The emergence of Internet advertising (e-advertising)

Development

When the first Internet advertisement appeared in March 1997 on Chinabyte.com, China was already three years behind the United States. However, this did mark the beginning of China's Internet advertising industry and played a critical role in the development of its Internet industry. From then on, Internet advertising has offered a new option in addition to conventional advertising modes for advertisers to establish a 'cyber communication' channel with their potential consumers/customers. According to WiseCast, in 1998, advertisers spent a total of RMB30 million on Internet advertising. In the next year, three times as much was spent, a total of RMB90 million. 2000 saw a dramatic increase of 289 per cent in Internet advertising spend , a total of RMB350 million. Although the advertisers' enthusiasm was dampened by the downturn in the IT industry and the general slowdown of the world economy in 2001, Internet advertising still managed a growth of 20 per cent to reach RMB420 million (see Figure 6.13.1).

Figure 6.13.1: Internet advertising spend in China (RMB million)

Advertisers

Many the advertisers still need time to recognize fully the role of Internet advertising and the popularity of the Internet will also take time to develop before there is a sufficient 'Internet population' to convince advertisers that advertising on the net will help them reach the target consumers/customers. According to a survey conducted by WiseCast, there was a total of 669 Internet advertisers in 2000 and the number increased to 1,004 in 2001, an encouraging increase of 50 per cent. However, a closer look at the composition of the advertisers will reveal that the advertisers were basically 'patrons' of the Internet or IT related businesses. In 2000, for example, the number of Internet medium advertisers amounted to 220, 32.9 per cent of the total. There were also 101 advertisers of IT products and 23 from the telecommunications services sector. The same pattern continued in 2001, although the number of Internet medium advertisers declined to 193. This decline was offset by the increase in the number of advertisers from the IT and telecommunications sectors, which totalled 155 and 45 respectively.

Advertisers that use conventional media are still sceptical of the reach that Internet advertising can deliver. Few advertisers of fast-moving consumer products are using Internet advertising. A good sign in 2001, however, was that there were 45 advertisers from medical services and the health care sector posting their advertising on the Internet, although their total spend ranked last after Internet, IT products, real estate and home improvement products, financial services, consulting services for overseas students and emigration.

Internet users

On the other side of Internet advertising is the audience, ie Internet users. Since China began to build its Internet infrastructure in 1994, the size of the Internet population has been growing at a phenomenal speed. According to the latest survey conducted by China Internet Network Information Centre (CNNIC) the number of Internet users in China had reached 45.8 million by 30 June 2002, a net increase of 12.1 million (35.9 per cent) over the past six months. This is an increase by a factor of 75 compared with 0.62 million Internet users when CNNIC did the first survey in October 1997.

Internet users' attitudes to Internet advertising is critical to the success of the advertisers, and for this reason, CNNIC conducted two surveys in January and June of 2001. The responses to this appeared to be quite encouraging (see Figure 6.13.2), provided the surveys are representative.

Figure 6.13.2: Chinese Internet users' attitudes towards Internet advertising

The survey results suggest that Internet users are much happier to click on Internet ads than to receive e- mail advertisements, the latter being labelled junk mail and rejected by many foreign Internet portals.