Marketing revenue growth saw some Chinese internet giants experience improvement in the initial three months of 2023 on a year-on-year basis — yet not Alibaba, whose market value holds the top position. Ashley Dudarenok, founder of ChoZan, a Chinese marketing consultant, commented that the industry generally assumes 2024 will be the year of recovery and resurgence. Of the major U.S.-listed Chinese online platforms, Pinduoduo got the most notable year-on-year rise in revenue from advertising sales in the Q1. The application stands out for its offerings of extraordinary bargains.
Companies in China have been spending cautiously on advertising this year as it is predicted that local consumption will not improve soon. Although marketing income parts of Chinese internet giants increased during the initial three months of 2023, the most valuable, Alibaba, lagged behind other companies. As the 618 shopping festival approaches, businesses remain hesitant. According to Ashley Dudarenok, founder of ChoZan, a China marketing consultancy, although it is costing the same amount to bring in customers, they are spending approximately 30% less.
It was reported that the mean disposable income of urban occupants in China in the first quarter was 12,175 Chinese yuan ($1,739), a rise of 3.9% from a year prior. As per a central bank survey, education, health care and travel were the top choices for planned expenditure. Dudarenok stated, “Generally speaking, it is expected that 2024 will be the time of growth and recovery. The aim for 2023 should be to come out of the recession and to stay connected with platforms as well as customers". She additionally brought up that promotional companies are also using funds just to experiment with search engines. Baidu and Microsoft's Bing have both been trying out new generative AI technology.
The Covid-19 pandemic has weakened Chinese consumer spending by causing economic growth to slow down and creating uncertainty about future income. Although no national stimulus checks have been issued, retail sales during the first four months of this year have slightly improved. Figures for May will be announced on June 15.Regarding the Chinese consumer this year, Dave Xie, principal at consultancy Oliver Wyman and an expert in China's retail sector, noted that people are looking to purchase higher quality products at a fair price. Furthermore, domestic cosmetics brands have increased their market share versus international brands due to promotions surrounding the 618 shopping festival. Upon being asked about the outlook for the Chinese consumer in the coming year, a JD Retail representative mentioned that growth is likely to be choppy and that performance by platform also varies as online shopping habits shift.
Brands appear willing to allocate increasing funds to ByteDance's Douyin, which may draw away from ad expenditure on Alibaba's Taobao and Tmall e-commerce platforms, as observed by Oliver Wyman's Xie. As ByteDance is not publicly listed and rarely reveals detailed figures, Pinduoduo reported the highest year-on-year growth in ad sales revenue among other major Chinese internet platforms listed in the U.S. in the first quarter. This group-buying app, renowned for bargain discounts, is probably doing well since locals are unwilling to pay higher prices. Sun Hao, partner at Beijing-based Goodidea Growth Network whose clientèle includes Nestle, P&G, and Tmall, affirms that many people in his environment resort to Pinduoduo. He also noted "significant" progress for the Little Red Book, or Xiaohongshu, app, since its users typically comprise of mothers and middle-class city dwellers with spending potential. The app isn't listed either. However, Sun stated that several brands didn't reach their goals for the first quarter and his overall conclusion is that ad budgets are on the decrease, particularly for traditional media. In the case of Douyin ads, he commented that the return on investment for each ad dollar is becoming slimmer.
Ending of China's stringent Covid regulations and the pandemic itself have undeniably encouraged travel and face-to-face affairs. Trip.com, a booking platform, stated that it amplified its spending on sales and marketing in the first quarter to 1.8 billion yuan ($256 million). Kelly Shi, the branding director, claimed that due to China's reopening, offline promotion has become increasingly relevant for iQiyi (known as the 'Netflix of China'). The organization has employed billboards and tactile experiences to publicize its material. The release noted that the company's selling, general and administrative outlay for the first quarter was 1.1 billion yuan, a 48% rise from last year, mainly due to increased marketing expenditure.
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The domestic market in China has experienced slower growth, motivating consumer companies in the country to expand overseas. This has been reflected in a report from Bain & Company from May of this year, which showed that China-based consumer product companies had the highest growth in international revenue in the whole of the Asia-Pacific region over the last ten years. Philip Leung, leader of Bain's Asia-Pacific M&A practice based in Shanghai, predicted that China-based businesses will execute more overseas deals within the next year and a half. According to him, the main aim of these deals is to access both overseas markets and also the Chinese market by acquiring popular brands.
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