Following Tencent’s structural adjustments, Tencent’s Senior Executive Vice President SY Lau, who has always been in the limelight, was given a new title. He was appointed as Tencent’s Chairman of advertising and Chairman of group marketing and global branding. Lau’s responsibilities will be coordinating advertising business with other sectors in the company. This will enhance Tencent’s branding influence in the global market, and help develop 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.
SY Lau stands as witness to an unprecedented new opportunity for China’s Internet advertising industry. In the United States, 40% of the market share in advertising comes from online advertising. In China, this portion could reach 64% this year. In the US, social advertising takes about 20% of the whole online advertising pie, while in China, social advertising only takes about 8%-9%, and more than 50% of that comes from Tencent. Lau joined Tencent in 2006.
Taking Tencent Advertising as an example, in 2006, online advertising revenue was 267 million yuan. Under Lau’s leadership, the revenue reached 27 billion yuan in 2016, a hundred-fold increase in Tencent’s advertising revenue in just a decade. Lau’s excellent achievements placed him into the “The World’s 21 Most Influential People in Marketing and Media” list by American magazine “Advertising Age” in 2011. Lau was also the first Chinese to win “Media Person of the Year” awarded by The Cannes Lions Festival in 2015. Additionally, he is a member of the Asia Pacific Advisory Board (APAB) of Harvard Business School.
“The advertising industry is going through drastic changes,” said SY Lau. If we look at the trend, 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 news feed 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. A modern Big Data-based era of advertising is coming,” said Lau. Algorithm-based intelligent push and newsfeed advertising is the mainstream model for Internet cost-per-action (CPA) advertising. Statistics also prove that: China’s mobile newsfeed advertising brought almost 4 billion dollars of revenue in 2016, a 110% growth rate over the year before. This revenue is expected to reach 6.6 billion dollars in 2017.
In Lau’s opinion, advertising in Tencent is significant in two ways. One is the value it brings for the stockholders as a stable source of revenue. The other is to work as a “connector”, which combines different businesses through advertising. Tencent hopes to enable the advertisers with such platforms.
“The future of Tencent advertising is to fully embrace social network, 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 Tencentadvertising’s integration lies in: First, providing a comprehensive solution for big clients, combining branding and performance-based advertisements to achieve high penetration rates. Second, for long tail clients, raise the amount of small and regional advertisers by optimizing and upgrading sales management and self-service tools to value advertising efficiencies.
Tencent needs to achieve the following in order to integrate advertising into its business, said Lau. “First, we need to resist loneliness, and build upon past success but start from zero again. Second, different parallel sectors need to communicate with each other. Third, Tencent has to switch its mindset from ‘to C’ to ‘to B'”.