In previous sharing, we said that 2019 is the first year of monetization of China's mobile Internet. As capital recedes, mobile Internet must have the ability to generate its own revenue, otherwise it will face painful lessons. In fact, from the rumors of food shortages last year to the financial fraud of Luckin Coffee, a supporter of the "traffic pool" concept, the essence is that there are problems with monetization: traffic is just superficial, and monetization is the essence. Among all monetization methods, the simplest is advertising.
Now I would like to share with you some things happening in the world of Internet advertising and peel off the industry’s “fig leaf” hidden behind the traffic.
Let me first share the big melee in the underworld in 2019. QuestMobile data shows that among the companies in the Internet field with advertising revenue exceeding 10 billion yuan, Pinduoduo, Sina Weibo and ByteDance use advertising as the main method of monetization, and advertising revenue accounts for more than 80%. Xiaomi and Meituan have been focusing on their advertising business in the past two years and have entered the 10 billion yuan echelon.
This also further proves that since the birth of China's Internet, the essential meaning of users and traffic has been advertising revenue. However, in the past three years, especially in 2019, this concept has changed dramatically:
On the one hand, Internet advertising is migrating from PC to mobile. The proportion of PC advertising has dropped from 10.8% in 2018 to 8.3% in 2019, while the proportion of mobile advertising has reached nearly 90%. It is expected that in the next two years, OTT and smart hardware will further squeeze PC advertising, increasing from 1.9% in 2019 to 7.1% in 2022. By then, PC advertising may only account for 4.6%.
On the other hand, the advertising type has shifted from display to "display + performance". In 2019, e-commerce advertising and information flow (including news and short video) advertising basically maintained a growth rate of around 40%. It is estimated that by 2021, the proportion of e-commerce advertising and information flow (including news platforms and short video platforms) advertising will reach 40.0% and 25.2% respectively. Among them, the revenue from purchasing related and short videos grew rapidly. In terms of specific growth rates, Kuaishou grew by 160% (Kuaishou started commercialization relatively late), Pinduoduo grew by 132.9%, Toutiao grew by 128.6%, and Douyin grew by 100%. Among them, there is an outlier. In the situation where traditional media are generally declining, Mango TV, which has been repeatedly mentioned by Mr. QM in the past few years, has grown by 115.7%. This is called comprehensive quality.
In the next few years, with the ecologicalization of traffic models (multiple locations, multiple forms) and the scenario-based extension of traffic (multiple screens, multiple channels, multiple scenarios), it is expected that these two major trends will continue further. How to do it? You might want to read the report.
Research Description of this Report
Report Navigation
The Internet advertising market in 2019 is undergoing a transformation. Both the supply side and the demand side are changing to adapt to changes in the marketing environment. This report will describe the changes in the Internet advertising market from both the supply side and the demand side.
1. Market development: more active overall, with growth and change driving development
1. The Internet advertising market has a solid foundation for development and is still an important component of the Internet economy
1.1 Monetization structure: Advertising is still one of the main methods and an important component of profit
Internet companies have diverse ways to monetize. E-commerce platforms represented by Alibaba and Pinduoduo still mainly monetize through advertising, and the advertising monetization rate has grown steadily. Companies represented by JD.com and Xiaomi have been focusing on their advertising business in the past two years, and it has become an important component of the group's profits.
1.2 Traffic composition: Mobile Internet and PC Internet are still the main components of Internet advertising traffic, and have formed relatively stable application scenarios
2. The market growth rate slowed down. Market competition becomes more intense
2.1 The Internet advertising market will continue to grow in the next three years, but the delivery forms will be more diversified
Mobile advertising will remain the main form of advertising, while OTT and smart hardware will expand rapidly, grabbing PC advertising budgets.
From the past year to now, brands have further strengthened their requirements for advertising value and refined process control. At the same time, they are exploring efficient ways to reach target markets such as young people and sinking markets. As a result, marketing technology, interactive methods, advertising forms, etc. have developed rapidly, and the carrier forms and combinations of the Internet advertising market have changed with each passing day.
2.2 Information flow advertising and e-commerce advertising, which combine brand display and performance delivery, are growing faster than the overall Internet advertising
2.3 The competition structure has changed, and the advertising revenue of media types close to monetization and users has grown faster
In 2019, new media (such as short videos) broke through the circle and continued to compete for the advertising share of the former mainstream media. In the future, the development of 5G will not only promote the development of the Internet industry, but also drive the development of new advertising forms. New channels may create a new ceiling for the growth of new media advertising revenue.
3. New trends that affect the competitive landscape are emerging
3.1 The competition landscape of top media has changed in 2019, with media such as purchase transactions and short videos entering the 10 billion yuan advertising revenue echelon
3.2 Advertising revenue growth was relatively concentrated in 2019, with short video and e-commerce platforms growing significantly
2. Market changes:Aggregating multi-form ecological traffic and expanding boundaries
1. Change 1: Traffic extension
1.1 Advertising location layout under ecological traffic
As traffic entrances and purchasing channels become more and more diverse, coupled with the influence of celebrities/KOLs, advertising formats and advertising locations are becoming more diverse.
The user purchasing process has become nonlinear. The innovative design of advertising locations and formats is consistent with the marketing target positioning, and resources are aggregated to achieve 2C or 2B advertising monetization.
1.2 Traffic extension 1: Building advertising layout with multi-channel, multi-screen and multi-entry integration
After the aggregation of multi-channel traffic, there is a lot of room for imagination in the design of advertising formats, advertising locations and timing, so the ecological traffic can be maximized.
1.3 Traffic extension 2: Expand and integrate third-party traffic through the ADX platform
Each media outlet makes its layout in the advertising ecosystem based on its own resource base. Through the ADX platform, it can break the limitations of its own traffic or resource scope and maximize the application of its own traffic.
2. Change 2: New media compete for supremacy
2.1 The video media industry is divided, short videos occupy users' fragmented time, and traffic monetization is significant
2.2 Increase in exposure to performance ads
The increase in exposure of performance ads is due to the fact that performance ads are charged on a click-by-click basis, and the probability of user clicks needs to be increased by expanding exposure; on the other hand, it also reflects the media's inclination to maximize the use of traffic resources.
3. Change 3: Information flow advertising becomes mainstream
After search and video patches became the must-have advertising formats for brands, information flow has gradually become one of the mainstream advertising formats.
4. Change 4: Changes in media mix preferences
Brands tend to invest more budget to cover a wider range of media, and promote precise delivery and comprehensive coverage simultaneously.
The previous section introduced the chaotic landscape of the Internet advertising industry in 2019, from which we can basically see who is dead, who is alive, and who is not sure whether to live or die. Below I would like to share with you the marketing events and landing points in 2019, as well as the changes in user behavior and media value reflected thereby. QuestMobile data shows that in 2019, China's total retail sales of consumer goods increased by 8%, exceeding 41 trillion (slightly different from the United States). If anyone still thinks that the domestic demand market is not worth digging deeper, Mr. QM can only say goodbye. Among them, online consumption still maintained a relatively high growth rate, exceeding 8.5 trillion, among which the proportion of channels such as live e-commerce and idle transactions is increasing.
Behind this change is precisely the change in user habits and media structure: user reach is fragmented, conversion chains are shortened, mini programs shorten the purchase chain, and live streaming compresses decision-making time. This can also be seen from typical marketing events in 2019 (including those officially considered "misunderstandings"), such as What is Page, the cooperation between NetEase Cloud Music and Sanqiang, Jay Chou's Weibo Super Topic PK Cai Xukun, Zhong Xuegao × Luzhou Laojiao, etc. Basically, they all use a combination of online and offline fragmented channels to accurately hit users and ultimately land on e-commerce channels to form conversions.
In this process, although they are all traffic concepts, the values of different media have also shown differences. The different characteristics of "tools + content", "channels + content", and "tools + channels + content" make the value of "user frequency and time" and "content" complement each other and it is difficult to distinguish the primary and secondary. Based on these media and content forms, with the combined marketing model of "Internet celebrity + brand + event" and the construction of a complete chain of e-commerce purchases, future changes are already visible: "channel × content - marketing - purchase" closed loop is formed, and the slogan-style screen dominance, circular exposure and other TV advertising models that were originally hated by everyone are being pushed into the ICU...
Report Navigation
Following the above insights from the supply side, the following will describe changes in the Internet advertising market from the demand side.
3. As more consumer purchasing channels are available, advertising needs to reach all
1. Retail consumption growth slowed down. Purchasing channels are more fragmented, and marketing pressure is increasing
1.1 In 2019, the growth rate of China's consumer market slowed down, the automobile industry continued to experience negative growth, and the apparel market was close to saturation.
1.2 The proportion of online consumption has increased, and online shopping channels have become more diversified
In 2019, users’ purchases through live broadcasting and idle transaction channels increased.
2. User catalysts are fragmented and video-based
2.1 In 2019, user catalysts are more fragmented, and online purchases are more focused on cost-effectiveness
2.2 The overall change in the user catalyst field is not significant, but the same field is more concentrated
2.3 Mini Programs shorten users’ purchasing channels and become a “connector” for online and offline consumption scenarios
2.4 The number of “onlookers” watching live broadcasts has grown rapidly, the payment ratio has grown steadily, and users have a more rational purchasing tendency
3. In 2019, the “younger” marketing highlights are prominent. Young users are repeatedly pried into
3.2 Slot marketing is easier to reach young users than nostalgia marketing
Marketing events represented by the brand created by Zhong Xue Gao based on young groups and the brand-young series of mobile phones launched by OPPO Reno have been particularly effective, with a clear leverage on young people.
3.3 In line with marketing goals, OPPO Reno’s creative series of advertisements continue to increase brand exposure
4. Reaching the lower-tier markets is a sustainable marketing goal. Scientifically select media combinations to achieve effective reach
4.1 The media preferences of the lower-tier population are pan-entertainment and shopping, and pre-installation is also an effective way to reach them
4.2 The media preference rate of the lower-tier population is low, so multiple channels can be selected for delivery
Media screening and selection:
1) Select media in the target audience’s preferred field based on TGI;
2) Select media based on mainstream advertising formats;
3) Look at the overlap of the same type or equivalent traffic scale in the same field;
4) Select media combinations to predict reach efficiency. According to the above process, we plan to select Kuaishou, Xigua Video, Baidu, Qutoutiao, UC Browser, and Pinduoduo as examples to judge the effect of media combination pre-investment.
After media screening, the selected media combination can cover 82.1% of the lower-tier population, among which Kuaishou is more efficient in covering the lower-tier population.
IV. China's mobile internet advertising trends: redefining media value
1. What are the problems encountered in media development?
1.1 Question 1: Content > Channel or Channel > Content? Users are more dependent on content, and content can overcome the limitations of media advertising capacity
At the current stage of development, Internet media is no longer limited to media attributes. Basically, as long as there is traffic, there is space and foundation for advertising capacity. The media has also extended in various directions such as tools + content, tools + channels + content, and channels + content. The core is to increase the frequency and duration of user usage, and content has become an auxiliary way to participate in traffic monetization.
1.2 Question 2: Can crazy exposure boost weak consumer power? Advertising exposure is still a means of supporting major promotions or important marketing activities
In March 2020, beauty and cosmetics sales exploded, especially during Women's Day, with sales increasing significantly. During the same period, advertising and live streaming were promoted simultaneously. The overall sales of the beauty industry show a trend of being driven by big promotions, and live streaming is also an important means.
1.3 Question 3: How valuable is KOL’s extended media traffic? As a traffic portal, it continuously drives users to stay active through the combination of people + brands + activities.
Taking the Kuaishou platform as an example, the activity of KOLs has driven the activity of platform users, not only in terms of fan stickiness and fan activity, but the effect of bringing goods needs to be viewed rationally.
The monetization of media platform traffic has formed a complete value chain of content stickiness + channel diversion + e-commerce purchase, and content/KOL has increased advertising and marketing monetization methods. Typical apps with the highest advertising revenue growth in 2019 have large traffic pools and, based on their own attributes, have expanded their traffic and monetization efforts.
2.2 Interpretation 2: Shortening the chain
Stimulating consumer purchases and shortening the conversion path (alleviating the diminishing stimulus effect) is also one of the necessary methods. Driven by the continuous shortening of conversion paths, user purchasing channels are becoming more diversified. In terms of advertising, precise user reach - a complete link is formed from the landing page to the e-commerce platform.
