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©️shen xiang original author｜lv yue

in the first quarter of this year, the double-digit growth in advertising revenue of more than a dozen internet companies was eye-catching, but the second quarter soon revealed a "cruel reality" - in the current market environment, sustained high growth is not easy.

in this second quarter earnings season, shen xiang counted 17 internet listed companies, of which only 8 were able to maintain double-digit growth, and the overall number was half of that of the previous quarter. alibaba still sits firmly at the top of the revenue list, while pinduoduo, which has always been soaring, has a rare drop in advertising revenue growth below 30%, which has never happened since the first quarter of 2022. the advertising revenue of some large companies also unexpectedly showed a slight negative growth. (note: bytedance and xiaohongshu are not listed and are not included in the statistics, and douyu’s financial report has not yet been released, so it is not included in the statistics)

according to data from cctv market research (ctr), the advertising market achieved a year-on-year growth of 5.5% in the first quarter of this year, but the year-on-year growth in the first half of the year was only 2.7%. the second quarter, which could have driven the market with the mid-year promotion, did not bring the expected growth momentum. at the same time, from a channel perspective, advertisers' spending on internet advertising in the first half of 2024 fell by 20.5% year-on-year, which means that budgets have been reduced and the stock game of internet media is very fierce.

the second quarter's results have poured cold water on the market, and the market situation seems to be more severe than expected. for this reason, we have also tried to refine the specific changes in internet advertising under the trend from different angles.

e-commerce platforms are under pressure

the mid-year sale did not bring much surprise to e-commerce platforms in terms of advertising revenue.

since last year, e-commerce platforms have continued to increase their efforts in low-price products and user services, and the internal competition has intensified. since the low-price strategy requires the platform to pay real money to encourage merchants to participate, and to attract more small and medium-sized merchants through short-term profit concessions, this is not conducive to the increase of commissions and advertising revenue, and therefore makes it difficult for e-commerce platforms to increase their commercial revenue. (click here to read "shen xiang"'s in-depth interpretation of the "price war")

alibaba's customer management revenue (including commissions and advertising revenue) has always been much larger than other companies in terms of scale. however, since the third quarter of 2023, its customer management revenue growth rate has been in the single digits, reaching 80.115 billion yuan in the second quarter of this year, a year-on-year growth rate of 1%. but at the same time, taobao's gmv and order volume each achieved mid-to-high-digit and double-digit growth this quarter.

this makes us further think about the value of the "low-price strategy" of major platforms to the company itself - although a series of low-price new marketing models and new products have attracted users and increased sales, their monetization ability is still weak, which leads to customer management income.（CMR）the growth rate lags far behind the growth rate of gmv.

it is not easy to sail against the current. after the 618 shopping festival, alibaba decided to weaken its absolute low-price strategy. at the same time, the new product "full-site promotion" can expand the traffic within the site by connecting paid traffic and free traffic; and with the support of ai big models, it can make marketing more accurate and efficient, breaking the existing growth bottleneck for merchants. of course, this still requires patience - alibaba ceo wu yongming said that it may take 12 months for this product to really run after its launch. (click here to read "shen xiang"'s in-depth interpretation of "full-site promotion")

image source: alibaba financial report

jd.com, which is also engaged in the low-price war, saw its market and marketing revenue increase slightly by 1.20% year-on-year in the first quarter of this year. at that time, jd.com summarized the reason as "the priority at this stage is ecosystem development rather than monetization strategy, so commissions are still weak."

however, in the second quarter, the growth rate increased to 4.10%, with revenue reaching 23.425 billion yuan. jd.com said that this was due to the accelerated growth of third-party merchants' transaction users and order volume in the second quarter, and the gmv of third-party merchants maintained a higher growth rate than the overall market, so the commission income in the second quarter began to stabilize gradually. at the same time, the advertising revenue can grow faster than the overall gmv because the platform is upgrading its advertising product capabilities and innovating more advertising models, providing third-party brand merchants, small and medium-sized merchants, etc. with easier-to-use and efficient marketing strategies and tools.

a deep analysis of jd.com's business model reveals significant differences from alibaba and pinduoduo. in the past, jd.com has long relied on the self-operated model, so now that it has begun to take into account the platform model and attract more third-party merchants, it will naturally have a more obvious increase in market and marketing revenue than in the past. jd.com is more optimistic about its performance in the second half of the year. jd.com cfo shan su mentioned in the earnings call that as the platform ecosystem improves, commission income and advertising income in the second half of the year will continue to grow along with the increase in gmv of third-party merchants. in the long run, the order volume and gmv of third parties will exceed those of self-operated businesses, and commission and advertising income will naturally grow healthily.

image source: jd.com financial report

unlike alibaba and jd.com, pinduoduo has been in high-growth mode for many consecutive quarters, and the low-price strategy rooted in its genes has not brought any adverse reactions at all. however, in the second quarter of this year, a turning point appeared - its online marketing service revenue was 49.116 billion yuan, a year-on-year growth rate of 29.48%, which was the first time since the first quarter of 2022 that the growth rate was lower than 30%.

pinduoduo management was even more blunt in its earnings call:"in the second quarter, our revenue growth rate declined significantly, which shows that high revenue growth is unsustainable. future revenue and profit growth rates will continue to be under pressure."

in fact, pinduoduo's quarterly financial report and the statements made in the executive conference call have caused great controversy in the capital market. putting aside all kinds of conspiracy speculation, just looking at pinduoduo's advertising business revenue this quarter, its growth rate is still at a relatively high level in the industry. pinduoduo has rarely made many changes and innovations in its advertising strategy, so the decline in growth rate can be attributed more to the fact that after its low-price strategy was imitated by everyone, its low-price and traffic advantages began to face the risk of being weakened.

this year, pinduoduo also began to emphasize that it would no longer simply pursue absolute low prices, but would improve the quality and efficiency of the platform supply chain and invest in building the platform ecosystem. after the financial report was released, pinduoduo also stated that it would invest tens of billions of resources to support new quality merchants and would reduce the handling fees of high-quality merchants by 10 billion yuan in the next year, which would inevitably affect short-term profits. the competition in the second half will obviously require pinduoduo and the industry to take a longer-term view and have more patience.

image source: pinduoduo financial report

the situations of the above three representative platforms may once again sound the alarm for the e-commerce industry. business competition is becoming increasingly fierce, market sentiment is volatile, and the biggest certainty is that the future will be full of "uncertainty."

from "absolute value" to "gold content"

when many companies are under pressure, whoever can maintain stable performance will become more rare and more valuable.

in the second quarter of this year, tencent's online advertising revenue increased by 19.45% year-on-year to 29.871 billion yuan. although the growth rate was slightly weaker than that of the previous quarter, it still remained at around 20%. tencent mentioned in its financial report that although the revenue of the mobile advertising alliance decreased year-on-year due to the reduction of advertising budgets of some internet service companies, there were two strong drivers that kept the advertising revenue growing relatively steadily:

the biggest driver is still the video account. tencent mentioned that in the second quarter, with the improvement of recommendation algorithms and the enrichment of localized content, the total user time of the video account increased significantly year-on-year, and advertising recommendations became more accurate. at the same time, tencent is also strengthening the transaction capabilities of the video account, which has promoted the sales of merchants. the continuous improvement and consolidation of this business closed loop will have a more significant effect on driving merchants to invest in marketing.

the second biggest driver comes from long videos. tencent video was very strong in the first half of this year, with many hits, which significantly increased its appeal to brand owners and their confidence in long-term investment.during the earnings call, tencent chief strategy officer james mitchell also clearly mentioned that thanks to self-produced dramas such as "joy of life 2" and "rose story" attracting more sponsorship, tencent video's advertising revenue increased by more than 30% year-on-year.

another platform that maintained steady growth was bilibili.

in the second quarter, bilibili's advertising revenue reached 2.037 billion yuan, a 30% increase over the same period in 2023; in the first half of this year, advertising revenue was 3.71 billion yuan, a year-on-year growth rate of 30%. looking at the long-term cycle, bilibili has maintained a growth rate of more than 20% for six consecutive quarters.

according to the financial report, performance advertising is the main force driving the growth of b station's advertising revenue. brand advertising and fireworks advertising products (i.e. up main marketing) also achieved considerable growth in the first half of the year. this is mainly due to b station's investment in advertising infrastructure, including the optimization of advertising matching algorithms, the upgrade of advertising delivery systems, the enrichment of creative advertising products, and the provision of analytical tools.there are more advertisers from emerging vertical fields such as internet services, ai and education.for example, ai products such as bytedance’s “doubao” and dark side of the moon’s “kimi” are all concentrated on bilibili for distribution.throughout the first half of the year, the number of advertisers on bilibili increased by more than 50% year-on-year.

like bilibili, kuaishou also has long-term double-digit growth in advertising revenue.

in the second quarter of this year, kuaishou's online marketing service revenue was 17.515 billion yuan, an increase of 22.08% over the same period last year. since the second quarter of 2023, kuaishou's revenue growth rate has always been stable at this level.

specifically, kuaishou mentioned that the year-on-year growth rate of its external circulation marketing service revenue has increased compared to the first quarter of 2024, with greater support from advertising growth in areas such as media information, e-commerce platforms and local life.especially this year, short dramas have become a big trend. the media and information industry has shown great enthusiasm for marketing investment in paid short dramas, with the average daily marketing expenditure more than doubling year-on-year.

the growth of the internal circulation also remained stable. there are many reasons behind this: including the site-wide promotion solutions and smart hosting products that attracted more merchants on the site, making the total product consumption reach 40% of the total internal circulation marketing consumption. at the same time, kuaishou also has more targeted marketing strategies, such as increasing the attraction of big promotion activities to small and medium-sized merchants, so that the investment consumption of these merchants increased by 60% year-on-year in the second quarter; more brand marketing activities were carried out for big brands in the fields of beauty, food and beverage, clothing, 3c products, etc.; in addition, the investment income of kuaishou xingmang short dramas also increased by more than 20 times year-on-year, which became a major boost.

image source: kuaishou financial report

who can still achieve high growth?

in the current environment where consumers are cautious about spending and advertisers are also careful about budgeting, it is difficult to maintain business stability. however, surprisingly, we still find companies that can give a report card that exceeds the industry average growth level.

one is netease youdao, which is in the education sector. its online marketing service revenue in the second quarter of this year reached 511 million, setting a new record. its revenue grew by 68.4% year-on-year, and it has achieved a year-on-year growth of more than 50% for seven consecutive quarters, which is rare in the internet advertising sector. (click here to read "shen xiang"'s interpretation of youdao's advertising business)

the reason why netease youdao can achieve high growth is that it has tapped into two opportunities:

one is to go out to sea.netease youdao has many years of experience in overseas marketing and has accumulated continuous experience in overseas influencer marketing. according to official data, the company has established long-term cooperative relationships with more than 860 overseas companies and has cooperated with 70% of the top 30 chinese mobile game companies overseas. this year, netease youdao also launched a one-stop overseas marketing platform to provide advertisers with more comprehensive marketing solutions.

the second is ai marketing.since the ai ​​wave began last year, advertising marketing has become the first place where new technologies are put into practice. currently, netease youdao has fully applied ai technology in marketing creativity, including the creation of advertising content materials, ai live broadcasts, data analysis of kol marketing, etc. at the same time, rta is also a product frequently mentioned by netease youdao. with the support of the ai ​​big model, its product capabilities such as personalized crowd screening and real-time traffic optimization have been further improved.

in addition to netease youdao, another company with high growth is huya in the gaming field.

previously, huya has always included advertising revenue in the "advertising and others" business. since the second quarter of 2022, the revenue of this business has been in a state of negative year-on-year growth for several consecutive quarters.

starting from the first quarter of this year, huya began to adjust its advertising and other business segments to "game-related services, advertising and other revenues." since then, the growth rate of this business has turned from negative to positive, and even increased by more than 130%. in the second quarter, the growth momentum continued, with business revenue reaching approximately 309 million yuan, a year-on-year growth rate of 152.7%.

in the first quarter of this year, we mentioned that the growth of game advertising was particularly prominent (click here to read "shen xiang"'s interpretation of advertising revenue in the first quarter). the activeness of the game industry has been widely mentioned by companies such as tencent, kuaishou, and bilibili, and has also driven huya's performance to a certain extent. but looking beyond the changes in the industry,huya’s high growth is actually a reflection of the phased results of its management renewal and strategic transformation since 2023.

in may last year, huya announced that its parent company tencent appointed lin songtao to replace huang lingdong on the board of directors, and the huya board of directors has approved the appointment of lin songtao as chairman. after taking office, huya chairman lin songtao began to sort out the business structure and formulated a three-year plan. the main goal is to promote the commercialization route by providing more game-related services and change the profit model that relies heavily on the single business of live broadcasting.

this year, huya has clearly transformed from a pure game live streaming platform to a game content platform.first, it strengthened cooperation with multiple content platforms such as douyin and kuaishou, allowing huya's anchors and self-created events to enter a wider public domain and gain more attention. this has also promoted the frequency of joint commercialization between platforms, which in turn has driven huya's advertising revenue to a certain extent. at the same time, huya is also launching self-made interactive variety shows such as "silent" and "competition to the finish line". each episode corresponds to a different theme, integrating game promotion and entertainment content, thus attracting more game parties such as mingchao, howling tianya, dnf mobile, and eji party to cooperate.

image source: huya financial report

under the general trend of rational consumption, the advertising industry faces a fairly long period of challenges.

although the situation is not optimistic, life must go on and business must find new ways out. the market will still be full of variables, and actively responding to adversity is the only way for every company to wait for a turnaround.