China’s digital ad spending expected to increase, but pace of growth to slow

The news: China’s digital ad market is poised to keep expanding over the next few years, though the pace of spending will slow as government regulations pressure the country’s Big Tech sector.

• Our forecast calls for China’s digital ad market to grow by 11.5% year-over-year (YoY) in 2022 to over $135 billion. That said, this year will be the last in which the country’s digital ad spending will increase YoY by double digits, as growth will drop below 10% through 2026.

More on this: China, which faces economic challenges in the wake of continued COVID-19 lockdowns and Russia’s invasion of Ukraine, has adopted measures that restrict corporate data transfers as well as limit and restrict the collection of personal information without consumers’ consent. Another measure would effectively regulate online advertising.

Effects of this regulatory scrutiny are now being felt by the country’s biggest tech companies.

• Tencent reported weaker quarterly revenue growth, citing moves it took to comply with the government rules.
• Ecommerce giant Alibaba posted its slowest quarterly revenue increase since it went public for Q3 2022.

Analyst insight: Despite the weakness tied to the government regulations, “China’s digital ad growth is still quite healthy going forward,” said Brian Lau, a forecasting analyst at Insider Intelligence. “It is still stronger than the other major well-developed markets in APAC. Ecommerce and social ad spending will continue to drive overall digital ad growth—together they make up 66% of total digital in 2022.”