MEDIA IN CHINA

A Whole Different World!A Whole Different World!Probably the Most Complicated Probably the Most Complicated

Media Market in the World Today...Media Market in the World Today...

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Ad. Spend Increasing Every Year = Pressure On Ad. Spend Increasing Every Year = Pressure On Media Costs, Inflation And Ad Clutter… Media Costs, Inflation And Ad Clutter…

Source: Nielsen Media AdQuest

+37%+37% +33%+33%+17%+17% +41%+41%+24%+24% +22%+22%+23%+23%+20%+20% +42%+42% +21%+21%

RMB ‘000

In 2006-2007, China Will Become The 3In 2006-2007, China Will Become The 3rd - rd - 44thth Largest Largest Global Ad Market! Already The 2Global Ad Market! Already The 2ndnd - 3 - 3rdrd Largest Largest

‘Volume Market’ For Many Marketers… ‘Volume Market’ For Many Marketers…

0

40

80

120

160Billion US$

Source: General Industry Forecasts / Ad Age

*Pepsi Group instead of Pepsi beverage only

# Category

1 P&G 宝洁 FMCG2 HAYAO NO.6 哈药六厂 Pharmaceutical3 UNILEVER 联合利华 FMCG4 JIANTE PHARM 健特生物 Healthcare5 COLGATE PALMOLIVE 高露洁 FMCG6 CHINA MOBILE 中国移动 Communication7 SANCHINE PHARM 三精药业 Pharmaceutical8 L'OREAL GROUP 欧莱雅 Skincare9 LAFANG 拉芳 Skincare

10 PEPSI GROUP* 百事 Beverage11 COKE 可口可乐 Beverage12 ARCHE 雅倩 Skincare13 KFC 肯德基 Fast Food14 TAITA 太太 Healthcare, Pharmaceutical15 HAOJIXING 好记星 PDA16 AOQILI 奥奇丽 FMCG17 CNICE 纳爱斯 FMCG18 JIANGZHONG PHARM 江中药业 Pharmaceutical19 E BAIFEN E百分 PDA20 McDONALD'S 麦当劳 Fast Food

Advertiser

2005 Top 20 Advertisers 2005 Top 20 Advertisers

Top 20 Advertisers Reflect China’s Full Embrace Top 20 Advertisers Reflect China’s Full Embrace Of ‘CONSUMERISM’… Of ‘CONSUMERISM’…

Source: Nielsen Media AdQuest

0

10

20

30

40

50

60

1979-1983 1984-1989 1989-1993 1995 +

Local Production Local Production Quality + More Quality + More TV ChannelsTV Channels

CCTV CCTV OutdoorOutdoor

Imported ProgramsImported Programs

Cable/Satellite ExplosionCable/Satellite ExplosionConsumer MarketConsumer Market

China Mass Media Development…China Mass Media Development…M

edia

Opt

ions

2006/07

2000+ TV Channels2000+ TV Channels

165 Million Internet Users165 Million Internet Users

450 Million Mobile Users450 Million Mobile Users

Media 2002 2005

TV Coverage 94.6% 95.2%

# of CCTV Channels 12 16

# of Satellite Channels 30 40

# of Terrestrial Channels 1,800+ 2,000+

Average HH TV Ch Penetration18+ 30+

# of Radio Channels 1,400+ 1,800+

# of Newspapers 2,137 2,119

# of Magazines 8,000+ 9,000+

# of Internet Users 45.0 mil 100.0 mil

Mobile Phone Penetration 16% 26%

PC Penetration (HHI %) 26% 29%

China Media Scene – Very FragmentedChina Media Scene – Very Fragmented

TV Rating Measurement

Print Measurement

OOH Monitoring

Net Ratings

Lifestyle & Media Consumption

Nielsen Media/CSM 100+ Markets

CMMS - 30 Key Cities

20+ Markets

Nielsen Media Net Ratings

CMMS - 30 Key Cities

China New Rich (H3) - 12 Key Cities

China Media FragmentationChina Media FragmentationSurprisingly Well Researched…Surprisingly Well Researched…

CHINA TV SCENECHINA TV SCENE

Milestone Of TV Development In ChinaMilestone Of TV Development In China

1978 ~ 2000Mass Media Boom…

2000 2001 2002 2003 2004 2005

Start of media consolidation in view of WTO, anticipating foreign threat but # channels still growing…

Political driven consolidation ‘failed’… Central Govt. step in to speed up

market consolidation

SARFT # 17• Sellers/Buyers looking for strong

media for effective communication; better rating/coverage/content

• Maintain ratecard for media, keep CPM/CPRP for buyer…

• Shake-up is the only market equilibrium…

Year of digital TV…• 2010: cover key cities

• 2015: shut down analog

Rapid Growth In TV Media…Rapid Growth In TV Media…Average HH Has Access To 30~50 ChannelsAverage HH Has Access To 30~50 Channels

Different Levels of TV Coverage… Different Levels of TV Coverage…

CCTV Satellite TV Provincial TV Local City Terrestrials

16 Channels…National roll-out, cost efficient

200+ Channels…Cost effective regional coverage

33 Provincial Satellite ChannelsSecondary National Coverage

2000+ Terrestrial Channels…High Reach and Frequency...Enhance efficiency & frequency

Data Source: CSM/Target 25-55/ Whole day average viewing

China TV Channel Share By City Tier…China TV Channel Share By City Tier…

National level, CCTV viewing share ↑National level, CCTV viewing share ↑

Tier 1: Local TV maintain strongholdTier 1: Local TV maintain stronghold

Tier 2: Satellite TV steals share from Local TVTier 2: Satellite TV steals share from Local TV

Time Spent Watching TV Is Steadily Declining As TV Fights Time Spent Watching TV Is Steadily Declining As TV Fights For Consumer Attention. We Need To Integrate For Consumer Attention. We Need To Integrate Communication Messages With Other Media…Communication Messages With Other Media…

35

37

39

41

43

45

47

49

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2001

2002

2003

2004

2005

NO TIMENO TIME: “I go to school, I have extra : “I go to school, I have extra

classes & homework after school, I hang classes & homework after school, I hang

out with my friends on weekends… out with my friends on weekends…

When do I get time to watch TV?”When do I get time to watch TV?”

SH 17 y/o Female High School StudentSH 17 y/o Female High School Student

MULTI-TASKING: “I sometimes create my own world to surround me. I listen to my music on my MP3, read my favourite magazine and chat with friends online at

the same time...’

SH 19 y/o Female University StudentSH 19 y/o Female University Student

STRICT CONTROLSTRICT CONTROL: “When I do get to : “When I do get to

watch TV I have to watch the programs watch TV I have to watch the programs

my father allows. He won’t let me watch my father allows. He won’t let me watch

Korean drama as he thinks they have Korean drama as he thinks they have

too much sex!”too much sex!”

BJ 16 y/o Female High School StudentBJ 16 y/o Female High School Student

Source: Starcom Media Pathways and stratosphere

Consumers Are Not Simply Passive TV Viewers… Consumers Are Not Simply Passive TV Viewers…

‘‘Exposure’ Is Not The Same As ‘Engagement’ BrandedExposure’ Is Not The Same As ‘Engagement’ Branded Content Allows Us To Move From ‘One Way’ To ‘Two Ways’ Content Allows Us To Move From ‘One Way’ To ‘Two Ways’

Communication To ‘ENGAGE’ Our ConsumersCommunication To ‘ENGAGE’ Our Consumers1. Trend in Consumer Participation

Branded TV content, SMS & Internet interaction are all increasing consumer participation and encouraging greater consumer involvement…

- 2005 Super Girl, Coke Mini Movie- 2006 CCTV ‘Win in China’ (based on US Apprentice series)- 2006 Sprite Music Chart, Star in a Billion, World Cup Titan, icoke.com

2. Trend in Consumers as Content Creators Personalized play lists, multiple personalities – Chat, Email,etc Role Playing and Fantasy Games, Personalized Avatars SMS Voting, Blogging…

CHINA IP SCENECHINA IP SCENE

Source: CINIC NB: User defined as person who accesses Internet at least 1 Hour per week. If individual accesses from multiple outlets counted each time

0.61.2 4.0

16.926.5

45.8

68.0

79.5

94.0100.0

111.0

0

20

40

60

80

100

120

Mil

lio

ns

Oct-97 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02 Jul-03 Jan-04 Jan-05 'Sep-05 'Mar-06

Cumulative No. Internet users

Number Of Internet Users Soaring…Number Of Internet Users Soaring…

My Consumption Habit Has Changed…My Consumption Habit Has Changed…

% of Time Spent By Media in Year 2000

TV51%

Magazines6%

Newspaper13%

Radio20%

Internet10%

% of Time Spent By Media in Year 2005

TV48%

Magazines4%

Newspaper11%

Radio18%

Internet19%

Medium Year 2000 Year 2005 Time Growth % Growth

TV 24.92 26.46 1.54 6.18Magazines 2.80 2.14 -0.66 -23.57

Newspaper 6.38 5.87 -0.51 -8.04Radio 10.01 10.01 0.00 0.00

Internet 4.86 10.23 5.37 110.49

Total 48.97 54.71 5.74 11.71

Time Spent On Media (Hours)Source: CMMS 2005, All AdultsSource: CMMS 2005, All Adults

46% Of All People Look At The Internet First For Information…

1 1 2 49

1723

2734

46

59

68

8087

94

103

0

20

40

60

80

100

120

Oct97

Jul98

Jan99

July99

Jan00

Jul00

Jan01

Jul01

Jan02

Jul02

Jan03

Jul03

Jan04

Jul04

Jan05

Jul05

Online User (Million)

Source: CMMS A/W 2005

We are Sourcing We are Sourcing Information Faster…Information Faster…

More Than 60% Connected More Than 60% Connected Through Broadband…Through Broadband…

6.2 Billion Hours/Month Are 6.2 Billion Hours/Month Are Spent On The Net…Spent On The Net…

Did You Know… Internet & Instant MessengerDid You Know… Internet & Instant Messenger

News 67.9

Search Engines 65.7

Email 64.7

Instant Messenger 41.9

BBS 41.6

Information Search 39.8

Online Music & Radio 38.3

Watching & Downloading Video 37.1

File Download & Uploads 33.8Internet Games 33.2

Top Ten Internet ActivitiesVideo Chat 68.6

Voice Chat 61.6

File Transfer 47.9

Online Games 40

Online Music 38.9

Online TV 33.6

Search Engine 31.1

SMS/ MMS 25.4

Multilateral Voice Chats 24.3

Video on Demand 18.7

Blog 14.7

Multilateral Video Chats 14.8IP Telephony 12.9

Activities on Instant Messenger

Source: CNNIC, 17th Internet Survey

5 million bloggers

3 million blog accounts

Surged from Surged from 1 million in 20041 million in 2004

Source: CINIC June 2005 & Analysys International 2005 & China Daily 4/3/2005

5% of all Chinese 5% of all Chinese Internet users blogInternet users blog

Did You Know… BlogsDid You Know… Blogs

Did You Know… Search Engine MarketingDid You Know… Search Engine Marketing

Search is Becoming as BIG as all other forms Search is Becoming as BIG as all other forms of Online Advertisingof Online Advertising

2006 2007 2008Onl i ne 493 641 833Search 445 693 1040

China – Search & Online Advertising Comparison

Source: iResearch - All figures in USD million

Did You Know… GamingDid You Know… Gaming

China will overtake South Korea in terms of No. of Gamers, Average Time Spent per Gamer and Revenue Generated by Gaming…

It is considered more of a social hangout activity with friends

Chinese government is concerned about the addiction angle New legislations classify >4 hours of gaming as a sign of

addiction

Mobile gaming will continue to grow with Post ‘05 phones…

Did You Know… Impact of GamingDid You Know… Impact of Gaming

“Last year a 40-year old man used a real knife to stab to death a younger man who had borrowed his virtual sword from an online videogame and sold it for $870. There are no laws in china protecting virtual property; so Qiu Chengwei, the man whose sword had been stolen, got no help from the police.”

Fortune Magazine, October 2005

Is All this True only for Teens and Men?Is All this True only for Teens and Men?

Diapers is a major category for online merchants like

TaoBao (Premium tier consumers buy diapers online)

Casual gaming in China is growing with housewives

leading the growth…

53

73

62

9

49

38

1 2 3

24

7

2

75

26

2

63

7173

10

47

30

27

11

29

14

3

8 8

22

3

0

10

20

30

40

50

60

70

80

Che

ck E

-mai

l

Rea

d N

ews

Art

icle

s

Info

rmat

ion

Sea

rch

BB

S

Cha

t

Pla

yin

g G

ames

Pag

er S

erv

ice

Dis

tanc

eL

earn

ing

/Tra

inin

g

Mak

e P

erso

nal

Hom

epag

e

Do

wnl

oad

So

ftw

are

Sho

ppin

g O

nlin

e

Mak

ing

Tel

eph

one

Cal

ls

Job

Sear

ch

Sho

rt M

essa

ge

Do

wnl

oad

ing

Mo

vie

s &

MP3

s

Oth

er

F20-44 Prestige CM User F25-34 working, income>2000, college above

Data base: All female who have accessed internet in past one month

Internet usageInternet usage

30 – 40% of Mid Tier and Above Beauty 30 – 40% of Mid Tier and Above Beauty Product Consumers are OnlineProduct Consumers are Online

Source: CMMS, top 30 cities

China Leads The World in Mobile Subscribers China Leads The World in Mobile Subscribers

Currently there are 388 mil subscribers

Always In Touch…Always In Touch…

Source: CMMS A/W 2005

Mobile Phones Making People Accessible 24/7…

388 million subscribers; 1-in-3 own a mobile phone vs 1-in-15 5 years ago

No. Mobile Phone Users (Millions)

2 4 7 13 2443

85

180207

269

334

402

0

50

100

150

200

250

300

350

400

450

1994 1996 1998 2000 2002 2004

Chinese Consumers Sent Chinese Consumers Sent 280 Billion SMS In 2005…280 Billion SMS In 2005…

Mobile Ownership – 388 Million Subscribers Today… Mobile Ownership – 388 Million Subscribers Today… Will Increase To 535+ Million By 2009…Will Increase To 535+ Million By 2009…

China - One of the highest mobile usage market in the World; SMS / MMS / Downloads

Average mobile phone replacement cycle: 9 to 18 months

Multi-purpose handsets- Voice, Email, Photo, Video, Music, Internet, Games…

Mobile internet will grow faster once Wi-Fi or Wi-Max enabled phones come into market…

Source: www.mii.gov.cn

Did You Know… MobileDid You Know… Mobile

18/07/2004 – China’s first mobile newspaper “China Women” MMS edition was launched…

15/11/2004 – First mobile novel “Ju Li” launched in Beijing and Shanghai…

1/1/2005 – Mobile TV launched by Shanghai Mobile & Shanghai Media Group (SMG)…

Source: www.mii.gov.cn

CHINA OOH SCENECHINA OOH SCENE

Explosion of IMPACTFUL OOH Catches Eyeballs Explosion of IMPACTFUL OOH Catches Eyeballs of The Modern Mobile Chinese Consumers…of The Modern Mobile Chinese Consumers…

Increasing OOH Media Exposures…Increasing OOH Media Exposures…

Data Source: China Media & Marketing Survey 2005 A/W Wave

High Traffic Area, High Awareness

COVERAGECOVERAGECOVERAGECOVERAGE

HIGH AFFINITYHIGH AFFINITYHIGH AFFINITYHIGH AFFINITY

Role of OOH = High Traffic Area; Extended ReachRole of OOH = High Traffic Area; Extended Reach

Targeted Reach

White CollarsWhite Collars Frequent TravelersFrequent Travelers Upscale / Trendy GroupUpscale / Trendy Group

MTR StationsMTR StationsCity Centre Bus SheltersCity Centre Bus SheltersDowntown BillboardsDowntown Billboards

New Innovative Media Formats Will Further New Innovative Media Formats Will Further Flourish the China OOH Scene…Flourish the China OOH Scene…

OOH…The Last Frontier: Chaotic, Lack Of OOH…The Last Frontier: Chaotic, Lack Of Regulation, Opaque Pricing…Regulation, Opaque Pricing…

CHINA PRINT SCENECHINA PRINT SCENE

China Print Media; Still At Developing Stage…China Print Media; Still At Developing Stage…

2,100+ titles in circulation…

High penetration medium in urban

cities; provides broad market coverage…

However, Newspapers are – With average printing quality...

No circulation audit/detail breakdown

Well developed in key cities but

still developing in smaller cities

Currently, there are > 9,000 magazine titles in China…

However, circulation are claimed by publishers; no 3rd party auditing system available…

The developing stages of Magazine in China : Local dominance; e.g. Readers Early entries of JV; e.g. Elle, Ray,

Cosmopolitan… competing in the female magazine arena

WTO Boom; more entries like Bazzar, Oggi, Seventeen and Vogue etc…

National Titles High circulation Government support Different genres…

News (Global Times) Government Titles (People’s Daily) Sports (Sports Weekly) Economic (Economic Observer, China Business News) Lifestyle (Modern Weekly)

Local Titles High regional coverage in local markets Relevance; News closely related with local flavours Immediate; hot news and instant report

Newspaper In China… Newspaper In China…

Magazine In China… Magazine In China…

Well dominant by Female Lifestyle Fashion Title, about 800 titles currently

Vertical Titles on a growing trend Wedding Postnatal Healthy Automobile Business Sports IT Travel

Media In ChinaMedia In ChinaHighly Fragmented / Growth In Emerging Media…Highly Fragmented / Growth In Emerging Media…

……NEEDS A ‘LOCALISATION’ APPROACH – NEEDS A ‘LOCALISATION’ APPROACH – Market-by-Market Integrated ConsiderationsMarket-by-Market Integrated Considerations