China’s digital-advertising market to trump TV in 2014: Magna/UM

China will be one of two countries in APAC (along with Australia) for which this is true. Recent reductions in prime-time TV advertising minute volumes, the plateauing of viewership and the annual auction mechanisms are exacerbating TV inflation, which means the dominant media category will soon have its tables turned in favour of digital. Total adspend in TV has seen slow growth relative to digital and other competing media.

Digital media consumption is already high, and this is one of the prime drivers of the Chinese advertising market. With a market share of 35 per cent, it is on par with internet penetration that has occurred among the young and the well educated.

Further growth will have to come from expansion to the uneducated or the old (50+ year-olds), as internet penetration among these audiences has not moved significantly in years, the report stated.

Mobile-based advertising is growing strongly as the immensely popular Weibos (micro-blogging social networks from Sina and Tencent) are already raking in 10 per cent of digital ad revenues and 3.5 per cent of total ad revenues.

Digital out-of-home is also becoming an increasingly significant advertising category. In many ways, China’s digital OOH segment is the global leader at least in innovation (and soon enough in spending), driven by population density in the eastern cities, few restrictions and good consumer tolerance.

Magna and UM still expect China’s TV market to grow this year, but at a slower pace than the past few—at 8.3 per cent growth in 2014.

That growth will remain in the high single-digit or low double-digit rate through 2018, although TV will continue to give up share of total media to digital.

The report suggests that CCTV's auction system is falling out of favour for some Chinese advertisers. Also, TV viewing times, at just under 165 minutes per day in China, are relatively low by international comparison. Many large markets are clocking close to or more than 300 minutes per day.

Although online advertising revenues may grow by 31 per cent in 2014 (slightly down from previous years), digital is one of the cornerstones of any advertising campaign and remains the fastest growing segment of the Chinese digital market—one of the most advanced in the world.

Tencent, the largest Chinese internet company by total revenues, does not earn much directly from advertising. Baidu is not as large by total revenues, but has by far the largest advertising portion. The rest of the digital competition is much smaller and diversified between search, social networks, instant messaging, email services, LCD screens and public transport TV.

Of the US$15 billion of total incremental ad revenues in 2013, China alone provided nearly US$5 billion, or 30 per cent of global growth. This is more than the contributions of US and Japan combined.

China’s programmatic market-share, now being only 5 per cent, will increase to 23 per cent by 2017—that will make it the third-largest programmatic market globally then.