Advertisers facing creative challenge

Despite the stringent industry regulations, some of the bigger foreign advertising agencies were more than convinced about the early potential in the land of more than 1.3 billion.

Often hailed as the father of modern advertising in China, T.B. Song, chairman in China of Ogilvy & Mather and WPP, the world's largest advertising company, was among the first to establish a modern advertising practice when he helped launch a joint venture with Ogilvy & Mather and Shanghai Advertising Agency in 1991.

Despite the opening of the advertising industry in the 1980s, it was not until the 1990s that both businesses and consumers began to see any form of promotions in any form of media, he says.

"All the agencies were government owned," Song said, describing the advertising landscape when he first began working in Shanghai.

"At that time, advertising was very simple. It was just about brand awareness and direct."

Perhaps the biggest change for foreign ad firms looking to expand in China came seven years ago, after a policy shift allowed outside agencies to establish wholly owned foreign enterprises in 2005.

The importance of the advertising industry in China is more than emphasized in the nation's 12th Five-Year Plan (2011-15), which has laid out plans to develop the industry that currently accounts for over 1 percent of China's GDP. The new focus is an important component of China's blueprint for moving on to a modern service-based economy.

Despite the robust growth rates and a promising future, there are still several challenges for both foreign and domestic advertising firms.

With television making up 77 percent of the advertising market share, according to a report released by Chinese market research company CTR, restrictions on media have created a barrier for foreign advertising firms operating without a Chinese partner seeking to engage in the largest portion of the market.

"This is the biggest challenge facing foreign firms," said Wang Guoji, a professor of advertising at Peking University's School of Journalism and Communication.

Twin advantages

In addition to the restrictions on media, different business practices, language and cultural barriers also present hurdles in an industry whose sole foundations are centered on communication.

It is for this reason that many of the largest companies find pairing with a local agency crucial. With a better grasp of how local businesses operate, individuals familiar with China's advertising practices can often lend an advantage when working with multinational firms.

"They are able to respond to and reassure the local business leaders who often lack global vision. This is something that is difficult to have within a multinational agency, not even in the highest tier of multinational companies," Doctoroff said.

"Even then, the relationship management is always a challenge for multinational agencies."