China eats into US dominance of the digital media pie

China is challenging America’s historical dominance of digital media revenues with the global powerhouse now accounting for two of the six largest online media firms, according to a report.

Baidu, the internet search firm, and Tencent, the internet service portal, were the only non-US based brands to rank in the top ten list of the world’s largest digital media companies with revenues of $3.4bn and $5.4bn repsectively in the first half of 2014, according to a report from consultancy Strategic Analysis.

China was also home to four of the top ten fastest growing online media firms with Baidu (up 56 per cent) and Tencent (up 43 per cent) joined by software provider Qihoo and online media owner Sina growing year-on-year revenues by 123% and 36 per cent respectively in the period.

Despite securing a bigger slice of media budgets, China’s most prominent online media players still trail the established offerings of their US counterparts. Google topped the rankings for the 44 online media firms surveyed, with $31.4bn in digital media revenue, a 12 per cent uplift on the same period last year.

It was more than three times that of its nearest rival Amazon’s $10.3bn, a 9 per cent jump year on year. The revenue rise reflects Amazon’s expansion beyond its e-commerce business, which was acknowledged by Google chairman Larry Page earlier this year as transforming the online retailer into its biggest threat for revenues.

Facebook ranked third with $5.4bn, an increase of 66 per cent, and ahead of Tencent and Apple. The iPhone maker’s iTunes business ($5.2bn) was fifth, highlighting a drop in music sales the business acknowledged in its most recent quarter.

Yahoo, which was the only firm in the top ten to post a revenue drop, took seventh spot with $2.2bn and was beaten by search engine Baidu.

Netflix (2.6bn), Yahoo Japan $2bn and Microsoft Online services ($1.9bn) rounded out the top ten list.

Michael Goodman, director of digital media for Strategy Analytics, said the comparative six of the Chinese and American markets has played a big role in the performance of companies headquartered in the latter.

He added: “The fact that there are about 2.5x more Chinese than Americans online is a big factor so they’ve been able to hit such heights solely in a domestic market. The big question, and the key threat to US global dominance, is whether they can translate this success outside China.

“The Chinese companies have been particularly adept at generating revenues across a variety of services. The fastest mover, Qihoo, for example has done well in both advertising and Internet value-added services, driven by expansion into search and mobile. Ultimately, this increases revenue per customer, a vital component of sustained growth – Baidu, for instance, has upped ARPU 50 per cent over the last year.”

Meanwhile, Twitter was the second fastest grower in the first of half of 2014, up 122 per cent to $562m. Like Facebook, which placed third with a growth rate of 66 per cent, the social network is looking beyond its own walled garden in order to carve out new sustainable revenue streams.

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