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Tencent’s main social networking properties include WeChat, marketed as Weixin on the mainland, and online social networking site Qzone. Photo: SCMP Pictures

New | China’s social networks set for boom, as advertising spending forecast to jump 56 per cent to US$5.33b this year

Tencent and Sina Weibo poised to benefit as advertisers maneuver to reach consumers through social media

Total advertising spending in mainland China’s social networks is predicted to hit a record US$5.33 billion this year, driven by campaigns run on the platforms of internet giant Tencent Holdings and Weibo Corp's microblogging service.

“Tencent and Sina Weibo are the two leaders in China’s social network advertising space on account of their strong user base, engagement and large mobile presence,” eMarketer forecasting analyst Shelleen Shum said.

Tencent’s widely popular social mobile-messaging platform WeChat — marketed as Weixin on the mainland — and online social networking site Qzone are the Hong Kong-listed company’s primary advertising vehicles.

Tencent Chairman & Chief Executive officer Pony Ma Huateng. Photo: Edmond So

“We expect the launch of Sina Weibo’s autoplay video ads this year will drive user engagement and appeal to advertisers with its targeting options,” Shum said.

E-commerce powerhouse Alibaba Group, which owns the South China Morning Post, is a major shareholder of Nasdaq-traded Weibo, which is often called “China’s Twitter”. Weibo's largest shareholder is internet media company Sina Corp.

Hangzhou-based Alibaba bought an 18 per cent stake in Weibo in 2014 for US$586 million, with an option to increase that to 30 per cent. Alibaba picked up that option when Weibo was listed on Nasdaq that same year.

Data from research firm eMarketer showed that social network advertising expenditure on the mainland is forecast to increase 56 per cent to US$5.33 billion this year, up from an estimated US$3.42 billion last year.

The average advertising spending per social network user is projected to rise 46 per cent to reach US$10.40 from US$7.10 the previous year.

“This year, advertisers in China will account for 16 per cent of all social network ad spending worldwide,” eMarketer analyst Cindy Liu said.

New York-based eMarketer has forecast global social network advertising expenditure this year will reach US$32.97 billion.

“Many of the social networks in China are still in very early stages of monetisation,” Liu said, referring to their commercial potential. “Along with the growing middle class and a generation of young consumers, spending per social network user is expected to rise rapidly.”

According to survey results it published in January, Kantar China Insights found that 50.9 per cent of mainland China’s consumers used social media last year, up from 34 per cent in 2014.

Liu said expectations for social network advertising growth in China have been raised significantly because of Tencent’s efforts to earn more revenue from WeChat, which had an average of 697 million monthly active users last year.

In August last year, WeChat opened up Moments — a personal newsfeed similar to Facebook’s — to all its advertisers in August 2015.

Chinese e-commerce company Alibaba Group acquired an 18 per cent stake in web portal Sina Corp’s microblogging service Weibo in 2014. Photo: Reuters

“High-spending advertisers are likely to flock to this new ad type to take advantage of the app’s massive reach of highly engaged users,” Liu said.

Tencent last month reported that its advertising business achieved a 110 per cent year-on-year revenue growth last year, while SWeibo posted a 52 per cent increase over the same period.

Total digital and mobile advertising spending in China is forecast to rise 30 per cent to US$40.42 billion this year, from US$31.09 billion last year, despite the lingering economic slowdown, according to eMarketer.

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