20230616-招银国际-2Q23_online_advertising__recovery_in_cautious_mode_5页_775kb

China Internet Sector Update - Q2 2023 Online Advertising Analysis

Sector Overview

• The China Internet sector is rated OUTPERFORM, indicating it is expected to outperform relevant broad market benchmarks over the next 12 months.
• Total online advertising spending in 2Q23 saw a 15% YoY recovery, driven by a low base from 2Q22 and improving consumption, but it remains below 2021 levels (92% of April 2021 ad spending).
• Expectations for ad market recovery are moderate across 2Q23-4Q23E; better-than-expected growth could result from additional policies supporting consumption and economic confidence.

Ad Market Dynamics

• Advertiser sentiment remains cautious; only 31% of surveyed advertisers expect budget increases in 2023E, down from 44% in 2021 and 32% in 2022.
• The difference between advertisers expecting budget increases and decreases is minimal (1 percentage point), reflecting ongoing uncertainty.
• Short video and social community platforms are the go-to choices for advertisers due to strong conversion and ROI.

Platform-Specific Analysis

• Online ad revenue growth for Q2 2023 is projected at:
  • Kuaishou: 28% YoY
  • BiliBili: 25% YoY
  • Tencent: 16% YoY
  • Baidu: 15% YoY
  • Weibo: 3% YoY
• The 2-year CAGR for online ad revenue decelerated to +3%, impacted by stagnant user traffic growth and macroeconomic factors.
• Favored platforms include those with growth potential: BiliBili and Kuaishou for user traffic and monetization opportunities, and Tencent for innovative ad products.

Key Recommendations

• The CMBIGM recommends monitoring economic policy developments and forecasts continued but cautious growth in the sector.

Analyst Certification

• All views in this report reflect the personal views of the responsible analyst and are not affected by compensation or conflicts of interest.