WPP Group on its Advertising Growth in China (WPPGY 1H05 Conf Call Quotes)

by: Ezra Marbach

Since Sohu (ticker: SOHU) lowered its advertising revenue growth outlook for the year in late July analysts have been consistently pressing Chinese company management teams during earnings conference calls on whether they have seen any signs of a slowdown both in the Chinese advertising sector and in the overall Chinese economy. Focus Media (ticker: FMCN) has not seen any downturn -- nor has Sina (ticker: SINA) which expects online ad revenue growth of 30% this year and another 30% next year. On the analyst front? Former Pacific Growth Equities analyst Jason Brueschke (now with Citigroup) believes Sohu's advertising issues are "an isolated, one-time event". Other analysts expect online ad revenue growth to slow. What about the offline-advertising market? CEO Martin Sorrell of advertising firm WPP Group (ticker: WPPGY) discussed his company's increasing presence in China during management's 1H 2005 earnings results conference call:

....The lack of strength in Western Europe. These are big economies. These are $2 trillion GMP economies - France, Germany, U.K., Italy, Spain. There's only two Asian economies which are over $1 trillion and that's Japan and China, but they are growing faster. It's exactly the same as the direct, interactive and Internet business. That's only 3 or 4 or 5% of worldwide ad spending but it's growing like crazy. And you -- we've put into the release the organic growth rates for China and India. In the first six months of the year China's up 22%, India is up 13%. These are growth rates which are twice or four times what we're seeing elsewhere in the Group.

....And just to put this in perspective, here are three markets - China, India and Brazil. This -- these are the figures 2004. You can see that China, including Hong Kong and Taiwan, in 2004 was about $275m. It's already at $350m.

....The market shares that we have in China is about 15%. We're the biggest buyer on CCTV already. We're the biggest group in China.

....We'll be announcing a small, not big, acquisition in China in a couple of weeks' time.

(Quotes are from the CCBN StreetEvents transcript.)

Not subscribed to this blog? You can get updated headlines for free by adding it to your My Yahoo page. Just log into your My Yahoo page, then return to this blog and click on the "+ My Y!" button on the top right of your screen.