Marketing in China: Should a Demand-Side Platform Be Uber-Like? - eMarketer

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Marketing in China: Should a Demand-Side Platform Be Uber-Like?

October 14, 2016

Grace Huang
Co-Founder and CEO

As programmatic becomes a buzzword for China’s digital marketers, defining what counts as programmatic ad spending has become a source of confusion. eMarketer’s Andria Cheng spoke with Grace Huang, co-founder and CEO of iPinYou, China’s largest demand-side platform (DSP), about how she defines programmatic ad spending in China and the roles internet giants Alibaba, Baidu and Tencent play in programmatic.

eMarketer: What problem were you trying to solve in China by starting iPinYou?

Grace Huang: The way digital marketing was transacted was very manual and traditional. I realized it should be powered by technology and data, where, at the time, there was nobody talking about those two words. The market has totally changed since then. Everybody is talking about how important data and technology are to digital marketing.

eMarketer: What’s the biggest difference between programmatic and traditional digital ad buying in China?

Huang: Traditional digital media is very similar to traditional media. It’s optimized on a campaign basis. However, in the programmatic world, everything is optimized in real time, so that means we could get feedback on specific KPIs [key performance indicators] or whatever metrics the client is most interested in.

“The programmatic trend is about how technology is enabling media buying efficiency.”

The machine will detect very quickly which creatives actually generate, say, higher conversion and adjust the strategy in real time. Those two elements are really the fundamentals to the whole programmatic method.

eMarketer: By your definition, programmatic is still a small part of China’s digital ad spending.

Huang: There are different definitions of what should be included in programmatic spending. If you include the automatic targeted ad serving technology from Tencent or Baidu or [Alibaba’s] Alimama, then programmatic is very big.

In our definition, we don’t really include that. A driver of programmatic buying for advertisers is transparency, meaning that they want to separate technology from inventory providers and from data providers. A pure DSP has to be technology-focused and basically cannot carry any inventory.

eMarketer: Why is conflict of interest a big concern in China?

Huang: BAT [Baidu, Alibaba and Tencent] are enabling themselves with their own data, their own inventory and their own technology. It’s not programmatic because Baidu, for instance, has only one goal as a publisher: selling inventory. It’s a black box.

China is a much smaller market compared to the global market, so the players tend to play more roles along the value chain. The fine line is we cannot create conflict of interest, but it’s very easy to get across that line. In any market, creating conflict of interest is a big no-no.

eMarketer: Explain the idea of why a DSP should be like an Uber.

Huang: The programmatic trend is about how technology is enabling media buying efficiency. We don’t buy or own any inventories. Uber is a technology enabler. It doesn’t own any taxis. Airbnb doesn’t own any real estate. But with Uber or Airbnb’s machine, their algorithm and their technology, they can match the needs of whoever wants to take a taxi or wants to go from one place to another.

That’s how we see the trend and where we position ourselves in the market. The essence of our business is to maximize the best match between ad partners and a specific impression regardless of where the impression comes from. Because we are an independent player, we become the connection between everyone and make the matching magic happen. We are like Uber to the taxi industry.

eMarketer: Mobile programmatic has jumped to 70% of your revenue from less than 10% in the first quarter of 2015. What attracts your clients to it?

Huang: Programmatic on mobile is a big trend, and it’s very promising. The biggest opportunity for mobile programmatic is on performance, not on branding [campaigns]. A mobile device is very transaction-friendly. More and more clients have specific performance targets on a mobile campaign, and most of the large spenders are mobile apps like [taxi app] Didi Chuxing or a mobile game instead of Unilever or other large Fortune 500 brands. That’s a unique trend.

“Programmatic on mobile is a big trend, and it’s very promising. The biggest opportunity for mobile programmatic is on performance, not on branding [campaigns].”

eMarketer: Mobile videos have contributed to mobile programmatic ad spending growth. Why do you think there are a lot of challenges with mobile video?

Huang: Because it’s a much smaller screen, and there’s more user-generated content, which a lot of brand advertisers aren’t necessarily interested in buying. That limits the inventory available in the market.

eMarketer: How would you advise marketers interested in buying programmatic ads?

Huang: With programmatic, it’s an efficiency game. Because of the technology [associated with programmatic], it’s hard to be crazy about the media strategy. Advertisers tend to forget traditional branding and awareness building is very important. Because the market is consolidated, advertisers need to find the largest and best technology partners.

We always encourage advertisers to work with the tech vendors directly. In China, advertisers will give a lead to ad agencies, and the agencies will give to DSP vendors. That’s created a lot of confusion and miscommunication. Marketers tend not to understand what can and can’t be done with programmatic. That creates a gap. It can’t be a chain of communication. It has to be parallel communication.

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