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Here’s Baidu’s Opportunity in China’s Advertising Market

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Baidu’s advertising business is slowing

Despite the economic slowdown in China, the media advertising market in the country will grow ~15% this year, according to eMarketer projections. Digital advertising is expected to grow 22% to reach $79.8 billion in 2019.

By 2023, China’s digital advertising market is expected to have grown to $134.3 billion. Baidu (BIDU) is one of China’s top digital advertising companies alongside Alibaba (BABA) and Tencent (TCEHY).

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Though Baidu is one of China’s top digital advertising companies, it seems to be struggling to keep up with the competition. The company recorded the slowest growth in its advertising revenue in more than a year in the first quarter. Advertising revenue increased 3.0% YoY (year-over-year) to $2.6 billion in the first quarter, marking slowdowns from 10% in the fourth quarter and 23% in the previous year’s quarter. Baidu’s Internet search engine peers Google (GOOGL) and Yandex (YNDX) recorded advertising revenue growth of 15.4% and 18% YoY, respectively.

Baidu could benefit from China’s tax cuts

China has made hundreds of billions of dollars in tax cuts for small businesses and consumers, which could benefit it via increased spending on its products and services. Chinese small businesses could use their tax savings to run more digital advertising campaigns, thereby feeding Baidu’s advertising business.

On the consumer side of the equation, tax savings could be spent on devices such as smart speakers, which provide more convenience by allowing people to operate appliances in their homes simply by using voice commands. Baidu rose to become China’s top smart speaker company and third worldwide in the first quarter.

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