Online advertising spending in China will grow from $731m this year to $1.79bn in 2008, according to a recent forecast. Major sporting events, like this year's football World Cup and the 2008 Olympic Games in Beijing, can have a noticeable positive impact on the value of the market, analysts believe.
While observers agree that the market value is growing strongly, opinions differ considerably over the rate of growth. Spending increased about 35 per cent from $405m in 2005 to $605m this year and will reach $861m in 2008, according to Beijing-based researchers at Analysys International.
Analysts at Deutsche Bank, however, see a stronger growth rate of around 50 per cent and forecast the market value will grow from $731m in 2006 to $1.79bn in 2008. Smaller players' ad revenues are currently boosting the average growth rate because they are expanding at least 10 percentage points faster than the larger portals, explained Deutsche Bank analysts.
Brand-focused advertising accounted for 71.3 per cent of the market last year, according to Analysys, with the remaining 28.7 per cent of spending going to search engine ads, which generally emphasise specific products and services ahead of brands.
“As advertisers increased spending on internet advertising and improved recognition of the importance of search engine marketing, the search engine advertising market developed rapidly in 2005. With the rapid development of search engine advertising, the market share of brand advertising will decrease to 67.63 per cent in 2006,” Analysys researchers commented in a report summary.
Deutsche Bank analysts pointed out that Chinese consumers and advertisers are becoming more aware of the importance of brands, a factor that will help boost ad spending at major portals, which are the most suitable venues for brand-based campaigns.
Over and above this, the most important single driver of ad spending for portals is likely to be “the prospect of the value of online traffic going parabolic with the ramp of ecommerce over the next two years,” Deutsche Bank analysts commented in a client briefing.
Analysys expects the Olympic Games in 2008 to stimulate ad spending growth. According to local media reports, leading Chinese internet portals Sina and Sohu both made more than $5m from ad spending related to this year's World Cup. “The key for us is the ability of major portals to drive traffic for events – Sina reportedly saw 40 million netizens visit their World Cup site according to Nielsen – and the positive impact on online ad rate cards,” commented Deutsche Bank analysts.
While China's online ad market is growing fast, it is still tiny compared to major international markets. US online ad spending, for example, is predicted to be worth $14.5bn this year, according to Kagan Research, and to reach almost $26bn by 2011, according to forecasts published last month by Jupiter Research.
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