The online advertising in China by Daxue consulting

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ALL RIGHTS RESERVED
ONLINE
ADVERTISING
IN CHINA
SEPTEMBER, 2015
Daxue香港上海北京
Consulting

TABLE OF CONTENTS
1.0 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
ofadvertisingsuchasposters,placards,billboards,
signs and windows displays were prominently
featuredinChina’scities.Withastrongbackground
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.
Advertisingintermsofquantity,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
onthehugepotentialforonlineadvertisinginChina.
Online advertising in China
continues 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.
Onlineadvertisingwillcontinuetotakemoreshare
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.
SOURCES
http://www.beead.com.cn/newsinfo.aspx?nid=25&id=167
http://www.lxgg.top/news-hy-1.html
http://wenku.baidu.com/view/c30354c75fbfc77da269b1eb.html
http://www.meihua.info/a/53046
https://xueqiu.com/4453470453/24026066
http://www.ban-ma.com/index.php/discover/r-881.html
http://www.meihua.info/a/51713
http://www.wenku1.com/view/CE0360DA37EFC4EA.html
http://media.people.com.cn/n/2012/1029/c350882-19423103.html
http://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.
SOURCES
http://blog.sina.com.cn/s/blog_49c4b91a0100ybwt.html
http://zggg.guanggaow.cn/y/d/g.html
http://www.admaimai.com/Interview/Detail/521.html
http://www.fortunechina.com/magazine/c/2006-03/01/content_1603.htm
http://www.ytsports.cn/news-1297.html
http://report.iresearch.cn/html/20150507/249592.shtml
http://bbs.hexun.com/money/post_568_5396348_1_d.html
http://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
IndustrialandCommercialBureauofInvestigation,
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
the1994versionwithexpansionofprovisionsfrom
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
forcommoditiesorserviceswhichcausesdamage
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
(justlikeinthe1994version),theonlinecommerce
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
realityandrulesofpunishmentandimplementation
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.
SOURCES
http://www.junhe.com/images/ourpublications/Research_Reports/Research_Reports_CN/20150520.pdf
http://media.people.com.cn/n/2015/0310/c40606-26665331.html
http://www.saic.gov.cn/zzjg/zjld/gl/zyhd/201504/t20150427_155504.html
http://www.yicai.com/news/2015/04/4610472.html
http://news.xinhuanet.com/fortune/2015-03/12/c_1114619541.htm
http://www.ablanxue.com/shtml/201509/28074_1.shtml
Advertising Law of the People’s Republic of China
http://information.dla.com/information/published/Amendment%20_to_the_PRC_Advertising_Law.pdf
http://www.china-briefing.com/news/2015/03/04/new-advertising-law-expected.html
http://chinalawtranslate.com/bilingual-advertising-law-2015/?lang=en

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Consulting
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The online advertising in China by Daxue consulting

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The online advertising in China by Daxue consulting