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eMarketer expects advertisers in China will spend $9.29 billion on programmatic digital display advertising in 2016, a figure that sits between our estimates for the US ($21.55 billion) and UK ($4.06 billion). eMarketer’s latest report, “China Programmatic Advertising Forecast 2016: Alibaba Dominates the Market, but Landscape Is Poised for Growth,” explores the major effect of the so-called BAT companies—ecommerce giant Alibaba, search company Baidu and (to a lesser extent) internet services and social media company Tencent—on this spending.
This year, for the first time, more than half of digital display advertising in China will be transacted programmatically. However, the market for programmatic remains small and underdeveloped, with the BAT companies—specifically Alibaba—exerting a disproportionate effect on the programmatic ad market in a number of ways.
The programmatic advertising landscape in China has seen gains in recent years, with eMarketer estimating a triple-digit growth rate in 2014, followed by a growth rate of nearly 50% for 2015 and 2016. While total programmatic ad spending in China outpaces that of the UK, the share of digital display ad spending transacted via programmatic means in China (51.0%) in 2016 is forecast to trail the US (67.0%) and UK (69.7%) by significant margins.
Baidu, Alibaba and Tencent play a role in China similar to the one Facebook and Google play in the US and UK. When the BAT players are put to one side, China's programmatic ad market lags significantly behind that of the US, with fewer players and a smaller ecosystem. Alibaba alone is a juggernaut in China's programmatic landscape, accounting for about 60% of all programmatic advertising. When Baidu and Tencent are added, the BAT companies take up about 90% of the market.
Thus far, the biggest advertisers in China's programmatic environment tend to be focused on direct response—those with the single-minded goal of driving conversions. These include ecommerce sites, travel companies and online gaming platforms. Unlike brands, these players are less concerned with the potential downside of buying large volumes of remnant inventory—such as poor viewability and brand safety—in their bottom-line efforts to drive clickthroughs.
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