Baidu, Tencent May Rule Digital Ads In China, Like Facebook, Google

By | May 18, 2016

Scalper1 News

Baidu ( BIDU ) and Tencent ( TCEHY ) will dominate digital advertising in China, much as Alphabet ’s ( GOOGL ) Google and Facebook ( FB ) do in the U.S., says Goldman Sachs. Facebook and Google combined are “implied to represent” around 70% to 80% of the U.S. digital ad market’s dollar growth in 2016 and 2017, Goldman Sachs said in its research report. “ Consistent with the rest of the world, China’s digital advertising continues to take a growing share of total media ad spend,” wrote Goldman analyst Heather Bellini. “China total online spending was $33 billion in 2015, or 45% of total media spending, and is on track to exceed more than half of total ad spend in China in 2016. “Tencent and Baidu, principally the leading social and search engine in China, respectively, contributed 56% of the ad revenue growth among the major Chinese online market companies that are covered by (Goldman Sachs).” Goldman Sachs says the “Seven Pillars” of China’s Internet market are games, online advertising, e-commerce, travel, local services, finance and cloud computing. Tencent, a rival of Alibaba Group ( BABA ), has the dominant gaming platform in China, while Baidu is the search leader. Baidu is ramping up its Internet finance arm and making efforts in autonomous vehicles. Alibaba and Tencent lead in cloud computing. “Social advertising, online video and search will be the three growth drivers for the online advertising industry into 2020,” Goldman Sachs said. “For search, Baidu has demonstrated consistent paid click and cost-per-click trends with market leaders Google and (top Russian search provider)  Yandex ( YNDX ). Baidu looks primed for better mobile monetization as the gap between mobile and desktop cost-per-click narrows. “Given China’s large social media user base, we expect mobile ad spending to become an important theme in advertising. Applying Facebook’s successful social mobile monetization, we believe Tencent could benefit most, given its powerful social asset, Weixin. Online video is the fastest growing vertical and major driver of traffic in China. Baidu-owned  iQiyi, Alibaba’s Youku  and Tencent are the top three players in mobile online video.” In the U.S., meanwhile, the online ad market grew by $23.5 billion in 2015, Goldman Sachs said. Google’s net advertising revenue increased by $6.9 billion, while Facebook’s ad revenue increased by $5.6 billion. Scalper1 News

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