Posts Tagged ‘china’

By Don Gasper

Hong Kong’s advertising industry has bounced back after a difficult year in 2009, with newspapers expected to see a comeback in advertising revenue, driven by the banking and real estate sectors.

Speaking at the end of February at the 2009 review of the Association of Accredited Advertising Agencies of Hong Kong (HK4A), Tsang Kam-keung, CEO of GroupM’s Hong Kong operations, said he expected double-digit growth in all advertising in the first half of 2010.

He said that double-digit growth had resumed in the last quarter of 2009 and January’s spending was 18 percent up on last year.

Media-monitoring firm AdmanGo said that the crucial banking and property sectors started to increase their expenditure in January. As a result, newspapers were able to increase their share of the advertising market that month to 32.15 percent from 28.01 percent a year earlier, when newspapers and magazines were the hardest hit by the contraction in advertising.

Paid newspapers made up 73.79 percent of the advertising purchases in the newspaper sector in January. Hong Kong’s six free newspapers accounted for the rest.

AdmanGo estimated total adspend in January was HK$2.26 billion (US$0.29 billion), an increase of 18 percent on the same month in 2009, when total adspend was H$1.88 billion.  

Advertising purchased by banks and investment services firms grew by 72.33 percent year on year to HK$83.26 million from HK$48.314 million, while adspend by property companies increased by 139.99 percent to HK$52.807 million from HK$22.004 million in January 2009.

“From what we’ve seen, advertising is looking positive this year for newspapers,” said Maggie Choi, regional managing director at OMD Asia-Pacific, Hong Kong’s largest media planning and buying services provider. “Banks are coming back and a healthy property market means real estate advertising will continue to be a big part of newspapers.”

However, Hong Kong’s top advertiser in January was pharmaceutical company GlaxoSmithKline, which spent HK$33.2 million on advertising.

Looking back at last year, the HK4A said that advertising spending was about 10 percent down on 2008.

All major media in Hong Kong, including newspapers and TV, had seen advertising spending decline last year, Tsang said.

AdmanGo had previously announced a 5.86 percent growth in 2009 to HK$26.11 billion (US$3.36 billion). This figure was based on an assumption that all media had offered a discount of 60 percent to clinch deals.

However, Tsang said that television stations had discounted by more than 80 percent during the financial crisis. If one factored in such discounts total spending last year was about HK$18 billion.

Newspapers and magazines had recorded the sharpest drop in advertising revenue last year — about 15 percent. On the other hand, the Internet was that section of the media which had grown fastest, with a 25 percent increase in spending to HK$939 million.

“Advertisers want cheaper and more tactical media,” said Tsang. “The Internet is still perceived as a cheaper option.”

Chinese social network operator Tencent Holdings rose to the 10th place on the Stock Exchange of Hong Kong on Dec. 14.

The company, which runs China’s no. 1 instant-messenger service, was hardly known just five years ago. It listed in Hong Kong in June 2004. Now, thanks to a rally over the past three months that has buoyed its market capitalization up to more than HK$290 billion ($37.42 billion U.S.), it has become one of the top 10 companies listed in the Special Administrative Region, ahead of such firms as mainland telecommunications firm China Unicom. Its stock has gained 29 percent in value so far this year, making it the best performing blue chip of 2009.

Tencent boasts 484 million active account holders and is now seeking to persuade more users to take up subscriptions.

Currently the Chinese firm is just one-fifth the size of Google, which is possibly the only company that can rival its exponential growth since 2004. However, if Tencent continues to grow at its present momentum it might soon be closing the gap.

Thinking of tweeting during the 20th anniversary of the Tiananmen Square massacre? Keep your iPhone to yourself. Chinese authorities have stepped up censorship ahead of the sensitive June 4 anniversary.

Twitter has been blocked along with Hotmail, Microsoft’s new search engine, Bing, Flickr, Blogger, LiveJournal and Huffington Post.

Print media has not been immune either. In recent days, subscribers to The Economist magazine, the Financial Times and South China Morning Post found Tiananmen-related pages ripped out. And on TV, BBC viewers found the screen turned black on any reference to the event.

Google said access to YouTube in China had been restricted for several weeks now.

China has the world’s most intensive system of Internet censorship including automatic filtering plus active scrutiny by real life “cyber-police.”

By Don Gasper

China’s e-commerce giant Alibaba.com plans to increase its investments this year, fortified by a substantial war chest, a fast-expanding base of paying subscribers and a new pay-for-performance advertising product.

As revenue increased by 19 percent year-on-year in the first quarter of 2009, the company said in May that it felt it was actually benefiting from the current economic crisis, since more buyers were postponing business travel and switching to the Web for procurement instead.

Registered Alibaba users topped 40 million, up 36 percent on year, as more buyers moved their sourcing online to achieve higher efficiency and greater selection of suppliers and products

In the first quarter of 2009, the combined net addition of paying members across three key products – Gold Supplier, International TrustPass and China TrustPass – was a record high of 49,544.

“We are always looking for acquisition opportunities, so we’ve conserved cash for potential investment if a suitable candidate comes along,” said chairman Jack Ma, speaking in Hong Kong at the company’s annual general meeting on May 8. 

The cash-rich company is mulling acquiring foreign firms whose business does not overlap with that of Alibaba. Chief executive David Wei said that out of its reserves of RMB 6.9 billion ($1.01 billion U.S.) the company had RMB1 billion cash earmarked for possible acquisitions. However, if no suitable targets were identified, it would consider raising dividends instead.

Ma also said that if Yahoo Inc. wanted to divest part of its 39 percent stake in the Alibaba Group, which holds around 70 percent of Alibaba.com, his company would be ready to buy it back.

He said there were no plans at this stage to spin off Taobao.com, the online consumer-to-consumer trading site, or Alipay, the group’s online payment unit.

Revenue from the international marketplace was RMB506 million ($74 million) for the first quarter, an increase of 9 percent year-over-year and 3 percent quarter-on-quarter. The growth was primarily due to the increase in the number of members of the company’s Gold Supplier Starter Pack scheme, launched in November 2008.  The momentum in Gold Supplier membership acquisition continued from the fourth quarter of 2008 into the first quarter of 2009.

During the first quarter, the company added 12,782 Gold Supplier customers, for a total of 55,810. Even though China’s export sector declined by nearly 20 percent during the quarter, we achieved a historical high in Gold Supplier net adds,” a company statement said.

Members of the Alibaba International TrustPass scheme increased in the first quarter by 1,444 to 17,580, which was in-line with gains in previous quarters. “Steady progress has been made in building awareness and interest in Alibaba.com through our overseas expansion initiatives in key regions where we see promising potential for growth.”

Registered users on the international marketplace grew by more than 700,000 in the first quarter to a total of 8.6 million at the end of the quarter, representing an increase of 76 percent year-on-year and 9 percent sequentially. Simultaneously, storefronts on the international marketplace grew by more than 77,000 to a total of 1 million at the end of the quarter, representing an increase of 39 percent year on year and 8 percent quarter on quarter.

The company said on May 5 that it would raise fivefold the annual fee it charged its international members to $2,999, starting from June 15. In return it would upgrade the package of services it offered them.

Meanwhile, revenue from the company’s domestic marketplace was RMB301 million ($44 million), representing a year-on-year increase of 39 percent and a 5 percent quarter-on-quarter decrease of 5 percent. The year-on-year growth was mainly due to the increase in members of the China TrustPass scheme, while the sequential decline was mainly attributable to reduced revenue from the sale of keywords based on the old fixed-placement keyword bidding service.

“During the quarter we transitioned our customers to Ali-ADvanceTM, a new pay-for-performance keyword bidding service, which replaced the old fixed-placement service,” a company statement explained. “We also recognized less display advertising revenue in the first quarter compared to the prior quarter due to seasonality.”

Under the Ali-ADvanceTM program, officially launched in March, paying members can bid for keyword placement on a cost-per-click basis while product listings in search results will be determined by factors such as relevance of the customer’s product to the search and the keyword bid price. The company believes this will help improve the efficiency of suppliers’ marketing efforts while allowing for better monetization of the ever-increasing user traffic on Alibaba’s China marketplace.

China’s Internet entrepreneurs seem to have a predilection for exotic Middle Eastern names.

They chose “Alibaba” for the successful e-commerce platform of that name. Now Baidu has come up with another name from the Thousand and One Nights. It has launched “Project Aladdin,” an initiative aimed at making searches more comprehensive by uncovering useful parts of the “hidden Web.”

As a part of this project, Baidu released the beta version of an open data-sharing platform. The new platform allows Web masters and developers to submit data to Baidu in order to generate direct search results for dynamic information.

“‘Aladdin’ is an open platform for search engines,” said Baidu’s new CTO Li Yinan. “It is Baidu’s, but also everybody’s. We hope that future search engines will, like Aladdin’s Magic Lamp, meet the needs of all search users in an instant. Baidu hopes that the ‘Aladdin’ platform will develop, beyond the limitations of existing Web content, including the ‘dark net’ … and will ensure the provision of cost-free, precise search results which know no barriers.”

“Hidden Web” and “dark net” generally refer to content on Web-connected computers that aren’t indexed by search engines.

The company also launched publicly the Baidu Online Marketing Professional Edition, known too as “Phoenix Nest,” an enhanced bidding platform for online marketing customers. This platform offers customers more choices for keywords, new tools for managing marketing budget and additional data points to analyze return on investment.

“For Baidu’s users, we believe that Professional Edition will produce more relevant paid-search results, resulting in an improved search experience,” the company said.

“Phoenix Nest” was first revealed by Baidu’s management during the public image crisis created by reports on China Central Television last year of Baidu’s promotion of unlicensed medical providers. The new system, a step closer to the Google AdWords model, will step by step replace the company’s current bid-ranking system with an increased monetization of the right side of results pages.

 “One of the key challenges for this initiative is to maintain a good a number of clicks despite the F-shaped page viewing habit of Web users that often leaves the right side of computer screens ignored,” noted Zhang Chenhao, an analyst with JL McGregor & Company.

First-quarter profit of Chinese Internet portal Tencent Holdings nearly doubled to RMB1.04 billion ($1.5 billion U.S.) from RMB534 million for the same period last year.

However, the growth of online advertising was only sluggish at the firm, which operates the mainland’s leading instant-messaging service under the brand QQ as well as various online games.

“Our online advertising business was negatively impacted due to stringent budget control adopted by advertisers,” said Ma Huateng, chairman and CEO of Tencent.

Online advertising revenue increased by 1.4 percent year-on-year to RMB146.6 million ($21.4 million U.S.) from RMB145 million. This represented 5.9 percent of total revenue in the first quarter of 2009. The figure reflected lower advertising spending by customers under the uncertain economic environment as they imposed more cautious cost-control measures, which included delaying the budget approval process and signing of framework contracts.

China’s leading job board, 51job, says conditions for recruiters were tough in the last quarter, due to the economic downturn. Nevertheless, it believes it is in a strong position to cope with what it predicts will be a difficult year for human resources in 2009.

“As we expected, market demand for recruitment services in the first quarter was significantly impacted by the global economic crisis and the slowdown of the Chinese economy,” said CEO Ricky Yan.

Nevertheless, 51job had achieved its seventh consecutive year of profitability in 2008 and was “once again, the only leading provider of online HR services to generate profit in China,” he noted in a conference call.

“In terms of competition, both of our major online competitors are partly or fully owned by foreign-listed companies. Based on those companies’ public results, we can tell that both of our major competitors are making and generating a little bit more than RMB20 million ($2.93 million U.S.) in sales, but let’s say both of them lost more than – I would say more than $50 million. So, almost RMB350 million last year. That is a lot of money for two companies to lose in one year in the online recruitment market.”

Print advertising revenue for 51job for the first quarter of 2009 decreased by 4 percent to RMB70.6 million ($10.3 million U.S.) compared with RMB122.4 million for the same quarter in 2008. The decrease was primarily due to fewer print advertising pages in the firm’s 51job Weekly, which was adversely affected by a decline in market demand. The estimated number of print advertising pages generated in the first quarter of 2009 decreased by 36.5 percent to 2,916 compared with 4,593 pages in the same quarter in 2008.

Print advertising prices charged in each of  China’s major cities were relatively unchanged compared to the first quarter of 2008, but average revenue per page decreased 9.2 percent due to a greater contribution of advertising volume from lower priced cities.

Meanwhile, the firm’s online recruitment services revenue for the first quarter of 2009 was RMB68.2 million (US$10.0 million), representing a 13 percent decrease from
RMB78.4 million for the same quarter of the year before. This decrease was primarily due to lower average revenue per unique employer, which was partially offset by an increase in the number of unique employers using 51job’s online recruitment services.

Average revenue per unique employer decreased 17.4 percent in the first quarter of 2009 compared to the same quarter in 2008 as employers reduced expenditures for online recruitment products and/or chose lower priced products. Unique employers using 51jobs’ online recruitment services increased 5.3 percent to 63,684 in the first quarter of 2009 compared with 60,461 in the same quarter of the prior year.

Although 51jobs’ income from print advertising and online recruitment was slashed, the firm’s other human-resource revenues grew 10.9 percent year on year to RMB 39.5 million ($5.8 million U.S.), largely due to greater demand for human resource outsourcing.

Yan told analysts in his conference call that he believed the slowing down of the market demand for recruitment services would probably last a few quarters.

According to 51job’s own unaudited results, its net income for the first quarter of 2009 decreased to RMB9.4 million ($1.4 million U.S.) from RMB22.2 million for the same quarter in 2008.

Gross profit for the first quarter of 2009 decreased 24.1 percent to RMB94.7 million ($13.9 million U.S.) from RMB124.8 million for the same quarter of the prior year.

“With our broad product portfolio, superior customer service, premier brand and strong financial standing, we believe that we are strongly positioned to overcome what is to be a slightly difficult HR market in 2009,” said Yan.

The Inside Facebook blog has an interesting analysis of why only 300,000 of Facebook’s 200 million users are in China.

Some take-aways:

– Chinese Internet users have favored BBSs where participants can stay anonymous. There are nearly 3 billion registered BBS accounts and 80 percent of Chinese sites still administer their own BBS’s today. Anonymity makes sense in a country where Internet censorship is still harsh.

– Local Chinese companies seem to be doing better than Facebook in part because Chinese entrepreneurs are very fast at copying international ideas and Intellectual Property laws remain lax. This is compounded by a culture (called “Guanxi”) that makes local connections critical in doing business in China.

– Chinese social networking sites make most of their revenue from selling virtual goods rather than online advertising. A Chinese consulting firm estimated that the U.S. market for virtual goods was around $200 million compared with $3 billion in China. That’s not Facebook’s model (yet).

– Chinese gamers prefer virtual environments where they can grow flowers, fruits and vegetables in a personal garden, accumulating virtual currency along the way. Users can also visit their friends’ gardens and steal produce from them. Among the top sites: Happy Farm, Happy Farmer and Sunny Ranch. The impetus appears to be a desire among urban Chinese to have more virtual space. Leading Facebook apps like causes and Super Wall are, accordingly, less popular in China.

By Don Gasper

As the economic crisis continues in North America and elsewhere, enterprising firms are turning to China, in hope of tapping into its continuing growth. CareerBuilder has taken an extra step in a joint venture that helps Chinese companies tap international talent.

On March 31, CareerBuilder and Shanghai-based Vansun Technology Industrial Co. established a joint venture, CareerBuilder (Shanghai) Network Information Co., and launched a recruitment site at www.careerbuilder.com.cn on the same day, reported Shanghai’s Xinmin Evening News.

CareerBuilder (Shanghai) is in both Mandarin Chinese and English.

The new company CareerBuilder (Shanghai) is the first Sino-foreign joint venture to receive an online recruitment operating license from the Ministry of Industry and Information Technology, the report said.

The U.S. company was very keen on setting up a joint venture in Shanghai in order to establish a recruitment site which would enable it to extend its business in China within a
short period of time. It has been in negotiations with Vansun Technology since June 2007.

CareerBuilder’s CEO Matt Ferguson attended the opening ceremony in Shanghai, along with Yang Yi, chairman of Vansun Technology, who is also the chairman of the joint venture.

“The establishment of CareerBuilder (Shanghai) means that Vansun Technology will disappear,” says Yang, who left a position in the Shanghai Municipal Post and Telecommunications Administration Bureau in 1994 to set up Vansun, a private company that was recognized in 1998 as a leading one in the area of technology by the Shanghai Municipal Bureau for High and New Technology.

The new Web site is intended as a major platform for Chinese industries to recruit talent from all over the world. Xinmin Evening News said that the launch of the new site “means that Chinese enterprises interested in ‘going global’ have one more important channel for hiring international talent.”

The fall in asset values overseas due to the crisis has made the overseas market very attractive to Chinese enterprises, which see there an opportunity for low-cost expansion. However, many firms indicate that it is difficult to find employees who are bilingual, understand the local culture in overseas markets and have a head for business.

“CareerBuilder is a well-known international brand,” said Yang. “To cooperate with such a company is an opportunity for private enterprises like ours to move towards internationalization, which we must grasp firmly.”

The attraction of Vansun Technology from CareerBuilder’s point of view is that it already had an ICP license (a license to operate value-added telecommunications business) and a permit to run a recruitment service.

When the firm was set up in March 1994 its main business included Internet information services, value-added telecommunications business, human resources information consulting, personnel recommendation and hiring. In 2004 it set up subsidiaries Shanghai Qianqiu Advertising Co. and Shanghai Hengwei Human Resources Co. which specialize in projects in radio, TV and film and in advertising at exhibitions and fairs. In that year the firm received an ICP license as well as a permit from Shanghai municipality to run a personnel intermediary service.

“These two permits were the two main prerequisites for the joint venture between CareerBuilder and Vansun Technology,” said Yang. “We are at present the only company in Shanghai to hold both permits simultaneously.”

Getting permission for a joint venture in the online recruitment area was not straightforward, however. The leadership of the Shanghai Municipal Foreign Investment Office attached to the city’s Administration for Industry and Trade took a personal interest and the Shanghai Municipal Telecommunications Administration Bureau wrote a detailed report to the Ministry of Industry and Information, which it followed up with several phone calls to the Ministry’s office. However, the Ministry delayed its approval because this was the first time that a joint venture with such a scope of business was under consideration in Shanghai.

There is a huge risk attached to launching such a joint venture, Yang admitted: “This is the first time for us to set up an online recruitment company as a Sino-foreign joint venture and it’s also the first time for the relevant government departments to give their approval. We have no precedents to follow. Everything is ‘crossing the river by feeling for the stones’.”

Foreign involvement in the recruitment sector isn’t new. In 2005 Monster Inc. bought a 40 percent stake in ChinaHR, the country’s second-largest online recruiting firm, and in October 2008 it paid $174 million (U.S.) for the remaining part. Meanwhile, in 2006 Seek, two Australian firms, Seek and the Macquarie Group, bought stakes of 43 percent and 29 percent respectively in China’s No. 3 job board, Zhaopin. In July 2008, Zhaopin received a combined injection of $105 million from these two firms.

According to Ashley Steinhausen, CEO of New Career Group, whose English-only site is aimed at bilingual professionals, all that a job board needs to operate in China is an ICP license.

However, it seems that CareerBuilder has gone one step further and obtained a license which specifically authorizes it to operate an online recruitment business.

According to a company spokesperson, the new China site doesn’t change a link-exchange deal CareerBuilder made in 2006 with China’s big recruitment site 51job.com, with which it now competes.

CareerBuilder’s China initiative will no doubt be bolstered by deals cut this week with Europe’s top recruitment-technology agencies to better integrate recruiters’ legacy applicant-tracking systems with the CareerBuilder platform. CareerBuilder has properties in 13 European countries.

The new partnerships include: Amris, Bond, Broadbean, Bullhorn, Candidate Manager, ChangeWorkNow, First Advantage, iCIMS, Kenexa, MrTed, PeopleBank, Peopleclick, PCRecruiter, Profilsoft, and Webcruit (Kaonix). Partnerships also include job posting aggregators such as and eQuest and candidate sourcing tools such as TalentDrive, AIRS, Daxtra and infoGIST.

“CareerBuilder’s goal is to provide our clients worldwide with an experience that makes connecting them with the right people efficient and cost effective,” said Farhan Yasin, who was in a press release was identified as president of CareerBuilder Europe, Africa and the Middle East. Previous releases identified him as president of international. We surmise that Asia isn’t in his purview.

“Significant advances in technology have paved a road for new process-improvement tools that can easily integrate with a variety of applicant-tracking systems,” Yasin said. “By adding these partners, CareerBuilder is strengthening its commitment to improving the recruitment process for our corporate employers.”

CareerBuilder.com is the largest recruitment site in the U.S. with more than 23 million unique visitors, 1 million jobs and 31 million resumes. More than 9,000 Web sites, including 140 newspapers and broadband portals such as MSN and AOL, feature CareerBuilder’s proprietary job search technology on their career sites. CareerBuilder is owned by Gannett Co. Inc., Tribune Company, The McClatchy Company and Microsoft Corp. Besides the U.S., Asia and Europe, CareerBuilder also operates a job site in Canada.

China may have the world’s largest number of Internet users, but you wouldn’t know that from the amount marketers in the country spend on online advertising – less than 5 percent of their ad budgets, half of what their counterparts in the U.S. spend. The data comes from Nielsen.

The flip side: online ad spending is growing quickly. Q3 Internet ad spending grew 42 percent from the same period in 2007 to $541 million. That was more than twice as fast as ad spending growth in TV, newspapers or magazines. For all of 2008,

EMarketer estimated that China’s online ad spend would be $1.4 billion, which is 37percent more than in 2007.

GroupM went even higher, predicting $2.3 billion in 2008, up nearly two-thirds over 2007. The company said advertisers would spend a whopping $3.2 billion online in 2009.

By Don Gasper

Despite gloom and doom elsewhere, China’s major online advertising companies seem to be in good health and confident about future business. So far they show no sign of being affected by the financial tsunami that has hit most countries and which is also slowing China’s economic growth.

While advertising is being hit elsewhere, participants at the recent Adtech 2008 conference in Shanghai heard a prediction that in China interactive advertising is set to grow by between 10 percent and 15 percent next year.
 
“Overall, I think interactive advertising should still see 10-15 percent growth in 2009 but there will be a big change in focus,” said William Bao Bean, a former technology analyst at Deutsche Bank and now a partner at Softbank China & India Holdings. “We’re going to move from brand advertising – getting the brand out – to a more results-focused type of advertising. So instead of putting a banner up on an Internet site at the top of the page with your brand on it, we will move to perhaps text ads or rich-media ads, where there’s an actual action that takes place and that will hopefully eventually drive a sale.”

Meanwhile, Sina Corp., the country’s biggest online portal, posted another set of bumper results for the third quarter and expects its revenue to grow by more than 52 percent in the fourth quarter.

Dubbed “Warrior Princess” by one analyst, the company posted a 68 percent leap in sales during the third quarter to $105.4 million U.S., much of this attributable to the effects of the Bejing Olympics on advertising. Online revenue grew 66 percent year-on-year.

“There have been no cancellations of advertising contracts,” noted Jason Brueschke, head of Asia Internet media research at Citigroup. Sina “had a record-breaking second quarter and third quarter and it is going to have a record fourth quarter.”

Although gross margin shrunk from 62 percent to 52 percent due to costs related to the Olympics (the cost of content acquisition and Olympic sponsorship, etc.)  Brueschke is optimistic that margins will rebound when these costs are no longer an issue next year.

Sohu.com, which is Sina’s archrival, has also had a good quarter, with profits quadrupling, largely due again to the Olympic Games. The company, which proudly describes itself as “China’s No. 1 Portal of Choice for the Olympics,” capitalized on the growth in display ads linked to the games and is confident about the rest of this year.

Advertising revenues accounted for 42 percent of Sohu’s total revenues in the third quarter, totaling $51.1 million U.S., a 62 percent increase over the third quarter of last year and an 18 percent increase over the second quarter of 2008.  They consisted of $49.4 million of brand advertising and $1.7 million of sponsored search,  Brand advertising revenues for the third quarter increased by 66 percent year-on-year and 18 percent quarter-on-quarter.

Sohu estimates advertising revenues for the fourth quarter will be between $45.5 million and $47.5 million. Of this figure, brand advertising is expected to account for between $44 million and $46 million.

Meanwhile, another of the country’s Internet portals and the second-largest online gaming firm, NetEase.com, has reported that third-quarter sales were $118.8 million U.S. Profit was $93 million.

Revenues from advertising services grew 11.7 percent to $16.6 million U.S. for the third quarter of 2008, from $15.3 million for the preceding quarter and $12.6 million for the third quarter of 2007, respectively.

However, some analysts say that the real test is yet to come next year. Much will hinge on how successful the Chinese government is in stimulating the domestic market.

“There has been a mentality change in China and people are more cautious about spending because there’s a lack of business viability,” says Tian Hou, an analyst at Pali Research.

“Companies are hesitant to commit to ad spending since the economy is expected to get weaker,” she says. Focus Media, a leading advertising company, foresees less than stellar results in the fourth quarter, while Beijing-based AirMedia Group has warned that ad spending will slow in 2009.

Citigroup’s Brueschke admits that prospects for next year may not be as glowing as the performance in 2008. More than  half of Sina’s advertising customers are in the automobile, property and financial services sectors, all very vulnerable to the effects of the economic downturn. The same sectors constitute the main advertisers for Sohu too.

“Sina’s clients are struggling and investors are concerned about whether they will maintain their advertising levels,” the analyst says, as quoted by the South China Morning Post. But he still anticipates that even under the worst-case scenario the company’s online advertising will continue to grow in 2008.

“Even if China’s economic growth is only 5 percent, I expect advertising as a whole can grow 10 percent and online advertising 20 to 25 percent.”

By Don Gasper

Focus Media Holding, China’s leading digital-advertising company, has struck a discordant note by issuing a conservative earnings forecast for the fourth quarter of the year.

The company has hitherto been a favorite of investors, with its share price doubling and doubling again after it listed on Nasdaq in 2005. 

Revenue during the third quarter was $224.8 million, only slightly below the consensus analysts’ expectation of $231.7 million. Earnings were 39 cents per share, broadly in line with estimates.

However, while analysts have been expecting its revenue to be $248.4 million U.S. in the last three months of the year, the company itself says that it may be only between $190 million and $200 million.

“We saw a hugely challenging advertising environment towards the end of the third quarter, early in the fourth quarter,” Tan Zhi, the Focus Media CEO told a conference call. “The recent global financial turmoil and the slowdown in consumer demand in the U.S. and European markets have had a significant negative impact on the Chinese economy, as well as on the mindset of the corporate decision-makers in China. The market we are facing is the most severe in the recent history of the Chinese advertising industry.”

Tan said that some advertisers who had previously committed budgets had postponed their campaigns to next year. “They are not canceling contracts, but most of them delay their contracts.”

While China’s economy has shown signs of slowing – resulting in a massive program of state expenditure to maintain growth – the results posted by other advertising companies are better than those of Focus Media. This is making analysts think that the weakness may be company-specific.

Without going into detail, Tan indicated that cutbacks in advertising were expected to affect the performance of Allyes Online Media Holding, the company that operates its online advertising business, which Focus Media acquired in March 2007.

James Lee, an analyst with Sterne Agee, said that this was a surprise, as Allyes “has always performed well in the past.” 

Allyes CEO David Zhu said advertising service revenue from the Internet advertising division was $70.8 million U.S. in the third quarter of 2008, an increase of 66.5 percent compared to $42.5 million for the third quarter of 2007, and a decrease of 7 percent compared to $76.1 million for the second quarter of 2008. Internet advertising business had seen a slowdown of advertising spending after the Beijing Olympics.

In September the company announced that Allyes had registered with the U.S. Securities and Exchange Commission for an IPO whose purpose was to provide the subsidiary with greater flexibility in developing its leadership in the Internet advertising market in China.

Focus Media, which offers a wide range of  “out of home” advertising platforms, now says that it expects a fall in sales in most of its businesses – 50 percent for its advertising network in retail stores and 5 percent for both its LCD advertising network in commercial locations and its residential advertising network  

Earlier in the year the company was forced to shut down its mobile-phone-based advertising unit following a report on CCTV, China’s leading television station, which alleged it was the country’s main source of short-message spamming.