Chinese Internet advertising Changing Quitely
- On July 6, 2020
- China internet advertising
Internet advertising is the most mature business model in the business world, with the widest coverage and easy realization. Because of COVID-19, Internet advertising is going through a difficult time.
In the first quarter of 2020, China’s online advertising grew by only 1.9% year-on-year, the lowest single-quarter growth in the past two years. Taking into account the factors of China’s CPI price growth, Internet advertising revenue was actually negative growth in the first quarter.
It stands to reason that the epidemic has caused a surge in online traffic. According to the logic of realizing traffic, advertising should also increase accordingly. But the actual situation is cruel, on one side is the rapid growth of product-side traffic, on the other side is that the demand-side advertisers have greatly reduced their budgets. This means that when supply exceeds demand, advertisers shrink. With more advertising space, online advertising is even less valuable.
While the market has not grown, the revenues of Chinese Internet advertising giants have also undergone some changes, showing a trade-off.
Bytes jumped and sang high, Tencent played steadily, but Baidu and Weibo did not perform well in advertising revenue.
The top five listed Internet companies in China by market value are Alibaba, Tencent, Meituan, Pinduoduo, and JD.com. Their Internet advertising revenues account for a relatively high proportion of total revenue. Among them, Pinduoduo’s advertising revenue in 2019 is as high as 89%, while Internet upstarts with a valuation of over 100 billion US dollars are beating up and the old search giant Baidu’s advertising. The proportion of income also exceeded 70% of their respective incomes.
ByteDance achieved revenue of US$5.54 billion (about 39.65 billion yuan) in the first quarter of this year, a surge of more than 130% from the same period last year. And this number has successfully surpassed Alibaba’s advertising marketing revenue in the first quarter, becoming the Internet company with the highest advertising revenue in China.
Baidu and Weibo are one of the largest search engines and social platforms in China. Although the products of the two companies both created the highest level of active users in history in the first quarter, their advertising revenue in the first quarter of this year both showed a relatively clear downward trend.
Baidu’s online market service revenue in the first quarter was 14.24 billion yuan (including iQiyi advertising revenue), a year-on-year decrease of 19.3%. In the first quarter, Weibo’s advertising and market revenue was RMB 1.94 billion, a year-on-year decrease of 16.5%. These are the two Internet companies that have the most obvious impact on advertising revenue.
Alibaba’s online marketing revenue in the first quarter was 30.91 billion yuan, an increase of 2.6% year-on-year, similar to the increase in the advertising market in the first quarter.
In the first quarter, JD.com and Pinduoduo’s advertising revenue both showed double-digit growth. Among them, Jingdong’s market and advertising revenue in the first quarter was 9.53 billion yuan, an increase of 17% year-on-year; and Pinduoduo’s online market service revenue in the first quarter was 5.49 billion yuan, an increase of 39.1% year-on-year.
In 2020, regardless of the size and flow of Internet companies, the change in advertising revenue is due to the efficiency of advertising.
E-commerce advertising has the highest market share distribution among all types of Internet media advertising, and it continues to rise. The information advertisements, search advertisements and social advertisements ranked next to each other are not far behind e-commerce advertisements. E-commerce advertising is so important because it has the shortest conversion link and the highest conversion efficiency.
Due to the wide impact and high uncertainty of the epidemic on various industries, the overall budget of advertisers tends to decline. In the case of a limited budget, its advertising costs will flow more to performance ads that can generate ROI, while the display advertising budget, which focuses on long-term brand building, has dropped significantly.
In the past, people referred to users as traffic in the Internet context. But until now, users and traffic must never be equal. Short-term customer acquisition is traffic, and long-term conversion is the user. The value myth of traffic is shattered, and the significance of real users is gradually highlighted. As the convergence of traffic and users, the Internet has just begun a new battle.