Online adspend set to surge in China

Warc, 6 February 2013

BEIJING: Online adspend levels could quadruple in China during the next four years, and potentially top RMB200bn ($32bn) by the end of this period, a report has predicted.

According to iResearch, the research firm, internet advertising expenditure stood at RMB75.3bn in 2012, a 46.8% improvement on the RMB51.3bn recorded across 2011 as a whole.

"After experiencing high growth rates over a decade, online advertising has entered into a more mature period seen from the perspectives of both the media and advertising form," the company's report added.

Looking ahead, internet ad revenues are due to reach RMB102.4bn in 2013 and RMB206.8bn by 2016, as user and advertiser numbers continue to increase.

Paid search took exactly 34% of returns last year, up from 33.5% on an annual basis. Ecommerce sites claimed a further 23.3% of expenditure, beating the 17.5% registered in the previous 12 months.

Elsewhere, vertical industry sites saw their share fall from 16.3% to 13.6%, figures hitting 15.5% and 13% for portals. Online video enjoyed a lift of 0.6 percentage points, to 7.7%.

Search may lose its leading position in the market by 2016, however, as its 32.5% share is surpassed by that of ecommerce on 33.8%.

Baidu, the search giant, generated an estimated RMB22.3bn in advertising sales last year, and has set the target of expanding in the mobile space, where 80m people use its service every day.

"There is still a lot of work that we need to do to make that a better channel for our advertisers and customers," said Robin Li, the firm's CEO. "As our ROI improves for our customers, they will allocate more budget to the mobile advertising space."

Taobao, the online retail platform owned by Alibaba Group, logged RMB17.2bn in ad revenues in 2012, taking second spot on this metric.

Google was third on RMB4.43bn, a total that has dropped rapidly after the firm began redirecting Chinese search users to its Hong Kong site in 2010 as a result of concerns over censorship.

"We wanted to make sure that users are able to have unfettered access to our products, and the products where we believe they have ... we do operate in the market," Nikesh Arora, Google's chief business officer, said last week. "There is even a small revenue business that we have in China."

Data sourced from iResearch/Seeking Alpha; additional content by Warc staff