Common China Market Entry Mistakes In Ad Tech

Common China Market Entry Mistakes In Ad Tech

December 29th, 2014 // 10:18 am @ // One Comment

As programmatic continues to grow in China, many Western ad tech companies are also trying to catch this opportunity. Now I’ve listened to quite a few Western ad tech companies’ sales pitches, but most leave me unconvinced. Some of these companies are completely ignorant of the local market dynamics, while others are not sure how they fit in the Chinese ad tech ecosystem.

So let me summarize a few of the common mistakes I’ve seen Western ad tech companies make when entering China:

1. The “It’s How We do It in the West” Mentality

We see this mentality all that time in Western companies, not limited to ad tech. Think of Google, the most dominant search engine globally, but market share in China – less than 5 percent.

Political reasons aside, Google’s mistake was applying a Western ideal to the local market. Applying the same point to ad tech, some things that Western companies take as a standard simply does not matter in China.

Ad-serving for example, is the de facto standard in the West. But in China, most media channels will not allow ad-serving, and most advertisers either don’t know or simply don’t care. Instead of complaining about how the market is behind, they should spend their time and energy on making their technology stack work within the local ecosystem. Because in the end, advertisers and agencies don’t really care how you did in the West.

2. Western Ad Tech Companies Are Too Narrow in Their Product Offerings

Western ad tech companies tend to place a great importance in core product development. With this point in mind, they rarely venture outside of their original/core product. Meaning if they are a demand-side platform (DSP), they’ll spend all their R&D dollars on perfecting bidding algorithms. If they are a data management (DMP), they’ll spend all their energy on collecting and cleansing data.

Rarely do we see Western ad tech companies with multiple product offerings covering multiple parts of the ecosystem.

In China, most DSPs are DSPAN hybrids which have evolved out of traditional ad networks, so they have both open exchange and ad network inventory. On top of that, most local DSPs even have a DMP offering. So a single local DSP can cover multiple needs, and the local advertisers have come to accept a “one stop shop” offering from ad tech companies.

This point poses an issue for Western companies, because they tend to come into the market with a single solution. Now why don’t they expand their offerings? That brings me to my next point.

3. Over-Focus on Transparency and Position Neutrality

Western ad tech companies usually don’t expand outside of their core product offering because they want to maintain their transparency and neutrality. In the case of DSPs, they cannot have both ad network and open exchange inventory because it obscures the impressions that are being used for a particular advertiser. They also tend not to have a first party DMP offering, because then they would control the inventory as well as the data that says which impressions to buy. This poses as a point of conflict because they cannot maintain a neutral position either as a pure DSP or DMP.

Now this is a direct response to the nature of the Western markets, which place great importance in transparency and neutrality. But in abiding by these “rules”, they give up business opportunities as well as the competitive edge in the Chinese market. On the point of transparency, local DSPs have both ad network and open exchange traffic. This allows advertisers and agencies to have more flexibility regarding the quality of the inventory.

Most clients also tend not to care too much about the exact inventory that’s used, as long as the campaign results are satisfactory. On the other issue of neutrality, the local players all disregard it by offering multiple solutions up and down the ad tech ecosystem, with the most important offering being first party DMP. Because they know that once they hold a client’s data, then it’s easy to lock them down for all future campaigns.

So with these fierce local competitors that don’t seem to play by the same “rules”, how can western DSPs compete?

4. DIY Self-Serve Platform is NOT a Selling Point

Another interesting observation I’ve seen is the “big deal” Western companies tend to make over their awesome DIY self-serve platform. We see this with Google’s Display Network (GDN) and Private Market Place (PMP) offerings, as well as Criteo’s self-serve platform. However, I believe that the self-serve model is not yet prevalent in the China market.

Most agencies including my own team would prefer a managed service model, where the agency sets the buying strategy, and the local DSP selects the detailed inventory. Now this will probably change in the future, as programmatic gains more adoption in China, then I foresee that many agencies will have a programmatic team just like PPC that will operate these self-serve platforms. Hence, before that trend takes place, Western companies need to be flexible to run both self-serve and managed service models.

That means having a local account and operations teams is a must, not to be put off until you get clients.

This article was written for ClickZ

Category : Digital Marketing &Featured &Programmatic

One Comment → “Common China Market Entry Mistakes In Ad Tech”

  1. Tracie

    2 years ago

    Great insights! Really like the posts and thanks for sharing, Charlie.

    I think the 4th point also explains why the naming of Automated Guaranteed isn’t used as often as PDB.


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