China Advertising Market_09 Oct 2012_Credit Suisse

8% 7%
Figure 3: China GDP and advertising market growth rate (gross*)
(%)
35
30 25 20 15
6% 5%
4% 3% 2% 1% 0% 2011 2012E GDP YoY
Source: ZenithOptimedia
10
5 -
Figure 4: China advertising market breakdown(2012)
Figure 5: China advertising market breakdown—online (2012)
Outdoor & others 10.5% Cinema 0.1%
Radio 3.7%
THEME
2013: The slowest growth since 2001
Figure 1: China advertising market and online advertising market growth rate*
35% 30% 75% 65%
25%
20% 15% 10% 5% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Advertising market growth [LHS] Online advertising market growth [RHS]
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS
BEYOND INFORMATION™ Client-Driven Solutions, Insights, and Access
09 October 2012
Focus charts and table
Figure 2: Global adspend growth lags GDP growth
09 October 2012 Asia Pacific/China Equity Research Consumer Internet (Internet) / OVERWEIGHT
China Advertising Market
Research Analysts Wallace Cheung, CFA 852 2101 7090 wallace.cheung@ Regional Analysts Jeff Kahng 822 3707 3738 jeff.kahng@ Yuki Nakayasu 81 3 4550 9966 yuki.nakayasu@ Contributions by Amanda Chen Daniel Chen
China advertising market: Challenges in 2013
While the global advertising market is still growing, we expect the growth rate over 201114E to lag GDP growth. Meanwhile, the major driver of the global advertising market in 2011-14 should be the Internet and TV. We expect the Internet, which accounted for 15.9% of the global adspend in 2011, to erode the adspend of traditional media. Yet, TV will garner a steady 40% share, in our view. We forecast China will become the No. 2 advertising market in the world by 2015. During Credit Suisse’s China Internet trip in September 2012, we met experts from the advertising industry. They expect the ad market in China to grow merely 10% YoY in 2013E and the online ad market to grow by 20-30% YoY, slower than the capital market forecast growth of 30-40% YoY. We cut our 2013E China advertising growth from 13% to 9.6%, the slowest since 2001. One of the key reasons for the slowdown is the continued slowdown in the online advertising market. We expect the global ad market growth rate to drop; the Internet to erode the adspend of traditional media, except for TV Due to a slowdown in the online ad market, we cut our 2013E China ad market growth rate to 9.6%, the slowest since 2001
Magazine 2.3%
Newspaper 17.8%
Mobile Social Others, 3% advertising, 1% media, 2%
Display ad, 24%
Online video, 9%
TV 37.4%
Internet 28.2%
Search, 61%
Source: ZenithOptimedia, Credit Suisse estimates
Note: Net revenue, net of distributor costs and business tax Source: Company data, Credit Suisse estimates
China Advertising Market
2
09 October 2012
2013: The slowest growth since 2001
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013201420 Nhomakorabea52016
2013E Ad spend YoY
2014E
Nominal GDP YoY % Media markdt YoY %
Real GDP YoY %
* Gross of business tax and distributor cost. Source: ZenithOptimedia, Credit Suisse estimates
55%
45% 35% 25% 15%
* Gross revenue. Source: ZenithOptimedia, Credit Suisse estimates
■ We cut our 2013E China advertising market growth rate to 9.6%, the slowest since 2001, mainly due to the continued slowdown in the online ad market. We expect the Internet to erode the advertising spend of traditional media, while TV remains the most powerful medium in China. ■ We revise our 2013E/14E China online advertising market revenue YoY from 29.4%/22.2% to 25.3%/23.6%. We expect: (1) the search market growth to be in line with market expectations, but competition is intensifying; (2) brand advertising, including display and video advertising, to slow; (3) SNS to be a bright spot for online advertisUNDERPERFORM and raise target prices for Tencent and Sina. Given the challenging macroeconomic environment and intense competUNDERPERFORM and cut our target price from US$118 to US$83. Due to our positive view on SNS advertising, we raise our target price for Tencent from HK$294 to HK$300 and for Sina from US$78 to US$81, despite reducing our portal advertising revenue forecasts. We reiterate our OUTPERFORM rating on Sina and Tencent.