Author | Zimo
Edit | Tang Fei
Byte skipping has made a new breakthrough.
According to the Financial Times of the UK, byte hopping has once again achieved rapid growth in performance in 2022. Among them, EBITDA will reach nearly $25 billion in 2022, a sharp increase of nearly 80% compared with $14 billion in 2021. This also means that in 2022, the financial data of byte hopping has surpassed the old technology leaders Tencent and Alibaba. According to statistics, the EBITDA of the two companies in 2022 will be 23.9 billion dollars and 22.5 billion dollars respectively.
After entering 2000, China ushered in the Internet dividend period, and Baidu, Alibaba, Tencent and other Internet platforms opened their own glorious era, accumulating users and expanding their traffic pool through e-commerce, social networking, etc. As one of the important ways to realize traffic, advertising has always been the most important business of major Internet platforms. For example, in 2005, Baidu undertook most of its online marketing business relying on search, and its advertising marketing revenue once accounted for 90% of its total revenue.
As the tide recedes, bottlenecks come one after another. The demographic dividend has gradually disappeared, coupled with the slowdown of macroeconomic growth, and the Internet traffic increment has gradually peaked. While the giants are still thinking about the way forward, "newcomers" represented by bytes have found new outlets and gradually emerged.
In 2012, the byte leapt out of the box, breaking through the tight encirclement by exploring new ways of communication, content innovation and user sinking, and still achieving "overtaking at corners" by virtue of advertising revenue. It is reported that in 2022, most of the revenue growth of byte hopping will come from the core advertising business. The advertising revenue in 2022 will be 2.5 times higher than that in 2021, reaching about 10 billion dollars.
"Algorithm recommendation has become a killer at the beginning". A person who has long observed the development of the Internet industry told the Value Planet that traditional Internet platforms start with content, mainly rely on the integration and further processing of content, which belongs to the initiative to provide users with information or information services, but algorithm recommendation fundamentally subverts this model, It has become a user centered idea. Users can personalize what they like to see, and users and content will sink even more, which plays a vital role in increasing user stickiness.
Bytes did not stop here. The traditional communication mode dominated by graphic information also ushered in changes. The content communication mode of video and live broadcast rose, and the short video platform represented by dithering and fast hand attracted a large number of Internet users. Video based communication is a great help for commercialization. For advertisers, short videos and live broadcast with goods, which have a strong grass planting effect, have a direct and efficient conversion rate. It is reported that the advertising revenue of byte hopping will reach 200 billion yuan in 2020, accounting for 77% of the total revenue.
The growth momentum of byte beating is amazing, but from the perspective of size, compared with the global advertising giants Google and Meta, it is still not comparable. More importantly, whether the advertising business can achieve sustained high growth and whether the profit method can find another way to blossom in multiple places may be the key to byte's ability to truly achieve "curve overtaking". Because the current advertising business is probably facing an unprecedented "difficult environment", at least from the industry cycle, increased competition, demand side changes and other challenges.
Challenge of shrinking advertising market
The advertising industry has a strong periodicity. When the economy is good, enterprises will expand production, and will increase advertising efforts; When the economy goes down, enterprises will cut their spending, which will significantly cut their advertising budgets. After the impact of the epidemic in the past few years, the economic situation has experienced unprecedented pressure, the advertising revenue market has shrunk significantly, and the news of the budget reduction and more cautious investment of advertisers in the market has been heard all the time.
According to the Semi annual Report on the Internet Advertising Market in 2022 released by QuestMobile, in the first half of 2022, the scale of China's Internet advertising market fell 2.3% year on year to 290.36 billion yuan, and the number of advertising brands dropped 38.3% year on year.
Source: QuestMobile
Both BAT and other content platforms are under pressure. For example, in 2022, the sales and distribution expenses of Mengniu, the advertising giant, decreased by 4.86% year on year, and in the first half of 2022, the sales expenses of Shanghai Jiahua, a beauty enterprise that relies heavily on marketing, also decreased by 13.40% year on year. The report of Survey on Marketing Trends of Chinese Advertisers in 2022 released by CCTV Market Research also shows that in 2022, the proportion of advertisers with increased marketing and promotion expenses will decrease significantly compared with the previous year, and the proportion of advertisers with decreased expenses will increase.
Even Meta and Google, the two advertising giants in the world, are not immune. The advertising business is exhausted and under unprecedented pressure.
In the fourth quarter of 2022, Google's revenue was lower than expected, its net profit fell again, and its advertising revenue declined for the second time since its listing. Data shows that Google's revenue in the fourth quarter of 2022 was $76.048 billion, up 1% year on year, lower than analysts' expectations of $76.53 billion; The net profit was 13.624 billion US dollars, down 34% year on year. The net profit has declined for three consecutive quarters. YouTube's advertising revenue was $7.963 billion, down 7.8% year on year, also lower than analysts' expectations.
Meta's life is also difficult. According to the latest data in the financial report, the annual Meta advertising revenue in 2022 will be $113.64 billion, accounting for 97% of the company's total revenue, down $1.21 billion from 2021.
It is not difficult to find that the current advertising business is facing the most challenging market environment. It is not easy for Byte to maintain the sustained rapid growth of advertising business.
Competitive challenges
There is still a huge gap between the size of bytes and that of international giants.
In 2017, bytes not satisfied with domestic business officially went to sea, and TikTok, an overseas version of dithering, was launched. Since 2018, TikTok has risen strongly in Japan, the United States, India and other places. In October 2022, Tiktok's global daily active users (DAU) will exceed 1 billion. Till March 2023, TikTok has 150 million monthly active users in the United States, but it still lags far behind international giants.
Google data shows that Google Maps has an average of 278.6 million login users per month, Google Store has 274.6 million login users, Google Search has 332 million login users, Google Shopping has 74.9 million login users, and YouTube has an average of 401.7 million login users per month. In the second half of 2022, the average monthly active users of Meta's Facebook application in the EU will be 255 million, and the average monthly active users of its Instagram will be about 250 million.
Of course, the corresponding advertising revenue also has a large gap. In 2022, the byte advertising revenue will be about 10 billion dollars. Meta's advertising revenue in 2022 will be $113.64 billion, and Google's advertising revenue in the fourth quarter of 2022 alone will reach $590.4 billion.
Although the gap is still large, the rapid growth of TikTok still makes the giants feel "uneasy". In order to fight against TikTok, Meta launched Lasso, a short video application, in November 2018. Although it ended in failure, it did not stop there. Later, Instagram launched a new service called Reels. Meta has opened Reels to other products in succession. Facebook has also gradually opened Reels to users in more than 150 countries and regions around the world, trying to gradually "cultivate" Reels in the field of short videos to develop against TikTok.
Previously, Google also hoped to acquire FireWork, a short video application platform similar to TikTok, to compete with TikTok. Finally, Google decided to "practice" and launch short video service based on YouTube. In 2020, YouTube's short video application "Shorts" will be officially launched. Like TikTok, users can upload their own clips and add short videos of authorized music. In April 2022, Google revealed that YouTube Shorts has more than 30 billion views a day, four times the number in 2021. In June 2022, Google revealed that the number of monthly viewers of YouTube Shorts has exceeded 1.5 billion.
Source: Network
Back home, the dark moment of Internet advertising is beginning to dawn.
With the gradual release of the performance in 2022, the domestic Internet advertising market finally ushered in some happy changes, and the revenue of many platforms returned to growth.
In the first three quarters of 2022, Tencent's advertising revenue continued to grow negatively year on year, but in the fourth quarter, Tencent changed its declining trend, with a growth rate of 14.60%. Among the three e-commerce giants, Pinduoduo's revenue growth in the four quarters of 2022 is at a double-digit level, and it is also the only major enterprise except Alibaba whose annual advertising revenue exceeds 100 billion yuan.
Not only the data, but also the big factories are more optimistic about their business in 2023. Baidu CEO Robin Li said on the financial report conference that Baidu's advertising business revenue has improved significantly. In the long run, the business growth will also be higher than China's overall GDP growth. Li Ni, vice chairman and COO of Bilibili, also stressed on the financial report conference that the market share of the advertising business of Station B has continued to increase in the past year, and she is also confident that the growth rate of this year will be higher than that of the entire advertising industry.
From a macro perspective, Internet advertising has also shown some resilience. According to the QuestMobile report, the overall advertising market will decline by 9.4% in 2022. However, with the steady recovery of traffic and the increase of users' online time, the Internet advertising market will still grow by 1.4%, breaking through 660 billion yuan.
It is easy to see that with the gradual recovery of the economy after the liberalization of the epidemic, the major domestic science and technology platforms are ready to launch. For Byte, the domestic competitive pressure will also gradually increase.
The challenge for advertisers to become "harsh"
Today, the industry consensus is that the Internet incremental dividend has basically reached its peak. The Internet dividend has receded, and it is more important to retain customers.
In the past, the brand value of the platform was very important. Now, this trend is also changing. Advertisers begin to pay more and more attention to the effect, hoping that the faster the transformation of advertising is, the better the effect will be. This is also the reason for the better development of effective advertising in the past two years.
Yang Huaiyuan, general manager of Alibaba Super Huichuan Advertising Platform, said recently that for the marketing industry, what customers needed before was to increase new users. Today, in addition to expanding new users, they also need more demands such as user retention, activity, and payment conversion. The overall marketing focus has shifted from the front end to the back end. For brand manufacturers, the earliest advertising demand is exposure rate and click through rate. Today, it has become activation, registration, payment, repurchase and other indicators, which has become the industry development trend. Under the situation that the dividend of mobile Internet traffic peaked, the competition in the Internet marketing industry began to turn to the competition for the stock duration.
Zhang Chengliang, the Chinese brand marketing consulting partner of PricewaterhouseCoopers, also believes that the future brand competition will gradually move from "flow dividend driven" to a deeper "brand value driven" stage.
On the whole, unlike the previous traffic only business, it is more complex and difficult to do well in Internet advertising, and domestic large factories will enter a deeper area with more intense competition and more sophisticated.
Regulatory challenges
Some insiders told the value planet that for bytes, the uncertainty from the regulation during the development of TikTok is the biggest challenge.
In recent years, the United States has repeatedly suppressed TikTok on the grounds of "national security", including requiring American institutions to remove TikTok from all government equipment, requiring Chinese owners to sell shares of TikTok, and so on. Recently, even one American state has tried to ban TikTok completely. On April 13 local time, the House of Representatives of Montana passed the "TikTok Prohibition Act" on second reading. According to Montana law, the bill needs a third round of voting and the signature of the governor to take effect. According to the analysis of the Associated Press, "Montana is close to becoming the first state to completely ban TikTok".
Source: Network
In fact, whether online or offline advertising, its core driving force is user traffic and the accuracy of advertising. When the increment is facing a bottleneck, it is very important to increase the use of data. Only through data can we obtain the precise needs of users, and then achieve precise distribution and service.
"Bytes are now facing serious data segmentation problems," said the above industry insiders. Bytes need to meet the relevant regulatory requirements of overseas countries, especially for the purpose of data privacy protection, countries will put forward many restrictions on TikTok, which will greatly weaken their own control and utilization efficiency of data, More seriously, it may directly stifle the development of relevant business.
summary
In 2022, Byte Beat will "overtake at a bend" by virtue of advertising revenue, but the road ahead is still long and blocked.
Compared with the global advertising giants, there is still a gap between the byte beating and the current advertising business is facing the most challenging market environment, at least from the industry cycle, increased competition, demand side change and other challenges.
How to maintain the high growth momentum of advertising revenue, whether the profit method can blossom in more places, and explore more ways to generate revenue are all questions left to bytes.
Reference material:
[1] The revenue of many platforms returns to growth, but has the dark moment of Internet advertising really passed
[2] "Bonus bottoms out, Internet giants bid farewell to the era of traffic", e-commerce newspaper
(Statement: This article only represents the author's view, not Sina.com's position.)
