One of the leading diversions of advertising people in Beijing and Shanghai these days is speculating on the effects the global economic downturn is going to have on the regional ad business. Depending on who you talk to, predictions range from a “mild dip in first quarter revenues” to “it’s the apocalypse!”
Regardless of what happens to spend in China, one trend is already clear: advertisers are looking for ways to get much more for their RMB in 2009 than they got in 2008. Pacific Epoch’s Jim McGregor and About.com China’s Matt Roberts call this a “flight to value.”
Many people in the industry have begun interpreting this trend to mean a shift away from TV, outdoor, and print and toward digital. That might happen, but at best this is an oversimplification. To really understand what will happen, you first have to recognize that when it comes to how clients define value, there are essentially three kinds of advertisers in China:
The first kind thinks of “value” as being synonymous with return on investment. The better the measurable results for the company, its business, and its brand for a given level of spend, the greater the value.
This is the kind of advertiser who is going to experiment with new media, who is going to be the most skeptical about traditional media, and who we all usually think about when we talk about rational marketers. Sadly, this group forms a smaller fraction of the Chinese advertising market than should be the case.
The second kind of advertiser takes a more simplistic approach. Value means “price.” The less money I pay per unit of media, the higher the value I get. As long as real rates fall or at least remain stable, value improves.
The third kind of advertiser derives value from relationships. Either he or she trusts the media based on previous results, or they place their blind faith in that medium - or a specific company - because they know there is a little red envelope in it for them personally after their company pays the fees.
The latter two types still make up a large portion of the advertisers in China. To believe these groups are suddenly going to make a shift to digital or any other buzzworthy communications channel merely because they will offer better results is unrealistic.
What all of this means is that the flight to value will take five forms among the advertisers that neither collapse nor pull out of the market entirely:
- Some advertisers will take the downturn as an opportunity to experiment with their media mix, shifting their spend away from their core media to other media;
- As the downturn is liable to soften rates across much of the core media (including, but not limited to, regional television and print), other advertisers will take advantage by buying more of that media than they had before;
- Some advertisers will make no change at all, believing they already have the right mix and sticking with it;
- Other advertisers will stick with their current media choices because the decision-makers profit personally from the choice;
- Other advertisers - including some from the above groups - will pull budget out of advertising altogether and spend more on other forms of marketing.
When you deconstruct the audience, it is clear that there will be opportunities for nearly all media next year. The challenge will be to match what you have to offer with the clients who are interested in your particular pitch.
This entry was posted on Monday, December 15th, 2008 at 3:46 pm and is filed under Advertising, Digital, Marketing. You can leave a response, or trackback from your own site.
Media Hutong
March 5th, 2009 at 4:52 pm
In China, relationships are everything. And so is socially conspicious media like outdoor and television. You are probably right to point out that you can’t paint everything with a single brush. And the choice of which channel money will flow to depends largely on specific category and company strategies and budget circumstances.
Having said that, the move to digital is inevitable as marketers experiment more with accountability oriented channels. Just remember to go beyond the PPC model, click farmers are a huge industry in China.