MNC agencies score biggest China gains

SHANGHAI - Advertising agencies operating in China have reported an average 11 per cent increase in billings last year, compared with 2000, according to the China Advertising Association (CAA).

by | 07/26/2002

However, it was largely multinational agencies which made the biggest gains as they put greater emphasis on expanding their local client base Overall, MNC networks accounted for seven of the top 10 agencies.

Saatchi & Saatchi Great Wall once again topped the ranking, with billings of RMB1.40 billion (about US$170 million), up 1.2 per cent from the year before.

McCann-Erickson Guangming held the number two spot, despite a slight drop in billings. But, it was Leo Burnett which outperformed the market, surging more than 61 per cent to RMB1.09 billion.

Ogilvy & Mather, however, saw billings decline by almost 19 per cent.

The agency's Shanghai general manager, Michael Lee, attributed the fall to MNC clients cutting their budgets because of economic pressures

outside China.

The CAA said that the dominance of the 4As agencies was due to these agencies more actively seeking out local mainland clients and also an interest among Chinese brands to try them out, particularly in light of WTO.

A CAA spokesperson said: "China's entry into the WTO will stimulate the growth of the local economy and MNC agencies increasingly understand the importance of localisation. They not only aim to acquire more local businesses, but also hire more local talent.

"We believe that the MNCs will be quite strong in the coming years. Local agencies, therefore, have to be more active, more professional in order to make improvement."

Leo Burnett chief executive officer, Dennis Wong, agreed saying: "In China, we can not only depend on deriving revenue from international clients. We have to balance the portfolio between local and MNC brands. Local advertisers are becoming increasingly important to us."

Wong revealed that Burnett was planning to make an acquisition by the end of the year.

"We plan to buy a company specialising in events marketing, interactive and design in order to strengthen our operation in China."

Grey Worldwide Beijing general manager, Josh Li, said: "It's a fact that MNC agencies are able to perform better than their local competitors. The main reason is that local agencies have bottle-neck issues in expanding into large-scale, steady operations. They usually lack business vision and a developed approach to management."

However, there are a few star performers among the local shops. Among them is Shanghai Advertising, a 40-year-old local ad agency, which began actively hiring experienced expatriates last year in a move to change itself from an old-fashioned, state-run enterprise to an organisation that is more professional and modern.

CHINA AGENCY RANKING

AGENCY 2001 2000 Percentage

Rmb (billions) Rmb (billions) growth

Saatchi and Saatchi 1.40 1.39 +1.21

Great Wall

McCann-Erickson 1.36 1.37 -0.68

Guangming

Dentsu Beijing 1.09 0.70 +56.14

Leo Burnett Shanghai 1.09 0.67 +61.78

J.Walter Thompson/ 0.94 1.21 -21.88

Bridge

Beijing WeiLai 0.90 - -