MNC giants brave auction frenzy

It was only last year that the first multinational made a successful bid in the annual auction for airtime held by China's national broadcaster, China Central Television (CCTV). The crowning of Procter & Gamble as this year's bidding king, the auction's biggest spender in a room thronged with China's best-known brands, shows how much this event has changed. Just a few years ago, non-Chinese firms were unknown at CCTV's auction, wary of its highly-charged atmosphere and skyrocketing bids. But last month's auction for airtime in 2005 saw another 10 international firms joining P&G in securing slots. Their bids contributed Rmb753 million (US$91 million) to CCTV coffers, almost 15 per cent of the auction's income, with the auction itself accounting for half of CCTV's annual revenue. CCTV's head of advertising, Peter Guo, described this dramatic surge in participation by foreign companies as a "turning point in the history of our auction". This included successful first-time bids by the likes of Colgate, Gillette, KFC and Unilever, as well as a greater commitment by P&G, which more than doubled last year's investment. Some see the increasing involvement of foreign firms in CCTV's auction as an admission that their original media strategies, which tended to neglect CCTV in favour of local and regional stations, weren't working. For new entrants who had just begun to develop their distribution network, advertising on CCTV, China's only national broadcaster, seemed like using a sledgehammer to crack a nut -- and an expensive hammer at that, offering a much poorer CPM, the ratio of spend to audience, than local operations. For multinationals with well-developed internal systems to calculate media value, CCTV was simply too expensive. By contrast, domestic brands proved less averse to CCTV's rates, as they felt CCTV's 'cachet' and 'status' would rub off on their products. "CCTV has authority so the public thinks (your brand has, too)," notes Li Jia, president of Tongyi, a lubricant brand, and one of the biggest bidders at the auction since first taking part two years ago. "If you go to tier two and tier three cities, you will find Tongyi is viewed as a high-end product in their eyes." To some extent, multinationals have started to look at CCTV in a different light, but this doesn't mean they are abandoning their media efficiency measures. Unilever China uses a mix of local understanding and the company's international guidelines when deciding how much to spend, explains its media controller, Patrick Zhou. "We have to have a reasonable CPM, so we can buy CCTV, even though we take into account the qualitative factors, such as the authority and the credibility of the channel. It is important for us to see media value. We still need to see the quantitative numbers for CCTV's ratings performance." Although CCTV holds a unique position in the Chinese media landscape, it is the numbers that have made it increasingly attractive to cost-conscious multinationals. TV ratings tend to be falling in China, but CCTV is bucking the trend by holding onto its audiences. This appeal has been strengthened by a number of marketing initiatives, including a revamp of lead channel CCTV-1 last autumn, which won praise from domestic and multinational companies alike for pulling in audiences and making the channel an increasingly cost-efficient buy. "CCTV reprogrammed its prime time, prolonged the drama time, put all the favourite programmes from other CCTV channels into Channel 1 and auctioned more prime-time slots than last year," notes Bruce Lui, marketing director of Shanghai Fortune Food, who successfully secured airtime for the company's Fulinmen (Fortune) cooking oil. "The industry forecasts local TV and provincial TV will raise their rates by 20 per cent to 40 per cent next year. (In my opinion), CCTV auction time is cheaper." CCTV's revamp came after a clampdown by Chinese broadcasting watchdog Sarft on excessive prime-time adbreaks during last year, restricting airtime for big brands and increasing the attraction of the auction. By moving all its airtime around key slots on CCTV-1 into the auction for the first time, CCTV made it virtually obligatory for advertisers interested in these slots to take part. These changes have been accompanied by sustained wooing of multinationals, soliciting their views and acting on them. A new 30-second slot was introduced into CCTV schedules for the first time after requests by multinationals. The lure worked, with the new slots going to Colgate, Fortune Cooking Oil, KFC, P&G, Toyota and Unilever -- either multinationals or joint-ventures between local and foreign firms. Competition for the shorter 15-second slots was more mixed, with both international and domestic brands competing. Although both domestic and foreign brands are keen to stress that they are not carried away by the atmosphere in the auction, foreign companies still baulk at the amounts pledged by domestic firms for certain slots. Unilever left as little to chance as it could in the auction, holding frequent meetings with CCTV to work out how much spots were likely to go for to help it formulate its media plan. The company's participation in the auction was by no means a fait accompli, with a decision made months after the company first met with CCTV, as Unilever first assessed the value of CCTV and then how it aligned with plans for its stable of brands. The consumer goods company expects to get an idea of whether its investment has been worthwhile in three to six months, comparing the ratings performance on CCTV-1 with other platforms, including other CCTV channels as well as provincial and satellite stations, and keeping a close eye on sales revenues. The company secured its slots to launch new products into the Chinese market, believing it has now reached a critical mass in the mainland to increase its presence on the national stage. Likewise, P&G, which also spent months preparing for the auction, feels its move to the centrestage of the auction is a reflection of both its development in China and the initiatives taken by CCTV itself. "There are some parallels between our growth and theirs," comments associate director of P&G's Greater China media department, Pon De Dios. "Year on year, our growth has been quite solid. They've been taking a more consumer and marketing-oriented approach. The consumer is at the heart and centre of all our efforts and I would say the same is true for CCTV." P&G's commitment at the 2005 auction exceeded the total pledges from all the other foreign enterprises, some of whom would have been prompted to investigate the auction more closely following P&G's entry last year. While each will be examining their own investments in the coming months to see whether they stack up, the big boost by P&G to become this year's bidding king indicates that the companies who have done their homework are likely to make their presence felt even more next year.