Adil Zaim, CEO of Carat China
Carat China, it’s 860 people, and according to RECMA, the #1 media agency in China for the 3rd consecutive year (2012-2014), and the only agency from China, in the Global Agency TOP10, ranked #6. Encounter in Shanghai with Adil to share on the Chinese media market and the agency business.
• Chinese advertisers have become better than international ones.
«The golden age where chinese consumers were first time buyers is over. They don’t buy blindly, are more rational, and emotional at the same time. They buy, because they personally have a perception of the brand. Chinese advertisers had to change the game: they were chaotic, but they improved, and have even gotten better than international clients. They really understand it’s about building the brand and not just promotion; it’s amazing how it has changed. The minute we went from double to single digit(s) growth, they asked: «tell me what’s going on with my brand». I’ve seen a really big change these past 3/4 years »
• It’s a fragmented world: there’s no one model of agency
Western Media agencies represent below 35% of the media buying in China, the 65% remaining goes directly from advertisers to media owners, and/or brokers. Local media agencies are brokers, they buy placements. Some of them are competitors for the annual November auctions sale of prime time slots. Step by step, they improve and want to operate on the consulting side
• Prime Time Slots Auction Sales stabilize
Taking place each year in November, the annual auction is a strong indicator of the health of the Chinese Economy. For long, western marketers such as P&G were used to top bids, but Chinese advertisers are now taking the lead, and the amount bidded is slowing down, and is not as big as 5 years ago. 2 main reasons: CCTV was the only group to sell its slots, but there are now 4/5 other biddings happening on satellite TV stations accross the country. And obviously the shift of ad investments from TV to Digital
• Online TV is booming
Content is flowing but the industry is under scrutiny : indeed, until recently 80% of the online shows were from the US, but the Goverment announced late 2014, that video should respect the regulations of the movie industry, meaning online video platforms must get approval by official authorities, and respect a mix of foreign & local productions. This new policy leads to a breakdown of Korean, HK,Taiwan and Chinese produced shows representing pretty much +80%, leaving +/- 20% to the US… What Chinese video sites lack, is formats, so, a mix of the above regulatory issues, added to the cost of sourcing contents, lead to the development of online video sites own productions and in-house studios – Youku and Tudou have had their own for a couple of years already, but iQiyi, LeTV among others launched theirs more recently
As branded content increases, Carat’s StoryLab (London based HQ) was launched globally and will soon be announced in China
• Programmatic is a bit slower in China
« Why sell through programmatic if you can sell +40% the price ? +30/35% of the inventory is available for programmatic vs pretty much 60% in the West. Here, medias are not desperate at selling ads, inflation is still quite high on TV and the growth of the ad market stabilizes at +7/8% »
• Mobile is the single largest and personal mass media in China
Investments are obviously on the rise but it’s still hard to reach the power of TV, also due to its structure. The challenge of the mobile business is the infrastructure, it’s very fragmented (IOS, Android, device makers, mobile operators …) and that’s a barrier in terms of quality and doesn’t help to calculate ROI.
In China, there are also some local operating systems existing e.g. Xiaomi, they have their custom MIUI OS. Also, in the West, sales of mobile phones are conducted in a package bound with mobile operators. In China, consumer can buy the mobile phone directly and then choose any mobile operators they want.