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ASIA PACIFIC: CHINA

Advertising hits cyber wave in China
Author: Robin Teow, Lehman, Lee & Xu

Question: What happens when online craze hits the world’s most populous country?

It only gets crazier. China’s rapid Internet growth is viewed by many as unprecedented despite its yearly per capita GDP of less than USD 2,000. From online gaming, online video, online auction, online shopping, to online dating, China is well on its way to become the world’s largest market for each of these domains. One just has to look at the figures to understand why this is so. China's online dating market is expected to reach RMB 653 million or about USD 81 million by 2008, with an annual growth rate of 60 percent. The online games industry in China has recorded massive growth in 2006, with revenues up 73.5 percent over 2005 to a total of RMB 6.54 billion (USD 839 million). The Chinese e-commerce market generated sales of RMB 1.10 trillion in 2006, up 52 percent from 2005 according to CCID Consulting, a leading Chinese IT market research and consulting company. And the list goes on.

According to a recent report published by the China Internet Network Information Center, there were about 137 million Internet users in China at the end of 2006, approximately 10.4 percent of China’s population, and the number is spiraling at a blistering pace. The Chinese spent RMB 276.76 billion on Internet services in the same year, almost 50 percent more than the previous. And as the world’s second largest Internet market after the United States, China is expected to see an annual jump of at least 15% in the number of web users before 2010.

Chinese Internet users spend an average of 16.9 hours online each week, compared with 15.9 hours in 2005 and 8.5 hours in 2001. Total domain names in China now amount to 4,109,020 with an average growth of 200 thousand net additions per month. There are currently about 113,000 Internet cafes and bars in China. New legislation is planned to combat juvenile Internet addiction and the Chinese government has decided to ban the opening of new Internet cafes this year. A 2006 report from the China National Children's Center, a government think-tank, noted that roughly 13 percent of China's 18 million Internet users under 18 were Internet addicts.

With all these numbers, it comes as no surprise that few marketers can resist the lure of China’s massive online population. The shift of advertising from print to electronic is an accelerating trend in the US and the UK. The same phenomenon seems to be taking place in China’s red-hot ad market. The Internet is blossoming. More and more Chinese homes are connected to broadband. More and more Chinese are logging on. Infatuated by the growing reach and influence of the Net, advertisers are stretching far beyond the cramped text ads on search engines and web portals that have turned Baidu, Sina and Sohu into household names in China.

Advertisers are now jamming online ads with music and sophisticated color video. International and domestic companies have come up with innovative online ad campaigns to compete for online audiences’ attention and boost their sales. They are looking to the Web to build global brands and to connect with hundreds of millions of consumers. Online advertising, the main revenue source for Internet portals, saw a sustained high growth of over 50 percent to 5 billion Yuan in 2006, up from 3.3 billion the previous year. In addition, China recorded 1.5 billion Yuan in revenues from search advertising in 2006, an increase of 49.5 percent compared to 2005. According to the "2006 Internet Advertising Market Report" released by Beijing IResearch, IT, automobile and real estate enterprises have become the largest advertising customers, with a total share accounting for more than 70% of total Internet advertising.

It is interesting to note that young people dominate the online realm in China, with the groups aged 18-24 and 25-30 accounting for 35.2 percent and 19.3 percent of all Internet users, respectively. Chinese urban kids have grown up with the 'screen'. Be it mobile, out of home or on the bedroom desktop, their engagement with new media is much more intense than equivalent demographics overseas. They live in an era where new products and technologies are unceasingly arriving. Two decades ago, there were hardly any shopping malls in China; now Shanghai alone has 300. Growing acclimatization to this velocity of change has engendered a group of people who are particularly dependent on fresh stimulation.[1] Hence, brands need to log on to interact, communicate and sustain this clamorous, sophisticated audience.

When Motorola Inc. launched a new line of youth-orientated mobile phones in China two years ago, instead of advertising in traditional media, it designed an online marketing campaign in which it hired two college students known as the “Back Dorm Boyz” from the southern province of Guangzhou, who found worldwide Web notoriety with their low-quality, high-hilarity lip-synching video clips, to lip-synch As Long As You Love Me by the Backstreet Boys. The campaign proved to be an instant smash. A related lip-synching contest generated more than 14 million page views. The site was crashed at one point due to a sudden upswing in traffic. The sales of the new phones, needless to say, rocketed. “This was a grassroots, guerrilla way to relate to the youth of China,” comments Ian Chapman-Banks, Motorola’s phone marketing chief for North Asia. [2]

One recent digital campaign that did an interesting job was Coca-cola's “I-coke”. The website has 22 million registered users, which according to Jigsaw International's Black is positively "outrageous". Just what was it about the site that grabbed China's youth attention so much? Perhaps it is the way that the site is engrossingly interactive; it is always changing and keeps the demanding Chinese user super stimulated.[3]

Chinese consumers are becoming ever more intricate and trend-conscious. Marketing to them is no longer a straightforward task. As Black rightly puts it, "they are not blank sheets of paper anymore.” Learning about these emerging groups of consumers is a priority for international and domestic companies alike. To succeed in China, you have to "understand the psychographic profile of Chinese consumers, their emotions, and what they identify with in a brand," says Viveca Chan, brand expert and China head of Worldwide Partners. The same certainly applies to companies that are trying to storm into the flourishing world of online advertising in China. Internet is breaking down walls that traditionally divide media and allowing advertisers to do things that no other media can. However, in order to fully capitalize on the possibilities and continued rapid growth in online advertising, it is imperative for brand builders to know their customers and reach them with the right message.

Like it or not, we are now living in a consumer-controlled media world. For the next few years, online advertising is poised to surge further at an impressive rate. There is no national legislation specifically focusing on online advertising in China at present. The State Administration of Industry and Commerce regulates the Internet advertisement market by conducting regular examination of all websites and grants licenses to those that are qualified. That is to say, Internet companies must first obtain a government license before publishing online advertisements. Also, their online advertising service must be in compliance with relevant laws and regulations, and ads for certain special products can only go online after being examined and approved. In view of the huge potential of Internet advertising, it is only a matter of time before a new wave of tough legislation is enacted to regulate the new tech advertising phenomenon on all fronts.