This Year, Next Year: China Media Forecasts (2022 Summer)
In the volatile year of 2022, the global economy has been hit hard on all fronts, with several outbreaks of COVID-19 across China and inflation across the global. In response to the rising uncertainties, the Chinese government established the general principle of ensuring stability for 2022 in Q4 2021, while adjusting the economic structure and furthering balanced development, leading to the shift of population and consumers’ preference on media using. The structure of advertising spending has changed thus. Furthermore, the traffic dividend has come to an end, with more detailed policies, making the media industry become more standardized and penetrate into omnichannel. This week, we deliver a piece to unscramble the report This Year, Next Year.
Macroeconomy: the county-level economy will change the advertising spending structure
Counties will develop their infrastructure according to local conditions and the functions required by nearby mega cities, evolving the industrial structure to new- and high-tech industries. As the rural-urban income gap continues to narrow, consumption potentials in the lower-tier markets will continue to surface, with improved telecom networks and infrastructure. Both ads and goods can go to them at a lower cost and thus change the advertising spending structure.
Consumers: increased digitization triggers a media content revolution
The advances in technology have made it easier for people to find their voices and produce content. However, with limited energy and improved algorithms, users are affected by the content within a specific culture circle and their brand consumption behavior is distinctive.
Media: the industrial structure is upgraded to effectively respond to market demand
The media industry is more complicated than before. Ads have taken on more important roles throughout omnichannel, rather than displaying only. The industry is thus gaining speed in two major directions: scientific attribution on behavior of various consumer groups, and a greater focus on decentralized content output.
Forecasts of major media types
The unexpected Russo-Ukrainian war, inflation and labor shortages across the global, and new coronavirus mutations all cast a cloud over the global economic recovery. Accordingly, the International Monetary Fund (IMF) has slashed its annual global growth estimate to 3.2% from 4.9% for 2022, thrice, from October 2021 to July 2022, which represents a 35% drop.
Since the beginning of the year there have been recurring outbreaks of COVID-19 across China, with several major cities seriously affected. This has caused another shock on offline consumption scenes and consumer expectations, leading to a marked decline in household consumption since March. From the aspect of GDP, the tertiary industry bore the brunt of the outbreaks, down to -0.4% in Q2 from 4% in Q1, for some regional control strategies. Although the initial impact of this year’s COVID-19 outbreaks on the total retail sales is relatively slight compared to 2020, with established testing centers and consumption-buoyed policies, people still tend to rational due to the ongoing spread of these outbreaks across multiple regions. It is expected that the recovery of optional consumer goods will be under pressure for an extended period of time compared to essential products. Consequently, the advertising industry, closely related to catering and retails, has again entered a temporary period of low growth.
The spatial spillover effect and industrial digital transformation are the drivers for accelerating the development of counties in city clusters and the industrialization of neighboring cities, leading to the intra-provincial migration flows. As the overall consumption growth of residents in high-tier cities has stagnated, how to unleash the potential of consumers in the lower-tiers has been at the heart of future economic development. In May, China released the guidelines with a focus on county towns, expecting that in the future, the urbanization of counties would enable rural modernization and be able to break the urban-rural dual economic structure. This means that in the future, counties will develop their infrastructure according to local conditions and the functions required by nearby mega cities, evolving the industrial structure to new- and high-tech industries and the tertiary industry, such as commuter housing, high-end manufacturing, and tourism services. As the rural-urban income gap continues to narrow, consumption potentials in the lower-tiers will continue to surface, with improved telecom networks and infrastructure. Both ads and goods can go to them at a lower cost and thus change the advertising spending structure.
The COVID-19 has accelerated the access to consumer entertainment online, and the consumer life is becoming more closely linked to digital media, so further intensified digitalization. The advances in technology, such as AI-powered content and smart editing, have made it easier for people to find their voices and produce content. By contrast, however, the lower threshold for self-expression has led to a surge in content output and a decreasing probability of being spotted. The weekly average Internet usage time per person is also saturated, with improved algorithms, users usually encounter information that reflect and reinforce their own.
Over the past decades, the Internet got a big boost with the improvement of infrastructure and the widespread adoption of smartphones. The abundance of constantly improved apps continued to draw on consumers’ attention, and leading internet platforms thus grew at a rapid pace. This trend was even accelerated by the COVID-19 – which intermittently disrupted consumers' offline life and work, expediting the migration of their work and entertainment online. Internet platforms, once again, gained massive dividends for it benefitting all and occupied over 80% of app usage time.
Therefore, consumers have higher requirements for content quality than before. However, in terms of content preference, users are more easily affected by the content within a specific culture circle and content production shows differences, such as moeify, homie, influencing the overall tone of an app.
Media: the industrial structure is upgraded to effectively respond to market demand
Traditionally, media generally served the purpose of displaying. Thanks to technical development and well-established communication equipment, and driven by the COVID-19, the media industry is quickening its digital transformation journey. In the present age, new requirements are expressed for the advertising and marketing industry. As consumers are expediting the migration of their daily life online, especially from 2013 to 2020, advertising spending is flowing to digital apps and the share of digital advertising increased to 87.1% in 2021, up from 78.4% in 2019. Things are different this year, though. A rise in the strategic status of data elements and the traffic dividend has come to an end, making the platforms hard to maintain a rapid growth through expansion. Combined with the increased self-awareness and decreased consumption willingness, the digital advertising industry is facing the problem of reduced marketing efficiency due to decreased reach accuracy.
As a result, the media industry has seen an industrial structure upgrading, shifting from simply pursuing short-term efficiency to a more well-regulated development. At this stage, the policy focuses on actions against monopolies, which intends to break the original hierarchy generated by the scale effect and introduce more competition to offer surplus to society. The industry is thus gaining speed in two major directions: scientific attribution on behavior of various consumer groups, a greater focus on decentralized content output and omnichannel cooperation to comprehensively lower the marketing expenses.
Internet: from expansion to breakeven. Content iteration and industrial distribution ensure the long-term growth
The importance of data security and at the stage of red ocean, with recurrent outbreaks and global inflation, have forced some traffic-based business to face pressure on financing. Since the internet industry has made it to the maturity stage, high-quality development and break-even have become what it will pursue in the future. The growth rate of digital advertising spending is slightly lower than that estimated last year – from 9.2% to 6.6% year-on-year. The breadth of platforms will shrink in business, but vertical functions of an app will gain further development, especially in deepening into lives of consumers and taking more roles of entertaining. Notably, online ads are not simply for displaying and awareness, but for omnichannel cooperation and become a part of a brand and a product, providing added emotional value for consumers. Internet advertising spending will maintain an edge in the long term and is estimated to grow 4.9% year-on-year in 2023 based on a high base.
The macroeconomic fluctuation affects the outdoor industry. Collaboration efficiency and immersive experience are still the keywords
Affected by the control strategies in many places and the high-transmission of variants, consumers are hesitant to offline activities, resulting in a general decline in outdoor advertising spending, which is undoubtedly a huge blow to the industry. It is estimated to drop by 32.9% year-on-year in 2022. However, this has forced the industry to continuously control costs to improve operational efficiency and rapidly its digital transformation to better cooperate with online media. Although outdoor ads are easily affected by the uncertainties, one’s offline life still cannot be completely replaced by online life. In the future, as the Covid-19 is under control, with improvement of the macro environment and fiercer competition in online advertising, outdoor advertising spending is expected to increase by 0.9% year-on-year in 2023.