China's online advertising market will be one of the few industries to benefit from the SARS outbreak and grow by almost 30 per cent over the previous year, said a domestic Internet industry researcher yesterday.

"SARS (severe acute respiratory syndrome) actually helped more advertising clients know the importance of Internet media and brought more orders to Internet companies," said Henry Yang, president and chief analyst of Shanghai iResearch Co Ltd, the only consulting firm in China monitoring the online advertising market.

According to iResearch, online advertising revenues in the world's most populous country will reach 620 million yuan (US$74.88 million) this year, up 27 per cent from the previous year.

Online advertising market is estimated to expand by 30 per cent a year for the next three years and the revenues will amount to 1.38 billion yuan (US$167 million) in 2006.

At the same time, the proportion of online advertising market out of the total advertising revenues will also triple in the coming four years from last year's 0.5 per cent to 1.5 per cent by 2006, Yang predicted.

"The ratio in the United States is about 2.5 per cent, so there is a lot of potential for its development in China, if we can have the same ratio."

Yang believed that the increasing number of Internet users and the development of Internet companies are two major reasons for the market's growth.

According to official statistics from the China Internet Network Information Centre (CNNIC), there were 59.1 million Internet users by the end of last year, compared with 48.5 million in the middle of last year.

Yang estimated that the number may exceed 70 million in the ongoing CNNIC survey, whose result will come out in August.

Meanwhile, the fact that three biggest online advertising firms - Sina Corp, Sohu.com and Netease.com - began to make profits last year also made them have more time to spend on developing their advertising business, Yang said.

The spread of SARS in China in the first half of the year also increased the development of the market, Yang said.

According to iResearch's monitoring of 53 major Internet websites in China, the number of advertising clients grew by 16 to 208 in the second half of April over the first half, when SARS broke out at mid-April, while the figure rose by 11 to 219 in the first half of May.

The NASDAQ-listed three Internet portals - Sina, Sohu and Netease - continued to dominate the market in the first four months of this year.

According to statistics from iResearch, Sina led the advertising market with 79.46 million yuan (US$9.60 million) revenue in the period, compared with 180 million yuan (US$21.74 million) for the whole of 2002.

Sina Corp also adjusted its revenue in the second quarter to between US$24 million and US$25 million, up from its previous forecast of between US$19.6 million and US$20.3 million.

It said earnings per share would reach 13 US cents to 15 US cents per share compared with the 8 US cents to 9 US cents it previously signalled.

The second player, Sohu.com made 53.36 million yuan (US$6.44 million) from the business from January to April, about 47 per cent of last year's total.

Netease also achieved 16.22 million yuan (US$1.86 million) revenue from advertising, also 47 per cent of the total of last year.

The three companies accounted for two-thirds of last year's total, according to iResearch monitoring.

"We do not think there will be much change in the scenario, as their positions are already very strong now," said Yang.

However, he believed that the performance of overseas-based Internet businesses in China would be much better from the previous year.

The Chinese operation of US giant Yahoo already made 5.78 million yuan (US$698,000) in the first four months and its revenues more than doubled from 900,000 yuan (US$108,000) in January to 1.98 million yuan (US$239,000) in April.

(HK Edition 07/02/2003 page7)

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