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Analyst Notes

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Mar 04 2009 Full PDF Version
Online Ads: 2009 Another Banner Year?

China's online advertising market had a banner year (pun intended) last year thanks to the Beijing Olympic Games. BDA estimates that China's online advertising market was worth RMB 17 billion (USD 2.4 billion) in 2008, representing year-on-year (YoY) growth of 53%. Given the credit crunch and global economic downturn, what are the prospects for 2009? While growth is slowing from last year, we believe China's online advertising market will still grow at a relatively impressive clip of 20% or so in 2009. More internet users and usage, continuing national economic growth, the growing influence of online media and the cost advantages of online vs. offline ads are all fuelling the sector's development. In a cost-conscious climate, advertisers are keen to measure carefully their ROI and the interactive nature of online advertising holds an appeal as results are relatively easy to measure. As China's exports continue to decline due to the collapse of traditional markets such as the US, the economy needs to re-orientate itself to domestic consumers. The competition for domestic audiences will boost ad spending online. The principal beneficiaries of this burgeoning online advertising sector will include Baidu, Sina, Sohu and Tencent. Emerging formats are unlikely to gain much share. At the same time, traditional media will continue to dominate the advertising market, given their established industry structure and concerns in the general public about the credibility of new media. The traditional media industry will do all it can to protect their turf, as competition from the new media sector becomes more significant.