How Subway Advertising Really Works

This underground world charts the rise and fall of industries and companies.

Why is the subway full of e-commerce ads? Why have Liepin's ads, fronted by the actor Hu Ge, suddenly covered the Beijing and Shanghai subways? Which ad spots cost the most, and who is buying them?

For many office workers the subway is the main way to get to work, and besides the rush-hour crush, the one thing you can't escape down there is the ads. Whether you study them or just let them wash over you, they show a slice of the business world. The shift from consumer-goods ads to e-commerce ads reflects a shift in the market. And when a company suddenly spends heavily to put its name everywhere, that tells you something about its strategy.

This underground world charts the rise and fall of industries and companies.

The first ad on a Beijing subway platform appeared in 1997: a single 12-sheet light box. Since then, subway ads have become part of everyday city life.

Between 2009 and 2013, the number of subway lines operating in China jumped from 39 to 81, and it is expected to reach 176 by 2018.

The subway ad market grew with them. According to the 2014–2019 China Subway Advertising Market Research and Investment Outlook Report published by China Industry Information Network, China's subway ad revenue rose from US$220 million in 2009 to US$580 million in 2013, and is expected to leap to US$3.84 billion by 2018.

In eight Chinese cities, including Beijing and Shanghai, subway advertising is run by joint ventures of the French outdoor-advertising company JCDecaux. JCDecaux partners with each city's subway operator to sell the network's ad space. In Beijing the venture is called Beijing Subway Tongcheng; in Shanghai, Shentong JCDecaux.

In Shanghai, Shentong JCDecaux runs 95% of subway ad spots.

Beijing is messier: nearly 20 media companies divide up the ad space across its lines. Beijing Subway Tongcheng holds about 75% of it. Next comes Sanmu International, which handles the suburban lines to Changping, Yizhuang and Fangshan. Line 4 is run commercially by Asiaray.

Even on a single line, different ad formats can be sold by different agents. Tongcheng, for example, sells the mainstream formats on its lines: light boxes, wall murals, interior and exterior train wraps, and pillar wraps. Video ads in the tunnels, handle-strap ads, stickers beside escalators, ads on train doors and windows, wayfinding-sign ads and the big screens at station entrances each belong to other companies.

We chose Beijing and Shanghai as our samples. By ridership they are the busiest and second-busiest subway systems in the world, each carrying more than 10 million passengers a day.

Since Beijing Subway Tongcheng and Shentong JCDecaux control most of the ad space, we talked to people at both companies to learn how subway advertising works and the business logic behind it.

Which station has the priciest ads, and who buys them?

Think of the ad slot just before the CCTV Spring Festival Gala: whichever company appears there is seen as a brand with muscle. The subway equivalent is the question of which brand has "painted the walls" of the transfer corridor at Guomao in Beijing or Jing'an Temple in Shanghai.

The two have much in common. Both stations sit at the heart of a central business district, both are transfer points for several major lines, and both are packed: the Guomao transfer corridor sees more than 300,000 people a day, counting transferring passengers and those entering or leaving the station.

Jing'an Temple station is ringed by office towers, including Donghai Plaza, Shanghai Plaza and Jing An Kerry Centre. Four weeks of ads in its transfer corridor cost 2.58 million yuan at list price; at Guomao, 1.68 million.

The gap is not because Shanghai is pricier. The Guomao corridor has only wall murals, while Jing'an Temple's offers more formats: besides the murals there are 28 light boxes and pillar wraps. (Overall, Beijing subway ads actually cost about 20% more than Shanghai's.)

Brands that have bought this 2.58-million-yuan, four-week corridor at Jing'an Temple include Estée Lauder and the badminton brand Yonex, as well as internet companies such as Zhihu, which just ran a video brand ad there, Liepin and Mogujie.

At Guomao, the latest brands on the walls were JD.com, promoting its Butterfly Festival sale, and Liepin.

How are stations priced?

Before setting prices, the agencies sort every station into three tiers, S, A++ and A, from most to least expensive.

In Shanghai, 19 stations, including West Nanjing Road, Lujiazui, Jing'an Temple and Xujiahui, make the top S tier. Changshu Road and Shanghai Stadium sit one notch lower at A++. Stations with less traffic and less valuable shopping districts nearby are rated A.

Passenger traffic is the main factor in the ranking, but not the only one. Location counts too. Tiantongyuan, for example, handles huge crowds yet is rated A, the lowest tier: it is far from the center, its traffic comes almost entirely at the morning and evening peaks, and when passengers are packed shoulder to shoulder, ads don't get much of a look.

Tiers are reviewed every year. At Shanghai's South Shaanxi Road station, the Line 1 platforms used to be rated S and the Line 10 platforms A++ (yes, a station can be split in two). When Line 12 opened, South Shaanxi Road became a three-line interchange, and with the dense shopping district around it, the whole station was raised to S.

Downgrades, by contrast, are rare. Someone at Shentong JCDecaux told QDaily: "In the 1990s, subways were built to serve existing commercial districts. Now it works the other way around: wherever the subway goes, housing and shopping districts follow. That is the subway's value. So the area around an established station only gets better. A downgrade is unlikely."

Each tier carries a different price. For the most common format, the 12-sheet light box, a four-week run lists at 108,000 yuan at an S station, 78,000 yuan at A++, and just 38,000 yuan at A.

Despite the big gaps, companies large and small all want S stations most. Agencies usually sell spots as a bundle of S, A++ and A stations.

There are exceptions. Supermarkets, malls and housing developments advertise only at stations nearby. Beijing's Babaoshan station has reportedly even carried an ad for a cemetery.

Note that the list price is only a reference point. In practice, agencies give discounts that depend on how much a company buys. The Guomao corridor, listed at 1.88 million yuan for four weeks, usually sells for 85% of that.

Beyond light boxes, what other kinds of subway ads are there?

The 12-sheet light box is probably the most common subway ad: the kind you look at while waiting on the platform.

Conventional formats like light boxes are "coverage media": they work by being seen again and again.

Showier formats, such as interior and exterior train wraps and wall murals, are "impact media": they build a brand's image by overwhelming the eye.

Because Beijing's subway is older, especially Lines 1 and 2, it offers fewer formats. Shanghai's newer stations have more variety, such as product display cases and digital brand zones.

Some campaigns are less subway advertising than publicity stunts. Tencent once took over an entire subway corridor for its game Tiantian Racing, decking out the floor and walls like a race track and playing engine sounds as people walked through. The corridor itself saw little traffic. The real aim was a gimmick that TV and the internet would pick up and spread.

Who buys subway ads?

A little over two years ago, consumer-goods brands owned subway advertising. Only a handful of big e-commerce companies, such as Taobao, JD.com and Yihaodian, showed up at all.

But from the end of 2013, internet companies became the biggest subway advertisers. Today nearly half the ads you see underground come from internet companies of every kind.

In a sense this tracks the market. The ads are only the surface; underneath are companies and industries rising and falling.

Around 2010, when group-buying sites were booming, their ads were everywhere. Once the "war of a hundred group-buying sites" left the market in ruins, the ads vanished just as fast.

Within the internet industry, e-commerce is by far the biggest spender.

On the Shanghai Metro alone, Alibaba spends about 50 million yuan a year; ads for Taobao, Tmall and its travel site Alitrip run almost nonstop. Besides other heavy spenders such as JD.com and Suning, there is a crowd of smaller newcomers like Yangmatou and Mia.

Three years ago only the big e-commerce companies advertised; now online stores of every size are everywhere. That alone shows how hot the industry is.

Meanwhile consumer goods, an industry once famous for its marketing budgets, has clearly cut back on offline ads and moved its marketing online. QDaily explored this trend in an earlier article on consumer-goods brands' push to win younger shoppers.

Big companies roughly set their ad plans for the coming year at the end of the previous one, then adjust them. Startups are less predictable: they rarely plan that far ahead and buy ads as needed.

"Companies that advertise in the subway have usually been around for a while and are growing," said someone at Beijing Subway Tongcheng. "Subway ads are pretty expensive. If you buy only one or two spots you get drowned out; to make a noise you have to go big. So small companies usually come to us right after a funding round, when they want people to know their name fast."

Take Lagou, the job site that has lately wrapped whole stations in green. Before, it was known only inside the internet industry. After two funding rounds it began advertising heavily in 2015, and during this year's hiring season in February and March it spent tens of millions of yuan on subway ads in Beijing, Shanghai, Guangzhou and Shenzhen.

Compared with bus-shelter ads on the street, the subway is cleaner and makes a brand look more upmarket. That has to do with who rides it. According to the 2014 China Marketing and Media Study, 82% of subway riders are under 45, more than 70% have at least a junior-college degree, and more than 80% are white-collar workers.

So some companies use subway ads to lift their standing. Think of those online lenders with names like "XX Dai" that you've never heard of. If you saw one advertised in the subway, wouldn't you trust it a little more?

Subway ads follow the seasons

Lagou, Liepin, Boss Zhipin, Zhaopin, ChinaHR... If you ride the subway to work, your chances of avoiding these ads in the month or so since Chinese New Year are close to zero. (Oh, and they're all over the TV screens in office lobbies, too.)

"Collect your year-end bonus, then quit." Every year, the weeks after Chinese New Year are high season for recruitment ads. Over the whole year they are a small share of subway ads, but in February and March they make up 40-50%.

Other ads follow the calendar too. As the weather warms in April and May, travel and drink ads peak; in the second half of the year, the main event is of course Singles' Day, "Double 11."

Peak months (January, April, May, September, October and December) carry a 15% surcharge on media fees over the off-season.

What fills the gaps?

With so many formats, it is hard to calculate an overall occupancy rate for subway ad space. A rough estimate puts it at 75% or more for S stations.

Every subway company must give 3-5% of its ad space each year to public-service ads. The fire-safety posters and "Beijing's ten great sights" you see belong to this category.

When a commercial ad comes down, it is usually replaced by a public-service ad or by the agency's own branding. Whatever happens, no panel may be left blank.

And those posters for films that left theaters long ago? Usually they're still up because the agency hasn't yet found an advertiser to replace them.

The cover image and some photos in this article are courtesy of Shentong JCDecaux and Beijing Subway Tongcheng.

Reporter Ma Ningyi also contributed to this article.