Multi-nationals are increasingly looking to reach China's emerging middle class through the Internet. Companies are turning to the Internet to advertise because the Internet is where Chinese consumers spend the most time, more than TV or other media.
Online advertising is booming in China as marketers have begun to recognize the shift in consumer habits. iResearch, an independent consulting firm, forecasts the online ad market to grow at least 30% annually for the next eight years. The numbers of both Baidu, the leading search engine in China with approximately a 70% market share, and Google have been increasing as they ramp up their China operations. In 2006, Baidu pulled in $106 million in online marketing revenue in China while Google brought in $32 million compared to only $38.1 million for Baidu in 2005 and $19.4 million for Google. The numbers show that more and more companies are buying into the idea that online advertising works.
There are approximately 140 million users online in China, according to the China Internet Network Information Center, which forecasts that in less than five years China will overtake the United States as the largest group of Internet users as broadband services are rolled out into fourth and fifth tier cities and as disposable incomes increase. The Chinese are already the world's heaviest Internet users, spending more time online than any other nationality, including Japanese and Americans. The average amount of time people spend on the Internet in China has risen to 17 hours a week from 10 hours in 2002. This compares with just 13.9 hours a week in Japan and 11.7 hours in the United States.
To understand and get close to these consumers, the Internet is a great vehicle.
China's youth segment spends a great deal of its online time engaged in active discussion of products and advertising through blogs and BBS (Bulletin board system) forums. They talk about what they like and dislike about companies and life in general on the approximately 120 million active blogs in China. These opinions have tremendous effects on Chinese consumers as they often trust the opinions of bloggers and BBS posters more than they do the traditional media outlets.
There are several reasons Internet advertising is especially effective in China. First, there is a lack of ethics in many parts of the Chinese business community. For example, there is a lot of abuse of consumer trust in the food and drug industries. Because of this, people do not trust traditional advertising that much. Instead, they depend a lot on word of mouth and a circle of trust when choosing products.
The Challenges Ahead
The trend in interactive advertising in China will continue as e-commerce develops in China and more of the population gains access to the Internet. More so than in many other countries, every available surface in China is used to advertise brands with the end result that people are often numb to, and wary of, traditional media.
Through interactive campaigns, companies are finding ways to involve consumers and develop brand affiliation stickiness that will carry forward as younger consumers age into higher paying jobs. In two to three years from now there will be a much larger Internet community in China. The challenge for marketers is to leverage the Internet and mobile channels to drive business.
In a country where mobile phone users outnumber Internet users at almost 4 to 1 and will soon be able to surf the web via their mobile phones, marketers need to create the right interactive campaigns and strategies to tap into Chinese consumers demands to use their mobile devices and the Internet. The companies that are able to will benefit from the increasing consumerism of China's aspiring, middle, and affluent classes.