Chinese e-commerce giants battle for offline advertising market

The battle for online traffic between Chinese internet giants has gone offline.

Xinchao Media Group said on last Friday that it had received an RMB1 billion ($141 million) strategic investment from JD.com.

This is the second strategic investment for the elevator TV provider within 10 months. In November last year, Baidu invested RMB2.1 billion ($300 million) in the company to develop artificial intelligence for elevator TV.

“The investment from JD.com is all in cash,” Xinchao’s PR manager Yun Xiao told FinanceAsia.

Xinchao currently has 700,000 elevators in about 100 Chinese cities, and it is competing fiercely with Focus Media—backed by another Chinese internet giant, Alibaba. Focus Media landed a $2.2 billion strategic investment from Alibaba in July last year.

“We will use proceeds this time to improve our service,” Yun said, adding “but not necessarily for a massive market share expansion". The investment from JD.com will help it reach offline audiences in second or third-tier cities.

The battle for traffic volume has expanded to the offline world. As the benefit of user growth fades, giants like Alibaba and JD.com are looking for growth in second and third-tier cities, where most users focus on offline advertisements.

Internet giants have teamed up with offline elevator TV advertisement providers to gain viewers’ attention. Alibaba-backed Focus Media is top with a 35% market share in elevator TV advertising and equipment in about 2 million elevators in China, according to research firm Qianzhan. Xinchao, backed by Baidu and JD.com, is ranked second with equipment in about 12% of the elevators in China.

But Focus Media and Xinchao combined cover only half of the elevators in China. The market still has great potential to grow. And elevators are the perfect place for customised advertisements as people are forced to watch and listen. 

“Continuous urbanisation means that there will be huge growth in competition offline,” Yun said. “Most of the online traffic volume is controlled by several internet giants, and it is hard to find growth online.”

Singles’ Day sales on November 11th last year reflect the same trend. On the world's largest online shopping day, Alibaba reported annual sales growth of 27%, down from growth of 39% the previous year. Singles’ Day sales growth also slowed for the other e-commerce giants.

Chinese internet giants are anxious that traffic volume growth has stalled. The battle in the elevator TV market is just one example of how internet giants are trying to explore new markets.