Carat Raises China 2009 Ad Spend Forecast to 6.9% Growth

Growth is Stark Contrast to Expected 9.8% Global Decline

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SHANGHAI ( -- China continues to show growth outpacing the global recession hitting most western markets.

Aegis-owned Carat raised its 2009 forecast for ad spending in China to 6.9% from 4.6% -- on top of the 18.9% growth rate last year when the market was fueled by aggressive spending around the 2008 Olympic Games in Beijing. Carat also raised its 2010 ad spend estimate to 9.0% from 7.2%.

At the same time, Carat revised its prediction for worldwide expenditure in 2009 to a 9.8% decline (from -5.8% in March 2009), due to significant reduction of forecasts in all regions except Asia/Pacific, which will be nearly flat overall this year.

Weakness in property and automotive advertising has been offset by strong growth in less economically sensitive categories like personal care, snack food, pharmaceuticals, and quick-service restaurants. Spending is also dropping in categories like sportswear.

While China is "challenging" for advertisers, said Michelle Lau, Carat's managing director for China in Beijing, it "remains the most resilient of the major economies. We are also increasingly optimistic."

National and provincial broadcasters remain strong as marketers try to reach consumers outside China's first and second tier markets.

More than 4,900 companies advertised on China Central Television (CCTV), China's state-run national broadcaster, during the first eight months of this year, up more than 20% year-on-year. The cost of ad slots on CCTV have also risen by double digits this year.

Digital media such as paid search, social media campaigns, and ad placements in online games, are also rapidly becoming standard elements of the media mix, said Seth Grossman, Carat's managing director, eastern China, based in Shanghai.

While TV still captures 73% of all ad spend in China, the growth rate for digital is three times that of TV, and outdoor is growing at nearly double the rate of TV. Paid search in China, according to research by Aegis' iProspect unit, is growing at a 40% annual clip, compared to 5.9% for TV.

While China's continued growth is a bright spot for global marketers, the mainland is not immune from the world's problems. Over the past ten years, China's ad market has averaged 28% annual growth.

While the growth in digital media is "stellar," it's down from 77% in 2007 and 62% in 2008. Outdoor media in 2008 enjoyed a spectacular 35% rise fueled by the Olympics but even the 5-year average from 2003-2007 was a powerful 18%, well above 2009 levels, Mr. Grossman said. "While 2010 will clearly be better than 2009, it will not be a rapid return to the irrational exuberance of the first part of this century."

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