GroupM forecasts 16% ad spend increase for China in 2010

MUMBAI: Measured media ad spending in China is expected to reach RMB 306 billion this year, a 16 per cent increase over 2009, according to a new forecast from GroupM China.
The study, This Year, Next Year: China Media Forecasts is part of GroupM‘s media and marketing forecasting series drawn from data supplied by parent company WPP‘s worldwide resources in advertising, public relations, market research, and specialist communications. It was released by GroupM Futures Director Adam Smith and GroupM China Future Director Lucy Zhang.

The report also predicted that ad spending in China would reach RMB 339 billion in 2011, an 11 per cent increase over projected spending in 2010.
In dollar terms, 2010 growth is led by a 16 per cent hike in projected spending on television advertising, which was expected to increase from RMB 165 billion in 2009 to RMB 192 billion this year. The largest percentage gain came in the forecast for Internet ad spending, which is expected to rise from almost RMB 21 billion in 2009 to RMB 27 billion in 2010, representing a 30 per cent hike.

The year-over-year growth was attributed to several factors, including the following:

Rising Consumer Incomes. Per capita disposable income grew by 173 per cent in urban areas between 2000 and 2009, from RMB 6,280 to RMB 17,175, and retail sales volume nearly tripled during this period. A continuation of the consumer spending boom is anticipated to play a key role in sparking future ad spending increases.

Retail Distribution Of Goods: Increases in retail distribution are taking brands to more and more lower-tier cities. Subsequently, advertisers must invest to reach and appeal to new consumers in secondary and tertiary cities, which are set to grow more quickly than the developed cities of Shanghai, Guangzhou and Beijing.

Smith says, “Retail sales grew 15 per cent in 2009, double the rate of nominal GDP. 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: Media inflation will force ad budgets to rise as the cost of communicating with customers increases. Television especially remains a seller‘s medium in which the big channels like CCTV, Beijing TV and Shanghai Media Group (SMG) have tremendous power and influence. Demand for airtime far exceeds supply on these big TV channels, where stringent airtime restrictions also apply.

Zhang described the Chinese advertising marketplace as a collection of evolving, complex and fragmented markets and said advertiser options will need to multiply accordingly, especially in digital, events, sponsorship and other branded content, with each platform offering new ways to reach and engage with consumers.

“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. 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,” says Zhang.

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