Advertisers Pledge Nearly $1.9 Billion at China's CCTV Auction
BEIJING (AdAge.com) -- China's economic growth will remain strong next year, judging by a 15.5% increase in spending at this week's auction for prime-time ads on China Central Television (CCTV).
About 250 companies, including a handful of multinational marketers, trekked to Beijing to pledge $1.86 billion, a 17-year high, in China's version of the TV upfront market held in the U.S. Last year, China's advertisers committed to spending $1.6 billion.
The auction is widely viewed as an indicator of growth prospects not only for China's advertising industry over the next year, but also for the country's economy as a whole.
While most of the world went through a deep global recession, China has been the fastest-growing major ad market in the world for years, and that's not likely to change any time soon. In a new forecast looking at the next five years, eMarketer predicts total media spending in China will grow by 14.6% this year, and by 14.0% in 2011, 19.8% in 2012, 14.1% in 2013 and 13.3% in 2014. In the last year, China has become the world's-biggest internet market by number of users, and the world's-biggest car market.
The rowdy, all-day televised event, which sometimes resembles a variety show featuring CCTV stars, starts promptly at 8:08 a.m. and is traditionally held on Nov. 18. (Eight is an auspicious number in China, as it is similar to the Mandarin word for wealth.)
This year, the auction was brought forward to Nov. 8 to get companies planning and making decisions on ad budgets earlier, and to leave more time to finalize deals before 2011 rolls around.
Television accounts for about 82% of total ad spending in China, and much of that money is pumped into state-run CCTV.
Marketers spent almost $39 billion on TV advertising during the first half of this year, according to Nielsen Co.
Inflation remains a concern
Media buyers were not surprised that spending growth was so high at this year's auction. Strict new rules limiting advertisers' access to prime time went into effect in January 2010. That move immediately bumped up inflation rates, and the effect is still felt by marketers eager to reach consumers on China's only national TV platform.
"The advertising environment is no longer cluttered, and the commercial breaks have been shortened, [which] has led to a situation of limited media resources at many TV stations. Competing for ad space has become a key concern for advertisers," said Bessie Lee, Shanghai-based CEO of GroupM's operation in China.
The broadcaster has also become adept at creating package deals that can be sponsored by advertisers. CCTV carries out a national road show during the fall to promote the auction, and it started selling some airtime online for the first time this year. But the most popular bids -- for airtime around the nightly news, weather reports and drama-related programming -- were up for grabs at the auction.
CCTV sells its "best resources there, which advertisers should pay a premium for. If you look at same year-on-year resources, spending was actually up 28%," said Seth Grossman, Carat's managing director for China in Shanghai. "That's a pretty bullish sign. As these numbers get bigger, it shows that overall demand and interest in reaching Chinese consumers shows no sign of abating."
Foreigners bought 12% of bids
That's good news not only for CCTV but also for provincial broadcasters like Hunan Satellite TV, Jiangsu Satellite TV, Zhejiang Satellite TV and Anhui Satellite TV, which hold similar auctions during October and November to pre-sell their prime-time advertising during the coming year.
So far, spending at the regional auctions is up well over 20% this year. While they generate less media attention, marketers, especially multinationals, closely watch the provincial auctions. Few foreign companies have developed nationwide distribution systems that make it worthwhile to buy significant airtime on CCTV, opting instead for local broadcasters that reach consumers in key markets like China's Eastern coast, where consumers earn more than those in the interior.
Foreign companies accounted for just 12% of the successful bids this year. The top spenders were Jing Brand Co., a leading food and wine marketer, liquor manufacturers Wuliangye Group and Luzhou Laojiao Co., Gree Electric Appliances and the Postal Savings Bank of China. The biggest-spending foreign advertiser at the auction was FAW-Volkswagen Automobile Co., a passenger car joint venture between FAW Group Corp. and Volkswagen.
Local companies spend more on CCTV than foreigners, Ms. Lee said. "They appear more aggressive. Local brands are getting bigger and stronger, and need more national coverage as they expand. They are not just regional anymore."
While she was surprised that few multinationals took part in the auction this year, Ms. Lee said she believes "local companies are not afraid to go through the bidding process; rational planning is not part of their habit yet. They are bolder, happy to be gutsier with their investment planning and eager to lock away inventory. This is a very different mindset from multinational companies."
Domestic companies have also benefited from the government's stimulus program, designed to boost spending by Chinese consumers in second- and third-tier cities. Home appliance makers like Gree, Midea Electric Appliances and Wuxi Little Swan Co. have increased their marketing efforts.