Ad Slowdown Builds With Publicis Warning 阳狮预警反映中国广告市场增长加速下滑

By newsdoug on June 26, 2012

French publishing giant Publicis (Paris: PUBP) has become the latest media firm to warn of an advertising slowdown in China, setting the stage for some ugly numbers when new media companies start reporting their second-quarter results next month. The slowdown has already started to hit second-tier players like Phoenix New Media (NYSE: FENG) and social networking site Renren (NYSE: RENN), and has even shown signs of starting to affect top tier players like leading web portal Sina (Nasdaq: SINA). (previous post)

The one company that hasn’t felt much effect yet has been Internet search leader Baidu (Nasdaq: BIDU), though I suspect that will soon change, if not in the current quarter then probably by the third.

Let’s take a look at the Publicis news, which has the company’s CEO Maurice Levy saying that Chinese advertisers aren’t increasing their budgets this year from last year’s levels. (English article) The French company, a traditional media player that relies mostly on magazines for its revenue rather than Web sites, said its China organic sales grew 15 percent in the first quarter, hardly an impressive figure for one of its most promising markets.

I’ve been in this business long enough to know that when CEOs start to openly discuss a potential problem, it usually means that the problem is already quite large and they are simply trying to prepare investors for the inevitable ugly numbers that lie ahead.

New media are likely to feel the effects of the slowdown even more than traditional media like Publicis, since the former are more dependent on advertising from other Internet companies, many of which have laid off employees and slashed ad spending just to stay alive as a Chinese Internet bubble starts to burst.

As the bubble burst accelerates, look for the smaller players like Renren and Phoenix New Media to slip into single-digit ad revenue growth in the next 2 quarters, and to possibly even see their ad sales contract by the end of the year. Baidu won’t be far behind, and I wouldn’t be at all surprised to see the company’s ad sales drop sharply from their previous triple-digit levels into the far less impressive 10-30 percent range by the end of this year.

Bottom line: A new warning from Publicis reflects an accelerating advertising slowdown that could push many Chinese new media firms into negative ad revenue growth by the end of the year.

Enjoy this blog? Please spread the word :)