CHINA DIGITAL AD TRENDS
Multiple Forces Driving Growth
Digital ad spending will account for roughly one-third of total media ad investment in China in 2014. Over the next several years, that proportion is set to climb even higher, as digital ad spending gains outpace China’s overall ad spending growth throughout the forecast period.
Search, mobile and online video are important contributors to the total growth of digital in China. Meanwhile, social networks and social chat channels are opening up new opportunities with huge audiences.
This report examines the state of digital advertising in China, with a consideration of the impact of economic, social and regulatory trends. In addition, the report looks at some of the key drivers for digital ad spending growth.
Ad spending across all media in China will grow a healthy 8.2% this year, according to latest estimates for the country. While that growth rate represents a slight easing from the 8.4% increase in 2013, it will still outstrip China’s stated target growth rate of 7.5% in 2014.
One reason for ad spending’s healthy growth outlook is an ongoing effort by China’s government to reduce the economy’s reliance on investment and exports and instead increase domestic consumption. This is likely to drive gains for advertising in sectors such as fast moving consumer packaged goods (FMCG), travel, financial services and luxury products, among others.
However, the overall economy has shown signs of slowing growth, which has led some to wonder about the outlook for advertising budgets.
Thus far, ad spending hasn’t felt the squeeze, said Eugene Chew, chief digital officer at JWT Shanghai. “We still think that overall advertising spending in China will still go up, maybe by about 6% or 7% this year.”
Moreover, if slower economic growth does crimp ad spending, digital ad investment may not necessarily feel the pinch as leading marketers shift a larger portion of their spending to digital channels. “When the economy slows down, the first budget item that gets questioned is marketing spend in general,” said Brent Cohen, managing director and founder of Beijing-based Asia Media Services Ltd., an advertising, marketing and public relations firm. “[But] within that subset, the very first line item that gets pared back is branding, with emphasis shifting [instead] to performance marketing.”
That emphasis on performance is part of a confluence of factors driving a swing in budget allocation away from traditional media channels—TV and print in particular— and toward digital advertising.
“We see more brands allocating their resources from traditional TV to digital media in their pursuit of more integration,” said Andy Wang, North Region deputy general manager at Neo@Ogilvy. “Very generally speaking, a possible shakeout will mainly affect print and TV media.”
ZenithOptimedia’s “Advertising Expenditure Forecasts” report, released in June 2013, predicted a 4.1% gain in TV ad spending in China in 2014, to $16.7 billion. The ZenithOptimedia estimate suggested that only newspaper investment will decline in 2014, while budgets for all other traditional formats will grow, but at slower rates than in 2013. In TV’s case, spending increases will have slackened considerably from the double-digit gains seen just a few years earlier.