What Challenges Must Be Overcome To Enter The China Ad Tech Space?

China AdviceAs programmatic buying continues to grow internationally, one region is catching companies’ eyes: Asia Pacific. But online advertising technology in countries like China is a completely different beast than what many Western ad tech companies are used to.

Many players in the ad tech space in China, including the major publishers, are international companies looking to move into the region. They must learn the market, understand its nuances and connect with local partners.

We reached out to several industry executives in China with the following question:

How can US- or foreign-based ad tech companies make their way into the Asia-Pacific or China market? What challenges must they overcome and what advice do you have?

Please click below or scroll down for more:

Xiaofeng Wang, analyst, Forrester Research

Programmatic and RTB advertising is still at an early stage in China. Marketers, agencies and publishers are less experienced in programmatic and RTB advertising, and there are not many strong players of ad tech providers yet. With more experience, US- or foreign-based ad tech companies will have a good opportunity and advantages in technology and knowledge. However, the biggest challenge is the understanding of local market; consumer behavior, the media landscape and the advertising ecosystem are all very unique here. That is also why few foreign companies succeed in the Internet industry (or digital world) in China.

Tom Simpson, CEO, mediaQuark

One of the key barriers to foreign entrants is the big local publishers, who often control inventory using their own proprietary ad tech platforms and operate at multiple points along the buying chain. Sina’s Longyuan, and Tencent’s Tango are great examples of local interests consolidating their position in this way. While in the medium term this is sure to drive the programmatic premium market, it’s not so healthy for the wider ad tech ecosystem or for foreign entrants…Data can be quite hard to come by in China, with publishers and advertisers slow to move into this space due to privacy concerns. Although many clients do fantastic work with data in silos, this hasn’t necessarily translated to the industry at large. It is a significant opportunity for the next few years…Industry education must be the biggest focus for any new entrant. Driving better understanding and transparency is absolutely essential for clients, agencies and publishers in China to fully realize the benefits offered by ad tech. The importance of the right local partnerships can also never be overstated.

Peter Wang, CEO, and Cain Wang, COO, AdsMOGO

A key challenge as foreign-based ad tech companies enter China is the dramatically different ecosystem. Companies like Google, Yahoo, Facebook and YouTube are either insignificant or not operating in China at all, not to mention other smaller inventory and data partners these companies work with in other markets. In this case, you need to identify and establish reliable local media inventory and data partnerships even before you enter the market. Leveraging your global client base and becoming a bridge of the Chinese and the global market would be a smart start to differentiate yourself from local competitors, but it is also very critical to utilize local talents who really understand the market and local clients to go further. Given the different level of market and technology development (China’s mobile advertising and marketing are two to three years behind the United States in general), you may also need to make adjustment to your product strategy to fit the China market, which means you may need to make changes to your products and policies (sometimes even step backwards) to seize the opportunities in China.

Andy Fisher, Chief Analytics Officer, Merkle

Marketplace dynamics can be very different in China. One examples of this is that publishers have more leverage and thus are building their own private programmatic and ad tech platforms. Because of this, an outside vendor can be seen as a threat or not relevant to publishers…Additionally, because publishers control much of the ad tech stack, there is not a substantial amount of premium inventory on the ad exchanges. If your ad tech solution is focused on premium inventory, this is a big issue and you have to manage your relationship with publishers well…Ad tech approaches like viewability have a different dynamic. Agencies and publishers may see verification as a threat to their business model, or at least a substantial hit to their margin. In addition, few Chinese advertisers are asking for this service. Rather, western multinationals advertising in China are driving the requests for these approaches…As US- and foreign-based companies move into China, they need to support Chinese ad buying models as well. For example if you can’t support cost-per-time buys, you will have a limited audience for your product.

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