There are two kinds of advertising in China. One is typified by the ad executive who works out of a cramped office in a three-star hotel in Taiyuan, selling space in newspapers for a 10 percent commission and hiring students to hand out brochures at sport events and trade fairs.

Then there's Justin Tsang, president of MyClick Media, a Shanghai-based firm that saw an opportunity to combine the rising Chinese appetite for internet services on mobile phones with the print and billboard advertising blanketing the country's cities. Passers-by use their phones to "click" on coupons on billboards and in magazines by taking snapshots of two-dimensional bar codes which link to special offers on the brand's website. "Clickable coupons make traditional adverts work harder, make them more usable," says Tsang.

MyClick, which has 40 clients, mostly international brands, has worked with Motorola in advertisements in college newspapers and with airline Cathay Pacific's advertising campaign in free subway newspapers. Three percent of a 300,000 readership is considered a very good participation rate, says Tsang.

With 3G and the Beijing Olympics around the corner, brands are becoming more adventurous in adopting one or several media to run advertising campaigns. China, with its massive mobile phone user base and rising internet-using population, is increasingly a testing ground for new ideas. The local advertising market was worth RMB140 billion (€14 billion) in 2006, and continues to grow briskly. "Most brands are eager to explore the mobile channel in the run-up to the 2008 Olympics," says David Turchetti, CEO of 21 Communications, a Shanghai-based company running mobile advertising campaigns for brand-name clients.

Mobile internet or wireless application protocol (WAP) offers the interactivity on mobile that SMS cannot, says Turchetti. "Current campaigns include interactive voting, quizzes, surveys, ring tones and video downloads, not to mention mobile loyalty points programs. In the future, mobile TV will allow us to view video streaming with ample opportunities for brand advertising."

The revolution will be web-cast

A "revolution" in advertising is imminent, driven largely by the need to interact with a more informed and proactive consumer on more media, predicts The User Revolution: The New Advertising Ecosystem and The Rise of the Internet as a Mass Medium , an exhaustive global survey released in Beijing in March by investment banking firm Piper Jaffray.

In fact, the revolution may have already begun in China. Consumers here are more ready to accept the concept of mobile data. MyClick calculates that a quarter of 400 million mobile phones in China have capacity to go online and 25 million are actively doing so. "There's enormous potential in bringing mobile consumers to brands they're interested in by taking the technology out into places and spaces where people interact," says Tsang.

WAP is fast taking over from SMS as the preferred way for brands to advertise via mobile phones to target audiences in China. "SMS still has some traction, but it is certainly losing its effectiveness and WAP has taken centre stage," says Turchetti. Mobile marketing, he says, is also affordable for mobile users in China. "Already 88 percent of the traffic on China Mobile's [WAP portal] Monternet is to free WAP sites where the user pays only the data transmission fees, not any premium price for the actual content, which is free, much like online."

Mobile internet is a particularly powerful way of reaching customers in second- and third-tier cities, says Richard Robinson, CEO of Dada Asia, a China-based subsidiary of Italian-headquartered Dada, a developer of mobile entertainment products. Penetration rates for mobile phones may be lower in provincial cities than in Beijing, Shanghai and Guangzhou, but the same is true for other media as well. Mobile advertising, he says, gets better response rates and can "more readily cut through the clutter in these regions."

Surprisingly, the vast majority of mobile internet usage - 70 percent - comes from second- and third-tier cities, claims 21 Communications' Turchetti. Mobile internet, which he calls "the next frontier" in mobile marketing, makes for "a cost-effective solution" in cities outside the top three. "[It's] targeted, personalised and 100 percent traceable."

The internet has already overtaken newspapers as the number-two media source for Chinese consumers, who spend an average 10 hours online each week, according to tech research firm iResearch. That may pale next to TV viewing, which takes up 26 hours of the average consumer's time, but the amount of time spent on the web has doubled since 2000, particularly since cheap broadband became ubiquitous around 2005. China internet advertising, according to iResearch, will reach RMB9 billion in 2007 and maintain over 30 percent annual growth for the next eight years.

China's advertising market is doubling in size every year but internet advertising is only the tip of the iceberg, says David Zhu, CEO of Allyes, a leading internet advertising agency and provider of internet advertising technology in China. He says he expects online advertising spend to grow 50 percent this year, from RMB4 billion (€392 million) in 2006 to RMB6 billion in 2007, and by another 57 percent during 2008.

Zhu also predicts a greater shift of cash online. "It's time to prepare for rapid growth. Brands like Procter & Gamble are now spending. It will spend up to 5 percent of its overall advertising budget online in 2007." But growth will be dependent on investment in talent and unified standards. "There is a need to tell clients how media is contributing to results. All they hear is clicks and impressions (the typical measures for web-based ads). Clients will need insights, target people rather than just looking at data ... or there will be a customer confidence issue."

China's big three portals, Sina, Sohu and NetEase, account for 50 percent of the country's spending on online advertising. Average spend per advertiser in 2006 climbed 40 percent, says Allyes's Zhu. As in the US, he says, much of the small and medium-sized enterprise advertising market is going to search engines like Baidu and Google, though they are struggling to hold market share against the onslaught of other internet and mobile advertisements. "Most look at search as a lead generator and banner advertising on portals as branding, but it depends on the campaign direction."

The biggest challenge facing Baidu and Google is search engine optimisation, says Chandler Jurinka, the technology director at US search optimisation firm Performics (now owned by Google) who left to establish Localnoodles.com, an English-language online listings site for businesses in Beijing. "It's a fine balance. Baidu and Google want to help their customers make money but they can't give the secret of how their searches work. Google changes its algorithm four times a day so that companies can't figure it out."

Advertisers are keen to know how to optimise their advertising, so that their company's listing or advertising is higher in the results displayed by the search engine. "When search results become polluted with advertisements, the search results value goes down and users get turned off. It's a big problem for search engines right now. The internet is an information resource but there's a fine balance between revenue and serving as an encyclopaedia."

Jurinka believes he's solved the conundrum at Localnoodles. After 18 months of collecting and checking information, Jurinka's team sorted it into three searchable engines for business category and location to narrow it down. Sponsored links provide the revenue stream. "The rub," he says, "is that you are placing listings according to what people want. These are customers who already want to buy, so my advertisements will be very targeted. The idea is, ĄŽI'm looking for it, just tell me a good one.'" Hitting the target

Advertisers are moving online in China to better target consumers, says Jurinka. A 3.8-centimetre-squared advertisement on the back pages of a city newspaper costs RMB5,000, the same as a three-month sponsored link on Localnoodles. "But it's less effective - your eyes just bleed through the pages of newsprint. Advertisers are looking for ways of engaging customers who are ready to buy and they reach those much better with a sponsored link on a more targeted search." Voluntary ("opt-in" in industry lingo), targeted campaigns are the key to success in online advertising, says Jurinka. Sites must also allow users to interact, to hold their attention and hence increase the credibility of the content and advertisements. "Localnoodles.com doesn't endorse anyone, we just run sponsored links. The users generate the material, endorse or criticise a listing through reviews. It's a very social site - people who go on it stay on. They can add friends, or be a fan. But the legitimacy of the site and the searches comes from its users." Turchetti says Chinese consumers are like any others when it comes to spotting spam, and brands with a reputation for protecting privacy are "inherently trusted". That works for Tsang's MyClick as well. "We are different from other media because we're totally user-generated," he says. In other words, the attractiveness of the content is what hooks users. A MyClick campaign for Pizza Hut allowed users to click a coupon to go on to the Pizza Hut website where they could download a game, a TV commercial or a menu. The largest grouping (22 percent) who clicked through opted for a discount coupon, while the next most popular option was the menu.

As far as Tsang is concerned, mobile-friendly China represents a phenomenal testing ground for the next generation of multimedia advertising campaigns.

Tsang and his fellow internet advertising entrepreneurs have a number of factors on their side: Chinese people are getting richer, their tastes more savvy and the technology at their fingertips more advanced. This means advertisers will increasingly look to spread their budgets across a number of expanding media categories as they bid to win their hearts and wallets. Captive audiences The internet is not the only platform for advertising innovation in China. With costs low enough and technology advanced enough to put a television anywhere in a city, brands are cottoning on to the fact that they can create their own captive audience.

Brands are also using the ever-expanding networks of big-box retail chains to engage consumers up close, says Lijun Mei, chief executive of CGen, which runs advertising on TV screens in large supermarkets around China. "Clients are concentrating on particular stores to push sales. We can target particular geographical zones or the stores of one chain." The company's 200-plus clients, mostly consumer goods, buy 15-second slots or seven-second flashes of the product name and picture.

In-store screens are effective at introducing new brands and packaging, says Mei. The company has screens in 500 stores, including Carrefour, B&Q and Wal-Mart, with key markets being Beijing, Shanghai, Wuhan and Tianjin as well as Shenzhen. CGen is expanding fast - it signed 400 stores in the first quarter of 2007. The company monitors the effectiveness of advertisements through checkout interviews and sales information from brands.

While CGen, which recently entered a joint venture with France-based Thomson Media, lacks the network of Focus Media, whose screens are ubiquitous in commercial buildings in China, it offers more flexibility, says Mei. "We store information in store and can tell stores when to play. You can't put detergent with wine advertisements." A centralised server allows the firm to update prices and information across stores. "We can better reflect the different offerings of various store sizes."

Others see larger outdoor screens as a more effective way of branding and getting consumers to buy. Large screens will become more like urban TV sets, predicts Richard Chen of Tulip Media, which sells advertising on its 30 screens in Beijing and Shanghai and on 30 more in secondary cities. "CGen is more for food and beverage - we are for branding," he says. "You look at our screens and you go into the shopping malls around you."

Building a network of screens depends on getting permission for good locations, which in China can be time-consuming. "For one screen you need six months' lead time and another six to get all the required government chops," says Mei. To speed up the process the company teamed with the Beijing Media Group to get more sites. Each screen can cost up to US$3 million (€2.2 million) to install and has a life span of 10 years. One outdoor screen it erected opposite the People's Department Store in Nanjing is the world's largest. "In a key location, like Guomao [in Beijing] and Nanjing Road [in Shanghai], you can hit people from every angle."

Beijing-based media company EPIN airs video programmes on more than 100 train lines after installing what it claims were the first LCD screens in Beijing's West Railway Station. EPIN, operating out of 20 major cities and their railway stations, plays on a concept of "mobile audience," says company spokesperson Qiao Ning. Captive, train-riding audiences, she claims, are more receptive to commercials than other audiences.

Cracking the lower tiers

Cosmopolitan Beijingers and Shanghainese are generally open-minded when it comes to new technology and the advertising opportunities it delivers. This is is not the case in second- and third-tier cities, where high-tech solutions can create discomfort, according to Lijun Mei, chief executive of CGen, which runs advertising on TV screens in large supermarkets around China. Indeed, advertisers have found it pays to communicate using channels that are more deeply rooted in such communities.

Shandong-based Ji'nan Tianji Advertising Company, which had the novel idea of paying bicycle owners a monthly fee to put ads on their bikes (see picture), sees scope to expand by getting its adverts onto the rest of China's 600 million two-wheelers. Some investors see potential in the idea: the company raised RMB55 million (€5.4 million) in investment from three venture capital firms from Beijing, Shanghai and Shenzhen.

Proving that simplicity - not to mention food - is sometimes the best way to the hearts of Chinese consumers, Beijing-based advertising firm Yi Bian Zhong Guo saw advertising in bilingual restaurant menus as a way to make money and help the city's service industry prepare for the Olympics. The company provided restaurants with free, professionally translated menus which in turn carried clients' advertising. Its pitch to advertisers was simple: It offered targeted, zoned-in networks. "We could look at our map and see we have 1,000 restaurants in a particular area, or we could zero in on Haidian district because that's where the 23- to 32-year-old target demographic was," explains a company spokesperson.

Bank of China and supermarket chain Jingkelong both advertised, as did several real estate projects. The Jingkelong ad would point out a store around the corner. "Promoters and advertisers were very happy. Many put a discount code at the bottom of the page to be able to track response in particular restaurants." An online internet function allowed restaurants to log in and update menus. Within eight months Yi Bian Zhong Guo had 27,000 "mid- to high-tier" restaurants on board and was turning a profit by the ninth month. Unforeseen factors conspired against it, however: In April, a Beijing government push to standardise English in the city's menus proved the death knell of the business.