Driving up business in parking lots
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Advertising executive Liu Wenbo has found an easy way to address wealthy property and car owners by posting ads on parking lot attendant booths.
"By chance, I saw a pawnbroker posting their company name, address and telephone number on a parking booth in one community," he said. "It gave me idea to make parking booths an official advertising medium."
The simple idea has brought annual business revenue of more than 2 million yuan ($300,400) to Speed Media, an outdoor ad agency, the 26-year-old entrepreneur founded last year in Guangzhou, Guangdong Province.
China is likely to overtake Germany as the world's third largest advertising market behind the United States and Japan next year, according to the latest forecast from ZenithOptimedia, part of the French advertising agency group Publicis.
Cashing in on parking booths
Liu is not the first to cash in on ad space in parking areas. Channel Media, a Shanghai-based company established in 2006, has advertised in more than 2,300 parking lots in Beijing, Shanghai, Guangzhou and Shenzhen in Guangdong Province.
"They put ads almost everywhere inside parking areas, but we just put ads on parking booths," said Liu. "They spend a lot to rent ad space in parking areas, but we provide communities with free parking booths in exchange for ad spaces on these booths."
The cost of building a parking booth with two lit ads is around 10,000 yuan ($1,500). Liu got an investment of 3 million yuan ($450,600) from his former boss and began looking for potential residences in Guangzhou.
"Our target audiences are families with an annual household income of 300,000 yuan ($45,060)," he said. "Therefore we mainly choose communities with more than 1,000 residents, minimum parking capacity of 300 autos and an average area housing price of 15,000 yuan ($2,253) per square meter at least."
The company has signed contracts with more than 200 such communities in Guangzhou and installed about 300 parking booths. "Property management companies are willing to cooperate with us as they can save on building parking booths, and parking lot attendants are also satisfied with their improved working environment," he said.
The ads go for a cool 10,000 yuan per month per advertising light box. The new advertising medium has attracted local and multinational clients such as Shanghai Volkswagen, Toyota and Lufthansa Airlines.
Liu said several venture investment funds have expressed interest in his business during his participation in an entrepreneur training camp held July in Tsinghua University. "Speed Media is just a small company with a dozen employees, but we have found a potential new medium to explore and might grow as big as Focus Media (which operates the largest outdoor advertising network in China) one day," he said.
Liu plans to first expand to communities in Shenzhen next year, and may go further to Beijing and Shanghai if the business runs well. "Fast expansion will not help much," he said. "We don't worry about people copying our business model as the market is big."
Ad spending up
Liu's business is backed by increasing ad spending in China, which is expected to grow 51 percent over the next three years to reach $34.2 billion in 2013, according to ZenithOptimedia.
"The growth of ad spending mainly comes from multinational penetration into third-tier and fourth-tier cities, as well as local regional brands' national expansion ambitions," said Steven Chang, CEO of ZenithOptimedia Greater China.
Chang said banks and insurance companies, property developers, beverage companies as well as smart phone manufacturers are likely to contribute most to boost the total ad expenditure.
Currently television is still the top advertising medium in China, contributing 42 percent of the total ad spending this year, followed by newspapers, Internet and outdoor media.
China Central Television announced last month that its auction for prime time advertising in 2011 reached 12.7 billion yuan ($1.9 billion), a 15.52 percent growth year-on-year and the highest since it has launched such auctions in 1993.
But Internet and outdoor ads are surging fast. "Ad spending on the Internet will grow by 30 percent and is likely to surpass spending on newspapers in China next year," Chang said.
Figures from Analysys International show that search engines including Baidu and Google, the e-commerce site Alibaba Group, as well as portal operators such as Sina Corp and Sohu. com accounted for over 70 percent of China's online advertising market in the first three quarters of this year.
Analysts say the growing popularity of online video, social media networks, and microblog services will likely boost ad expenditure in the future.
More advertisers are adopting these new ad platforms to address young customers. General Motors, for example, has recently sponsored a series of short online films featuring its Chevrolet Cruze on the video-sharing website Youku.
The future of advertising
The increasing number of advertisements also tests the public's tolerance. There are frequent complaints over too many ads flooding websites, before films start in theaters, and ad placements in films and TV programs.
"People are getting bored with traditional advertisements and we need to figure out new methods to gain their attention," said Chang from ZenithOptimedia.
He said that interactive ads through screens are the trend. "People spend almost 80 percent of every day on different screens such as TV sets, computers and cell phones," he said. "Ads through outdoor digital screens will also become popular."
Ogilvy & Mather China has tried applying the latest digital technology to connect with customers. It expanded its digital lab in Beijing last month, and displays potential ad media such as interactive windows, digital tables and 3D wall projections.
Chang said the surge in digital ads has posed challenges to advertising agencies. "Advertisers are becoming increasingly focused on the ad effect, and they prefer to pay by ad effect rather than by medium costs or commission fees," he said.
Liu, founder of Speed Media, doesn't seem to be bothered by the new technology. "There was a company trying to put digital screens in parking lots but failed, as drivers do not have enough time to view details," he said. "Traditional advertisements will always exist if you put them in the right time and place."
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