Are There Great Opportunities in Digital Marketing in China?

The Internet era gave birth to the emerging digital marketing industry, which gradually evolved from the one-way communication of traditional marketing to the interactive communication of digital marketing. Driven by market demand, China's digital marketing industry has made great progress, with the market size rising from 173.05 billion yuan in 2018 to 239.53 billion yuan in 2022, and the annual compound growth rate from 2018 to 2022 reaching 8.47%.

In the future, digital marketing will develop towards the " technology + data " model, and data sharing between different companies and data suppliers will effectively improve the analysis accuracy of digital marketing. It is expected that by 2027, the market size of China's digital marketing industry is expected to reach 383.65 billion yuan, and the steady growth of digital marketing of fast-moving consumer goods is an important driving force for the growth of China's digital marketing industry.

Digital Marketing Industry Definition

Digital marketing uses digital communication channels to carry out marketing activities for products and services. It has strong timeliness, relevance, and a high level of customization. In recent years, technological advances in the fields of the Internet, communications, and interaction have greatly driven the development of the digital marketing industry. In the future, the digital marketing industry will become an indispensable part of China's digital economic ecosystem, becoming a digital link between enterprises and end users, and continuously creating added value.

Digital Marketing Industry Classification

According to different channels, the digital marketing industry can be divided into two categories: online digital marketing and offline digital marketing. Although the two have different communication channels, their core foundations are digital technologies such as big data, artificial intelligence, and cloud computing.

Online digital marketing is also known as Internet marketing. Its main online channels include online chat platforms (WeChat, QQ), e-commerce platforms (Taobao, JD.com, Pinduoduo), short video platforms (Tik Tok, Kuaishou), content social platforms (Weibo, Zhihu, Xiaohongshu), etc.

The communication channels of offline digital marketing include TV advertising, radio advertising, SMS advertising, community electronic advertising, etc. With the support of digital technologies such as big data, artificial intelligence, and cloud computing, the goals of precise and customized marketing can be achieved.

Digital Marketing Industry Characteristics

At present, China's digital marketing industry already has a number of high-quality leading enterprises, and the industry's CR5 has exceeded 20%. In the future, driven by demand, the digital marketing industry will still have broad room for development, and enterprises in the industry will also enter a stage of further integration.

1. Moderate industry concentration

At present, China's digital marketing industry has a moderate industry concentration. In 2021, the CR5 of China's digital marketing industry reached 23.4%, which means that the industry concentration is at a moderate level. Leading companies such as BlueFocus and Leo Group have accumulated certain market advantages, but other participants still have opportunities to expand their market share, and there is room for further integration in the industry in the future.

2. Strong demand in the fast-moving consumer goods industry

The FMCG industry has the most urgent need for digital marketing. At present, the proportion of FMCG digital marketing in the digital marketing market share exceeds 50%. The reason is that the FMCG industry is a buyer's market with fierce competition. Digital marketing will effectively enhance the competitive advantage of FMCG brands.

3. “ Technology + Data ” Model

Information technology and data are the two core foundations of the digital marketing industry. Based on information technologies such as the Internet, big data, artificial intelligence, and cloud computing, digital marketing still requires a large amount of user, consumption, and market data for decision-making analysis. Data sharing between different companies and data suppliers will effectively improve the analysis accuracy of digital marketing.

The development of digital marketing

Germination period 1990-2010

In the 1990s, the World Wide Web entered a period of rapid development. The advent of the global Internet era laid the foundation for digital marketing, and digital marketing officially entered its embryonic stage. During this period, digital marketing was still in its earliest stages, and the forms of digital marketing included single forms such as web page pop-up ads and search engine ads, and the core purpose of marketing was simply to sell products.

Start-up period 2011-2015

Since 2011, the rapid evolution of various information technologies has promoted the development of digital marketing, and digital marketing has entered its start-up period. The popularity of smartphones, e-commerce platforms, and social networking platforms has formed a closed loop in the digital marketing ecosystem.

During this period, the popularity of e-commerce platforms such as Taobao and JD.com, and online social platforms such as QQ, WeChat, and Weibo has led to rapid development of online digital marketing, and companies have gradually shifted their offline marketing budgets to online digital marketing.

High-speed development period 2016-Present

Since 2016, the integration and innovation of technologies such as big data, artificial intelligence, cloud computing, blockchain, and the Internet of Things have provided a solid technical foundation for digital marketing. The digital marketing industry has gradually developed in the direction of ecology, platformization, and omni-channelization. Enterprises in the ecosystem have worked together to build a marketing data ecosystem through data sharing.

During this period, the business model of digital marketing continued to be updated, and the formation of data platforms and data ecosystems helped solve the main pain point of digital marketing in the past - data silos, and the concept of precision marketing continued to heat up. Under the upsurge of the digital economy in the Chinese market , the digital marketing industry is expected to take advantage of the good market environment and actively expand the market.

Analysis of the digital marketing industry chain

The upstream of the digital marketing industry chain is composed of information technology suppliers, including Alibaba, Baidu, Tencent, Huawei, JD.com and other Chinese technology giants. The midstream of the industry chain is composed of digital marketing companies. The downstream of the industry chain is composed of digital marketing customers, including Uni-President, COFCO, Synear Foods, Procter & Gamble and others.

At present, upstream technology suppliers in the digital marketing industry chain have high technical barriers and certain bargaining power. In the future, as competition among upstream technology companies intensifies, the bargaining power of upstream companies will gradually weaken. Competition in the digital marketing industry in the middle of the industry chain is at a moderate level, and the CR5 of the industry reached 23.4% in 2021. In the future, competition in the digital marketing industry will gradually intensify, the market will become increasingly saturated, and the industry is expected to usher in a new round of integration, and the industry CR5 may reach more than 30%.

Upstream of the industry chain

Big data, artificial intelligence, cloud computing, blockchain, the Internet of Things and other technologies are the underlying foundation of digital marketing. Suppliers of such technologies are the core upstream link of digital marketing, and technology procurement costs account for more than 10% of the costs of midstream enterprises. The upstream link of the industry chain has huge technical barriers, and upstream companies have strong pricing power. For example, in the public cloud IaaS market, Alibaba, Huawei, China Telecom, and Tencent have formed a monopoly, with Alibaba's market share approaching 35% and Huawei's market share reaching 11.6%. In the future, intensified competition among upstream technology suppliers may reduce the procurement costs of midstream enterprise technology.

Midstream of the industry chain

Digital marketing companies support the midstream of the digital marketing industry chain. At present, the overall digital marketing industry is improving. The digitalization of traditional enterprises has brought huge demand for digital marketing. Digital marketing companies have a relatively broad development space, and the scale of the digital marketing market is expected to exceed 2.6 trillion yuan by the end of 2023. In the future, various emerging channels for digital marketing (such as " metaverse + digital marketing " ) will become a new track for digital marketing companies to deploy. Driven by these new channels and new models, the market scale of digital marketing is expected to exceed 3 trillion yuan in 2025.

Downstream of the industry chain

The downstream of the digital marketing industry chain is digital marketing customers, including fast-moving consumer goods companies, durable goods companies, and various service companies. Among them, fast-moving consumer goods companies and durable goods companies have extremely high demands for digital marketing. The two contribute nearly 85% of the sales of the digital marketing industry, totaling more than 2,064 billion yuan. In the future, with the continued increase in penetration rates in the fields of mobile Internet, live e-commerce, and the metaverse, fast-moving consumer goods companies and durable goods companies will continue to maintain a high level of demand for digital marketing, among which the growth rate of digital marketing in durable goods will be close to 15% between 2023 and 2027.

Digital Marketing Industry Scale

In the past five years, China's digital marketing industry has made great progress, with the market size increasing from 173.05 billion yuan in 2018 to 239.53 billion yuan in 2022, with an annual compound growth rate of 8.47% from 2018 to 2022. In the future, the growth rate of the market size of China's digital marketing industry is expected to remain at a high level, and may reach 383.65 billion yuan in 2027.

In the fast-moving consumer goods market, digital marketing services can bring huge competitiveness and brand influence to enterprises, thus having a huge market demand. From 2018 to 2022, the annual compound growth rate of the digital marketing market size of fast-moving consumer goods will remain at 5.6%, becoming the backbone of the development of the digital marketing industry. In addition, the durable goods market (such as automobiles, home appliances, etc.) has gradually attached importance to the layout of digital marketing, and the growth potential of digital marketing of durable goods has been gradually released, becoming a growth track for China's digital marketing industry. The market size of digital marketing of durable goods has increased from 427.4 billion yuan in 2018 to 719.5 billion yuan in 2022, with an annual compound growth rate of 13.91%.

In the future, the market demand for digital marketing of durable goods will remain high, thus continuously driving the rapid growth of the market size of digital marketing of durable goods. Between 2023 and 2027, the compound annual growth rate of the market size of China's digital marketing industry is expected to reach 9.87%.