The World: Opportunity is knocking in China's ad industry

Over the past ten years, China has usurped Hong Kong as a breeding ground for hot, new ad talent, Mark Johnson writes.

On the tenth anniversary of the handover of Hong Kong from British to Chinese rule, a huge irony is being played out in the city's advertising industry.

In 1997, leading talent in many industries - including advertising - fled to the West for fear Beijing would crack down on Hong Kong's freedoms. Ten years later, and that has failed to happen, and yet this "brain drain" is still a problem. This time, China has become not a force for driving away advertising talent, but one that draws it in.

"We're seeing a 'brain drain' in Hong Kong and Singapore for top advertising professionals," Jonathan Davies, the executive vice-president of CNN International News Advertising Sales, says.

"China's ad market is growing faster than their talent pool, and it needs to import experienced advertising professionals," he adds.

The growth of China's ad market has created a series of challenges for Hong Kong's industry. Once a powerhouse in the region, it is now being forced to undergo a period of transformation just to survive.

Conrad Chiu, the chief executive of Hong Kong and Southern China for Bates Asia, believes China's supremacy is now irrefutable, and that Hong Kong's ad industry needs to focus on developing its "high-value creative services offering". This would envisage Hong Kong's expertise in brand communications and its market maturity developing in a different way to the mass-market approach of the agencies on the mainland.

"China is the power centre. It has overtaken Hong Kong," Chiu explains. "If a company wants to launch a mass-market brand, for its market size, it would have to go to China. If it is launching in a higher-value category, banking, financial services, luxury goods or fashion, Hong Kong still has iconic status for aspirational products."

After a decade, it is clear China has been a benign ruler.

Moreover, the easing of travel restrictions in both directions has meant that, while business people can travel to and fro with ease, the vast numbers of mainland tourists have also provided a much-needed boost to Hong Kong's retail, tourism and property sectors.

Added to that is China's decision to favour Hong Kong's financial markets over Shanghai, bringing a boost to the city's economy.

Miles Young, the Asia-Pacific chairman of Ogilvy & Mather, argues these decisions are the drivers behind the recovery of the advertising industry, and the wider economy in the past two to three years.

He says: "There is now a revival of the consumer economy and a revival in spending (in advertising) in the retail, financial services and telecoms industries."

This is a far cry from the state of the industry ten years ago. Young says the city experienced a "crisis in confidence after the handover, and there was a 'dumbing down' of the Hong Kong ad industry".

But with real GDP growth of 5.6 per cent year on year in the first quarter of 2007, and two years of recovery in the advertising market, the outlook is far more positive.

The one constant over the past ten years, Keith Smith, the president international of TBWA\Worldwide, argues, has been Hong Kong's short-term outlook.

"Hong Kong continues to be as frustrating for advertising professionals as it was in 1997. It seems to invite 'short-termism', and the idea that 'we have to flog 100,000 phones, and that's the priority', rather than building the brand," he says. "China has gone to the more orthodox Western style of building long-term brands, as well as trying to sell 100,000 mobiles. Clients, local and international, understand that it is a long-term game."

The media industry has remained buoyant and a training ground for planners, Melanie Lo, the managing director at MindShare, believes. She argues one of the biggest changes is the growth in diversity of media, particularly TV. "Ten years ago, we were looking at two stations and four channels on terrestrial TV. We've added four main pay-TV players and need to look at more than 100 channels," Lo says.

The training ground Hong Kong has provided for media planners, especially for those aiming their careers towards China, remains as healthy as ever, Lo adds. She points out this is attracting ex-pat media talent from Taiwan, Malaysia, Singapore and India, who see it as an ideal springboard into China.

China is an inextricable part of the city's and the industry's future. Chiu says the biggest opportunity is with the 10,000 or so companies in the Pearl River Delta that will want to expand their brands.

Young agrees that China's proximity to the city is a huge advantage, but, having said that, he believes working life in Asia's most opulent city is much as it was ten years ago.

His only reservation, and those of many groups in the city, is the worsening air quality; perhaps the cost of being so close to China.


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