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Bytedance Attracts the Most Ad Spend in China - Dethroning Alibaba

Thinking beyond e-commerce platforms and Baidu

· Chinese Marketing,Digital Marketing,e-commerce

In 2020, the China market became more important than ever for brands around the world. While Western nations continued to struggle with the impact of Covid-19, China was able to get the virus largely under control, and its economy quickly rebounded to pre-pandemic levels, even achieving growth in some industries.

It currently appears that this situation will remain for much of 2021, and as such, businesses are ramping up their efforts in the region. With this many brands vying for Chinese consumers’ attention, a basic China marketing strategy based on outdated assumptions is doomed for failure. Let's take an in-depth look at the cold hard numbers in terms China's 2020 ad spend (data source: Morketing). Important Update 17 Apr 2021: Bytedance pulled in the highest amount of advertising dollars - 26 billion renminbi - in 2020. This is due to a staggering 46% YoY growth that put it ahead of Alibaba's 25.3 billion renminbi and Baidu's 7.3 billion renminbi.

China ad spend 2020, Alibaba ad, JD ad, Baidu ad

Alibaba & JD Gained Ad Market Share

Amid a pandemic, brands prioritized sales over brand-building. E-commerce giants Alibaba and JD ad sales saw big year-on-year (yoy) gains of 45.3% and 25.2% respectively.

So should brands go all-in for e-commerce in terms of your ad budget? For the answer, just look at top brands in your vertical in terms of their China media strategy. In the first quarter of 2020, Alibaba's average customer acquisition cost amounted to around $125, more than eight times its 2013 costs. The chances are that they will be allocating their communications budget based on the “60/40 Rule” developed by Les Binet whose research there tends to be an optimum effectiveness of 60% for brand building and 40% for activation such as e-commerce ads.

E-commerce platforms are modeled after Amazon where competition is fierce within its marketplace so increased ad spend is likely to see a lower return on investment (ROI) since there are very few products that have no alternative brands that may place competing ads. In addition, consumers tend to look at non e-commerce platforms to do their research prior to making a purchase.

This means it remains vital to invest in brand building to earn trust and positive 3rd party online reviews. For B2B brands, this is more important as there's no equivalent of a B2B marketplace that has the scale and reach of Alibaba and JD. More on brand building in our next section.

Baidu is Losing Ad Dollars to Video Platforms

Baidu used to be the defacto platform for advertisers in the early 2000s. Then Alibaba's Taobao e-commerce platform showed up and since it is far closer to the all-important purchase decision, its 2020 ad revenue is 300% larger than Baidu's.

In 2020, Baidu's ad revenue actually fell 6.6%. Shouldn't advertisers be desperate to get their brand in front of consumers who are spending more time online due to Covid-19? Yes, but the consumers are no longer just searching with Baidu and diversifying using video platforms such as Douyin, bilibili and Kuaishou since they are spending time consuming curated short videos based on their interests. So it's no surprise that ad dollars are following eyeballs.

Take Bilibili for example. Seen by many as the next big thing, content creators are joining the platform in droves. According to the same report, in Q3 2020, the number of active content creators on Bilibili was up 50% YOY and the number of influencer accounts with over 10,000 followers had increased 75% YoY. Nearly half of the content creators on Bilibili only began publishing content on the platform less than 6 months ago.

With this flood of new content creators, the average amount of content uploaded to the platform each month has increased 79% YoY. Despite massive growth, Bilibili has retained a highly engaged user base. In 2020, daily time spent on the platform per user soared to a record of 87 minutes.

Lifestyle, gaming, and educational content make up around 64% of content on the platform, so brands may want to think outside the box as to how they can create content that will capture these audiences.

As Ads Get Expensive, Owned Content Becomes Vital

"Private domain traffic," or siyu liuliang (私域流量), is a term that's enamored Chinese companies over the past year with overall internet penetration at 70%. They are increasingly focused on turning casual users into dedicated ones; that is, capturing "public traffic" and turning it into "private traffic."

So how do you capture and subsequently nurture this private domain traffic? The key is really multi-dimensional, multimedia content that can be accessed via live streaming, news articles and review sites. After brands capture such traffic, it is also necessary to keep the relationship going. Li Jiaqi, one of China's top KOLs who's known for peddling record-highs of lipsticks through livestreaming, reportedly operates over 500 WeChat groups, each with 500 active members, the maximum allowed.

This trend of brand-run streams will continue to grow in 2021.

As brands in China seek to capture the attention of the younger generation and consumers in lower tier cities, they will need to be willing to experiment with new channels and content types as well as rethink the typical consumer journey.

Get in touch to discuss how your brand can rethink your customer journey and get more bang for your marketing bucks.

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