Chinese tech firms, Baidu and Tencent are on a trajectory to dominate digital advertising in the country comparable to Google and Facebook in the US. That’s according to a Goldman Sachs report.
Tencent and Baidu to dominate digital ad market in China
Combined, Google and Facebook roughly represent up to 80% of the US digital advertising market in 2016.
Heather Bellini, Analyst, Goldman Sachs, explains that Chinese digital advertising was eating strongly into the country’s media ad spend. With total online expenditure coming in at $33bn last year, or 45% of total media spending, the companies are on track to reach over half of total ad spend in China. She adds:
“Tencent and Baidu, principally the leading social and search engine in China, respectively, contributed 56% of the ad revenue growth among the major Chinese online market companies that are covered by [Goldman Sachs].”
Games, online advertising, eCommerce, travel, local services, finances and cloud computing are touted as the top pillars of the Chinese Internet market, says Goldman. Indeed, Tencent runs the dominant games platform in the country, whilst Baidu is a leader within web search and has been busy expanding into finance.
According to the report, social ads, online video and search will contribute to much of the online ad industry’s growth until 2020. Baidu has been leading the way when it comes to paid click and cost-per-click advertising for better mobile monetisation.
However, as the country’s social media user base grows, mobile advertising expenditure will become a dominant theme within advertising. Hence, Goldman researchers believe that Tencent could benefit from a Facebook-style social mobile monetisation approach for its WeChat app.
Baidu-owned iQiyi, Alibaba’s Youku, and Tencent are set to remain the top players within mobile online video.