Ads on the up, but can it last?

China bucks commercial trends for year

SHANGHAI — China’s advertising industry bucked world trends and saw double digit growth last year, according to a report from AC Nielsen Media Intl.

Particularly significant was the 17% growth in spending on TV advertising, which now stands at $8 billion, the largest chunk of the $11 billion ad industry.

But according to some local media and foreign industry experts, the figures belie fundamental weaknesses in TV advertising that could trigger a fall in the coming years.

China’s success comes in sharp contrast to the experiences of other countries in the region and places China as the second largest advertising market in Asia, behind Japan. By contrast, Australia last year saw ad spending shrink 11% and Singapore 3.6%.

Many predict the growth will continue, thanks to China’s entry into the World Trade Organization last December and the capital’s successful bid to host the Olympics in 2008.

“Thriving consumer demand matching the nation’s optimism following its winning bid for the 2008 Olympics will continue to sustain high ad spending in the Asia-Pacific region,” ACNielsen’s Asia Pacific branch managing director Forrest Diddier was quoted as saying last week in the Shanghai Daily.

But things are about to change.

Many health and medical products will be banned from mass media advertising at the end of this year, according to new rules from the State Drug Administration.

That’s worrying as health foods and vitamins ranked first among the 10 most advertised products, with over-the-counter drugs at No. 2 and cough and relief medicines at No. 4.

The rules apply largely to prescription drugs, but over-the-counter medicines are also coming under fire.

Another weakness in the industry is the lack of international brands. The top 10 advertisers in 2001 were all domestic, eight of them pharmaceutical producers.

“The pharmas will continue to advertise,” says Ling Chen, media buying manager at the Shanghai branch of Lowe Worldwide, “but they will change direction, focusing on public events, like sports promotion, rather like tobacco companies did in the West as they were banned from mass media.”

The effect on the TV industry may be dramatic. “This will hit China Central Television hardest,” adds Ling. “Foreign companies are much more keen on regional channels that focus on the more lucrative East coast markets than national TV.”

There is also increasing competition in the TV market, according to business watchers China Online, with many advertisers choosing to use overseas media companies that have entered the Chinese market, including Discovery Channel and TVB-8.

Even if they want to advertise on CCTV, many foreign firms are put off by the unusual ad-buying process. For many years, CCTV has auctioned off its top 230 slots in a two-day bidding frenzy each November. Foreign companies complain that there is not enough data available about the slots and that the timing is bad for media buying.

It’s not all doom and gloom for domestic TV channels however. “Sure, the lack of pharmas’ money is going to hurt,” says Nicholas Page, Lowe’s strategic planner in Shanghai.

“But the Chinese advertising industry is very underdeveloped, and there is still an enormous growth potential before the market reaches its natural size. By next year, there will be plenty of new industries plugging the gap.”

More Biz

  • Paul Haggis Lawsuit

    Paul Haggis Hit With Lawsuit for Alleged Rape, Claims a $9 Million Shakedown

    SHANGHAI — China’s advertising industry bucked world trends and saw double digit growth last year, according to a report from AC Nielsen Media Intl. Particularly significant was the 17% growth in spending on TV advertising, which now stands at $8 billion, the largest chunk of the $11 billion ad industry. But according to some local […]

  • Sirius Logo

    SiriusXM Hit With Big Rate Hike by Copyright Royalty Board

    SHANGHAI — China’s advertising industry bucked world trends and saw double digit growth last year, according to a report from AC Nielsen Media Intl. Particularly significant was the 17% growth in spending on TV advertising, which now stands at $8 billion, the largest chunk of the $11 billion ad industry. But according to some local […]

  • Leonardo Da Vinci Salvator Mundi Auction

    How a Restored da Vinci Became the Most Expensive Artwork Ever

    SHANGHAI — China’s advertising industry bucked world trends and saw double digit growth last year, according to a report from AC Nielsen Media Intl. Particularly significant was the 17% growth in spending on TV advertising, which now stands at $8 billion, the largest chunk of the $11 billion ad industry. But according to some local […]

  • Barry Diller Hollywood

    Barry Diller Eyes $30 Million Gondola to Hollywood Sign (EXCLUSIVE)

    SHANGHAI — China’s advertising industry bucked world trends and saw double digit growth last year, according to a report from AC Nielsen Media Intl. Particularly significant was the 17% growth in spending on TV advertising, which now stands at $8 billion, the largest chunk of the $11 billion ad industry. But according to some local […]

  • Terry Crews WME

    Terry Crews Signs With UTA After WME Battle

    SHANGHAI — China’s advertising industry bucked world trends and saw double digit growth last year, according to a report from AC Nielsen Media Intl. Particularly significant was the 17% growth in spending on TV advertising, which now stands at $8 billion, the largest chunk of the $11 billion ad industry. But according to some local […]

More From Our Brands

Access exclusive content