Our research analysts covering China Internet & New Media expect positive Compound Annual Growth Rate (CAGR) from social media ads from 2016 to 2018 due to the growing popularity of social networking services.
Our analysts think that native ad types will be most popular, given their less intrusive nature. Meanwhile, the need for alternative native ad formats has led to the development of “cewebrities”, or key opinion leaders (KOLs). These KOLs engage with users across a variety of platforms, and the recent boom in live streaming is a result of this demand for interaction with “cewebrities”.
We believe monetization of social media ads is beginning to be unlocked. Ad dollars continue to migrate from desktop to mobile, and think mobile’s proportion of digital ad spending will rise. We expect that the social media ads market will observe a positive CAGR between 2016 and 2018F, against the overall online ad spending CAGR. This divergence is due to the relentless rise of user time spent on social network service (SNS) platforms. Consequently, advertisers are allocating a larger proportion of their marketing budgets to branding via social media.
Additionally, search dominance looks to be shrinking, according to our analysts. We look for China’s search market revenue to observe a slowdown in CAGR growth. We attribute this potential slowdown to more stringent regulation and search’s diminishing grip on mobile traffic. This is because the development of apps prevents some search engines from indexing a complete set of data, which in turn hurts the effectiveness of those search engines.
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