Speaking anonymously to Digiday, one executive who previously held a C-level position at a holding group agency, explained that while medium-sized companies still work with agency trading desks, “big clients are now working with independent [demand-side platforms]”.
“Many big brands don’t fall into group-level deals because they can negotiate better direct deals with publishers on their own,” he added. “China is really a supply-side market, meaning that media agencies’ buying power doesn’t exist.”
Another anonymous source, this time from an ad-verification firm, pointed to the trust issue and said that “trading desks are losing business this year because brands consider them as a ‘black box’”.
The BAT, on the other hand “own many media properties in China and have solid tech”.
Local Chinese agencies are happy to rely on the BAT for their ad tech business, he said, but international agencies are reluctant to work with the trio because the margin is significantly lower – 5% as against 50% from trading desks.
For whatever reason, brands in China do appear to be taking greater control over their media spend. A report from agency consulting company R3 showed that, in 2016, in-house resources were taking a lead role in several marketing disciplines, including digital strategy and data analytics, and increasing their involvement in media planning and buying.
“Brands in China are increasingly relying on the BAT because of the growth of social, e-commerce and ad tech,” said Greg Paull, co-founder and principal for R3. “Brands are also investing heavily in dedicated in-house media roles to oversee media planning and buying or run direct deals with the BAT.
“But media agencies tend to lead lots of strategic work and play an active role in campaign development in China,” he added.
Data sourced from Digiday; additional content by WARC staff