Chinese Retailers Spend More on Ads as Internet Use Grows

Chinese retailers are pouring money into advertising as the country’s growing middle class spends more of its time online.

China’s top online apparel retailer VANCL Technology Co. Ltd. announced Tuesday that it plans to sink at least 500 million yuan ($79.4 million) into online advertising this year. Major Chinese online retailer 360buy.com, which is reportedly looking to resume the application process for a U.S. initial public offering, also recently announced plans to up its advertising spending.

The positive trend could pay off big for search engines like Chinese internet behemoth Baidu.com (NASDAQ:BIDU), which last week reported its fourth quarter revenue had gained a staggering 82.5 percent in twelve months.

Search engines got 39.7 percent of the 51.2 billion yuan spent on online advertising last year in China, according to data from iResearch Consultants. The data also showed that Chinese e-commerce operators spend, on average, between 60 percent and 70 percent of their online advertising budgets on search engines.

Baidu holds 77 percent of the search market in China. Google (NASDAQ:GOOG) trails far behind with 11 percent, while Sohu.com (NASDAQ: SOHU) is barely on the board with 3 percent, according to Analysys International data. The number of internet users in China was up to 505 million at the end of 2011, according to a Reuters report that cited information from the China Internet Network Information Center.

To contact the reporter on this story: Gina Smith at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com