Ad industry prepares for big transformation

An exhibitor displays portrait printing equipment at an advertising expo in Chongqing. Sales of China's Internet advertising reached 63.9 billion yuan ($10.23 billion) last year, a surge of 45.9 percent year on year. Li Jian / Xinhua

As IAA World Congress draws near in Beijing, sector rethinking its role, strategy

The ongoing decline in traditional media affected the growth of China's advertising industry, while Internet advertising witnessed a surge last year, an industry official said on Monday.

Print and radio ads shrank significantly, but new media, especially mobile Internet, showed an upwards trend, said Yan Jun, secretary-general of the China Advertising Association.

The association reported a drop of 2.75 percent in television commercials and 9.17 percent in newspaper ads compared with a year earlier.

But Internet advertising in China last year reached 63.9 billion yuan ($10.23 billion), a surge of 45.9 percent year-on-year.

"The industry has been undergoing a period of structural adjustment," Yan said.

The association's statement also said the expanded sector's value amounted to 502 billion yuan in 2013, with 6.84 percent yearly growth.

He confirmed speculation that the country's slowing economy may have affected advertising growth and forced the industry's transformation.

Yan spoke in Beijing, which this week will host the 43rd annual International Advertising Association World Congress. The event brings together advertising professionals from around the globe to discuss industry development, creativity and media trends.

IAA, the advertising industry's largest international organization, granted hosting rights to its 2014 world congress to the China Advertising Association last year.

It will be the second time Beijing has hosted the event, with Chinese capital also having the honor in 2004.

"China's advertising industry has delivered an accelerated surge since we held the last congress 10 years ago," said Gan Lin, vice-minister of the State Administration for Industry and Commerce.

In 2004, the industry's annual sales totaled 100 billion yuan, with 870,000 practitioners in 100,000 business units. Today, the number of practitioners and business units have surged to 2.6 million and 445,000, said Gan.

The fast-developing industry has become the world's second-largest ad market, after the United States.

The congress hopes to attract more foreign advertisers as well as encouraging local advertising firms to keep an eye on the global market, said Gan.

The industry not only plays a role as a service industry but is also an economic barometer, Gan said.

The industry's annual revenue as proportion of GDP stayed at a relatively low level, 0.91 percent, in 2012 and later stagnated in 2013 to 0.88 percent.

"The share in developed countries is normally over 2 percent, but we are still far behind," said Gan. "Thus, while our industry is not a great powerhouse yet, we will win in sales quantity."

Meanwhile, experts warned that changing the existing sales model is vital.

"Fewer people will run advertisements through agencies in the future," said Chen Xianhong, a professor of advertising at Huazhong University of Science and Technology. "It's the market trend."