Economic Barometer: the advertising industry

"Now the competition is fierce, and they are all in the red ocean ." Guo Zhiming, managing director of strength media China, told reporters about the current situation of the advertising industry.

Since the financial crisis, the pressure on major advertising companies has increased. By the end of 2008, Hongmeng group, the world's largest advertising and communication group, had cut jobs by thousands, accounting for 4%-5% of its total employees. The world's third largest advertising and communication group, aipezhi, also cut jobs by 2000, accounts for 5% of the total number of employees.

Global advertising giants are struggling, and China's advertising industry is also hard to get stuck. Tian Tao, vice president of CTR Market Research, said: "As the market's pessimistic outlook on the macroeconomic situation will erupt in 2009, the Chinese advertising market will be on the brakes as a whole ."

In 2009, the downsizing plans of major advertising companies gradually surfaced. At the same time, low-price and easy-to-monitor online advertisements have begun to become the new darling of advertising.

Low-profile layoff

"The laid-offs have started since a year ago, but they are all relatively low-key. Many 4A companies have been removed from a group because of the customer's withdrawal orders ." An industry insider told this reporter that "oomei, once claimed to be never laid off, is no exception ."

It is understood that previously, the Beijing branch of the United States was responsible for Motorola's global advertising business. With the withdrawal of the motorcycle, more than 70 members of the project team were collectively cut. In response, Ke Yingde, president of Beijing Omei group, told this reporter: "Like many companies in the same industry, Omei is integrating resources to meet and predict the business needs of customers and their brands, this means that the scale of some fields will be reduced."

It's not just Omei. Another advertising giant, Macon, previously issued a letter not advocating layoffs in the Asia Pacific region for the sake of security. However, due to the loss of global business of Intel, a major customer, he also raised a huge layoff policy for the project team. According to the reporter's understanding, apart from the explicit layoff of customers such as OGI and Macon, many other companies have also adopted measures such as freezing salaries and preparation.

In the past, the project team that lost customers had time to find new customers or be absorbed by other project teams. But now, "Most companies have no spare money to raise members without Projects ".

Not only are there layoffs, but the architecture of some advertising companies is also changing. It is understood that WPP Group's group company has four subsidiaries. In the past, each branch had a different group responsible for different projects of the same customer. However, to save costs, the group has opened up branch barriers and combined the previous four into one group for project operation.

Reduced advertisers

The shrinking of advertising companies stems from the cost reduction of advertisers. Wang Zhile, director of the research center for multinational corporations at the Chinese Ministry of Commerce Research Institute, said: "Companies are reducing expenditures, such as compressing public relations fees, reducing production volumes, and even cutting jobs. In this economic situation, business operators will think that due to the market downturn, the demand is greatly reduced, and advertising will not play any role in sales ."

This is true. Reporters learned that since the market downturn, large advertisers such as automobiles, real estate, electronics and other companies have all significantly reduced their advertising budgets. "Our advertising budget has been reduced by nearly 70% this year ." An international electronics manufacturer marketing department staff told this reporter.

The budget reduction has substantially reduced the revenue of advertising companies, especially 4A companies serving multinational companies. According to relevant sources, due to the withdrawal of orders from some multinational companies, Zhiwei Thomson's branch in Beijing has only one electronics company's customers, making it difficult to survive.

"However, it is even worse for small companies ." An internal staff of an advertising company reluctantly told our reporter: "Our expenses have been replaced by 20 million of mineral water for advertisers. Now we are busy selling mineral water ." It is understood that the economic situation is poor, advertising companies are under great pressure to compete for advertising customers, and advertising companies are weak in negotiating with advertisers.

In this case, some advertisers even propose zero-payment first, and the advertisement is then paid based on the effect. "The first payment rate for a person's participation in an advertisement is only 10%, and the first payment for an advertisement for another golf course is not paid ." Said the above person. Guo Zhi-Ming also told this reporter: "The competition is fierce. In order to compete for customers, the cost of advertising companies has fallen sharply ."

Network advertisement surges

However, China's advertising industry, in contrast to the general slump in global advertising industry, is likely to be able to maintain a certain level of gold. The reporter learned from multiple advertising companies that while most advertisers reduce their budgets, advertisements for fast-moving consumer goods closely related to people's livelihood have maintained a certain level of growth, "The advertising budgets for P & G and McDonald's in China have all increased this year."

"We expect this year's growth to be equal to China's GDP growth ." Kotaro Yamada, general manager of the Japanese electronics advertising company in Beijing, maintains a certain degree of confidence in the company's business in China.

In addition, this growth has also begun to show new features in today's situation. According to Mr. Kotaro, advertisers are increasingly focusing on online advertising in the context of economic downturn. Tong Weiliang, vice president of trend media group, also told this reporter that due to low fees for online advertising, it is easy to monitor the advertising effect through clicks and screen stay time, at present, many advertisers are gradually increasing their online advertising.

"We even have blogs and forums for advertising and marketing ." Advertiser of a company told this reporter. According to reports, the economic downturn and reduced advertising budget also provided opportunities for the company to try new advertising marketing. For example, Cartier, as a luxury, has now begun to advertise in the Baidu Post Bar, which was hard to imagine before.