Carat forecasts profits 'in a few years' despite heavy investments in China

Just months after announcing the launch of offices in secondary cities in China, Carat expressed confidence that it would be running a profitable operation in the country within a few years. Mr Douglas Flynn, chief executive of Aegis Group, which is Carat's parent company, said the media independent is the first media agency to establish a network of offices outside the key cities of Guangzhou, Shanghai and Beijing. He acknowledged that this "looked like a recipe for disaster", however, the Aegis chief said the expansion was necessary because China was such a fragmented market that it was essential to have local presence in secondary cities. "In Asia-Pacific, media specialists are accepted most in China, Australia and Japan. With China, the country is so complex - just look at the number of television stations and publications at the provincial and city level which you have to look at, not to mention the mushrooming number of websites - and you know you cannot run the whole of the country out of a few offices," Mr Flynn told MEDIA. The move into secondary cities is also accompanied by the fact that significant disposable incomes are no longer only found in the key coastal cities. Wealth is filtering into secondary cities, making more localised targeting more important. Carat Asia chief executive officer David Liu said that while the message is always important, in China the medium is more important. "More importance is placed on the delivery than the packaging. This is underlined by the fact that clients are more worried about which channels are being used to get the message across. "This has been the situation in China for a long time. As a result, you can say that China started out as being media-driven and not, as in most other countries, creative-driven." The China operation currently employs more than 90 people and more will be hired on a needs basis, said Mr Liu. Carat, meanwhile, has also started new ventures in Japan and New Zealand. In Japan, it has acquired a majority stake in Tokyo-based Strategic Planners International (SPI), an independent media planning and consultancy business, and renamed it Carat SPI KK. Mr Flynn said the agency "would give us a good 'look see' into the market place". However, he ruled out acquiring a media buying company or setting up a full Carat office in Japan for the time being. "Every idea has its time. This is the right time for what we've done. We might buy some time in the future but it's not about burning money. We're taking a step-by-step approach," he said. In New Zealand, Carat has purchased the country's largest locally-owned media independent, Strategic Media. The new company will be known as Carat New Zealand. "We have worked closely with Strategic Media for many years and share the same culture of innovation - openly challenging conventional media solutions," Mr Flynn said. "This acquisition is a natural step and establishes Carat New Zealand as a major force in this market." The new developments in China, Japan and New Zealand reflect the fact that Carat is stepping up its bid to be the leading player in the media specialism field. "Although we came to Asia a bit late, we now have a comprehensive geographic network, but there are challenges ahead," Mr Flynn said. These include introducing more of its network clients to the Asia-Pacific region, making the China operation profitable, determining the next step in Japan and how to enter the Korean and Indonesian markets.

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