Online search advertising in mainland China set to soar on back of e-commerce growth

PUBLISHED : Wednesday, 01 April, 2015, 8:00am
UPDATED : Wednesday, 01 April, 2015, 8:58am

Online search advertising in mainland China is set to reach a record high US$14.9 billion (HK$115.5 billion) this year, fuelled by the steady growth of e-commerce activities across the country.

That amount will mark a 33 per cent increase from US$11.2 billion last year, and make up 18 per cent of the forecast total US$81.6 billion global online search advertising market this year, according to data published on Tuesday by research company eMarketer.

Mainland search giant Baidu and closest rival, both of which are listed on the Nasdaq stock market in the United States, 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. is estimated to 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 has been 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.

About 61.7 per cent of total online retail transactions in 2018 is predicted to 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, the head of China internet research at Barclays, said in an investor note published 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 that of the US.

Total search advertising revenue in the US is forecast by eMarketer to advance 11 per cent this year to US$25.6 billion, from US$23 billion last year.

US-based internet search titan Google is projected 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 company to retain its 54 per cent worldwide market share.

Microsoft’s Bing is estimated to retain its 4.2 per cent global market share, with forecast search advertising revenue this year of US$US$3.4 billion. Yahoo is predicted to post US$1.9 billion in search advertising sales, good for a 2.3 per cent share.