Study: Online ad market in China to reach $605M by 2005

Internet-based advertising revenue in China will continue to be resilient even though global advertising spending has slowed down, market researchers have concluded. Online advertising is estimated to reach US$604.5 million in 2005, according to a report released by BDA (China) Ltd., a technology consultancy, and Iamasia Ltd., a Hong Kong-based market research company.

China is expected to see a compound annual growth rate (CAGR) of almost 80 percent over the next five years, based on Internet advertising revenues estimated at $32.7 million last year, the report said.

The online advertising industry in China is seen to be in its infancy, and therefore less affected by the dot-com crash, leaving room for the Internet to gain importance as an advertising medium, the joint report said. Online advertising growth is also expected to outpace that of the traditional advertising media, the report said.

“Online advertising [in China] is still fairly strong,” said Matthew McGarvey, Beijing-based research manager at International Data Corp. Asia-Pacific (IDC). However, even though advertising revenue is growing in the Chinese mainland, IDC estimates Internet advertising will reach US$215 million in 2004, significantly lower than the BDA-Iamasia figure.

IDC measures Internet-based advertising as pure placements of online ads excludes direct TV or wireless advertising.

China’s domestic advertisers are regarded as the main drivers of online ad spending, even though the rest of the Asia-Pacific region is losing online advertisers, McGarvey said. “There’s not much infrastructure such as ad networks in place and the role of the advertiser is not fully developed in China. Right now, it’s a direct relationship between ads and the portal,” he said, adding that as the advertising industry in China takes shape, local online advertising will further pick up pace.

However, even though Chinese advertisers are expected to be spending more online, the mandate from large advertisers is to get out of the Internet advertising business, and fewer advertising companies are recommending Internet advertising to their clients, McGarvey said. Advertising agencies are moving away from Internet-based advertising and are being more selective in how they place advertisements, he added.

IDC is a subsidiary of the International Data Group, Inc. (IDG), the parent company of the IDG News Service.

Iamasia, in Hong Kong, can be contacted at

, and IDC Asia-Pacific, in Beijing, can be reached at