The China Opportunity

georgegallateData-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is by George Gallate, CMO and EVP of global development for Merkle.

When I first went to China in 1991, I was in awe.

When I lived in China for three years in the mid-2000s, I was in awe.

Today, I’m still developing data-driven marketing programs for clients in China, and I’m still in awe.

China must be on every marketer’s radar – not only as a producer of goods, but as a massive consumer of goods and services. The opportunities it offers data-driven marketers are vast, but many challenges lurk for those entering and operating in China.

Mind-Boggling Stats

China’s huge, vibrant and fast-growing economy is second-largest behind the US, which it is expected to surpass by 2020, according to the World Bank.

Its online population, already the world’s largest, continues to grow quickly in size, purchasing power and sophistication. China’s digital population outgrew the US in 2007 and now has 2.3 times more people accessing the web with more than 641 million users.

Contrary to popular belief, the largest day of ecommerce each year is not Black Friday or Cyber Monday. Since 2013, it has been Singles’ Day, which takes place on 11/11 in China. The occasion was commercialized by Alibaba, which famously had the largest IPO in history. In 2015, Singles’ Day sales through its online retail site, Tmall, totaled $14.3 billion. By comparison, Cyber Monday sales reached $3.07 billion.

Huge Opportunity

The digital ecosystem in China is growing rapidly, giving marketers the opportunity to target precisely at scale and build massive brand franchises. On top of all this, China is home to some of the largest and most sophisticated digital platforms in the world.

The country’s largest digital platform, Baidu, for example, combines search, social, music, videos, images, an encyclopedia function and a Q&A community. It is the fourth-largest digital platform in the world and delivers twice the impressions of the Chinese government’s television network, CCTV. The “Baidu Union,” which is a network of more than 600,000 sites, massively extends that reach.

So, given the size of the opportunity, what is holding marketers – particularly performance marketers – back?

The Challenges Of Scaling The Great Wall

If operating remotely, organizing a performance marketing presence in China is a complex process. Setting up accounts, which require Chinese licenses, can be complicated, in addition to managing currency, payment and exchange issues while translating varying languages. Marketers must also navigate many different formats and protocols, stay on top of all the options and changes or, if working with a vendor, manage their performance.

Once operating in China, marketers may find it difficult to manage vendors and a general lack of sophisticated, ROI-focused digital marketing practices. They must also integrate the APIs of China’s platforms and manage bids, while finding and retaining staff to develop, manage, optimize and grow programs. At the same time, they will face transparency issues.

Over the years I’ve worked in China and evaluated many performance marketing programs. I see them falling into one of three types.

First is the “Set & Forget” type, where there is some initial thought, but not much ongoing care.

Those with a “Spray & Pay” program take the view that China is big, so let’s go for it. Their budgets keep growing.

For the third program type, which I call “Optimize & Maximize,” there is an ongoing focus on continuous improvement based on clear metrics. The program grows when goals are met.

Clearly, the third type is superior, but unfortunately, many programs are type one or two.

Entering Or Improving Current Performance

Managing a program in-house, especially if remote, will be difficult, so I’m assuming marketers are doing it through a third-party vendor. They must understand the vendor’s credentials. Many agencies, even some of the larger ones, outsource buying and management of their clients’ programs.

Marketers entering and operating in China must also understand their connections. Does the vendor have direct relationship with the platforms, or are they buying through an intermediary? Many agencies do this. If they’re buying through an intermediary, marketers are close to the “Set & Forget” approach and will likely end up paying more than they should.

Marketers need to understand what they should and should not pay for. Most platforms pay commissions to the vendor. Unless a program is highly sophisticated, or has smaller budgets, marketers should not pay additional management or program fees on top of the cost of media.

Marketers need to understand their approach. China is huge. Mao’s army would not be large enough, given the amount of data available, to do this manually. To be truly effective, a combination of experienced people and sophisticated technology is required. Who will be working on this business and for how much of their time? Though China is large, truly experienced practitioners are in high demand. Watch out for bait and switch.

Finally, and most importantly, marketers must understand their business. They need to stay on top of reporting, push for optimization and ask for forecasts. They need to ask, “What have you done for me today, and what’s next?”

Follow George Gallate (@gallate), Merkle (@MerkleCRM) and AdExchanger (@AdExchanger) on Twitter. 

 

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