WSJ(5/22): Ad-Spending Growth In China Continues To Impress
11:29, 2001-05-22
By Michael Flagg Staff Reporter of The Wall Street Journal
HONG KONG -- Advertisers spent 18% more in China's cities during the first three months of 2001 than in the year-earlier quarter, down from a 36% growth rate for all of last year, estimated U.S. market-research firm ACNielsen.
China's growth is nonetheless impressive, because many ad agencies worry a slump in the U.S. economy will hurt advertising in Asia. Spending, for instance, fell during the quarter in troubled South Korea and Taiwan, say media buyers. But the Chinese economy has been surprisingly strong in the past few months. (In Hong Kong, spending grew 4.8%, down from 17% for all of last year.)
So at least some of the decline in the first quarter could be merely a one-time drop thanks to an earlier-than-usual Chinese New Year that meant less time to advertise before this big holiday. Some agencies, though, say consumers are also spending more slowly, and advertisers have cut back for that reason.
""Consumer spending is not growing at the pace we expected"" for nondurable products like soft drinks and soap, says Barry Leung, regional director for China at the big U.S. ad agency Bates Advertising. ""So our clients have been very conservative during the first quarter.""
Another reason growth is slowing in China: Since the most populous country in the world became the region's second-largest ad market a few years ago, after Japan, it's not likely to grow as fast as it matures. ""With such a large base, you can't have 35% growth every year,"" says Andre Nair, a marketing consultant in Hong Kong.
Many people in the advertising business in Asia expect advertising spending to grow in most countries this year, if slowly, even as it languishes in the U.S., where this is the worst year for advertising in a decade. But they are trying to hold down costs and delay hiring, just in case.
""We do not believe the Asia-Pacific area will be immune to slower economies in the U.S. and Japan,"" Douglas Flynn, chief executive of Britain's Aegis Group PLC, said recently. ""However, we will continue to see solid growth in 2001.""
Aegis, the parent of media-buying firm Carat, forecasts 15% growth in advertising spending in China, 4.5% in Taiwan, 7% in Malaysia and 8% in Thailand.
Chinese companies, especially those making medicines, have been spending heavily on advertising in the past two years, says ACNielsen, displacing foreign brands as the biggest spenders. The reason: Local companies are preparing to face even more foreign competitors when China prepares to enter the World Trade Organization and open its markets. And local pharmaceuticals, in particular, have a lot of competition, especially from each other.
The top advertisers during the quarter were Yandi Medicine, a cough remedy, Naobaijin Health Products, a drink supposed to help the mental acuity of older people, Dongfeng Yanfan skin cream and Yandi Children Medicine.
To be sure, ACNielsen's numbers aren't exact: It surveys newspapers, television and magazine ads only in China's big cities, which it estimates account for only 80% of all ads in China.
Secondly, to calculate spending, it multiplies the number of ads by published advertising rates, which are often steeply discounted by newspapers and television stations. The company concedes the spending figures are inflated, but says it doesn't know by how much.
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