Eight is a lucky number in China and, in Chinese, rhymes with "wealth." So at 8:08 a.m. on Nov. 8 state broadcaster China Central Television (CCTV) opened the annual bidding for its hottest advertising slots. Representatives of more than 280 Chinese and foreign companies bid for airtime on everything from Country Love, a popular drama set in rural northeastern China that is slated to run in next year's prime time slot on CCTV 1, to that precious minute following the 7:30 p.m. weather report. "Grasp the opportunity. Take it in your hands," intoned the nattily dressed auctioneer. "Believe in the power of the brand." CCTV even summoned the stars from its top programs to jazz up the auction.
By the time the gavel fell on the final bid at 8 p.m., $1.9 billion had been committed for next year's slots on CCTV's dozen-plus channels, 16 percent more than last year and a record high for the 17 years the auction has been held. Although well-known multinationals Volkswagen (VLKAY) and Procter & Gamble (PG) were big spenders, local companies dominated. Milk and ice cream marketer Mengniu Dairy bid the highest, $34 million, to sponsor the fourth season of Country Love, which as many as 100 million Chinese will watch. "Any company that wants to be seen as a leading brand must get [its] products shown on CCTV," says He Dang, chairman of Nasdaq- listed Charm Communications (CHRM), a media agency that represented more than 20 companies in the auction.
The golden age of television advertising, a distant memory in the U.S., is coming into its own in China. Urban per capita income is up 173 percent since 2000, to $2,515. WPP Group's (WPPGY) investment arm, GroupM, expects mainland sales for liquor, household appliances, autos, and office products to reach $45 billion this year and $50 billion next year. While China's ad industry is growing at a double-digit rate, globally the ad market is expected to expand just 3.6 percent this year.
What makes advertising in China special is the continued dominance of the airwaves. GroupM figures 63 percent of total ad spending goes to TV, vs. 44 percent in the U.S. CCTV gets a third of that money, with the rest going to 1,000 provincial and local stations, including some powerful regional broadcasters in Hunan and Shanghai.
Digital marketing, up almost one-third this year in China, still accounts for only 8.8 percent of ad spending. "CCTV is viewed as the authoritative voice of the state. It is credible, reliable, and influential," says Jin Yibo, assistant to the president at Wuhu (Anhui)-based Chery Automobile, which spent $7 million for a slot during Country Love.
TV still leads in part because it's hard to measure the Internet's reach in China. Low broadband penetration in rural areas also limits the impact of digital media. Perhaps most important is the tube's track record. "In recent years we have achieved over 50 percent growth in sales annually," says Xu Xinjian, president of Jiangsu-based Sunrain, an alternative energy company that first promoted its solar water heaters on CCTV in 2002. "That has shown it is the right platform and medium for us to advertise on."
Other marketers have the same experience, says Andrew Carter, the Shanghai-based director of tactical planning at GroupM China. "If you are a company and are advertising on TV and getting double-digit growth, why change things?"
The bottom line: China's embrace of brands is driving a big increase in ad spending. Television, especially state TV, is a big beneficiary.