Pacific Century CyberWorks' online advertising network AdSociety
was recently granted a full advertising agency licence in China,
strengthening its ambition to move into offline services to reduce its
reliance on online advertising.
While large, multinational agencies have operated in China for several
years and also have full agency licences, AdSociety is hoping to sell
services to the agencies themselves. It believes its restructuring will
allow it to grab a slice of China's US$10 billion advertising
market, which is tipped to hit an average annual growth of 13.8 per cent
in constant prices over the next three years, according to Zenith
Media.
With its eye on this pie, AdSociety Daye, the company's joint-venture
agency in China, believes there is a place for it to become a "broker of
the brokers".
Patrick Jonathan Wong, chief executive officer, AdSociety, comments:
"China's accession into the World Trade Organisation and the 2008
Beijing Olympics will add greater momentum and growth to China's ad
market. The positioning of the joint-venture is to operate full-scale
advertising service across all types of media platforms - similar to
Tom.com. The joint-venture will provide all traditional advertising
platforms, including TV, billboard, outdoor, print, radio and event
management."
AdSociety is counting on earning 65 per cent of revenues from offline
advertising by the end of next year. As a media representative, it
expects to take 15 to 20 per cent as a commission from media owners.
Wong estimates this to be a market of between US$1.2 and $1.6 billion.
Antony Young, Zenith Media, chief executive officer, sees the entry of
an "international" player like AdSociety into media representation as an
interesting development.
Local brokers still dominate this part of the business, with many
advertisers and agencies buying through them. However, the
highly-fragmented nature of this part of the business will make the ride
a rough one for AdSociety.
Grey China chief executive officer and chairman, Viveca Chan, doubts if
an international or even a new player will enjoy any advantage. "There
is a narrowing market for brokers in China, especially new ones that do
not have established connections," Chan says. "Media buying needs media
clout and strong media relations. AdSociety is not an 'international'
player compared to the large agency networks.
"In any case, buying is very localised. You need to know each market
well, all the media etc. And it takes time to develop a network."
Both Chan and Young agree there is a need for more professional media
selling in China. Young says: "China media owners, while they have
become increasingly more sophisticated in the major markets, generally
still tend to operate with a monopoly viewpoint."
Although recent consolidation of media ownership into regional groups -
the setting up of the Shanghai Media & Entertainment Group last April,
for example - is gaining widespread momentum, he says the challenge will
be to convince established media owners to take on such partners.
AdSociety believes its offer of an integrated platform will be a
compelling argument. Like Hong Kong tycoon Li Ka Shing's Tom.com
company, which extended its offerings to sports marketing, print
magazines and outdoor media, AdSociety is venturing far from its core
internet advertising business.
"It's about survival," says Wong, outlining the company's many
revenue-generating ideas. One is to use its overseas network to source
programmes for China's television stations, something that WPP's media
holding company is doing through a joint-venture with Hong Kong's Star
East Works.
"With the consolidation of China's TV stations, competition will stiffen
and better programme content quality will be expected," says Wong who
sees this as another revenue opportunity.
While Young believes pricing will be critical as "PRC clients remain
highly price-sensitive", Chan says the value proposition will be the
key.
"There is a general need to increase standards, which goes back to the
training, quality of people etc. Agencies already have integrated
capabilities. But it is the value proposition that will win," says
Chan.
"Can they offer a better rate, or cover areas others don't, such as in
the second or third tier cities. Will they be able to monitor as well as
do the buying? Of course every agency wants the best deal, rates,
quality of service and are willing to work with third parties to get
value for something such as buying direct, syndicated programmes. Being
just a broker is not enough."
