6 Invest in

6 Invest in China

This year China accelerated its development as the world’s fastest-growing marketing communications market. It is expected to surpass the U.S. in ad spend growth for the first time in 2006—increasing major media spending by $4.2 billion, compared to an increase of $4 billion in the U.S., according to WPP’s GroupM. (China posted a 21 percent increase in growth in 2005, to $40 billion, according to Nielsen Media Research.) If those numbers alone don’t explain the urgency behind industry investment in the region, the Chinese government—theoretically—made it easier this year for foreign firms in the sector, allowing them to come into the market without a joint-venture partner. While there is a track record of often difficult, if not disastrous, affiliations between international and local agencies, some major players are still not opting to go it alone. In June, latecomer Omnicom, for which China is now a top corporate priority, said it entered into a partnership with well-connected corporate giant Citic Guoan. Likewise, in September, The Ogilvy Group, the largest operator in China, re-upped for another 15 years with Shanghai Advertising Ltd. China’s expanding urban middle class and future prospects of growing disposable income among rural consumers, in a country of 1.3 billion people, continues to be a major industry lure. But the challenges of generating profitable revenue—given the unique characteristics of the market—and finding enough talent will continue to be a major industry challenge going into 2007.