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Olympics and consumer power spark Ad spending growth in China

11 August, 2008

New GroupM Report Predicts Country On Track to Become World’s No. 2 Ad Market in 2010

Advertising spending in China is expected to grow more than 20 percent this year and almost 20 percent in 2009 triggered not only by Olympic-related expenditures but also growing consumer power and urbanization, according to a new study from GroupM.

The report, “This Year, Next Year: China” is part of GroupM's media and marketing forecasting series drawn from data supplied by holding company WPP's worldwide resources in advertising, public relations, market research, and specialist communications. It includes forecasts for advertising spending in all major media.

“We’re confident of strong media investment growth extending to 2009 as demand in China becomes an increasingly important source of growth for global marketers as well as Chinese companies focusing on brand-building,” said GroupM Futures Director Adam Smith, who oversees all “This Year, Next Year” reports. “Growth in 2007 was relatively restrained, but we predict many marketers are conserving funds for the anticipated Olympic bonanza this year.”

The report said the Beijing Olympics will play a key role in accelerating media investment growth 22 percent to $35 billion, an increase from 2007 but below the explosive 29 percent annual compound average of 2001-2007. The report also forecast a 19.5 percent hike in spending to $42 billion for 2009.

In global terms, Smith pointed out that China will supply 23 percent of an anticipated 5.8 percent growth in global ad spending in 2008 and 30 percent of an expected 4.5 percent global growth in 2009.

The report pointed out that last year China overtook Germany to become the world’s third-largest ad market behind the U.S. and Japan. It is expected to fall within 10 percent of Japan in 2009, which, with Japan now in or near recession, should be an easy gap for China to close in 2010.

The report identified television and the internet as the primary engines of ad growth in China, especially this year with the Olympics generating an estimated $400 million in spending on CCTV, China’s national television network and the exclusive Olympics broadcaster. The figure represents six percent of all new media investment in the nation in 2008.

The internet is expected to command 7.3 percent of ad investment in 2008, rising to 8.5 percent next year, the report said, noting that it is China’s fastest-growing medium and is on track to become the second-largest advertising medium after TV within a few years.

“China has the world’s largest internet community with more than 250 million users,” said Smith. “That’s an increase of more than 90 million from June of last year, representing a year-to-year growth of more than 55 percent.”

The report also revealed the following:

Rising incomes and consumer price inflation will fuel consumer expenditures, translating into increased sales for marketers. Per capita disposable income in China grew 120 percent in urban areas between 2000-2007, from $816 to $1812 currently. Retail sales tripled (at current prices) between 2000 and 2007, a development that contributed significantly to the report’s growth forecast.

Beyond 2008, retail distribution will extend to all 600 smaller cities throughout China as marketers will spend more money developing new consumers to balance with more developed markets like Shanghai and Beijing.

Online gaming is coming to play a vital role in internet advertising in China. In 2007, 120 million online gamers resulted in a huge growth in embedded advertising in online games. E-commerce also is growing despite low credit card penetration, with 46 million consumers shopping online in 2007. By 2010, an estimated 100 million-plus Chinese consumers are expected to shop online.

Acrobat Document GroupM_PressRelease_Olympic_Consumer_Power_Aug08_g.pdf

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