China updates online advertising rules to tame algorithms that have been a powerful force behind success of apps like TikTok
- The amended Internet Advertising Management Measures will take effect on May 1 this year
- Algorithms are the secret sauce that drive the popularity of apps such as TikTok, connecting advertisers to target consumers more precisely
China’s market regulator has published updated rules on online advertising, including oversight of recommendation algorithms used by apps such as Douyin, the Chinese version of TikTok, that are used to push commercials to targeted individuals.
The amended Internet Advertising Management Measures, a big update from “provisional” regulation published in 2016, from the State Administration for Market Regulation, will take effect on May 1 this year, impacting a highly competitive, evolving market worth over US$70 billion.
While the updated regulations still focus on limiting pop-up online ads, they also lay the groundwork for the state to rein in powerful push algorithms. According to the update, anyone who uses recommendation algorithms in online advertising “must record the rules for algorithms as well as advertising logs”.
Algorithms are the secret sauce that drive the popularity of apps such as TikTok, connecting advertisers to target consumers more precisely.
However, potential abuse of algorithm power when it comes to children and teenagers is a concern for Chinese authorities and has been raised by US lawmakers to restrict the use of, or potentially ban, TikTok in the country.
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In China, TikTok’s owner ByteDance has quickly emerged as one of the country’s top online advertising revenue generators, thanks to the popularity of Douyin.
According to the latest annual report by the Interactive Marketing Lab Zhongguancun, an agency that follows online ads, ByteDance ranked second in China’s online ad market in 2022, one step behind Alibaba Group Holding, owner of the South China Morning Post, and ahead of Tencent Holdings, Baidu, JD.com and Meituan.
China’s online ad market total revenue dropped 6.4 per cent last year to 508.8 billion yuan (US$74 billion), according to the report.
As competition intensifies, online advertising in China has become increasingly intrusive, and some of the new provisions in the regulations are directed towards reining this back.
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The regulations demand that operators and live-streaming influencers “undertake the responsibilities and obligations in accordance with the law” when it comes to advertising.
The SAMR said that the move is aimed at “adapting to the new features, trends and requirements of” the online advertising industry.
The rules bar the pushing of ads to vehicles, navigation devices and smart home appliances without user consent. They also state that ad publishers “shall not attach additional ads or commercial links when users send email or instant messages”.
The new regulations also address other issues, such as stipulations for pop-up ads on apps. The 2016 document only said that there should be a turn-off button for such commercials.
