China, the world's largest contributor of new ad dollars, is currently the second largest ad market, but its path and its future will be like no other country's. Here's what you need to know about GroupM's new report.
“The essence of marketing has not changed,” the report states. “What needs to change is people’s thinking. “It’s not just about strategic thinking in marketing. It is about breaking down barriers between traditional departments and properly integrating internal and external resources, to focus on the consumer experience and business development.”
Subscribers can read the full report here: GroupM: Spotlight on China
Despite a general slowdown in the Chinese economy, the service sector posted a year-on-year growth rate of 7.5%, accounting for 60% of all GDP growth. In 2018, GDP grew 6.6%, but is expected to weaken slightly in 2019, despite measures to spur consumption.
Domestic consumer spending growth is slowing, but there are hot and cold spots. Upgrade-type tech products and cosmetics have seen double digit sales growth, the report says. Meanwhile, car sales have fallen to -7.1%, 45% lower than a year previous. Part of the reason is the increase in house-buying debt, putting increased pressure on the spending of middle class Chinese people.
Online spend, is one of the hot spots. According to the National Bureau of Statistics, nationwide online retail spending grew by 23.9% in 2018.
Amid escalating Trade frictions with the US creating uncertainty, it is likely that advertisers in China will reduce advertising budgets, GroupM suggests, or maintain limited budgets while diverting them toward delivering more immediate results.
“China’s mobile internet use has reached a rate of 788 million people, a number that represents a 4.7% increase compared to 2017, and accounts for 98.3% of all Chinese netizens. Chinese mobile users spend an average of 289 minutes per person, per day on their devices.” Basically, mobile is fundamental to marketing in China.
Mobile advertising accounts for 70% of digital advertising and has become the absolute mainstream of the market. Decreasing effectiveness of the format, however, has seen the market move towards more targeting and the use of richer content.
Unlike Western markets, where RTB [Real Time Bidding] is often used, “Chinese apps typically adopt CPM [cost per mille], CPC [cost per click], and CPD [cost per duration]for ad buying, possibly because of their preference to hold ad pricing power on their own and avoid hostile bidding.”
The report provides a useful approximation of how Chinese apps compare to the US app ecosystem.
| CHINA APP || US APP |
| WeChat || WhatsApp+Facebook+Skype+Instagram |
| Sina Weibo || Weibo Twitter |
| Alipay || PayPal |
| Taobao || Amazon/eBay |
| iQIYI || Netflix |
| Baidu || Google |
| Douyin (Tik Tok) || Musical.ly |
| Meituan/Dianping || Yelp/Groupon |
| Netease Cloud Music/QQ Music || Cloud Music/QQ Music Spotify |
| Momo || Tinder |
| Toutiao || BuzzFeed |
Mobile payments are one of China’s major innovations and an area in which it is the global leader. More specifically, two companies – Alipay (53.76% market share) and WeChat Pay (38.95%) – are the undisputed leaders in the space. Payment tech does not only cover e-commerce, however, it is also used in brick-and-mortar stores. Both companies are now eyeing overseas expansion with Chinese tourists and diaspora in mind as key consumer segments.
Influencers are an important part of the Chinese marketing world, just like the West. However, there are key differences:
“MCN [a Multi-Channel Network] is more than just an agency that gathers online celebrities; it fulfills additional roles, such as discovering potential cyber celebrities, offering consultation to them, and helping to produce videos, short videos, social events, and building e-commerce platforms to convert influence into actual sales. MCN companies in China manage to involve themselves in every process in the content value chain.”
One key strategy in Chinese marketing is the idea of social commerce, effectively selling lots from within social media environments. There are two ways to do this:
- Commercialised social: get Key Opinion Leaders to interest users and then convert through the same platform.
- Socialised E-commerce: build offers around social acquaintances, meaning that the more people share the offer, the cheaper it becomes for them.
Programmatic Buying and Brand Safety
Since the latter half of 2017, confidence has returned to the programmatic market following several common solutions to brand safety concerns. Budgets are increasing with that confidence. In the coming year, GroupM points to the digitalisation of legacy media as well as integration across channels. Developments in AI will also be key to the industry and to consumers.
Ultimately, the Chinese marketing world must adapt how it measures marketing in a more complex ecosystem. “We will need a new set of methods to assess results”, the report states.
Gaming in the mainstream
Though there are 200 million eSports fans in China, gaming is only just beginning to hit the mainstream. Yet, brands still struggle to see gaming as a route to a lucrative audience.
The other problem is gamers’ lack of appetite for traditional marketing. It is imperative for brands to offer value to gamers and let them take the lead – any undeclared gamers in your brand or agency may be incredibly useful assets in the coming year.
Sourced from GroupM