China Ad-Spending Forecast to Grow 12% or More

Due to Lesser Impact by Recession, ZenithOptimedia, Carat Predict Country Will Shoot Ahead of Other Markets

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SHANGHAI ( -- As ad spending recovers slowly around the world, China will shoot ahead in 2010 with double-digit growth. According to new forecasts by ZenithOptimedia and Carat, China's ad market will grow by 12.1% this year (ZenithOptimedia) or up to 16% (Carat). Previously, ZenithOptimedia was predicting 9.5% growth in ad spending this year in China, and Carat expected 9%.

ZenithOptimedia is forecasting just 2.2% global growth in ad spending for 2010. Thanks to its outsize growth, China will jump from the fourth-largest ad market in the world in 2009 to the third largest in 2011, overtaking Germany and lagging only the U.S. and Japan, according to ZenithOptimedia.

Both forecasters said the global financial crisis has had a lesser impact than expected on China's economy, and that global marketers clearly see China as a key market to invest in as they seek to sustain global growth.

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Seth Grossman, Carat China's managing director, outlined three key reasons for China's fast-paced growth:

The global headquarters of major advertisers are focusing more on China, and how much they need to invest to succeed there. Some of the biggest budget increases are coming from multinational advertisers funneling additional money into China, even at the expense of other markets.

Advertisers are accelerating efforts to grow sales beyond China's first- and second-tier cities into less-developed markets, and that expansion into lower-tier cities requires bigger media investment. Major manufacturers such as Lenovo Group and Procter & Gamble Co. have already moved into these markets, but they are being followed by marketers of beverages, sportswear, luxury goods, skin care and cosmetics as well as retailers such as Carrefour and Walmart. McDonald's, for instance, opened its first McDonald's Hamburger University in China this month, and announced plans to almost double the number of outlets in China to 2,000 by the end of 2013.

Finally, media inflation is rampant thanks to new rules limiting access to prime-time TV spots from China's broadcast regulator, the State Administration of Radio, Film & Television (SARFT), and restrictions on outdoor inventory in Shanghai, home of the 2010 World Expo.

"Airtime restrictions alone would drive a price increase but decreased supply coupled with increased demand is driving media inflation upwards from 15% in some places to over 100% in other channels," Mr. Grossman said.

TV, which accounts for over 70% of ad spending in China, is likely to grow 16% this year, and online-media spending is forecast to grow 30%.

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