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Shake It Up, Baby
There has been a lot of discussion in the advertising community in China about what the current downturn will mean for the space. General consensus is that advertising, especially digital advertising, will not be as adversely affected as many other sectors. That said, there will be definite shifts in the overall composition of the market. At a recent AmCham event, Matt Roberts, GM of About.com's China website discussed a "flight to value" that should effectively cull the herd in the very crowded online media space. As clients are more cautious about their spending, they will look more closely at their partners and the channels they use for promotion. Measurable ROI (something very challenging in China) will become much more important. At the same event, Neil Ducray, General Manager of TouchMedia discussed how he believes that this is a huge opportunity for domestic agencies to step up. Today (but maybe not for too much longer) the international agencies are still stronger than the domestic ones. A company (local or foreign) that can provide 90% of the value for 50% of the price should do much better than a firm that provides 50% of the value for 90% of the price. This uncertainty brings opportunity, and the better local firms (the traditional low-cost shops) will use this as a chance to move up the value chain. In the words of President Elect Obama's Chief of Staff Rahm Emanuel, "never let a serious crisis go to waste." The shops that have the right price/value equation are poised to do quite well during the coming shake-up.
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Ian runs operations and research.
