The saying ‘Same, same but different’ may more commonly be heard in Thai markets while bartering for a fake Rolex, but as many Western ad tech and agency players take their businesses to China, they are finding a similar story awaits them.
As with almost all aspects of marketing and tech, China is a hot topic. The lure of a new middle class at unprecedented scale and a technology ecosystem that’s regularly leapfrogging the West, all wrapped within the mysterious ‘great firewall of China’ makes it intoxicatingly alluring for programmatic players.
The latter part of this equation, the great wall of closed-off infrastructure and lack of openness, has bred a programmatic marketplace that looks a lot different to elsewhere, not least because Google and Facebook are nowhere to be seen.
"Like no other in the world"
As David Chen, managing director, China for data, technology and innovation at Publicis Media, says: "The media landscape in China is a little like the wild, wild west and like no other in the world.
“For starters, the Chinese government in the internet space has created a unique programmatic ecosystem where global giants – Google, Facebook, and YouTube are non-existent. While programmatic is seeing high uptake in China, big brand advertisers still view programmatic with some level of skepticism, given that fixed-price solutions allow them to determine where their ad is placed and delivered as compared to a supposed ‘black box’ solution where advertisers have no control over where their ad appears,” he says.
That doesn’t mean it isn’t booming, nor that it isn’t competitive. The latest research from Forrester, a report titled ‘The World’s Largest Digital Market Goes Programmatic’, reveals that online display ad spending in China will reach $14bn in 2016, and programmatic buying will represent more than 20 per cent of that. It’s not as big a proportion as more mature markets but Forrester says this won’t be the case for long.
"The lines between online and TV is very close"
Susan Salop, VP Asia at Tubemogul, says the market is increasingly interesting to global players because the market is good for ads, particularly video.
“In China they call online video OTV, the lines between online and TV is very close. You don’t have as much paid content, it is all monetized through advertising. There are three or four ads before content online, which you wouldn’t see if in other markets. Users are used to it. Most of the content is professional as there are strict laws around media and video, so you don’t see as much UGC quality video. We think that can be good for advertisers, it tends to be premium and professional,” she explains.
But while growth is on the horizon, Mickey Zhang, Xaxis China managing director, says: “China is still not very mature, especially as compared to other markets in Europe and North America.”
She puts this down to a lag in three areas; publishers were reluctant, branding dollars were slower than direct response and, finally, tech development.
Zhang says Xaxis now has cooperation from all of the key media owners in the market, and that the branding dollars are starting to follow, though she says that largely starts with the global FMCG giants and trickles down to more local brands.
"Tech has developed very quickly"
In terms of technology, she says that had been slow but that signs of maturity are showing as issues such as viewability and ad fraud are tackled and that “kind of tech has developed very quickly”.
But outside that, the types of players you may be used to seeing on the Lumascape just don’t appear.
Xaxis’ Zhang, says: “For most of the ad tech companies that are global, they have no operation capability in China. Appnexus, which Xaxis is using in other markets, has no capability in China. Almost all DSP companies have no operations, so we use a local DSP companies as tech partners. For other ad tech companies that are in ad fraud or brand safety, such as Grapeshot or Moat, these companies have already kicked-off the China business. They still need more time to integrate with the local DSP companies.”
This faster speed of adoption for this specific technology can be attributed to a bigger need. Ad Fraud is specifically prevalent in China, according to those working in the industry.
20 per cent of impressions are non-human
According to Chen, “Ad fraud is a problem for all markets but for China, it is a particularly serious one. According to RTBAsia, between 15 to 20 per cent of China’s 10 billion daily impressions that are traded in ad exchanges are non-human. This high ad fraud rate can be attributed to Chinese computers running old versions of Windows which are infected with malware and allow bots to run in the background. A large portion of Internet users are also using crowdsourcing software that generate fake traffic statistics on their sites.”
Ivan Zhou , managing director of Greater China at Sociomantic, says: "Viewability has started getting attention but not many actions have taken place. Compared to the widespread ad fraud issue globally, it is a less pressing issue to be addressed in China."
Another issue in the market, which is also another issue keenly felt by advertisers worldwide, is walled gardens. There’s a growing unease, particularly from agencies, around how much control players like Facebook and Google have because they ultimately hold the data.
In China this issue is leveled at Baidu, Alibaba and Tencent, which Chen says control about 90 per cent of the programmatic market in China. This has helped make it harder for global programmatic businesses to put their stake in the ground, as it relies so heavily on partnerships with the right players.
"Lack of access to premium Chinese supply"
“While there are a few western DSPs and SSPs in the Chinese market, the main challenge in operating in this market is the lack of access to premium Chinese supply. Most western DSP providers with affiliations in China use Google ADx for display and Google AdMob for mobile to serve ad inventory in the China territory. However, while Google is said to cover over 80 per cent of available programmatic-RTB Chinese inventory, a huge portion of Chinese inventory is not available. Chinese inventory for direct programmatic, private marketplace and automated guaranteed deals for transaction are also unavailable to western DSPs.
Due to the way the programmatic market in shaped in China, most big publishers in China have control over the whole ad-tech stack by bundling exclusive access to private exchange inventory with a self-owned DSP. With marketers in China being accustomed to not paying for data, being able to monetise the DMP is difficult. Hence, it is difficult for western businesses looking to enter the space,” says Chen.
Sociomantic's Zhou, says: “China’s programmatic industry is still about two years behind the most mature European markets. Independent DSPs still focus a lot on getting exclusive deals for premium inventory. BAT, especially Alibaba, sit on enormous amount of data and they have potential to develop cutting edge products. But at present, it’s still a copy and catch up play.”
The BAT is opening up, with Tencent inking data deals with GroupM, Omnicom and Dentsu Aegis earlier this year, and this is creating a slipstream for global brands and businesses to start trading in a smarter way on Chinese audiences. Much like the way China has leapfrogged the West with mobile messaging apps, after a ‘fast-follower’ start it will undoubtedly prove to lead the charge for programmatic too soon. If it doesn’t become the most important market for programmatic and data-led advertising, it’ll at least be the most interesting.