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Alibaba Takes the Lead in China's Digital Ad Market

Baidu drops to second place

September 21, 2016 | Media Buying

In its latest forecast of ad spending around the world, eMarketer has made upward revisions to both its total and digital ad spend forecast for Asia-Pacific, thanks to recent reports showing strong digital advertising activity in China. This year, China will be home to more than a fifth of all digital ad spending worldwide, amounting to $41.66 billion.

Within China, the BAT companies—Baidu, Alibaba and Tencent—continue to be the key players benefiting from the ad spend uptick. Thanks in part to its increased revenues from display ads, Alibaba now enjoys the largest share of China’s digital ad market—this year, more than a quarter of the total, equating to $12.05 billion.

In previous forecasts eMarketer had predicted that Baidu would stay out in front—last year, Baidu earned 28.0% of digital ad revenues in China, compared to Alibaba’s 24.8%—but due to a challenging few months when the company received negative press, along with new regulations coming into place this year, eMarketer has downgraded its outlook. Baidu’s digital ad revenue is now expected grow minimally this year (by 0.3%) to $8.87 billion. Meanwhile, Alibaba and Tencent will both continue to surge ahead and report increases of 54.0% and 68.0%, respectively.

WeChat owner Tencent has seen phenomenal growth over the past few years, and this year China’s largest online entertainment and social networking company will earn $4.12 billion in digital ad revenues. By 2018, Tencent’s digital ad revenues will reach almost $11.0 billion—closing the gap with Baidu, which is forecast to earn just over $12.0 billion that year.

eMarketer forecasting analyst Shelleen Shum commented, “The heightened regulation on internet advertising is expected to weigh heavily on Baidu’s search revenues in the near term as they roll out stricter standards across all advertisers. Although also affected by the new regulations, Alibaba’s ad revenue particularly from mobile shows no sign of ebbing with robust growth from the ecommerce retail business. We now expect Alibaba to take a larger share of digital ad revenues than Baidu in 2016.”

Total media ad spending in China continues to be heavily influenced by mobile at the expense of more traditional ad spending formats. As mobile usage has grown so too has mobile ad spending’s share. Once again the BAT companies are out in front, earning the lion’s share of mobile internet ad revenues. Alibaba remains the leader, with mobile ad revenues of $11.1 billion—which is expected to grow to almost $20.0 billion by 2018. Tencent’s mobile ad revenues are also rising, and by 2018, the WeChat owner is forecast to overtake Baidu with revenues of $9.05 billion.

Shum added, “Ad spending in China continues to shift rapidly toward digital formats and in particular mobile formats as more time is spent on mobile devices. We think that this trend will persist in the coming years, especially as more offline services become integrated online via mobile applications.”

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