In Depth: China’s Ad Market Cools as Businesses Lose Patience

[para. 1] China's advertising market is experiencing a slowdown in growth as businesses grapple with weak consumer demand and increasing competition. This has driven many companies to reduce their advertising expenditures or reallocate their budgets toward marketing strategies that promise quick sales. [para. 2][para. 3] According to data from QuestMobile, the growth rate of China's internet advertising sector decreased to 6% in 2024, amounting to 758.4 billion yuan ($103.3 billion), compared to 7.6% the previous year. Meanwhile, the overall advertising market only grew by 1.6%, a significant drop from the 6% rise seen in 2023, as reported by CTR Market Research Co. Ltd. [para. 4] An advertising specialist from Alibaba referred to this as reaching a “freezing point,” noting that companies across industries are cutting their advertising budgets in an effort to reduce costs and boost efficiency.

[para. 5][para. 6] Certain sectors like automotive, tourism, and fast-moving consumer goods have maintained or increased spending on brand awareness campaigns. Many companies are opting for marketing efforts that deliver immediate financial returns rather than long-term brand-building initiatives. [para. 7] Internet companies have been hit hard due to their reliance on advertising revenue, with major players such as Alibaba and Baidu experiencing slowed growth and subsequently enhancing their AI-driven marketing tools to appeal more to advertisers by emphasizing cost reductions and efficiency improvements.

[para. 8] Industry-specific spending varies considerably, with internet companies and traditional automakers decreasing their advertising outlays, while tourism and electric vehicle sectors are investing more. [para. 9] The tourism industry, riding on the wave of anticipated recovery in outbound travel, has notably increased its marketing budgets, as exemplified by Trip.com and Tongcheng Travel Holdings, which boosted their marketing spends by 29% and 25.7%, respectively. Smaller travel firms have also intensified efforts, particularly during holiday seasons, on platforms like Xiaohongshu.

[para. 10][para. 11] A notable shift is evident in the automotive industry, with traditional automakers like SAIC Motor Corp. and Great Wall Motor Co. reducing advertising budgets as demand for fossil-fuel vehicles wanes. In contrast, electric vehicle manufacturers such as Nio, Zhejiang Leapmotor, and BYD have increased promotional spending, with BYD's budget rising by 84%. [para. 12] Concurrently, various internet firms are cutting costs post-pandemic amidst weakened consumer spending and regulatory challenges. [para. 13] Zhihu Inc., a major player in the online Q&A space, exemplified this trend by cutting marketing expenses by 21%, achieving a profitable quarter despite ending the year with a significant net loss.

[para. 14][para. 15] Acquiring new customers has become more challenging and costlier, requiring businesses to focus on faster, more tangible marketing returns. This is evident in the auto sector, where companies increasingly demand quantifiable outcomes from their marketing investments. [para. 16] The role of AI in marketing is growing, with major e-commerce operators deploying advanced AI tools to optimize ad performance and reduce costs. Alibaba, for instance, launched an AI tool on its platforms to aid vendors in improving sales efficiency.

[para. 17] ByteDance has emerged as the leader in China’s digital advertising market, capturing a 25.9% share, with Alibaba and Tencent trailing behind. [para. 18][para. 19] ByteDance maintained steady advertising growth but faced challenges in diversifying ad formats. Tencent experienced a significant advancement, leveraging tech optimizations to enhance ad marketing services and surpassing 100 billion yuan in revenue for the first time. [para. 20] Kuaishou beat out Baidu in advertising revenue, utilizing AI-driven innovations to diminish video ad production costs for advertisers.

[para. 21] Lifestyle platform Xiaohongshu has gained prominence as an advertising destination, attracting clients from platforms like Douyin due to its appeal among young, affluent consumers in major cities. [para. 22][para. 23] With this strategic approach, Xiaohongshu entered the top 10 companies by advertising revenue in 2024, overtaking competitors such as Weibo, which reported a drop in advertising earnings amidst industry challenges.