At 400 million people and growing, China boasts the world’s largest emerging middle class. It is a consumer audience that global advertisers are eager to engage, with 80% of top chief marketing officers planning to increase their China spend significantly over the next 12-18 months.
To date, however, advertisers have struggled to reach this important audience effectively. After a decade of helping global clients target China from the US, and another decade building and operating local agency teams on the ground in Asia Pacific, I believe the challenges can be summarized in the context of technology, culture, and organizational structures.
Technology has been something of a stumbling block to global advertisers trying to access China, where three players dominate the digital media scene. Baidu, Alibaba, and Tencent (BAT) are the local market leaders in social, search, video, commerce, and gaming. Engaging with them, however, requires a different approach than their US contemporaries such as Facebook, Google, and Amazon. Data and reporting processes are different. Creative requires a lengthy review and approval process. Data sources for augmentation or safety and transparency are hard to integrate or are entirely unique to the market. There is no IAB nor IAB-equivalent ad standards. It’s hardly surprising that China’s digital ecosystem is often referred to as “a second internet.”
From a culture perspective, the mix of global program adaptation and local program origination requires large teams on the ground and often leads to challenging interaction between offices. And historically, there’s been little that agencies can do to avoid this, given the necessity of local market knowledge in effectively reaching those audiences.
Organizationally, agencies and brands have experimented with different operating models –such as “Hub and Spoke,” “Centers of Excellence,” and “Distributed.” Their intent has often been laudable, with agencies working an optimal mix of strategy, media, creative and client service to maximize efficiency and effectiveness for the brand. But the result has often been labor-intensive and bureaucratic, requiring feet on the ground to execute everything from research and strategy to media planning and buying to creative development. It is a world removed from the “agile” approach we recognize today as imperative to success in digital marketing.
These long-standing challenges, combined with growing demand by advertisers, requires a new approach. Ad tech companies, such as The Trade Desk, have had to commit significant time and capital to establish a foothold in the market and understand the culture. In addition to integrating with the local Chinese supply-side environment, establishing working relationships with BAT leaders and other market players is necessary for ad tech companies looking to bring global businesses into the Chinese market. But with a nearly $80bn digital advertising market in China (as of 2019), these upfront investments can pay huge dividends for ad tech companies in the long term.
This evolution and expansion of marketing and media technology, 'the Quiet Trade Deal', is now making it possible to revolutionize the agency model and address those cultural and organizational challenges to succeed in China. These advances allow agencies of all sizes to compete from anywhere in the world. Technology has enabled multinational agencies and brands to drastically increase global efficiency and it has also allowed local and regional agencies access to markets around the world.
What does this mean for agencies and brands? Barry Lowenthal, chief executive officer of the Media Kitchen, a mid-sized media agency, sums up how technology is changing his agency’s operating model:
‘[We] buy media in 36 countries around the world and we do a lot of that buying from New York. Now we don’t need to have people on the ground in Shanghai or wherever else we would need to negotiate with media owners in all of these markets. We can buy a lot of that inventory through a click from New York or any other place.
With new technological advancements, local and regional agencies can confidently buy media not only in North America but also in China, EMEA and the rest of APAC. While technology doesn’t remove every challenge to market entry, it is easier than ever to get started.
In many cases, on-the-ground teams are not required. B2B models, cross-border commerce and remote participation in China’s huge commerce marketplaces are simple routes to enter the market. Brand-building efforts are even easier as no product fulfillment is required. Most importantly, smaller brands and agencies can assess their China market potential with little resource and budget. Desired audiences can be identified with global tools and tested to quantify market opportunity and build business cases.
For multinational brands and agencies, the implications are also revolutionary. The decades-old, resource-intensive agency model can be reinvented. Globally standardized approaches and reporting allow everyone to be trained on and operate to a single transparent standard with a single version of the truth. Budgets can be optimized, and best practices can be shared across markets as well as within them. Finally, standardization allows for increased levels of automation, artificial intelligence (AI) and machine learning. There is enormous potential for an increase in both efficiency and effectiveness
As global advertising demand converges on China, this is a once-in-a-generation opportunity for brands and agencies of all sizes to rethink their global operating models, and address age-old challenges in new ways. All advertisers can now operate global networks with true agility. The playing field has been leveled. The world is now literally open for business.
Todd Krugman is senior vice-president of marketing at The Trade Desk.