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Tencent, Baidu to Lead China's Digital Ad Market

By | May 19, 2016 12:26 PM EDT
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Sportel Asia Conference

Visitors and exhibitors network at the Tencent booth during the Sportel Asia Conference on March 15, 2016 in Singapore. A Goldman Sach report has noted that Tencent and Baidu are likely to be the big players in China's online advertising market.(Photo : Getty Images)

Tech giants Baidu and Tencent are expected to dominate China's digital advertising market, just like their American counterparts Google and Facebook, according to a report from Goldman Sachs.

"Consistent with the rest of the world, China's digital advertising continues to take a growing share of total media and spend," Heather Bellini, an analyst at Goldman, said.

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In 2015, China splurged $33 billion, or 45 percent of its total media spending on digital advertising. Bellini noted that the country is on pace to surpass over 50 percent of its total spending on ads this year.

"Tencent and Baidu, principally the leading social and search engine in China, respectively, contributed 56% of the ad revenue growth among the major Chinese online market companies that are covered by [Goldman Sachs]," the report said.

Goldman Sachs has suggested that China's online advertising industry will be driven by social advertising, online video, and search by 2020. For search, Baidu is leading the way as it has delved into "paid click and cost-per-click trends" like Google and Yandex.  Meanwhile, Tencent reigns supreme in the country's gaming platform and cloud computing.

"Given China's large social media user base, we expect mobile ad spending to become an important theme in advertising," the report said. Researchers believe that Tencent could benefit more from Facebook-like social mobile monetization because of its influential social asset WeChat. Meanwhile, Baidu's iQiyi, Alibaba's Youku, and Tencent will all be major players in China's online mobile video industry.

In the United States, the online ad market soared to nearly $24 million last year. Google ad revenue climbed to $6.9 billion, while Facebook rose to $5.6 billion.

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