observed Mr. De Dios during an afternoon lull as he munched on chicken wings.
As he expected, the auction ultimately generated $866 million from 200 companies, easily passing CCTV's goal, $826 million, and a 16% increase above last year's sluggish result. CCTV's rates have been growing even though viewership is falling due to better competition from provincial channels, a trend that worries CCTV executives.
This year's strong performance is largely due to interest in the Olympics and the programming specials CCTV is creating to hype the sports event, but the disparity between CCTV's rates and its appeal among consumers is the one reason only two foreign companies take part.
“Most multinationals don't have as many brands in as many different categories as we do,” said Mr. De Dios, “so it makes more sense for them to buy time for certain provinces and cities rather than on a national basis.”
At the end of the day though, media experts say the auction is really about ceremony, “giving face” to partners and making CCTV look good.
Besides tying their brands into the Olympics, Chinese companies are buying slots at the auction “to make a big show, to further government relations, or to gain credibility and stature before an IPO,” said Rob Hughes, managing director, MindShare, Beijing
While P&G is the king of the auction, the real winner is always CCTV.
Top 20 Advertisers at the CCTV auction (2007)
Company name; US$ spending ('000); % share
1.) Procter & Gamble (consumer goods); $53,592; 6%
2.) Wang Lao Ji (beverages); $48,376; 6%
3.) Heng Li (pharmaceuticals); $35,843; 4%
4.) Meng Niu (dairy); $31,640; 4%
5.) Long Li Qi (toiletries); $27,992; 3%
6.) Ming Shen (pharmaceuticals); $25,320; 3%
7.) Haier (electronics); $3,227; 3%
8.) Yili (dairy); $20,994; 2%
9.) Lenovo (electronics/IT); $20,651; 2%
10.) China Telecom (telecom); $19,604; 2%
11.) Hai Xing (electronics); $16,582; 2%
12.) Rong Fu (beverages); $16,572; 2%
13.) China Bank (financial services); $16,272; 2%
14 .) 361 (sportswear); $15,933; 2%
15.) CITIC Bank (financial services); $15,423; 2%
16.) Nao Bai Jing (health care); $15,272 2%
17.) Gui Zhou Yi Bai (pharmaceuticals); $14,824; 2%
18.) China Chemistry (industry); $14,526; 2%
19.) Hao Ji Xing Learning Palm (electronics); $13,609; 2%
20.) Qi Rui (auto); $13,046; 2%
Others: $406,735; 47%
Total: $866,498; 100%
Source : China Media Consulting Group (estimated)