This is a sponsored post by Xaxis.
Despite its explosion in importance and usage, programmatic has often been seen as a subject of complexity. And once you add China to the mix, you will find people scratching their heads in an effort to wrap their mind around programmatic in the region.
What stage is it in now?
Programmatic advertising is not the new kid on the block in China – it is also not a “one hit wonder.” The proof is in the pudding: programmatic ad spending is growing exponentially in China.
According to eMarketer, it is expected to exceed $9.29 billion in 2016 (up 48.4% from 2015’s $6.26 billion) and will take up more than half (51.0%) of total digital display in the China for the first time.
The rise of programmatic buying has been aided by numerous factors, including more media inventory being open to programmatic buying, proliferation of e-commerce marketing, digital measurement getting more transparent and standardizing to evaluate performance (thus, advertisers are able to see the benefits of programmatic buying).
How far has it come?
Despite strong market growth, programmatic display ad spending in China (51%) still trails behind the United States (67%) and United Kingdom (70%). There are several factors that have hindered growth in the region:
- Uncertainty about the quality of ad placement: Inventory available in ad exchange is seen as long tail and has a reputation of being low quality. In addition, some advertisers – especially those focused on branding – worry about their brand being damaged by ad exposure under those uncertainties.
- Rise of Walled Garden: BAT (Baidu, Alimama, Tencent), the three giants dominating search, e-commerce and social respectively, have formed a close loop with their own ecosystem making connection across various data difficult. This closed loop undermines the possibilities of utilizing data creatively and effectively to maximize programmatic campaign effectiveness.
- Lack of effective and neutral audience data verification: More and more companies claim they have a data management platform (DMP) with specific segments. However, it is dramatically difficult for advertisers to pre-verify or post-verify the effectiveness of these DMPs. So far, third party tracking companies can only partly verify social-demographic data, but there is no better way to monitor this kind of “unique data”.
- A serious complexity of competition: After the programmatic market boomed, more than a hundred companies – good and bad – mixed together, creating a surge in the “make money fast” mentality. Advertisers need an agency with solid knowledge and rich execution experiences to help them enjoy the benefits of real programmatic.
Where is it headed?
- As demand for programmatic buying among advertisers rises, media vendors become more willing to release their premium inventory for programmatic buying. For example, Xaxis, leveraging GroupM buying power, enjoys close partnerships with Youtu, iQiyi, Tencent and other key media to leverage their premium resources for programmatic buying – all of which will be surprisingly beneficial to Xaxis advertisers.
- On the other hand, there are also gradually mature ad technologies that meet the increasing attention and need from advertisers on ad viewability, fraud prevention and brand safety to fundamentally ensure quality of inventory.
- Mobile will be the next growth engine of programmatic buying and will gradually replace the dominant role of PC, especially given the surge of smartphone adoption being facilitated by faster mobile networks, as well as price reduction for both devices and mobile network fee.
- While cross device measurement remains a challenge, it is still a major discussion point in China. In turn, Xaxis is investing a lot in this area to conquer the difficulty.
With positive advancements – such as premium inventory, increasing technology maturity to viewability and anti-fraud, as well as mobile programmatic capabilities – programmatic buying continues to mature in China.
The article is written by Mickey Zhang, Xaxis managing director, China.