International 4As agencies continued to dominate the upper reaches of the CAA's league table according to its latest industry survey, based on tax receipts collected from each advertising license held in the PRC, but more local agencies found places in the top 10, claiming five of the slots compared with just three in 2001.
The CAA said domestic agencies have been updating their practices and are securing larger pieces of business as a result. "Since 2000, more and more local shops started seeing the importance of making their business more internationalised and professional," a CAA representative said. Agencies have been especially focusing on recruitment in order to turn themselves from old-fashioned state-owned enterprises to modern organisations providing quality services, the representative said.
The rise in revenues for China's local agencies appears to come from increased spending from domestic firms, with more categories ratcheting up marketing spend as a response to market reforms initiated by the Chinese Government, But international networks have said that standards have yet to improve for local agencies to present serious competition to MNCs pitching for China business.
"Rather than local agencies professionalising, it's probably a lot of local brands really driving marketing and advertising expenditure," the head of one 4As agency said.
Another said: "The progress of local agencies in terms of professionalising standards has at best been incremental. There has been no breakthrough. If there had been a breakthough we would find ourselves competing more against them."
Local firms nevertheless tend to be more profitable than their international counterparts, organised in a way that facilitates fast turnaround and carrying little cost.
The different business models have hampered international agency ambitions to develop their Chinese networks through acquisitions, with international and domestic agencies by and large competing in different spheres of business. The booming Southern China economy, however has produced some local shops that have developed themselves to a level that they have become tempting targets for the global players.
The CAA said that local agencies were improving their operations all the time. "More and more big clients are starting to try them out and it is not difficult to see local agencies doing better and better," the association said. In CAA's ranking of advertising billings, Leo Burnett has toppled Saatchi & Saatchi Great Wall from the top slot. Saatchis dropped to second place, with a 13 per cent billings rise.
The CAA also recorded advertising revenue, which also includes media revenues, where Beijing Dentsu once again topped the ranking. Additional reporting by Christy Liu