Strong Demand at CCTV Auction Will Boost China's Ad Market

TV Spending Will Grow 7-10% Next Year As Advertisers Move Into China's Lower Tiers

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SHANGHAI ( - Local and international advertisers pledged to spend 9.26 billion yuan ($1.36 billion) to run commercials on China Central Television (CCTV) in 2009 at the state-run broadcaster's annual auction on Nov. 18, 2008, an increase of 15.4% over last year's auction.

The strong growth indicates continued confidence in the spending habits of Chinese consumers, despite global economic woes. China remains the engine of growth for companies on a global basis and domestically. Marketers cannot afford to cut back, a level of commitment that was clearly evident in the upfront bidding.
Seth Grossman
Seth Grossman
Traditionally, CCTV sets the tone for all other media owners and we can therefore expect to see continued ad spend growth for China in 2009. Carat estimates a 7-10% increase in 2009 for total TV advertising expenditure.

Domestic companies drove the growth at this year's auction, with Chinese food and beverage and finance and insurance companies leading the charge, along with several companies that were first-time participants in the prime-time auction such as Tianyu mobile phones and Feihe Dairy.

Some categories took a step backwards, however, such as household appliances, which have been hard hit by the declining property market, as well as firms strongly affected by the current economic turmoil such as those with a heavy reliance on exports.

Procter & Gamble Co. topped the spending at the auction for the fifth consecutive year by committing 515 million RMB ($75.3 million). Key domestic players driving the CCTV bidding included United Da Tong Auto Parts in second place with a 313 million RMB commitment ($45.5 million), followed by Nice Group at 305 million RMB ($44.4 million).

Nine of the top 10 advertisers in the auction were local companies and those ten advertisers accounted for nearly one-third of the total committed spend in the auction.

While the importance of tier one markets like Shanghai and Beijing remains critical, expansion into second, third, and even fourth tier markets increasingly drives the growth in ad spend. Despite increased competition from satellite channels like Hunan Satellite TV and Shanghai's Dragon TV, CCTV remains the most efficient media channel to reach a broad swath of the Chinese population.

Given that CCTV can often be a cost-effective option for marketers seeking to reach as few as 20 cities and that basic marketing plans for many advertisers now include more than 30 cities--and sometimes as many as 400-- we're seeing the beginning of a long-term trend toward CCTV as the logical choice to support deep distribution.

We can also predict that demand for prime inventory will be intense in markets outside of the affluent coastal regions while the outlook for sustained rapid growth in Shanghai, Beijing, and Guangzhou remains strong. The CCTV auction results will likely embolden other media owners to hold firm or attempt to raise rates as we head into 2009, even though none of them have the same clout as CCTV.

The strong demand during the CCTV auction should calm those who fear that China will be the next domino to fall amidst the global economic turmoil.

Still, as we look ahead, we will see marketers shift budgets to more "accountable" media where results can be more immediately and easily quantified and optimized, especially digital. Our forecasts show that marketers plan to significantly increase online spending in the current economy, at the expense of traditional media such as newspapers.

We are also seeing brands consider reevaluating their media mix to seek ways to improve efficiencies, such as moving to cheaper TV day-parts or shifting to less expensive media.

In doing so, however, brands must consider the potential negative impact from moving out a medium or day-part which more effectively reaches your target from a media consumption standpoint, just to save on cost per rating point (CPRP) efficiencies.

It is also important to not forget to reinforce a brand's perceived value during a time of economic challenge, because if that can be established, consumers will seek out ways to purchase their preferred brand. CCTV's reach and stature offers brands an opportunity to reinforce that perception on a national stage.

Growth in advertising expenditure will definitely slow but what is slow for China would be cause for celebration in most other parts of the world. The CCTV auction shows some brands are aggressively exploiting market conditions. Now is the time for brands to step up, stake their territory, and enjoy the benefits for years to come.

Seth Grossman was recently promoted to managing director, eastern China at Aegis-owned Carat in Shanghai.

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