Discounting cuts online ad revenue at China portals

PUBLISHED : Friday, 08 September, 2006, 12:00am
UPDATED : Friday, 08 September, 2006, 12:00am

Sales probably less than half of that claimed, survey finds

Top mainland internet portals sold display advertising worth 1.5 billion yuan in the three months ending in July, although their actual revenue was probably only about 600 million yuan due to widespread discounting, media research firm Nielsen/Net Ratings said yesterday.

'In China, it is common [for major portals] to offer special promotions to lure advertisers,' said Hans Yu, managing director of Nielsen/Net Ratings in Greater China. 'Portals like Sina and Sohu always sell 'buy one, get one [free]' packages.'

Mr Yu estimated that actual advertising revenue of the leading portals was about 200 million yuan a month, although they claimed 500 million yuan. 'The difference reflects the free ads given out by the portals,' he said.

The research monitored 200 websites in China, which accounted for more than 95 per cent of total mainland online advertising revenues. The survey does not include ad revenue sponsored searches.

Leading portals such as Sina, Sohu and NetEase are focusing on building ad sales to broaden their revenue base. Sina, the largest mainland portal by revenue, said advertising revenue last year grew 30 per cent to about 663 million yuan from the year-ago period. The strong gains continued this year, with ad revenue for the three months ending June 30 climbing 45 per cent to 230 million yuan. Advertising revenue accounted for 55 per cent of Sina's total sales.

Ad revenue at No2 Sohu for the quarter ending June 30 grew 33 per cent on an annualised basis to about 177 million yuan.

Automotive advertisers were the biggest spenders in the Nielsen survey, accounting for 26 per cent of total online ad revenues, followed by computer and electronics firms with 22 per cent and consumer goods sellers such as beverage makers at 11 per cent.

Although online advertising is growing rapidly, it still captured only a sliver - 1.5 per cent - of the total ad market in the mainland in the three months ending July 31.

In the same period, television was the overwhelming choice of advertisers, with total ad revenue of 78.4 billion yuan, or 80 per cent of the market, trailed by newspapers at 15.7 billion yuan (16 per cent) and magazines at 1.9 billion yuan (1.9 per cent).

There is little doubt the online market has plenty of room to grow.

'As the mainland internet users grow at the rate of 30 per cent to 50 per cent per year, the online advertising market still has much room for future growth,' Mr Yu said.