Consumer Spending Strength Will Keep Ad Spend High

Media Innovation and Strong Retail Sales Driving Economy Says Matt Brosenne

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Matt Brosenne
Matt Brosenne
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Breakthrough advertising growth is on the 12-month horizon, catapulted forward by this year's spectacular Olympic performance.

As the 2008 Olympic Games wind down, it is time to consider life and advertising after the Olympic Games in China. High expectations are warranted for strong advertising growth through the end of 2008 and into 2009 as China's consumer fundamentals continue to improve.

While the world economy and the China stock markets have yet to show sure signs of resurgence, consumers in China are striving for consumption gold. Retail sales in July increased by 23.3% -- a new high and well above the industry's predictions. Rising salaries and incomes and a drop in inflation are the primary drivers behind the increase in retail spending.

This sales strength is a strong sign for advertisers in China. As consumers continue to spend, marketing support budgets will remain healthy.

Athletes' performance provides content
With demand levels in China continuing to rise across the country, a cycle is forming that has the power to drive consumer sales as well as advertising levels again in 2009. While the Olympic Games lasted for only 16 days, their effect is likely to last into the fourth quarter of 2008. The games have driven media consumption up significantly, especially for TV. The incredibly strong performance of Chinese athletes will continue to be a story for the next few months.

Many athletes, coaches and supporters made China's success possible, so there will be no lack of content for different media, and these stories have strong engagement value. The Olympic Games are a source of pride and accomplishment.

Advertisers have a unique opportunity to take advantage of this for the next few months, and build a firm foundation to maintain growth throughout 2009.

After the Olympics, a loosening of the advertising regulatory environment will provide new opportunities, attracting advertisers more strongly back into the fray.

It's likely Olympic sponsors will continue to spend at higher levels than the same period last year to maximize sponsorship benefits through to the end of the year.

At the same time, non-sponsors will begin to up their ad spend in an effort to get back into the game and erode progress made by sponsor competitors through the Olympics.

This is especially the case for brands that purposely went off air or kept a very low profile to avoid fighting an uphill battle for share of voice during the hectic Olympic period.

Finally, lessons learned by sponsors and non-sponsors alike across two solid years of Olympic marketing have changed the marketplace. I expect to see more robust and more comprehensive marketing strategies for brands across categories in China.

Olympics drives interest in digital media
From a media perspective, the Olympics have had a tremendous impact. The games broadcast across CCTV channels have easily touched in excess of one billion viewers across the country.

At the same time a host of new media resources have utilized the Olympics to demonstrate their ability to drive more consumer contacts. Advertisers are likely to aggressively take advantage of opportunities like new media channels and new ad formats. Mobile TV on public transport is a good example.

Mobile phone TV both on the 3G and China Multimedia Mobile Broadcasting (CMMB) standards are in a similar yet less developed situation than mobile TV on public transportation. As the Olympics approached, these viewing services along with the required equipment to enjoy them hit the market.

The growth of these services will continue to pick up speed, with potential audiences reaching into the hundreds of millions.

There are certainly some concerns about the downturn in the U.S. and world economy.

While China is by no means isolated from these effects, the retail sales market is weathering the storm. This, along with the boost provided by the Olympic Games, will propel the advertising market toward strong growth over the remainder of the year and into 2009.

Matt Brosenne is the international business director of CSM Media Research in Beijing.

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