Digital ad spending in China will grow by 5 per cent this year, but there will be a power swap among the major platforms, as Tencent becomes the No. 2 publisher, displacing Baidu, with Alibaba remaining And No. 1, but with lowered expectations, according to eMarketer’s latest forecast for the region.

Alibaba’s ad revenue is almost three times Tencent’s, but its growth story will not be as rosy in 2020, the analyst said. In recent years Alibaba has successfully leveraged its ecommerce platforms to generate a whole new line of search ad revenue, akin to the Amazon model in the US. In 2016 and 2017 Alibaba saw growth rates in digital ad revenues across its various properties in excess of 40 per cent, and last year that rate was still 24.3 per cent.

This year, however, with online customers pulling back on spending and searching more for basic staples and less for high-end consumer products, eMarketer forecasts Alibaba’s net ad revenue will grow by only 6.5 per cent (down from the pre-pandemic estimate of 19.3 per cent). This decline will be driven by a dramatic deceleration in Alibaba’s search ad business, which grew by 41.2 per cent last year, but will grow by only 8.9 per cent this year.

Still, Alibaba’s combined ad revenue of $27.05bn will easily lead the pack, and represents 35.9 per cent of all digital ad dollars spent in China. The analyst also forecasts a strong rebound for Alibaba next year, to the tune of 16.8 per cent growth, as China’s macroeconomic conditions return to relative normalcy.

Baidu will bring up the rear among the BATs, in terms of 2020 performance, growth, aggregate revenue, and long-term outlook. Although Baidu still towers over niche players like Sina and Sohu, eMarketer forecasts that Baidu’s net ad revenue this year will drop to its lowest point since 2016. Baidu’s $7.85bn will represent a 14.3 per cent drop year-over-year, coming after a 2019 that also saw an 8 per cent decline.

Baidu’s decline means that, for the first time ever, Tencent will move into the No. 2 position for net digital ad revenues, claiming 12.6 per cent of China’s total spend, to Baidu’s 10.4 per cent.

“Baidu has had trouble attracting search ad dollars, despite being free of competition from Google,” said eMarketer Forecasting Analyst, Ethan Cramer-Flood. “Advertisers are showing that they increasingly prefer the reliability of Alibaba’s platforms for their search spend.”

Although eMarketer forecast that digital ad spending in China will be $5.73bn less this year than anticipated, the $75.33bn total will still easily rank China as the second-largest market for digital advertising in the world, behind only the US at $134.6bn. China’s 5 per cent growth rate in digital ad spending also ranks among the fastest in the world, despite the rapid slow down.

In fact, eMarketer forecasts that China will be one of only two countries where advertisers grow their digital ad spending at double-digit rates every year from 2021 through 2024, leaving the country with $120.90bn in digital ad spending by 2024. (India is the other such country.) This will put China far ahead of the No. 3 market (the UK with $29.18bn), but far behind the US at No. 1 ($225.66bn).