China's ad spend growth is going to take a hit, with its 2020 forecast at 3.9%, down from previous projections of 6.9%, according to the latest report from Dentsu Aegis Network (DAN).
In its "Ad Spend Forecasts" report, DAN said the spread of COVID-19 and moderate economic growth in recent years were the reasons for the revision.
The estimation is slightly better than last year's 3% growth of the China ad spend market. In 2019, spending in China was impacted by the overall slowdown in the macro economy and the impact of Sino-US trade tensions.
In 2019, television, newspapers, magazines, and radio spend was in decline, with only OOH and digital seeing growth over the year. However, OOH is facing a difficult year moving forward - with an expected growth rate of -6% - due to a change in ad formats in response to controls imposed on outdoor activities because of the COVID-19 pandemic.
This year, government measures supporting economic growth are expected to be rolled out, with the 2020 Summer Olympics and 2020 Summer Paralympics hoped to provide a boost to the second half of the year if the events go forward.
Ecommerce will continue to rise after the pandemic recedes as it is expected to capture a 42.4% share of all digital spend in 2020, and will be boosted as consumers go online to make essential purchases. Short video, mobile gaming, news, and online video were the top four app categories for this year - based on a conclusion by QuestMobile - and advertisers are adjusting their spends accordingly.
Online video has been an important format for digital advertising - taking a 10.3% share of total digital spend - but the landscape is evolving. Its growth is limited by inventory issues and shrinking commercial audience size as viewers opt for VIP paid memberships and opt-out from watching long pre-roll ad formats. During the COVID-19 pandemic, paid subscriptions for online video have notably increased.
As digital in China has been rising over the previous decade, digital ad spend in China in 2020 is forecast to be more than thirteen times larger than it was in 2010, accounting for US$68.2 billion and a 68.3% share of total ad spend.
Mobile continues to be a key driver for China's digital spend and is expected to increase by 17.6% in 2020, accounting for 77.5% of total digital advertising spend. This will continue to grow with diverse formats and the expansion of 5G.
As China's programmatic advertising market matures, more media platforms have accepted programmatic buying. With more ad formats served programmatically with increased premium positions available, advertisers have embraced this expansion of choice. This is reflected in the growth rate of programmatic which is estimated to be 45.7% in 2020.
"Marketers in 2020 need to manage contrasting dynamics; long and short term, global and local, digital and traditional. Ultimately, they need to remain focused on long-term sustainable growth by winning, keeping and growing their best customers," said Michelle Lau, CEO of DAN China.