China's Ad Spend Growth Will Slow Next Year

Uncertainty Stems From Recession Fears in U.S. and Europe Says Alex Abplanalp

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Alex Abplanalp
Alex Abplanalp
China's post-Olympics media market is very much business as usual for the fourth quarter of 2008. Many non-Olympic related advertisers held back media activities during the whole Olympic period, in the lead up and during the games, to avoid the intense advertising clutter. There is no real sign of a significant hangover for the remainder of 2008.

At this point, however, the situation for 2009 is less clear-cut. The uncertainty is not related to any post-Olympic syndrome though, it has more to do with the economic climate in the U.S. and Europe.

It's clear that the pressure on multinationals in China to deliver higher revenue and profit targets in 2009 will be intense, as multinationals look for additional growth from the BRIC markets -- Brazil, Russia, India and China -- to compensate for shortfalls elsewhere.

Of these, China will be a primary focal point. This will undoubtedly impact on marketing and advertising budgets for 2009, where there will be intense focus on driving greater media efficiencies and value. The percentage rate of year-on-year ad spend growth in China next year will definitely drop compared to 2008.

Domestic advertisers will also help determine the health of the ad market next year. They represent more than 60% of the total ad dollars spent in China. State-owned enterprises are under intense profit pressure from the government.

Their reaction to that pressure will impact their media investment. Historically, they have invested a higher percentage of their sales revenue in marketing than established multinationals put into advertising.

For example, domestic advertisers are more likely to buy expensive advertising packages on China Central Television. So the CCTV auction in November for 2009 airtime will be a critically important health indicator for the media market in 2009.

I think there will be a slowdown in China adspending in 2009, relative to what will have been another high growth year in 2008 driven by the Olympic Games and double-digit GDP growth. Growth in ad spend this year will top 21%, but next year, my provisional forecast is 12%.

At this point though, it's difficult to forecast because there are so many more variables involved. The picture will be much clearer after the CCTV auction.

Alex Abplanalp founded China Media Consulting Group in Shanghai in 2007. Before that, he was Zenith Media's CEO, China.

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