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China advertising growth slows

News, 11 March 2016

BEIJING: The rate of growth in China's advertising revenues more than halved in 2015 as the economy slowed and as the impact of a corruption crackdown was felt in certain categories.

Figures in the latest Advertising Report from insights provider IHS indicated that net advertising revenues last year reached a total of 375.2bn yuan ($64.1bn).

That represented a 7% increase on 2014, when growth of 16% was recorded, and was the first time in five years that growth had fallen to single digits, CFO Innovation reported.

But IHS expected that the next few years would see growth recover and predicted it would be in the region of 9% to 12% between 2016 and 2020, by when net advertising revenues are forecast to be 639.6bn yuan.

"Slowing economic growth, an anti-corruption campaign that greatly reduced liquor ads, and tightened advertising regulations for pharmaceutical products all contributed to a drop in advertising revenue," said Qingzhen Chen, advertising analyst for IHS Technology.

"Still, the Chinese advertising market, which has reached the size of many mature markets, will continue to grow at rates seen in emerging markets," she added.

When considering how different media fared, familiar patterns were evident, as digital channels gained at the expense of traditional ones.

Online advertising accounted for very nearly half (49%) of all net advertising revenues, with TV trailing in some way behind on 30%. Print's share, meanwhile, had fallen to 8%.

"Suffering from the continued rise of online advertising, broadcasters in China have been struggling to adapt to the changes in the media landscape," Chen said.

While most have their own digital platforms – websites and TV apps – she observed that "they do not operate as well as online-video hosting platforms, such as Youku Tudou, LeEco and iQiyi".

China's Big Three internet companies – Baidu, Alibaba and Tencent – are expected to take a growing share of online ad revenues; already they claim 68% and are slated to take 76% by 2020.

Chen sounded a note of caution on the industry's future prospects, noting recent moves by the Chinese government to tighten control of both television broadcasting and the internet. These steps, she said, "may have an additional negative effect on advertising revenue".

Warc's preliminary estimate for 2015 adspend growth in China, published in December, stands at 8.6%. This was a slowdown from the 12.5% growth recorded for 2014, yet pushed the market value to RMB313bn ($51bn) last year.

Contrary to IHS forecasts, Warc believes the rate of adspend growth is expected to ease further this year, to +6.9%. Market turbulence is expected to continue as China attempts to shift its economic output away from production and towards consumption.

Data sourced from CFO Innovation; additional content by Warc staff