In recent decades, technology creation and adoption has advanced rapidly in China. The nation now leads the world in clean energy investment, mobile payments, and supercomputing. In the advertising and marketing world, China is also ahead in digital adoption: online advertising spend topped TV spend in China in 2015 – something that isn’t expected to happen in the US until 2017 at the earliest.
But considering that China leads in digital advertising adoption, the market is still lagging in the programmatic space. eMarketer expects advertisers in China to spend $9.3 billion on programmatic digital display advertising in 2016, claiming 51% of total digital advertising spend, and growing 48% year-over-year. That’s compared to $21.6 billion in the US, which represents 67% of the total spent on digital. The Chinese (and greater APAC) market clearly isn’t ahead of the curve in the programmatic space.
So how are brands and agencies thinking about China today? Based on my conversations with global agencies, it’s safe to say that everyone is interested in the opportunity presented by this large, digital- and mobile-friendly market – but what has them excited is something much more foundational than programmatic. They are clamoring for a solution to the age-old question of consumer identity – something that’s a necessity in any modern marketing mix.
We haven’t come that far.
To date, most of the world’s largest agencies and holding companies have entered China with separate trading desks that operate in China as autonomous entities. They all admit that China is behind in programmatic – up to four or five years behind – but they want to influence the market to progress. In addition, because this is such a mobile-first market, they are just as interested in digital identity solutions as their counterparts in the rest of the world. They have a burning need to enrich mobile data with cross-device identity data, even more so than we see in the US/EMEA.
The market is also educated enough to realize that in such a mobile-heavy environment, “cross-device” isn’t just mobile to desktop – it’s phone to tablet, phone to another phone, and even app to web on a single mobile device. Connecting behavioral data and signals from each of these channels to paint a more detailed, albeit anonymous portrait of consumers is exactly what they want.
Likewise, the concept of a Data Management Platform (DMP) is hot in this market, though the strategy and ecosystem and products are newer. Overall it seems that though the market is still learning about programmatic, the players are cutting-edge and up to speed when it comes to identity data. They just need the ecosystem to catch up.
How easy is identity in China?
Agencies are all thinking about identity in China, but how do they take action on this? They know that programmatic may be be behind, and they can live without that, but they can’t do without identity.
Marketers looking for identity solutions generally have two broad options – deterministic and probabilistic. Deterministic platforms are by default closed ecosystems – the data stays in and isn’t accessible and portable outside of those platforms. So marketers turn to alternative solutions. In China, the deterministic walled gardens of Baidu, Alibaba, and Tencent (the “BAT” companies, as they’re often called) account for 95% of the programmatic spending – dominating even more than Facebook and Google do in the rest of the world. Given the dominating market share of these companies, there is a very long tail of ad servers and exchanges, few of which are independent companies with any real programmatic scale – something typically seen as a critical building block for identity.
While the programmatic adtech ecosystem has played an integral part in the construction of independent identity solutions in the rest of the world, many of those dynamics don’t quite replicate themselves in China like they play out in the rest of the world.
That said, there are a lot of point solutions in the ecosystem that could be leveraged. SSPs, DMPs, measurement companies, and even the agencies themselves have data that can possibly be leveraged toward building identity solutions. For example, Drawbridge has partnered with Miaozhen Systems, a measurement company, to bring an identity solution to the greater China market.
A tech stack built for the rest of the world won’t function straight out of the box in China due to the adaptation required for the idiosyncrasies of this market – the different types of challenges in China require different solutions. The data attributes have their own specificities and the methodology needs to adapted, but the good news is that the framework is there.
If we think the walled gardens of Facebook, Google, and the like are a challenge in the rest of the world, then that challenge is even more intensified in Chinese market with Baidu, Alibaba, Tencent, and Xiaomi. Their stronghold of reach, users, and services is much more concentrated, and thus the challenge is much more imminent. The opportunity for a democratized solution – for marketers to own the data equation in terms of anonymous consumer identity – is even more relevant behind the great walls that these large companies have put up.
Kamakshi Sivaramakrishnan is founder and CEO of Drawbridge and can be found tweeting at @kamakshis