Programmatic Advertising in China

Programmatic Advertising in China is dominated by just a few players, which are mostly internet companies. The programmatic buying market in China is called DSPs. Alibaba, Tencent, and Baidu dominate it. Alibaba alone controls about 60% of the Programmatic Advertising in China. The three companies combined have a market share of 90%. This dominance is not expected to go down any time soon.

Net Digital Ad Revenue Share in China from 2016 to 2019

Since China is a mobile-first nation, most of the SSPs are major apps. This includes Tencent Video and Youku. Both of them provide video services as well as live streaming services. Few independent SSPs exist in China since large publishers prefer to build their SSPs to sell traffic at the highest price while small publishers will sell their ad inventory to large ad networks such as BAT.

Domestic ad Exchanges

Major companies like Baidu, Sina, Tencent, and Alibaba have created Ad Exchange Platforms that offer high-end biddable resources and have functional modules connected with third-party DSPs. The two largest ad exchanges are:

Taobao Ad Network and Exchange (TANX)

TANX is an Alibaba property. It was amongst the earliest and largest online ad exchange in the Media Buying China scene. DSPs, merchants, and publishers, all participate in TANX. Other third-party data and tech firms who work as DMPs also participate. This makes it possible for participants to find potential customers.
With the aid of DMPs, TANX is able to leverage the rich consumer data that is collected from the Chinese retail marketplace and use its algorithms to choose online ad inventory for participants. Prediction on the click-through rates and conversion rates of ads is also possible due to this. Besides better efficiency in targeting consumers, TANX uses transparent pricing of ad inventory upgrades.
The Alibaba revenue stream from ads is huge. Most of it is from offering ad services to merchants using Taobao and Tmall, which are Alibaba properties. In 2016, Alibaba engaged in an expansion plan. It worked with AdChina, an ad tech firm that serves SSP and DSP in Media Buying China. Today, it offers programmatic ad services to various brands.
There is also an enterprise level DMP that makes it possible for various major advertisers and agencies to tap into the Alibaba users’ data, which is managed by AdChina and Alibaba. With this platform, they expect to own the biggest ad exchange in China.

Tencent Ad Exchange (TAE)

The scale of the Tencent audiences paved the way for its Ad exchange platform. Since Tencent is so dominant on social media, with a quarter of the internet users in China using Tencent platforms, this made sense. Tencent has social media platforms like QQ, WeChat, Tencent Video, and Tencent News. It gives Tencent insight into user behavior. Today, WeChat is the largest social media platform in China with over 871.6 million monthly users. The platform is quite popular among people of all ages. In terms of monetization, Tencent takes things slow and safe. On WeChat, each user gets only one ad a day.

Personal Data in China – a Driver and Inhibitor of Programmatic Ads

Personal data is a major driver of programmatic advertising. The personal data users provide is used to create a personal portrait and form data labels. By matching the data labels between demand and supply, precision marketing is possible and real-time bidding can be achieved in short periods.
Today, MMPS and DSPs in China own huge amounts of data. For instance, iPinYou, a major Chinese DSP has over 3000 user attributed data labels. This company and others are able to utilize big data analysis and extract in-depth data from trivial and mass data. Thus, allowing them to achieve an accurate portrayal of the target customer.
However, the RTB exchange also requires user data and use behaviors analysis to understand which firms with ad needs are best suited for each spot from the ad publishers. Those suitable companies can then join the bidding. However, the Chinese tech landscape makes data sharing hard. As such, it can prevent the growth of programmatic advertising.
Since China is mobile first, the advertisers have come up with mobile ad formats. In 2017, over 79% of programmatic advertising went to mobile ads. It is expected that mobile will continue to be the main accelerator of programmatic purchases in the Chinese market.

Lack of Transparency in Pricing is a Major Issues in China

Transparency is still not available in China. In the traditional ad networks, money is made by buying low and selling high. However, DSPs do not work like that. Instead, a transparent service fee should be charged. Though the practice is also in the US, the difference is how opaque it is in China. The reason is that big tech in China will not allow third parties to access their inventory. Besides that, the SSP and DSP lines are blurry. If the issues persist, the brand reputation and profits of companies in the Chinese digital ad market could be impacted. In short, programmatic advertising is not very effective in China.

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Martech is a complex topic where technology and processes are constantly evolving. I’ve tried to make sense of this complex industry by explaining ideas in an unbiased way, looking at events and technologies holistically, and shining a light on participants and practices when warranted.

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