Online Ad Set to Surge in China

November 5, 2010 § Leave a comment

eMarketer released a report recently on ad growth in China. (the report is available through NYU library)

“One word can sum up the ad market in China—growth. With the world’s most vibrant economy and the second-largest consumer market, economists, marketers and brand managers are all bullish when it comes to China’s future.”

Total ad spending will grow to $33.64 billion in 2011, a 16.4% increase from 2010. Online ad spending will jump 37% reaching $3.7 billion this year and will account for 11% of the total ad market, compared with 15.1% in the U.S.

“Ad spending per internet user remains low, indicating an under-saturated market,” the report says.

As a Chinese, although I do believe total ad spending as well as online as spending is going to grow in China, I am not as over-optimistic as the eMarketer report, or any other reports mentioned in the above chart. Ad spending per internet user is not a reliable indicator in that most netizens in China falls into the lower-income & low-education category, especially migrant workers.

According to an annually report by China Internet Network Information Center, 76.8% of total internet users have an education below college level in 2010. Among the 420 million netizens in China, 30.7% of them are students,  16.7% engaged in small private businesses (street vendors, food stores etc.), another 15.7% have low-end jobs.

By stating all these facts, what I really mean to say is that about 70.4% out of the total internet population have below-average income. Here goes again the quality and quantity problem. A huge group of internet population and a relatively low spending per internet user doesn’t necessarily mean more businesses would flood the market until it is fully saturated. Advertisers focus on a select few websites and groups of people, where their investment will actually generate results. There is a huge division between luxury goods, average-family consumer goods and low-end products. This is what should be taken into consideration, rather than sheer number, and perhaps unwarranted confidence.

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