JUN YUAN: All the four major agencies have trading desks in China, so our main competitors in this market are VivaKi, which belongs to Publicis; Group M's Xaxis; Amnet from Aegis; and also IPG's Cadreon. Some Japanese agencies in this market have also set up trading desks as well.
We don't really have competition at the moment because all the trading desks are serving our own group clients and there isn't much overlap. But once business starts growing and the market gets more mature, I'm sure we will start pitching and competing directly on some clients. At this stage, this year or early next year, we won't see too much competition.
How much of a focus is China right now for Accuen overall?
China is one of the key markets in Asia-Pacific for Accuen. The RTB market is in very early stages and we're jumping directly from ad networks to programmatic buying, so the market is growing rapidly.
To compare, Australia has been running RTB for several years, but looking at the market size in terms of revenue, China is catching up. This year was our second year and our revenue was almost 80% of Australia's revenue for 2013 and we're pretty sure that next year we'll overtake Australia in terms of revenue and product offerings and team size.
One benefit of Omnicom is that we have a strong client base, including multinational and international clients such as Intel, Johnson & Johnson, Grand Hyatt and Tourism Australia. When we are educating clients, many have already been educated by their own teams and the marketing departments of the other regions. One client, Intel, is doing a lot of programmatic buying in China and they are constantly exchanging knowledge with the US team and they are sharing their findings. That type of collaboration is definitely helping the China clients grow faster.
What is holding back clients and advertisers from getting into programmatic buying in China?
Advertisers need time to change their mindset from the traditional content-buying model to the audience-buying model. China clients are used to buying ads on cost-per-day model, so whenever you log on to the page, you would be able to see the ad and show the ad to your bosses and prove that the ad is really happening. But if you do programmatic buying, there isn't a chance to do that, because it is audience-driven.
Advertisers also need to get used to the click-through rates. If you're doing programmatic buying, we are filtering out the fake clicks and the CTR is lower compared to other traditional media channels. We have to educate the clients to not just look at the CTRs, but to look at a user's engagement and CPM and CPC.
And how are publishers reacting to the growth of programmatic in China?
When we started in China in April last year, we only had two RTB exchanges: Google AdExchange and TaoBao Tanx. But now, after about one year, we are seeing about 10 different exchanges and all the major publishers in this market—Tencent, Baidu, Sohu, Sina and Youku—are transitioning to the RTB model.
One of the major new ad exchanges of this year was Baidu, because Baidu had a huge traditional ad network. Whether they wanted to switch to RTB or not, after this year, they saw that the trend of the market was going toward RTB, so they launched their Baidu Exchange about four months ago. They needed their own exchange in order to get back to the same starting point as the other publishers and compete.
As the trading desk for an international holding company, what challenges do you have in China?
First of all, we have the challenge of finding talent in this market that can do programmatic buying. We're trying to shift the talent from SEM to RTB because the business is quite similar and requires optimization skills. We are also converting a lot of specialists from computer science or mathematics backgrounds because they have very strong analytical skills and know how to get insights from the numbers.
In terms of data, it's not like the US where there are standardized data solutions. In China, there are a lot of data providers, but we don't have any standards to follow and everyone is running on their own. We see a lot of potential data providers. They have a lot of data but they haven't claimed themselves to be data providers yet, so we call them potential data providers.
Some major clients are building up their own data-management platforms to enable better efficiency for programmatic buying. We work with third-party data providers and we also partner with some publishers directly and because we are the agency of the clients, we can track a lot of digital campaigns from clients, accumulating first-party client data. We built up our own data-management platform solution for our clients to standardize the data from different sources and integrate it into one platform and make it useful for our clients.