China online advertising revenue reached 75.31 billion Yuan in 2012 and entered into a period of steady growth.

According to the latest data of Chinese online advertising in 2012 released by iResearch, China's online advertising revenue reached 75.31 billion Yuan, up 46.8% over last year. The growth rate was comparatively slow and it indicates that the online advertising market has entered into a relatively steady period.

Along with the increasing number of internet users and the change of their behaviours, advertisers need to find a more effective way to reach more consumers. The online advertising industry still has room to improve and advertisers have started to pay more attention to the effects of marketing.

Big Data, RTB and a variety of DSPs were hot in 2012, while emerging advertising companies changed the online advertising industrial chain and new marketing techniques were adopted in order to improve advertising precision.

Display And RTB Market Size

The display market is estimated to be worth about half of the total advertising spend - around the 32 billion Yuan mark (€4.2 billion/ £3.6 billion/ $5.7 billion). This would make China a little bit smaller than Japan, currently the second biggest display market in the world, and on a par with the entire European market. But by 2016 China could eclipse them all, and might even vie for top spot with with the US. iResearch expects display to be a 100 billion Yuan market in four years time.

But what about the RTB market size in China? It is still early days. Impression-level buying has only really got into its stride in 2012. Tabao and Adx were the first mover exchanges in the market, but now we are seeing a number of big portals, like Sina opening private exchanges. Some international players are in the market, working with the big holding groups. And local ad tech providers like iPinYou are helping to grow the RTB spend with their own solutions.

The RTB market is estimated to be currently around 5&-10% of display volume. Industry leaders expect that to rise to at least 30% of the display market over the next three-to-four years, as advertisers realise the value in price and inventory transparency - something that has been lacking so far in the Chinese ad market. Growth is strong. Last year for instance, Tabao, one of the largest ad exchanges in China handled around 1 billion Yuan of spend - that's around $160 million. And that was only after twelve months of trading. The company is still to open up its own significant - and intent-laden - inventory to RTB.

Innovation rather than online advertising adoption fuelling future growth

iResearch analysis found the growth rate of online advertising revenue become slower due to the following three reasons: Firstly, after experiencing a high growth rate over a decade, online advertising entered into a more mature period, seen from the perspectives of both media and advertising forms. Secondly, the advertising services of key enterprises are more mature and the growth point of online advertising in the future lies in reform and innovation of these enterprises. However, the mobile advertising is still in its early stages of development and it will continue to face the difficulty of monetisation. Thirdly, the weakness of the macro-economy and the decline of netizens' demographic dividend will also influence the development of online advertising market to some extent.

In 2012, the growth rate of the search market kept in line with the growth rate of the online advertising industry as a whole. Meanwhile, the e-commerce platform and independent video websites kept a rapid growth and their market share increased.

The number of Chinese internet users reached 564 million in 2012. The penetration of online video audiences outstripped search in May 2012 and online video became the most popular internet service. The hottest teleplays and TV shows brought high traffic for the online video industry. Consequently, advertisers’ demand for co-operation between TV channels and websites became stronger and the value of online video advertising increased. Under the trend of multi-channel advertising, more and more advertisers started to budget more for online video advertising. Therefore, by revenue, share of video websites in internet service increased by 0.6% to 7.7% in 2012 and is expected to boost further.

iResearch predicts that by 2016 advertising revenue for search and e-commerce will occupy 30% of total online advertising revenue, with other media channels keeping a stable rate of increase.

iResearch believes that in 2012, internet advertising revenue exceeded 50 billion Yuan, which outstripped that of newspapers, and in 2013 it will be close to TV advertising revenue and reach 100 billion Yuan. The rapid growth of core media will significantly increase the marketing value and reflect the trend of online advertising.

ExchangeWire will be doing a series of pieces analysing and assessing the growth of the Chinese RTB space over the coming weeks - with interviews and commentary from local and internatioanl players active in the market.