Online search advertising on mainland China set to hit record high

PUBLISHED : Thursday, 02 April, 2015, 2:11am
UPDATED : Wednesday, 15 April, 2015, 3:31pm

Online search advertising on the mainland is set to reach a record high of US$14.9 billion this year, fuelled by the steady growth of e-commerce activities across the country.

It marks a 33 per cent increase from US$11.2 billion last year, and will make up 18 per cent of the US$81.6 billion global online search advertising market forecast for this year, according to research company eMarketer.

Mainland search giant Baidu and closest rival Sohu.com both listed on the Nasdaq stock market in the US, are expected to continue leading sales from domestic search advertising.

Baidu's search advertising revenue is predicted to rise 34 per cent to US$7.1 billion this year, from US$5.3 billion last year, and grab 8.8 per cent of the global search advertising market, up from 7.6 per cent last year.

It is estimated that Sohu.com will record a 62 per cent increase to US$520 million, from US$320 million last year, and corner 0.6 per cent of the global market, from 0.5 per cent a year ago.

According to eMarketer, a major driver of Baidu's success on the mainland was strong e-commerce growth from the large metropolitan cities, such as Beijing and Shanghai, to lower-tier cities, counties and villages.

It said: "There is a strong user case for search and discovery among new online buyers".

Internet consultancy iResearch has forecast the mainland's online shopping market size to aggressively expand and be valued at 7.3 trillion yuan (HK$9.2 trillion) in 2018, from 2.8 trillion yuan last year.

It is predicted that about 61.7 per cent of all online retail transactions in 2018 will be conducted on mobile devices, compared with 33 per cent last year.

"As user traffic continues to move from PC to mobile, transition to mobile monetisation remains an important focus for all online advertising companies," Alicia Yap, head of China internet research at Barclays, said in an investor note on Tuesday.

"Baidu has seen its mobile search traffic exceed [those from] PC in December and mobile contributed 42 per cent of total search revenue in the fourth quarter last year."

While China's search advertising market is on track for steady growth, it remains behind the US, where eMarketer expects revenue to advance 11 per cent this year to US$25.6 billion, from US$23 billion last year.

US-based giant Google is expected to lead the global market with a 16 per cent rise in search advertising sales to US$44.5 billion, from US$38.4 billion last year. That would be enough for the firm to retain its 54 per cent worldwide market share.

Microsoft's Bing is predicted to retain its 4.2 per cent global market share, with search advertising revenue of US$3.4 billion forecast for this year. Yahoo is expected to post US$1.9 billion in search advertising sales.