China's ad-driven video market surpasses in size and scale

According to GroupM’s The State of Video report, released Monday, the main difference between Chinese video giants and their western counterparts is their 80:20 advertising to subscription ratio. China's ad-supported audience far exceeds its subscriber audience, which itself totals around 80 million. More than half of all video viewing hours are long-form.

China's annual video advertising revenue is estimated by UBS to be roughly equivalent to YouTube's globally. The Chinese BAT tech giants (Baidu, Alibaba and Tencent) command 75% of the video advertising audience. 

Each of the giants has its own video platform, with Baidu's iQiyi taking the largest share in subscriptions and standing equal to Alibaba's Youku in advertising. However, Tencent takes the top spot in the video business due to its portfolio of content joint ventures, social reach and payment.

In a separate GroupM report on advertising on OTT (over the top) services in China, this sector is shown to be increasing exponentially, hitting RMB1 billion (US$150 million) in the first half of 2017—equivalent to the total amount in 2016.

OTT accounts for 11% of all TV viewing currently, while the figure is expected to reach 20% by 2020. However, the report points out that the OTT advertising model has yet to reach a mature stage, which the report defines as pervasive content-based advertising. Instead, fairly "primitive" pre-roll ads and screensaver ads dominate, accounting for 60% and 40% of OTT advertising, respectively. That said, significant sectors—retail, ecommerce, finance and auto—account for 72% of OTT advertising. 

Chinese OTT advertising value (in billion RMB)