Chinese money set to shape adtech

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China is on the cusp of a significant adtech/martech consolidation that will shape future marketing.

Already the second-largest economy, the country has shifted from a purely export-driven market to one where local consumers impact global buying trends. It has created a huge interest in marketing.

When compared with the rest of the major economies, many of the transactions in China are online. It is the reason why eMarketer forecasted digital ad spend in China will reach US$40.2 billion last year. By 2020, this number is expected to double. That is phenomenal considering the current economic malaise.  

China also does not have long roots in TV and print that Western countries or even the surrounding regional countries do. Add the huge number of eyeballs coming online every day as the Internet permeates to the rural areas and you can understand why eMarketer sees TV spend is half of the digital’s share. For many countries, it is usually the other way around or near even.

Mobiles permeate every facet of Chinese society. We are not talking about the younger demographic that is common elsewhere. In China, everyone uses the mobile Internet no matter what is the demographic. Even brick and mortar businesses are mobile, including small mom-and-pop grocers at a market using QR codes to sell their produce. It means you are reaching out to a very Internet-savvy consumer crowd across age groups.

Mobile has also replaced TV. It is not uncommon for consumers of all ages watching videos using the smartphone. eMarketer predicts that mobile video will account for 73% of all digital video ad spend by 2020. Advertisers need to be mobile video savvy to penetrate this visually-motivated consumer population. In fact, the increase in programmatic ad spend in China is mainly due to video.

Lastly, it is a market that does not have the usual dominant players like Facebook, Twitter and Google to set the trend. In their absence, home-grown companies are offering similar services. But labeling them as copycat services no longer apply. Just look at how WeChat is defining mobile advertising by offering a robust social media platform designed for mobiles that has a widely-accepted payment engine.

Surviving the China ascendency

So how can international adtech companies survive or even succeed in a market that will be increasingly dominated by Chinese markets?

First, you need to understand that the China digital market has evolved separately from the rest of the world. Other economies are similarly walled off, but not one where so many potential consumers live with different expectations and use different platforms. 

It offers an opportunity for regional or international adtech companies to become a bridge to an international audience. Many of the big players in China understand that they need to go beyond their domestic economy to maintain their growth. But many lack experience or even understanding of what non-China consumers want.

It is, however, a fleeting opportunity. As CMO Innovation reported before, Chinese players are now buying into Western peers. It brings international expertise, talent, know-how and customer bases into the company fold. It will be a matter of time before these consolidations and acquisitions will create new global behemoths.

Chinese companies are also accustomed to keeping competing technologies out at the inconvenience of their customers. While outside of China, it is easy to share content across different platforms with a click, Tencent, Alibaba and Baidu are making it difficult for customers to move between platforms. It is not uncommon for one company to block links or QR codes to stop consumers from switching to a rival platform. It impacts developers and adtech companies.

This same rivalry will be brought to the international front as Chinese companies grow their international presence. It means regional and international adtech companies need to align with their Chinese counterparts up front. 

One area where regional and international CMOs may hold the keys—for the moment—is standardization. Many advertisers, especially in the West, follow the Interactive Advertising Bureau ad guidelines. It will be a while before China-based adtech and martech companies catch up.

But, eventually, Chinese companies will catch up. As they buy up new adtech companies to get a slice of global CMO spend, it will be companies who are ready for Chinese ascendency to the global scene that will gain the most.

Are you ready?

Further reading:

ad2games wants a piece of China marketing action

Winter is coming as adtech and martech converge

More programmatic ads found violating IAB guidelines