Adspend set for further growth in China

15 September 2010

SHANGHAI: Advertising expenditure levels are set to record a double-digit expansion in China during each of the next two years, GroupM has predicted.

WPP's media arm estimates spending will increase 16% to 306bn yuan ($45.4bn; €34.9bn; £29.3bn) in 2010, and by a further 11% to 339bn in 2011.

Television ad sales are due to surge 15.9% in 2010, to 192bn yuan, and 9.5% in 2011, as this channel retains a dominant position overall.

However, TV's share will decline slightly, from 62.8% in 2009 to 62% in 2011, primarily because of the internet's rising importance.

More specifically, online revenues should come in at 27bn this year, an uptick of 30% on an annual basis.

Display returns are pegged to climb 34.1% in 2010 and 21.8% in 2011, figures standing at 28.7% and 39% respectively concerning search and 25.1% and 31.4% in turn regarding other web ads.

As a result, the internet's proportion of budgets will increase 7.9% in 2009, reaching 8.8% in 2010 and 10.3% in 2011.

Elsewhere, newspapers were anticipated to enjoy an 11% improvement in 2010 and 5% in 2011, simultaneously losing 1.4% in share, to 13%.

Magazines should account for 2.1% of outlay by this date, essentially static even as category adspend leaps 9% in 2010 and 5% in 2011.

Radio's 20% acceleration in 2010 could moderate to 10% in 2009, as its share remains flat on 2.9%.

Having posted a modest contraction last year, outdoor is in line for expansions of 15.8% and 10% annually over the forecast period, maintaining out-of-home's 9.7% proportion of revenues.

The main contributors to the positive trends observable in China include rising wealth among shoppers, with disposable income reaching 17,175 yuan in 2009, measured against 6,280 yuan in 2000.

Retail sales volumes almost tripled in this timeframe, boosted by stronger distribution into lower tier cities, which are expected to grow at a faster pace than larger markets such as Beijing and Shanghai.

"Retail sales grew 15% in 2009, double the rate of nominal GDP," said Adam Smith, GroupM's Futures Director.

"Advertising serves this rising urban consumer and increasingly the rural consumer as well. Advertising investment could well run ahead of GDP for years to come."

Media inflation may also "force" expenditure upwards, especially as broadcasters like CCTV, Beijing TV and the Shanghai Media Group have considerable influence.

Demand for inventory is currently exceeding supply on many leading stations, reinforced by the introduction of tighter restrictions on airtime.

"The media market is about to begin an era of hyper fragmentation, offering media agencies and advertisers a massive degree of choice when formulating media plans," said Lucy Zhang, Futures Director, GroupM China.

"This may come as a surprise to western advertisers who might not normally associate choice with China."

"The key challenge for advertisers in China is how agencies manage and evaluate this choice while striving for further media effectiveness and higher returns from media."

Data sourced from GroupM; additional content by Warc staff