The Programmatic Globe: China
Going deep on the programmatic scene in Beijing and beyond
Here at Sociomantic, we’re lucky enough to get to work with marketers in over 70 markets, helping them from our offices around the globe to take advantage of the many benefits of programmatic advertising technology powered by local market expertise.
In working across these diverse regions, one thing has become crystal clear: when it comes to e-commerce and programmatic marketing, no two countries are alike. And no one has a better view on the differences and eccentricities of these different markets than our VP Global Advisory Services, Lothar Krause.
That’s why we’re inviting him, with support from each of our local teams, to share unique, market-specific insights about the ins-and-outs, the ups-and-downs, the triumphs and challenges of programmatic advertising in each of the countries or regions that are stationed.
Next up: China.
Ever since Alibaba created the Singles’ Day shopping holiday seven years ago, the 11th of November has become a national e-commerce carnival. Many online vendors push out their best promotional deals of the year on this date, and it’s become a phenomenon even in other parts of the world, especially across Asia — this year, it brought about RMB 120,7 billion (US $17.79 billion) in sales in China. By comparison, Black Friday in the United States only brought about US $2.5 billion, around 14% of its Chinese counterpart, meaning that there’s no doubt China has become the largest e-commerce market in the world.
A report by Morgen Stanley forecasted that in 2018 the e-commerce turnover in the Chinese market will surpass that of the rest of the world combined. As the world becomes more interconnected in this digital age, giants like Facebook and Google have penetrated and taken over most markets, but China has incubated its own unique ecosystem, with its own set of policy restraints and the Great Firewall.
Baidu, Alibaba, and Tencent (BAT) Share the Kingdom
After 10 years of fierce competition in the industry, foreign players like Google, Amazon, eBay, and Uber have all withdrawn from the market. This left the three local players as the standing winners with their localized services and features: Baidu, Alibaba, and Tencent (BAT). Through various measures, such as investment funding and acquisition of smaller players, they have each created their own suites of Internet services and dominated the market with them. The remaining market share is distributed among other mid-sized companies such as JD.com, Xiaomi, and Didi Chuxing.
Alibaba and JD Run the E-commerce Show
Be it business-to-business (B2B), consumer-to-consumer (C2C), or business-to-consumer (B2C), Alibaba.com, Taobao and Tmall (all Alibaba subsidiaries) have the biggest share of local e-commerce. Alibaba is the biggest player in the e-commerce market with 57.4% of market share, while JD.com follows second with 23.4%. Other e-commerce players like VIP.com, Suning Commerce Group, GOME, Dangdang and Amazon China together make up 20% of the remaining market.
Programmatic Advertising: Going Mobile
Being the world’s largest smartphone market has helped in China’s surge of mobile programmatic ad spending. According to eMarketer, mobile programmatic digital display ad spending 2016 reached an impressive US $8,95 billion. Not only does this signify that programmatic is taking over more than half of China’s mobile display ad spending, it also puts mobile’s share of total programmatic ad spending in China at 81.0% in 2016, surpassing the 70.2% of the U.S and the 74.6% in the U.K.
The shift of e-commerce sales from PC to mobile has also been progressing for a couple of years. Also according to eMarketer, retail m-commerce sales will keep rising at a speed of 45.7%, reaching 61% of retail e-commerce sales in 2017. Even though m-commerce may still occupy only 15% of total retail sales this year, it is projected to increase to make up a quarter of total retail sales by 2019.
Aside from the growth of smartphones, tablet penetration is also surging through the years and is expected to reach 405.7 million users in 2017, taking 55.1% of Internet users and 29.6% of China’s population. This will make China the country with the largest tablet population in Asia Pacific.
Programmatic Advertising: Going Transparent
In the process of chasing performance metrics in programmatic advertising, metrics of viewability, brand safety and user engagement should also be taken into consideration.
While more brands are willing to jump onto the programmatic bandwagon than in years prior, ad fraud continues to be a concern, third-party verification and surveillance are falling short, and advertisers are disappointed with ad bots and false traffic, with around 30% of the traffic bought in China being made up of fraudulent clicks and views. This creates an opportunity for ad tech players to take the lead in counter actions. At Sociomantic, we regulate the quality of inventory through our Supply Quality Index (SQX).
We entered the Chinese market in 2015 with an office in Shanghai, and given its unique circumstances, a data center was set up in December 2016 to facilitate our platform in accessing domestic inventory in order to better serve clients wanting to advertise behind the Great Chinese Firewall. A move such as setting up a data center has become necessary to keep up with the growth of programmatic in the market, as shown in the infographic.
Programmatic in China: The Present and Future
Our Managing Director for Greater China, Ivan Zhou, shares his insight:
“The programmatic market in China has matured through the years, and advertisers’ understanding and acceptance of programmatic technology has significantly increased. At Sociomantic, we are aware of these marketers’ concerns towards programmatic. This is why we have placed great emphasis on inventory quality and invested time and resources into combatting ad fraud from the beginning. It takes a concerted industry effort to overcome these challenges that plague advertisers. For our part, we are happy to support our clients through the application of the SQX, as well as our Glass Box approach to partnership, which makes all optimization functions transparent to our clients. We think these are important steps in pushing for a more transparent programmatic industry.”
Check out previous posts in the Programmatic Globe Series: