Local and international advertisers pledged to spend almost $1.4 billion to run commercials on China's top TV network next year, indicating continued confidence in the spending habits of Chinese consumers, despite global economic woes.
The commitment was made during China Central Television's version of the U.S. networks'"upfront" ad sales, an unusual live auction of CCTV prime air-time that's been dubbed China's "economic Olympics." Participants included domestic Chinese companies as well as global giants such as Coca-Cola Co.
CCTV's auction on Tuesday brought in 9.26 billion yuan (US$1.36 billion), a 15% increase in revenue over last year -- although the figures aren't directly comparable because the network added new inventory to the air time for sale and the Beijing Olympics are over and done. The higher number also reflects about a 10% increase in ad rates, according to media buyers.
A year ago, ad spending at the government-controlled TV station's prime-time auction grew 18%. But this year's increase suggests continued enthusiasm at a time when ad budgets elsewhere are expected to be flat or even decline.
"This is a tremendous amount of investment being committed to China at a time of incredible economic uncertainty," said Seth Grossman, the China communications planning director for Aegis Group PLC's media buying agency, Carat. "China remains the engine of growth for companies on a global basis and domestically," he said.
China's economy has been taking a hit from slowing exports, and many economists believe it is important for the health of the global economy for the country to encourage domestic consumption. The Chinese government has announced a $586 billion economic stimulus package designed to get money flowing through the economy by supporting rural areas, building transportation infrastructure and other social services.
Media agencies cite a recent survey of Chinese Internet users by Nielsen Co. that found consumers' willingness to spend in the next 12 months rose 2% compared to May. "There is caution out there," said Manpreet Singh, the China chief executive of Interpublic Group of Co.'s Universal McCann media buying agency. Nonetheless, "companies may be controlling costs on the other side of the world, but they don't want to miss out on what is happening here," he said.
China's $35 billion advertising market is an indicator of the health of the country's consumer sector. Hong Kong-based analysts Media Partners Asia expects overall spending on advertising in China to grow by 10.9% in 2009, versus 21.8% in 2008.
Even without the global economic problems, media buyers had expected some slowing of spending on advertising on CCTV next year, following increased rates in 2008 when the channel had exclusive broadcast rights to the Beijing Olympics.
Many multinational companies, which accounted for about a quarter of the money spent at the CCTV auction, were bullish despite budget pressures from their head offices in the U.S. and Europe.
Coca-Cola participated in the CCTV auction for the first time, but declined to say how much it spent. Its participation "reflects our continued commitment to invest behind our brands in China -- which has become one of our most important international growth markets," said spokesman Kenth Kaerhoeg.
Procter & Gamble Co., which has been the single biggest customer at the auction in recent years, was said to be an active participant in the auction again this year. P&G -- which generates about 30% of its sales in China, Russia and other developing markets -- didn't reply to requests for comment.
Overall, CCTV didn't lose any of its major and long-term multinational clients this year, said Xia Hongbo, the director of CCTV's advertising department. "Seeing that China is a most important market for their global business growth, these multinationals always give more money to the Chinese market for brand-building and marketing campaigns in order to take the lead in the market," he said.
Domestic Chinese companies drove the growth at this year's auction, with food and beverage and finance and insurance leading the charge, along with companies that were starting to advertise during prime time for the first time.
Cautious companies are looking for a return on their investment, which CCTV -- the only national broadcaster -- can uniquely provide, said Bessie Lee, the China chief executive of WPP Group media buying company GroupM. "CCTV's leadership position has been strengthened quite a bit this year, because of its coverage of the snowstorm, the earthquake and the Olympics."
Few complained about increased prices. Packaged good maker Nice Group spent 305 million yuan to sponsor drama programs in 2009 that cost it just 229 million in 2008. Next year will be a "watershed" for Chinese companies, said Dong Liying, an executive in Nice's marketing department. "Those who are strong will become even stronger," she said.
China's embattled milk companies, embroiled in a tainting scandal, also bid aggressively, with Sanyuan Dairy Co., spending 132 million yuan for a short ad before the nightly weather forecast, and Mengniu Dairy Co. spending 44.9 million yuan for an ad before the popular "Focus" news program.
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