Tencent's new chairman of advertising outlines online advertising strategy

Tencent has announced that its senior executive vice president SY Lau has been appointed as Tencent's chairman of advertising and chairman of group marketing and global branding.

The appointment is part of Tencent's plan to adjust its structure for new opportunities in China's internet advertising industry, the Chinese gaming and social media firm said in a release. The company expects that China's online advertising will account for 64% of the market share in advertising. With social advertising currently taking about 8% to 9% of the whole advertising pie, and more than 50% of that coming from Tencent, Lau said he sees huge market potential.

Lau's responsibilities will be to coordinate advertising business with other sectors in the company with the aim of enhancing Tencent's branding influence in the global market, and developing strategic cooperation with international partners.

"For Tencent, a company whose market value has pushed it into the world's top ten through recording breaking share prices, the appointment of Lau will strengthen Tencent's strategic power in digital entertainment and information, while further combining content and technology," said the release.

Lau joined Tencent in 2006, and was recognised in the company for leading a hundred-fold increase in Tencent's online advertising revenue within a decade, from RMB267 million in 2006 to RMB27 billion in 2016.

"This is an era of algorithms"

Speaking about opportunities in the advertising industry, Lau identified a few phenomenons.

"On the one hand, cost-per-action (CPA) advertisement is growing fast. On the other hand, the growth speed of branding advertisements is slowing down. With regards to newsfeed advertising, cost-per-time (CPT) advertising is switching to cost-per-action. There's a great demand for news aggregation advertising. This has huge business potential. Short-form video advertising has also become a global trend on social media."

"I think what all of the internet companies agree on is that this is an era of algorithms", said Lau.

Quoting statistics that China's mobile newsfeed advertising witnessing a 110% growth rate over the year, bringing in almost 4 billion dollars of revenue in 2016, Lau said the revenue is expected to reach 6.6 billion dollars in 2017, meaning that algorithm-based intelligent push and newsfeed advertising is the mainstream model for Internet CPA advertising.

In Lau's opinion, Tencent could differentiate its advertising model in two ways:  the value it brings for the stockholders as a stable source of revenue, as well as its role as a "connector", which combines different businesses through advertising.

"The future of Tencent advertising is to fully embrace social networks, video and mobile advertising. What I care about most is the coverage, as well as the penetration and retention rate."

Lau said the future directions of Tencent advertising's integration lies in first providing a comprehensive solution for big clients, by combining branding and performance-based advertisements to achieve high penetration rates; and second, raising the amount of small and regional advertisers for long tail clients by optimising and upgrading sales management and self-service tools to valuate advertising efficiency.