Growth of China Online Advertising on a Fast Track - Online Adspend Reached RMB 9.4Billion in 2007.

1 February 2008
Shanghai

The online advertising market in China finished 2007 showing healthy growth, hitting RMB9.4 billion spent on display advertising, according to the latest AdRelevance Report from Nielsen Online.

AdRelevance is a Nielsen service that tracks and analyzes online advertising, industry trends, advertiser activities and campaigns. According to AdRelevance, the value of online display advertising in China reached RMB 2.8billion in the fourth quarter of 2007, an increase of a further six percent from the previous quarter, bringing the total 2007 online ad spending to RMB 9.4 billion or US$1.3 billion.

Compared to the US, where online advertising took off much earlier, China registered only one-tenth of online advertising in the US, showing the enormous potential for China’s online advertising market which is certainly on a fast track in the lead up to the Olympics and with the rapid growth in Internet penetration. In 2007, total online advertising value for the US recorded US$10 billion .

The value of online display ads for each of the first three quarters of 2007 was RMB 1.7 billion, 2.3 billion, 2.6 billion and 2.8 billion respectively (See chart 1). The biggest growth for online display advertising in China was recorded in the second quarter, with ad spend skyrocketing by 35 percent, while the peak occurred in September, with RMB 1 billion spending recorded in just September alone, the highest month of growth for the year

In 2007, approximately 3,097 advertisers and 27,000 campaigns were advertised online. Automobile (22%), IT/Electronics (20%), FMCG (10%) and Finance (9%) continued to be the top four sectors contributing to the overall growth of the online advertising market, with the Entertainment (9%) sector also making inroads into the top five. Spending for the top five sectors accounted for over 70 percent of total ad spend in the China online market.

The Top Online Advertisers in China

“At the moment China’s online advertising market continues to be very much driven by the top 500 enterprises and multi-national advertisers. Compared to the traditional media, there is huge room for growth with the potential for small and medium size advertisers to beef up their advertising efforts online” said said Hans Yu, Managing Director, Nielsen Online. ”It’s also worth noting that while vertical websites featuring specific content like entertainment or IT etc have been successful in attracting ad spending, portals are still holding a leading position among advertisers when it comes to allocating advertising dollars online.”

The ad value of the top 50 advertisers online accounted for 46 percent of total online advertising market, and 31 percent of the total number of campaigns. Topping the list with the biggest Online advertising spend in 2007 were Mazda, Toyota and Lenovo. China Mobile and Mengniu were the only two local Chinese brands on the list.

Expectation for 2008

According to Nielsen Online, the growth momentum of China’s online display advertising market in recent years has set the stage for an even greater and faster growth in 2008 in view of the Olympic Games. It is expected that growth in 2008 will be at least 50 percent more than that of 2007

Ad Valuereflects CPM-based advertising online, and excludes search-based advertising ,paid fee services, performance-based campaigns, sponsorships, barters, partnership advertising, advertorials, promotions and e-mail.

The online advertising expenditures reported only takes into account image-based technologies and advertising sold per CPM. It does not reflect house advertising activity, strategic partnerships between publishers and advertisers, or text units, paid search, sponsorships, email, units contained within applications (e.g., messengers and pre-rolls) or performance based advertising.

Online adspend per quarter 2007

2007 Top 10 Estimated Ad Value by Brand