Incumbents struggle to retain media accounts in China amid slowdown

As the advertising market softened in China this year, a higher proportion of brands have opted to switch agencies, new data from Ebiquity and Comvergence shows. Of the 73 media pitches analysed in the first three quarters of 2023, Ebiquity China found that 59 of them, or 81% were awarded to new agencies, over incumbents.

The Chinese market is known for frequently changing agencies on accounts, but last year only 75% of media accounts were awarded to new agencies. The 25% retention rate in 2022 was considered high, with more brands (albeit a minority) sticking to the agencies they knew in times of change. Prior years had even lower retention rates at 16% in 2021 and 15% in 2020 respectively. This latest data from 2023 may now signal a return to the days of high media agency turnover. 

Such a trend may be exacerbated further as Ebiquity forecasts a rise in pitches in 2024 as a means to control costs in a soft advertising market. The media management firm is predicting China's ad market will grow more slowly (3.5%) in 2024 than in 2023 (4%), adding: 

Against a softening economy, more advertisers expect an easing in media cost pressures to achieve better cost efficiency. Coupled with recent higher demand of media buying transparency, this will drive more agency pitches in China in 2024. Centralised management of agencies and conducting regular reviews have become an effective approach for advertisers to control marketing costs, reduce waste, improve efficiency and governance.

Alongside cost efficiency, another driver of agency turnover is advertisers' demands for greater results, control and transparency from new data and tech capabilities, Ebiquity says. Advertisers are asking agencies for more help with different aspects of digital transformation, including integrating consumer data, building user journeys, achieving targeted delivery through precise audience profiling, improving media buying efficiency with AI algorithms, setting up dynamic dashboards, partnering with ad tech companies to apply AI, and leveraging big data to help gauge campaign effectiveness and create more personalised experiences.

“In 2022-2023 agency pitches, advertisers’ asks for data and tech capability have increased substantially, says Stewart Li, Ebiquity China's managing director,  Li adds this has led to a shift in perception around marketing in-housing, which has now become more collaborative work involving agencies than previously, when in-housing might be considered to be a competitive point of friction.

Related to these shifts, Ebiquity recently published a white paper suggesting the need for a more collaborative media agency selection process, noting that the current process is often too long and complex and fails to create better value and quality for advertisers. 

Top media pitches in Q1-Q3 2023

The latest media account results in China between January and September 2023 as recorded by Ebiquity and Comvergence, record 73 media pitches with US $16.7 billion in review. Of this amount 56 pitches worth $13 billion were run by local advertisers and the remainder were global or regional accounts. 

Among the accounts changing hands, the largest was Carlsberg's $1.11 billion media account, which shifted over from IPG's Initiative to Dentsu's Carat. Second largest was the $950 million Jaguar and Land Rover account awarded to Omnicom's Hearts & Science, which had previously been served by Dentsu's iProspect for planning, and WPP's Mindshare for buying. In third place, H-Line Ogilvy won Junlebao's $950 million account over iProspect.