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Ad auction bucks the trend

By Zheng Yangpeng (China Daily)
Updated: 2008-12-01 10:10

Domestic milk companies, who are eager to cast off the shadow of the tainted milk scandal, bid aggressively, with Mengniu Dairy Co spending 44.9 million yuan for an ad between the Weather Forecast and Focus news programs. Ads before Weather Forecast were purchased by newcomer Sanyuan Dairy Co at a cost of 132 million yuan.

And the volume of advertising bids by financial and insurance companies also expanded significantly this year. Twelve banks and insurance companies bid successfully, spending more than 1 billion yuan altogether.

However, as Kwok says, luxury product makers have been "hit heavily. They are not necessities, so when consumers are in a bad financial situation, they are the first to be cut."

Facing pressures from their head offices in the US and Europe, many multinationals cling to China as their silver lining. But when spending on ads, they are cautious. P&G, which has remained the single biggest customer in the auction for consecutive three years, remained low key, refusing to disclose whether it maintained the title. Kwok says P&G's bid this time increased 5 percent, which is "mild growth".

Next year: cautiously optimistic

In fact, despite the cheers from CCTV, China's ad industry has reasons to worry.

The latest report from CTR Market Research says the growth rate of China's ad spending in the first three quarters of the year already slowed to 13 percent, compared to 17 percent in the same period last year. The market research company forecasts that ad spending in the fourth quarter will further dive, dragging the whole year's growth to 11 to 12 percent.

But according to Chen, there are as many reasons to cheer as to worry, "We have to evaluate the coming situation from an all-round perspective. Six major factors, including three positive and three negative, should be taken into consideration."

Among the positive factors to prop up sustainable growth, vast domestic demand is the defining one. "We have seen an increasing income for Chinese residents in recent years, and I believe China is now the most valuable market in the world." says Chen.

The Internet is another reason to be optimistic. The number of Internet users in China has surpassed the US and ranks No 1 in the world. China's Internet advertising is also leading the world.

At the same time, macroeconomics is the biggest negative factor, which is experiencing a downturn.

The second was the Beijing Olympics, which encouraged enterprises to pour considerable sums into advertising. As a result, the post-Olympic period will see a comparative slump, which Chen describes as a "restoration phase".

The third is that consumers' confidence in many brands is experiencing a downturn following the melamine in dairy products scandal.

With these factors in mind, Chen sees "knock out" competition ahead. "We have to admit that a large quantity of weak media and ad companies will disappear," Chen says, "It is a process of selecting the superior and eliminating the weak."

The year 2009 will be "a year of integration", as described by Chen. In a long run, this is good."

Chen says he is "cautiously optimistic" about 2009's prospect, which he predicts a growth of around 10 percent. Kwok says the growth would be 8 to 9 percent.

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