Baidu set to lose lead­ing role in dig­i­tal ad­ver­tis­ing

China Daily (USA) - - BUSINESS - By MENGJING and HUMEIDONG in Fuzhou

On­line search gi­ant Baidu Inc is set to lose its top spot in the na­tion’s boom­ing dig­i­tal ad­ver­tis­ing mar­ket this year to its ri­val Alibaba Group Hold­ing Ltd, ac­cord­ing to a re­port from Lon­don-based mar­ket re­search firm eMar­keter.

E-com­merce heavy­weight Alibaba has so far notched up a 28.9 per­cent share of China’s dig­i­tal ad mar­ket, equat­ing to $12.05 bil­lion, said eMar­keter, which re­searches dig­i­tal mar­ket­ing, me­dia and com­merce.

In pre­vi­ous fore­casts eMar­keter had pre­dicted that Baidu, which uses search re­sult list­ings to gen­er­ate in­come from ad­ver­tis­ers, would stay out in front. Last year, Baidu earned 28 per­cent of China’s dig­i­tal ad­ver­tis­ing rev­enue, com­pared to Alibaba’s 24.8 per­cent.

But eMar­keter has down­graded its out­look for Baidu this year as it has wit­nessed chal­lenges in the past few months due to tighter gov­ern­ment con­trols on search re­sult ad­ver­tis­ing. Baidu’s dig­i­tal ad rev­enue is ex­pected to see slug­gish growth this year of just 0.3 per­cent to $8.87 bil­lion. Mean­while, Alibaba and Ten­cen­tHold­ings Ltd will con­tinue to surge ahead and re­port in­creases of 54 per­cent and 68 per­cent, re­spec­tively.

Baidu, Alibaba and Ten­cent, the top three firms in China’s in­ter­net in­dus­try are es­ti­mated to take a to­tal of 60 per­cent in the coun­try’s dig­i­tal ad rev­enue of $41.66 bil­lion in 2016.

But the gov­ern­ment’s tight­ened con­trols on on­line ad­ver­tis­ing are only part of the rea­son for Baidu’s slow­ing ad rev­enue. An­a­lysts said that the Bei­jing-based Baidu’s lack of strong mo­bile prod­ucts is an­other fac­tor af­fect­ing its abil­ity to at­tract ad­ver­tis­ers.

Shelleen Shum, an an­a­lyst from eMar­keter, said the tighter reg­u­la­tion of in­ter­net ad­ver­tis­ing is ex­pected to weigh heav­ily on Baidu’s search rev­enues in the near term.

“Al­though also af­fected by the new reg­u­la­tions, Alibaba’s ad rev­enue, par­tic­u­larly from the mo­bile sec­tor, shows no sign of abat­ing thanks to the ro­bust growth of its e-com­merce re­tail busi­ness,” she said.

Baidu’s net in­come for the quar­ter end­ing June 30 was 2.4 bil­lion yuan ($359 mil­lion), down34.1 per­cent year-on-year, as the com­pany dealt with the im­pact of tougher con­trols on in­ter­net ad­ver­tis­ing and in the health­care sec­tor.

“Huge traf­fic is the bedrock of on­line ad­ver­tis­ing busi­ness. But un­like Alibaba and Ten­cent, which have nu­mer­ous suc­cess­ful mo­bile prod­ucts that can at­tract traf­fic from users. B aid us till lacks a new cut­tingedge to help jump start its slow­ing­tra­di­tional search busi­ness ,” said Lyu Ronghui, an an­a­lyst with in­ter­net con­sul­tancy iRe­search Con­sult­ing Group.

Apart from e-com­merce, Alibaba’s cloud com­put­ing busi­ness is grow­ing rapidly to help turn en­ter­prises user into ad­ver­tis­ers while Ten­cent has been gear­ing up to mon­e­tize its pop­u­lar ap­pWeChat and has a thriv­ing gam­ing busi­ness which can also make money on ad­ver­tise­ment.

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