BEIJING: Online and mobile advertising revenues are continuing to increase in China, with this positive trend likely to accelerate over the rest of this year.

According to estimates from iResearch, the media monitoring specialist, internet advertising spend in China reached a value of 6.4bn yuan ($936.9m; €764m; £647m) in the first quarter of 2010.

While this was equivalent to a decline of 8.6% on a quarterly basis, it also represented an expansion of 85.4% compared with the first three months of 2009.

More specifically, display ads claimed a market share of 44.3% from January to March this year, while search received 30% of all advertising funds allocated to this channel, an uptick of 1.7% on Q1 2009.

Baidu, which operates a range of portals including the biggest search engine in China, generated 1.3bn yuan in ad sales, a total that fell to 590m yuan for Taobao, the online marketplace.

Google, which has recently scaled back its activities in the world's most populous nation, followed in third on 563m yuan, with Sina on 380m yuan and Sohu on 290m yuan.

Some 49.2 billion search enquiries were entered by Chinese web users in Q1 2010, 67.8% of which were made via Baidu and 29.5% using Google.

Elsewhere, rich media took 6.8% of all advertising budgets directed to the web in this period, iResearch reported.

Overall internet video revenues stood at 590m yuan in this timeframe, of which 328m yuan was accounted for by advertising.

The top five video sites in the country, a group which featured Youku and Todou, were responsible for 80% of this ad expenditure and 82% of the time netizens spent watching this kind of content.

In an effort to leverage its strong position, Tudou has announced its intention to take a direct role in producing, broadcasting and distributing content.

"We want to get our own hands deep into the content business and minimize the dependencies that stem from involving too many third parties," said Gary Wang, Tudou's founder and chief executive.

Mobile adspend recorded growth of 400% year-on-year and 30.3% quarter-on-quarter, iResearch said, and this medium is set to gain further ground going forward. 

Looking more broadly, the Chinese e-commerce sector as a whole was worth 1.43trn yuan in the first quarter, an improvement of 93.5% year-on-year.

Business-to-business transactions contributed 52.6% of this total, with retail sales on 10.1%.

Taobao is the largest e-tail service in China, and now has over 1 million "stores" on its site run by consumers as well as operating services for major brand owners such as Unilever.

Previous figures from iResearch stated that online retail sales came in at 190bn yuan in China in 2009, with 105 million people buying goods and services in this way.

"For ten years we have been hearing that e-commerce won't work in China because there are no credit cards. Then overnight it is the hot topic," Chris Reitermann, president of OgilvyOne China, said.

In concluding, iResearch predicted that China's continued economic expansion was likely to fuel greater demand for digital advertising among brand owners this year.

Major events such as the Shanghai Expo and the FIFA World Cup will also drive this process, the company added.

Data sourced from China Internet Watch, Interfax, CMM, Shanghai Daily, China International Business; additional content by Warc staff