Web ads surge in China

10 February 2011

BEIJING: Online adspend climbed by over 50% in China last year, encouraging major players such as Baidu, Sohu and Sina to launch innovative services that could boost revenues.

Research firm Analysys International suggested the country's web advertising category expanded 109% on an annual basis in the final quarter of 2010, hitting 9.72bn yuan ($1.4bn).

For the entire year, figures surged 76.6% to 27.5bn yuan, indicating the rising importance of this medium among brand owners.

Paid-for search contributed 3.9bn of sales during Q4 2010, a 96% increase, and 11.6bn yuan across the whole 12 months, a 62.7% leap.

Baidu held an estimated 75.5% of the search sector by the close of last year, a 73% improvement on the previous quarter, Analysys International stated.

According to Baidu, its internet advertising returns came in at 7.9bn yuan for 2010, a 78% jump, and drawn from 412,000 companies.

"Even though our revenue started growing robustly only a small percentage of business in China are taking advantage of search engine marketing," said Robin Li, Baidu's ceo.

"Therefore we will need to further promote SEM among China's business community. To do this we have established a qualification program to train online marketing professionals to understand SEM."

The corporation's broader recent initiatives have incorporated rolling out services covering real-time search, a video platform, document-sharing tools, apps and ecommerce.

"In a fast-changing industry like ours, constant innovation and aggressive investments are key to ensuring that we continue to lead the market and benefit from emerging internet megatrends," said Li.

While display remains a "small" part of Baidu's business at present, the organisation is now seeking to become a "leader" in this area.

Sohu, which operates a popular eponymous portal and various other properties, such as search engine Sogou and real estate offering Focus, is adopting a similar strategy.

It secured $231.4m in "brand advertising" revenues last year, up 20%, including $28m from video ads and $18.6m generated by search.

"We believe with higher penetration rate of the internet population, more and more advertisers are willing to shift the more traditional budget allocation to online," said cfo Carol Yu.

"We believe FMCG will be one of the leading faster-growing industry categories."

Google's share of the Chinese search segment declined to 19.6% in December 2010, following a decision to shut down its local arm based on censorship concerns.

However, Eric Schmidt, soon to be Google's executive chairman, restated ambitions about making headway in China.

"Over time I would hope - especially in my new role with more of an external focus - that I can try to get more of Google, appropriately and within our policies, into China," he said.

Larry Page, a co-founder of Google alongside Sergey Brin, is replacing Schmidt as chief executive.

"Between the three of us, I have always been the person who believes the most in expanding into China," Schmidt added.

Sina, another big Chinese web specialist boasting a diverse portfolio, saw its ad revenue rise 27% during the last reporting quarter, reaching a record $81m.

The company runs a microblogging platform comparable to Twitter, Sina Weibo, which it hopes to monetise through advertising going forward.

"We will be able to make a lot of profit on it," predicted Charles Chao, Sina's ceo. "It is just a matter of time."

Data sourced from Baidu, Bloomberg, People's Daily Online, Seeking Alpha; additional content by Warc staff