Online advertising spending on the mainland is expected to surpass 60 billion yuan (HK$73.5 billion) this year, driven by the rapid growth of internet users in the world's second-largest economy and campaigns surrounding the London Olympic Games.
'We believe online advertising has reached a turning point as key hurdles to its mainstream acceptance fall,' said Alan Lau, a principal at management consulting firm McKinsey in Hong Kong.
In its latest internet investment guide, JPMorgan Securities (Asia- Pacific) forecast the mainland's online advertising market to grow 33 per cent to 63.8 billion yuan this year, from an estimated 47.9 billion yuan last year.
'We expect the rising number of internet users and increasing time spent on the internet will continue to drive online ad allocation,' the report said.
According to the China Internet Network Information Centre, the mainland's internet population reached 505 million at the end of November - an internet penetration rate of 37.7 per cent.
The state-run centre had earlier reported that the average time spent by mainland users online each week totalled 18.7 hours in June, up from 18.3 hours in December 2010.
JPMorgan expects the number of internet users on the mainland to reach 605 million this year, a penetration rate of 44 per cent.
Online advertisers' budget allocations are expected to start in earnest in the second and third quarters because of the London Olympic Games, which will be held from July 27 to August 12.
'Normally, ad spending will be relatively skewed in the second half due to more holiday spending demand,' the JPMorgan report said. 'The London Olympics would drive high-profile brand-building efforts.'
The London Oympics' roster of worldwide sponsors include Coca-Cola, Acer, Omega, McDonald's, General Electric, Panasonic, Samsung Electronics, Visa, Atos and Procter & Gamble. All have extensive operations on the mainland.
Sectors on the mainland tipped by JPMorgan to see fast growth in online advertising exposure this year include fast-moving consumer goods, information technology and the internet.
Online advertisers are also expected to gain from Beijing's efforts to encourage greater consumption to drive retail sales.
'On the demand side, advertisers now have easier ways to place online advertisements via ad agencies, networks or exchanges,' McKinsey's Lau said. 'On the supply side, more web publishers have gained sufficient audience reach. They have mastered how to create better ad inventory through analytics and traffic segmentation, and have developed clearer ways to measure marketing impact.'
The JPMorgan report said the fast-moving consumer goods sector would be keen to pursue campaigns that could efficiently integrate both online and offline marketing.
'Online ads are not considered low-cost anymore,' JPMorgan said. 'Top [luxury] brands like Coach, Tiffany & Company, and Cartier all initiated large online ad campaigns in 2011.'
The report noted that advertisers were willing to pay premium rates for online display adverting campaigns in leading mainland portals, such as those of Tencent and Sina.
Advertising on online video sites are also predicted to flourish this year because such content would be made available on smartphones, media tablets and internet-enabled televisions. The top sites include Youku, Tudou, Sohu Video, and Tencent Video.
Lau said advertising on social-networking sites would strengthen because marketers would be able to target advertising to specific user segments.
Google's estimated share of the mainland's online advertising market in the first half of last year, says Analysys International