Caixin Weekly | Who is Still Advertising? (AI Translation)

财新周刊｜谁还在做广告？

[para. 1][para. 3] The past year in the advertising industry has been described as reaching a "freezing point," as businesses across sectors, except for a few like automobiles, culture and tourism, fast-moving consumer goods, and Chinese liquor, have significantly slashed their advertising budgets. This is largely due to intense operational pressures, leading companies to prioritize efficiency and cost-cutting over brand exposure. Many businesses have shifted their focus to performance advertising, which aims for tangible transaction outputs, facilitated by enhanced data analytics.[para. 1][para. 3] The focus on performance advertising has led internet companies to emphasize cutting-edge technologies, such as artificial intelligence (AI), to promote advertising effectiveness.

[para. 4][para. 5] While traditional advertising channels, like television and outdoor ads, have experienced only stable or declining shares, newer formats like e-commerce and auction-based feed advertisements are on the rise, reflecting the industry's growing emphasis on conversion effectiveness. China's internet advertising market in 2024 is estimated to reach 758.36 billion yuan, with a forecasted growth rate of 6% year-over-year. This represents a slowdown compared to previous growth figures. However, the shift in advertising expenditures highlights the specific sectors that have gained or lost budgetary allocations, such as increased spending on cinemas, elevators, and high-speed train stations, versus reduced allocation for traditional media like television.

[para. 7][para. 8] On the domestic front, the government's economic outlook suggests instability, with insufficient effective demand dampening consumption, as echoed by Premier Li Qiang's efforts to bolster spending and investment. Advertising remains a core revenue stream for internet companies, which are now experiencing growth challenges. Mid to long-tail content platforms are particularly affected by declining advertising income. In contrast, giants like ByteDance continue to dominate a large share of China's advertising market. Meanwhile, in the U.S., strong digital ad growth is driven by social media engagement, sports events, and the presidential election, with giants like Meta and Alphabet recording substantial annual ad revenue increases.

[para. 10][para. 9] Throughout 2024, there is a reflection of shifting advertising investments within a complex marketplace. Different industries, from tourism to beauty sectors, display varied budgetary trends. The tourism sector, for example, capitalizes on a revival in outbound travel demand, seeing online agencies like Ctrip and Tuniu significantly increase marketing budgets. Similarly, beauty industry advertising maintains a stronghold, indicating an ample budget prioritization despite competitive pressure. Major brands like L'Oréal and Estée Lauder lead this industry's spending, although the concentration of budgets among top brands may hinder industry-wide competitiveness.

[para. 23][para. 24] Entrepreneurship in various sectors, like automotive and real estate, is increasingly focused on metrics beyond just ad viewership, emphasizing tangible conversion outcomes. This reflects a broader shift toward practical results in industries with typically longer conversion processes. Businesses prioritize platforms with effective customer acquisition metrics, although emerging platforms like Xiaohongshu emphasize conversion within niche marketplaces. Lowered trust in sheer brand visibility has elevated focus on pivotal advertising and transaction channels, with technology playing a role in targeting precision.

[para. 30][para. 31] In terms of market share, ByteDance is projected to top the advertising revenue leaderboard. However, Tencent leverages AI to outpace sector averages in ad revenue growth, showing that technological integration is vital for sustaining advertisers' confidence and budgets. The ad market's intensifying competition reflects pressures on platforms to innovate in achieving higher conversion rates and audience engagement. Additionally, China's slowing ad market growth echoes broader economic trends, demanding heightened adaptability in a challenging landscape. The concentration of advertising budgets with larger platforms underlines structural shifts in advertising strategy amid evolving consumptive needs and market dynamics.