Online Advertising in China | Daxue Consulting

+86 (21) 5386 0380www.daxueconsulting.com

TO ACCESS MORE INFORMATION ON ONLINE ADVERTISING IN CHINA, PLEASE CONTACT [email protected]

© 2015 DAXUE CONSULTINGALL RIGHTS RESERVED

ONLINE ADVERTISING

IN CHINA

SEPTEMBER, 2015

Daxue香港上海北京

Consulting



TABLE OF CONTENTS1.0 ONLINE ADVERTISING IN CHINA

• The rise of advertising in China

• Online advertising in China continues to grow

• Why brands should care about online advertising?

• The unprecedented trend in online advertising

• Three tips for advertisers to achieve success in China

2.0 CHINA’S NEW ADVERTISING LAW

• China’s new advertising law

• A remedy for false advertising

• A clearer definition of false advertising

• Heavier administrative penalty & civil responsibility

• New costs in, old costs out

• e-Commerce shops of personal care products face big reform



Online advertising will continue to grow

and take share from the traditional advertising market.



THE RISE OF ADVERTISING IN CHINA



The rise of advertising in China

At the time when the People’s Republic of China

was founded, the old advertising industry had

undergone a robust development. Various forms

of advertising such as posters, placards, billboards,

signs and windows displays were prominently

featured in China’s cities. With a strong background

in advertising management, many advertising

techniques were further used as an important tool

for social ideological and economic propaganda.

However, during the Cultural Revolution,

advertising was prohibited and attacked as “feng

zixiu” (i.e. feudalism, capitalism, revisionism).

Advertising agencies were disbanded, leaving

China’s industry to stagnate at a time when

advertising was undergoing rapid development

elsewhere in the world. The situation improved

with the end of the Cultural Revolution in 1978.



After the Third Plenary Session, planned economy

transitioned to market adjustment. Many new

products needed help developing new markets

and expanding sales, providing an opportunity for

the advertising industry to recover and develop.

The year 1978 is regarded as the beginning of the

advertising industry recovery in China.

Advertising in terms of quantity, form, management

and other aspects has since improved by leaps

and bounds, but its long hiatus and subsequent

boom has created a parallel development that

separates Chinese advertising from the rest of

the world in a few key ways.

The year 1978

is regarded as

the beginning of

the advertising

industry recovery

in China.

“



Online advertising in China is growing at a

shocking rate, playing an increasingly important

role in the advertising industry. It even surpassed

billboard advertising to become the fifth largest

media after the four traditional mediums

(television, radio, newspapers, magazines).

Notice that China still relies heavily on these

traditional advertising channels while online

advertising in China is innovating at a very rapid

rate. This is one of the curious factors that define

China’s advertising space. In response, numerous

international advertising agencies have set up a

special online media division in order to capitalize

on the huge potential for online advertising in China.

Online advertising in Chinacontinues to grow

In 2014, the advertising market in China continued

its steady expansion with a growth rate of 9.7%,

higher than the GDP growth rate of 7.7%.



According to Tsinghua University School of

Journalism and Communication’s Media Blue

Book: China Media Industry Development

Report (2015), online advertising revenue in 2014

exceeded television advertising revenue for the

first time, with more than 150 billion RMB.

Online advertising will continue to take more share

from the traditional advertising market and come

to support the majority of growth for the whole

advertising market in China. As more companies

realize that the downward trend of print media is

difficult if not impossible to reverse, they will seek

to pivot into online advertising.

Online advertising

revenue

has surpassed

that of television

in China

for the first time.

“



Why brands should care about online advertising?

In July 2015, the CNNIC (China Internet Network

Information Center) announced that the number

of Chinese netizens reached 668 million, with an

internet penetration rate of 48.8%.

Among them, the number of mobile phone users

reached 594 million, about 88.9% of the total

internet population. With the trend towards larger

screens and the continuous improvement of

mobile applications experience, mobile phones

are likely to become the main internet terminal for

a majority of internet users. In addition, the overall

diversity of internet users has greatly improved.

Internet users in rural areas are experiencing a

rapid growth as well. More and more industries

are now suitable for online advertising, which

will undoubtedly become a long-term growth

momentum for online advertising in China.



The unprecedented trend in online advertising

The online advertising market boom not only

encourages traditional advertising agencies

to pivot towards online advertising, but has

also spawned a growing number of advertising

agencies entering the online advertising market.

In addition, user service providers, firms that offer

services to measure advertising effectiveness,

and many other companies have also entered the

online advertising market.

At the same time, facing huge profit space, the

online advertising market has become a major

source of income for many websites.

The competition between websites is becoming

more intense. A lot of websites are constantly

adjusting their ads, revising the original ads and

improving their layout.

SOURCEShttp://www.beead.com.cn/newsinfo.aspx?nid=25&id=167http://www.lxgg.top/news-hy-1.htmlhttp://wenku.baidu.com/view/c30354c75fbfc77da269b1eb.htmlhttp://www.meihua.info/a/53046https://xueqiu.com/4453470453/24026066http://www.ban-ma.com/index.php/discover/r-881.htmlhttp://www.meihua.info/a/51713http://www.wenku1.com/view/CE0360DA37EFC4EA.htmlhttp://media.people.com.cn/n/2012/1029/c350882-19423103.htmlhttp://www.lxgg.top/news-hy-1.html



Three tips for advertisers to achieve success in China

Specify advertising purposes and target

Creative advertising production

Specify the budget



Three tips Specify advertising purposes

and target

Advertising purposes can be brand promotion,

product promotion or online business. Advertisers

should choose different types of online ads

corresponding to their different purposes. If it

is to promote the brand, advertisers should put

their advertisements on a website which has a

significant amount of traffic, a high reputation and

an audience in line with target consumers. One

ideal venue for this is the densely populated and

highly active Chinese blogosphere.

Finding a blog that matches the target

demographic requires local expertise, but it’s

often more successful (and less expensive) than

advertising in more traditional outlets.

If it is to promote a product or channel construction,

suitable for industry portal advertising, and if it is

to promote an online business, then one should

engage in Baidu SEM, making bids on keyword

rankings in China’s dominant search engine.



Three tips Creative advertising

production

Media forms of online advertising includes text,

pictures, animation, and other rich media, all of

which are especially popular in China, where

consumers react positively to creative, delicately

designed and accurate positioning of advertising.

Viral campaigns are particularly effective as their

populist nature overcomes some of the initial

skepticism that is growing in China following

several highly publicized scandals regarding false

advertising.

However, China’s netizens are extremely

discerning, and in a country where verified

user reviews rate higher than any other form of

recommendation, false advertising can backfire

quickly and catastrophically.



Three tips Specify the

budget

The cost gap between different types of online

advertising and web platforms is significant. The

advertising costs on Sina, QQ and other big sites

range into the tens and hundreds of thousands

of RMB. Small professional gateways charge

in the tens of thousands typically. The price is

relatively cheap for advertising networks, but

mostly personal websites are comparatively low.

As previously mentioned, identifying smaller (by

Chinese standards, they may still have monthly

traffic of a hundred thousand unique visitors or

more) websites which attract readers close to a

product’s target consumer is a sure way to keep

costs low and simultaneously make sure the

message reaches those most likely to buy.

SOURCEShttp://blog.sina.com.cn/s/blog_49c4b91a0100ybwt.htmlhttp://zggg.guanggaow.cn/y/d/g.htmlhttp://www.admaimai.com/Interview/Detail/521.htmlhttp://www.fortunechina.com/magazine/c/2006-03/01/content_1603.htmhttp://www.ytsports.cn/news-1297.htmlhttp://report.iresearch.cn/html/20150507/249592.shtmlhttp://bbs.hexun.com/money/post_568_5396348_1_d.htmlhttp://media.people.com.cn/GB/22114/52789/146056/8825543.html



CHINA’S NEW ADVERTISING LAW



China’s new advertising law

In recent years there have been many problems

with fake and inaccurate advertising in China.

According to State Administration for Industry

and Commerce of the People’s Republic of China

(SAIC), for the past eight years (from 2007 to 2014),

SAIC has dealt with a total of 370,000 cases of

illegal advertising, about 30% of which are false

advertising. In 2014 alone there were 26,700

cases of false advertising and representation and

the percentage has kept increasing for the past

five years. The Chinese authorities have stepped

up their efforts to deal with false advertising lately.

Crest bore the brunt and faced the biggest fine

for false advertising in China.

Their advertising copy reading “use Crest dazzle

double effect whitening toothpaste for just one

day and your teeth really turn white” was judged

to be false advertising and as a result, Crest was

fined 6.03 million RMB. According to the Shanghai

Industrial and Commercial Bureau of Investigation,

the whitening effect in the advertisement was

produced by excessive use of CGI, not the

toothpaste. ”Toothpaste is generally intended for

teeth cleaning and sometimes has anti-acid or

desensitizing functions. Whitening is actually very

difficult to accomplish,” said an industry expert.



A remedy for false advertising

“Advertising Law of the People’s Republic of

China (Revision 2015)” (New Advertising Law) was

passed by the fourteenth plenary meeting of the

12th National People’s Congress (NPC) on April 24,

2015 and implemented on September 1st, 2015.

The New Advertising Law is a major overhaul of

the 1994 version with expansion of provisions from

49 to 75. It has made changes and improvements

to the legal liability of advertising bodies, the

identification of false advertising and the power of

regulatory authorities. The New Advertising Law

is believed to be a remedy for false advertising

thanks to the following two breakthroughs.

1

2

A clearer definition of false advertising

Heavier administrative penalty & civil responsibility



A clearer definition of false advertising

Previously in the old advertising law there were

only a few provisions for the definition of false

advertisement. The new advertising law provides

a very detailed definition of false advertisement

with five specified situations and clarifies what is

false advertisement for the very first time.

Heavier administrative penalty & civil responsibility

In the old advertising law, the advertising agent

and publisher bore joint liability with the advertiser

only when they designed, produced or published

the advertisement with knowledge of the falsity of

the advertisement.

However, with the new law, the advertising agent,

publisher or endorser must now bear joint and

several liability with the advertiser, particularly in

the case when a false advertisement is published

for commodities or services which causes damage

to consumers’ life or health, even if the agent,

publisher or endorser is not at fault or negligent.



New costs in,old costs out

To comply with the new advertising law, firms

previously reliant on misleading or false

advertising would have to factor in significant

fines. The new law increases the penalties of

false advertising, but how effective this will be

for most large companies able to absorb these

fines is still unclear. As new costs come in, old

costs exit the market.

The 1994 version of advertising law requires

the advertising agent to undergo company or

advertising management registration before

conducting advertising activities.

This provision is completely canceled in the new

advertising law. This modification further reduces

government intervention in the advertising market

and eliminates entry market costs.



e-Commerce shops of personal care products face big reform

The new law is going to be easier on big brands

since small firms with relatively small capital will

find themselves particularly vulnerable to the

relatively large fines incurred by false advertising.

Substantial online shops of personal care

products, for example, are likely to be affected

by the new advertising law.

Although the new advertising law lists only three

phrases, “state level”, “highest level”, and “the

best” as forbidden to appear in an advertisement

( just like in the 1994 version), the online commerce

sector has reacted with panic to the increased

penalty (200-1000 thousand RMB).

As early as January 1, 2015, Taobao launched

“identification of information inconsistent with the

reality and rules of punishment and implementation

details” for Taobao sellers. It stated that words

such as “highest, lowest, best, hottest,” as well

as advertising inconsistent with actual effect, will

be subject to an appropriate “legal process” and

listed a detailed approach.



What’s more, moisturizing, whitening, firming,

anti-acne and other common language regarding

the efficacy of cosmetics will be difficult to be

freely advertised on product descriptions in the

future as well.

The new advertising law also stipulates that

advertising spokespersons must not make

recommendations or testimonials on products

they have not used or services they have not

received, which implies that men cannot endorse

female cosmetics and care products any longer.

Minors under 10 years old can also no longer

be advertising spokespersons under the new

advertising law.

The popular reality TV show “Dad, where are we

going” in China made many kids celebrities. Some

kids were able to earn up to 150 thousand RMB

per day simply through endorsements. The new

advertising law has brought a full stop to this.

SOURCEShttp://www.junhe.com/images/ourpublications/Research_Reports/Research_Reports_CN/20150520.pdfhttp://media.people.com.cn/n/2015/0310/c40606-26665331.htmlhttp://www.saic.gov.cn/zzjg/zjld/gl/zyhd/201504/t20150427_155504.htmlhttp://www.yicai.com/news/2015/04/4610472.htmlhttp://news.xinhuanet.com/fortune/2015-03/12/c_1114619541.htmhttp://www.ablanxue.com/shtml/201509/28074_1.shtmlAdvertising Law of the People’s Republic of Chinahttp://information.dla.com/information/published/Amendment%20_to_the_PRC_Advertising_Law.pdfhttp://www.china-briefing.com/news/2015/03/04/new-advertising-law-expected.htmlhttp://chinalawtranslate.com/bilingual-advertising-law-2015/?lang=en



About usDaxue Consulting is a market research

company dedicated to providing the

best specially tailored, high-quality,

customer-specific data in one of

the most challenging markets in the

world; China. We leverage our unique

network of university organizations

and professors, business associates,

industry experts and foreign and local

consultants to find the information you

need efficiently, reliably and in a manner

that addresses your specific needs.

We excel because we’re reliable,

resourceful and flexible, everything

that the Chinese market demands.

BEIJING, CHINA Room 726, Building 1, 40 Dong Zhong Road,

Dongcheng District

SHANGHAI, CHINA Room 1701, Building 1, 525 Fangxie Road,

Huangpu District

HONG KONG, HONG KONG ISLAND 13 Queen’s Road Central, Floor 23,

Central District

PARIS, FRANCEDaxue Consulting, 45 Rue de Courcelles,

75008 Paris

http://www.daxueconsulting.com



If you like what you see, follow us!

Yes, these are clickable buttons!

https://www.linkedin.com/company/daxue-consulting

http://www.facebook.com/daxueconsulting

http://www.twitter.com/daxueconsulting

http://www.instagram.com/daxueconsulting

http://daxueconsulting.com.cn/?page_id=3327

http://weibo.com/daxueresearch

© 2015 DAXUE CONSULTINGALL RIGHTS RESERVED Daxue香港上海北京

Consulting

CONTACT USHONG KONG | BEIJING | SHANGHAI

www.daxueconsulting.com

[email protected]

+86 (21) 5386 0380

+86 134 6658 3902

This report is the property of DaxueConsulting. No copyrighted materials may be reproduced, redistributed, or transferred without prior consent from Daxue Consulting. For more information on the industry featured in this report, please contact us.

Marketing

Online Advertising in China | Daxue Consulting