Special Report: China - Growing pains

China is now open for business. The media market is vast, complex and hard to penetrate but, King Lai says, it is coming of age.

FOREIGN MEDIA INVESTMENT - A wall behind the door

On the face of it, circumstances could not be more favourable for foreign companies wanting to get into China. Media investment regulations continue to relax following China's entry into the World Trade Organisation, a process that will get advertisers more excited as the clock counts down to the 2008 Beijing Olympics.

But while the carrot is dangled in front of foreign players, many are already finding that a brick wall lies behind the "open" door that had been locked for so long. Foreign companies may be permitted to run fringe media on short-term contracts, but outright ownership is still restricted and programme content must adhere to strict government guidelines. Many restrictions - written and unwritten - in day-to-day business remain unresolved.

To make things even trickier for would-be foreign entrants, the Chinese government has made sure that the local players, such as Shanghai Media Group (SMG) and Beijing Media Group (BMG), are given a generous headstart.

RESEARCH - Feast and famine

The big question for anyone involved with media research in China is: when is enough enough?

Ten years ago, every media specialist and major client was desperate for research and, sure enough, research suppliers obliged by generating more surveys, more audience data, more people-meters and more monitoring, with the added confusion of data duplication in many markets.

Today, basic competitive reports regularly reach 150 pages of data and the sample sizes of the major research studies are commonly 70,000-plus.

But that's still not enough to provide meaningful local insights on anything but the broadest of target groups.

Historically, agencies and clients have toiled to find reliable implementation data and the market used to be dominated by people who were forced to rely on their instincts, common sense and intuition. Not any more. Nowadays, it is not uncommon to find media planners hiding behind the reams of data available to them, instead of relying on what marketers really need to gain a foothold in China: innovation, initiative, insights and a genuine point of difference.

TELEVISION - New roosters in the coop

Television is king in China, no question. According to audience research, 94 per cent of China "watched TV yesterday", while TV helps itself to 71 per cent of the country's adspend.

TV also enjoys the most comprehensive and sophisticated measurement systems.

The big consumer goods TV advertisers such as Procter & Gamble were the first to move into China and so media research has largely focused on producing ratings data and competitive monitoring research for TV. This has allowed a virtuous circle to snake around the medium - agencies, looking for accountability, find themselves using TV more often as it's relatively easy to quantify.

But the scent of change is in the air, as consumers grow more sophisticated and the media landscape fragments. In 2003, radio and print's combined share of adspend enjoyed a year-on-year increase of 34 per cent, while TV's share slipped. And, although it is still not accurately measured, no-one can deny that the rise of outdoor advertising is reshaping China's fast-changing cityscapes.

Once other media are better measured, it surely won't be long before China grows into a market where television is no longer the automatic choice for media planners.

MEDIA AGENCIES - Seeing the bigger picture

Executing a media schedule in China is no picnic. The size and complexity of the market stretches media professionals' technical skills to the limit and, as a result, the basic media service available in China is no longer the poor cousin to advertising it once was.

Problem is, this generation of media specialists has grown up completely separated from creative agencies. Planning across more than 200 individual markets or buying across 2,000-plus TV stations a week, many have no time to see the copy, understand the consumer or get a real grasp of the brands they work on.

One widely held prediction for the next five years is that clients will start to benefit from the evolution of the media specialist. Yes, the implementation agencies that dominate the space now will still exist.

But separately, "communications generalists" are likely to emerge. This new breed of agencies will be judged on their quality of talent, depth of insight and ability to think outside of traditional media boundaries and roles.

As a consequence, we'll probably see the return of a more international mix of agency people. And, as media companies begin to look outside their own walls for talent, the opportunity will surely arise for hotshops, consultancies and smaller agencies to reclaim a market that has been dominated by the buying of spots, space, slots and segments for so long.

- King Lai is the chief operating officer of Initiative Asia-Pacific.

CHINA'S MEDIA LANDSCAPE

MEDIUM/ Estimated Share of Predicted

Lowdown adspend 2004 advertising growth in

(dollars billion) market 2005

TV 11.0 71% 40%

Although spend figures vary wildly (some sources put TV's share at no

higher than 40 per cent), no-one questions TV's dominance. According to

the Chinese government, early every household has a TV set (penetration

has reached 99 per cent) and the number of cable TV users has passed 100

million. TCL is the world's largest TV producer, selling 18 million sets

in 2004. China's most popular show is CCTV1's Xi You Ji (Journey to the

West).

Press 2.7 17.5% 25%

Eighty-five million newspapers are sold in China every day, making it

the largest print market in the world. Newspaper ad revenues have

enjoyed an 87 per cent rise in five years, despite the recent closure of

many titles by the government. China's best-read daily is Beijing's

Cankao Xiaoxi (circulation 2.7 million) while the most popular magazine

is Family, a fortnightly lifestyle title (circulation 4.2 million).

Radio 0.15 1% 50%

The fastest-growing medium measured by Initiative, yet radio's share has

been eroded in recent years by the rise of TV. One in two people hears

radio each day in China, and there are more than 1,000 radio stations,

though most are still heavily censored and operate as mouthpieces for

the government.

Outdoor 1.5 9.7% 10%

There are more than 18,000 outdoor contractors in China. The largest

player is Clear Channel's Clear Media, with 20,000 panels. China is home

to the world's largest billboard, 300 metres long and 45 metres high,

overlooking the Yangtze river in Chongqing - but no-one has advertised

on it since 1998 because heavy fog makes the site difficult to see.

Internet 0.1 0.6% 120%

The number of internet users in China reached 90 million in 2004, making

it the second-largest web market after the US. By Morgan Stanley's

reckoning, China's online market will outgrow the US by 2008. Most

mobile phones, for which there are 100 million subscribers, have

internet access, so the internet's reach could be higher than current

figures suggest.

- Sources: Initiative (TV, press, radio adspend), World Association of

Newspapers, Clear Channel International (outdoor adspend), Morgan

Stanley iResearch (internet adspend).