By Gordon Chu | Tuesday, December 22, 2009
As my primary role in business development, I have my hands in a little bit in every division at METAN – from TV production and marketing to operations and digital. However, as my New Year’s resolution, I’m pledging to go back to the METAN basics to where our entire business model is rooted: brand advertising. This is our forte, our core competency, and certainly our bread and butter. This is also the biggest opportunity in the China market today.
I read that total measured advertising expenditures in the first half of 2009 fell nearly 14.3% versus a year ago (to $60.9B USD) in the United States. Compare that to China’s ad spend and you see an inverse of that figure of nearly growth of 12% in the first three quarters of 2009 (to $54B USD) according to the latest figures by CTR Market Research.
Hardly anyone will argue against the fact China is becoming the global hot spot for any global brands. With nearly all roads leading into China today, there’s no question paying close attention to the growing China market will be a critical step in any global brand’s strategy for expansion. However, the idea of advertising is vague. And statistics are just that – statistics. A more critical look into 2010 for the two platforms leading the way (television and online) will unveil a better idea of where the money is and where it’s going.
TV – KING OF THE HILL
Television remains as the predominant media platform with a 78% market share of the total ad spend in China . I will note that although I say sarcastically it grew a mere 14% in the first three quarters of 2009 versus the previous year, television has given up some distance to other forms of advertising including that of Internet and outdoor. I will also note that television in China will never be undermined or ever go away (at least not in the foreseeable future) – as long as the mass media is under current regime and regulations, television will forever have a footprint in how media is consumed and preferred.
For 2010, Chinese advertising on television will shift from that of driving viewers to that of media value. This really should not have taken anybody by a big surprise. After all, in the US, this transformation has started long age starting with the advent of online videos and digital video recorders. These technologies allowed viewers to skirt traditional advertising and put more pressure on media value and brand integration in the content themselves.
In China, although technologies have made a significant impact in how content is consumed on an on-demand basis, the biggest factor in this shift comes from that of advertising inventory. Effective January 1, 2010, SARFT (State of Administration of Radio, Film and Television) is implementing regulation #61 whereby TV commercial airtimes cannot exceed 12 minutes per hour. As a result, estimates of an increase of 24-25% on advertising rate cards will ultimately drive advertisers to focus on getting more for their money.
With more advertisers scrambling to stretch their advertising dollars, the idea of branded integration will continue to be the new buzz word amongst agencies and content providers. Several months ago, we talked about ‘Ugly Wudi’ as one of the first to pioneer branded integration in Chinese television programming. Today, there are already new shows on-air and in the works that are riding the coattails of ‘Ugly Wudi’. Yet, with over 3,000 TV stations in China to fill of content, programming still has a long ways to mature before it meets the branded integration needs for global brands.
At the end, good content is king. I note ‘good’ only because advertisers still need to balance the idea of brand image with that of media value. To put it shortly, I do believe branded content will be more readily available, but media value is not about availability but if it’s ‘right’ for the brand.
ONLINE – THE NEW KID ON THE BLOCK
Online opened up in China with a flurry. With over 360 million Chinese netizens in just over 10 years, online media is a formidable alternative platform to that of television.
While Internet advertising revenue growth in the US has hit a plateau of under 5%, China’s forecast of 20% growth in 2010 has digital advertising agencies appearing out of nowhere for the first time in the past few years. After all, this is where the key elusive demographic that the majority of global advertisers are salivating to get a chance to market is consuming their media.
For 2010, the big question about online advertising is not about why, but how. Unlike television where advertising has more of a defined role of where trends are shaping the industry, online is still the wild west for advertisers. For one, everyone is a content provider whether legitimate or not which really puts more pressures on content providers to produce more quality programming and on platforms to create the right marketing and promotion campaigns to make online advertising a legitimate success.
More importantly for 2010 on answering the ‘how’, online is still a fluid and dynamic platform. Advertisers understand the language of ROI (return on investment) and with constantly evolving platforms without rules and metrics, providing a sustainable business model will constantly be in-flux. For 2010, it will be a year of proving out the validity of online as content providers, platforms, and advertisers converge to figure out the right business model in the China market.
TV & ONLINE – WHOLE IS GREATER THAN THE SUM OF ITS PARTS
From my personal experience, the Chinese have a very ‘silo’-ed way of thinking of media platforms. As a content provider, it is either television or online – never that of both. With that, advertising has evolved their thinking in the same. However, from looking at media consumption behavior, I believe there will be a convergence of the two. Whether that happens sooner than later, I wouldn’t even know where to speculate; but this inevitable convergence of platforms will provide the richest and most effective opportunity for advertisers and content providers alike.
For 2010, platform convergence will shed light to a new way of media is consumed in China. The idea of platform convergence is more than just having the content available on both online and television, but utilizing both platforms to cross-promote the content and ultimately enhance the viewer experience. For television, online provides a whole new dimension of watching programs from audience interactivity and behind-the-scenes footage to an e-commerce component and social-networking aspect. For online, television provides the ultimate platform for promotion to drive viewers across to the digital threshold.
In this convergence scenario, both television and online fills the void where neither one could do successful on its own – simply put, at the end, advertisers win. For advertisers, the convergence of platforms is the pinnacle of media value. In a recent conversation with Kenny Bloom, CEO of Visitek Holdings, Bloom states it best, “At the end, brands care about driving sales….” – a statement that perfectly encapsulates the idea of how online and television can work together.
CONCLUSION
From online to television, China is an endless market of media opportunity. Despite the ever-changing media landscape and the difficulties following a moving target, I do believe Chinese media is evolving and shaping the right way.
As 2009 dwindles to its final days, I’m personally encouraged and excited to tackle 2010 with vigor and a new focus on brand advertising. Despite the ups and downs of navigating through the China market, 2010 only promises more of the same – and I wouldn’t have it any other way.
What I Learned from Chinese Reality TV