China total ad spending will decrease by 2.8pc by 2020: GroupM

The marginal decrease in total advertising spending in 2020 for China is a third of the 7.6pc experienced by the US and a quarter of 11.8pc experienced by the world

By the end of 2020, the total advertising spend in China will exceed RMB 626.2 billion ($90 billion), with the Sleeping Giant entering a resumption stage, due to stimulus policies gradually taking effect. According to the latest China Mid-Year Forecast Report from GroupM, ad spends in China will shrink by 2.8 percent, faring better than the US at a 7.6 percent decline and the world at a 11. 8percent decline. For context, advertisers and agencies connected to WPP and Publicis told Profit that in the best-case scenario, the total advertising spend in Pakistan would be $440 million.

“From another point of view, even though this black swan event brought an enormous negative effect; however, from the upgrading of practitioners to products, from the reshuffle of business operations and management philosophies, the epidemic is also a catalyst that unexpectedly accelerates industrial change and innovation,” said Sarah Zhang, a director in the knowledge team at GroupM. “Never waste a good crisis. There is no making without breaking, thus there will be a power of integration generated by the market to improve efficiency.”

The report projects that 79.4% of total advertising spends in China will go to internet mediums such as search, mobile, social, video, and publishers. The remaining 20.6 percent of the total advertising spend in China will go to TV, outdoor advertising, radio, newspapers, and magazines, at 10.7 percent, 7.4 percent, 1.5 percent, 0.7 percent, and 0.4 percent respectively. This means that the number of money advertisers and media agencies spend on magazines in China is $360 million, which is roughly double what the equivalent stakeholder groups in Pakistan will spend on TV advertising.

In the report, Zhang says that during the outbreak of C19, e-commerce, long and short-form video, and social media platforms achieved higher growth, adding that there is still room for top digital media to increase their ad revenues. She said that eCommerce companies, especially fresh food e-commerce and daily life service apps, penetrate all aspects of life such as online purchase and home delivery services for daily necessaries, and pharmaceuticals. She added that takeout, remote working, cloud conference, and online education are in hot pursuit, and the service supply-side has become digitized. 

“Online shopping has accelerated to become the predominant purchase channel, leading online and offline to speed up to integrate,” she said. “Meanwhile, the epidemic keeps bubbling up and anti-epidemic requirements compel people to change their way of living and working. It makes the scenarios of home economy and cloud application become more abundant, and new demands will motivate the creation of new tools and new business models.”

According to a Monthly Financial Statistics Report from The People’s Bank of China for January 2020 to May 2020, monthly bank savings increased 8% year on year, reaching a height of 10.4 percent in May. Zhang said that after experiencing different anti-epidemic measures domestically and abroad, most consumers enhanced their confidence in domestic brands. Especially time-honored brands proactively chose to leverage this advantage to do marketing with elements of nostalgia and crossover.

“The higher brand perception and experience, the higher acceptance consumers will have, bringing the greater conversion rate into actual sales,” said Zhang. “Therefore, brands need to demonstrate their core value and deliver their brand concept sustainably by advertising, PR events, services, and so on; this is still the solid foundation to gain rapid growth during the recovery period. Thus, brands should shift their attention from simply focusing on traffic to intensive and redefined brand building, step from homogenization to differentiation, and move from price competition to value competition. To gain insights from consumer needs and to build smooth communication channels to consumers are still the key components of media strategy.”

Babar Khan Javed
Babar Khan Javed
Babar Khan Javed covers the advertising industry and marketing function in Pakistan for Profit. He can be reached on [email protected] with details about media, creative, and digital briefs, future projects, management changes, client wins or losses, and everything in between.

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