It has been a tough year for the online advertising market in China. Despite some recovery in the first half of the year, the online advertising market faced considerable challenges in the second half: some industries, major ads buyers (K12 education, mobile gaming, etc.) were crushed by the intensifying regulatory scrutinies. Most online ads platforms' growth slowed down in Q3 and didn't guide well for Q4 either.

We think 2022 is unlikely to be a better year, even though the industry seems to have hit rock bottom. The overall economic growth is not expected to improve significantly, while the policymakers have had a higher tolerance for slower growth. Large buyers like K12 education and mobile games will no longer contribute to the budget, and thus 1H22 will face a tough comp. The covid resurgence is becoming common in China and hurting overall consumption longer than wanted. Many industry verticals are now dialing back ad buying, accommodating the new norm.

Besides these macro concerns, one major headwind would be the impact of the Personal Information Protection Law (PIPL). The law was enacted on November 1, and the industry is still assessing the impact. Nonetheless, the early channel checks have shown that the accuracy of ad targeting has been affected after some personal information is no longer allowed to be collected. Online advertising ROI is likely to be lowered, and ad buyers will likely cut their spending.

We expect the overall online advertising market growth to slow down further in 2022. Meanwhile, emerging platforms increasingly compete for the budget, leading to a worsening environment.