Full transcript below:

Matthieu David:  Hello, everyone. I’m Matthieu David, the founder of Daxue Consulting Strategy Market Research Company based in China and this podcast, China Paradigm. Today, I am with Steven Proud. You are a global marketing director of Brandigo. Brandigo is a full-service marketing agency specializing in three specific missions, I would say: brand strategy, brand experience, and sales enablement. And most specifically in B2B, which is something very, very interesting because I see a lot of agencies, marketing agencies, branding agencies specializing in luxury, in retail, in beauty, but in B2B it’s much more interesting and I feel that there is so much to do in B2B in the digital industry, and more.

Thank you so much for being with us today, Steven Proud. The first question, as always, is about the size of the company and the history of the company. If you can share how many people, revenues, and the number of clients does Brandigo have today?

Steven Proud:  First of all, good morning, Matthieu David. Thank you for inviting us as well. We’re excited to do this. I love how you’ve said that we’re we are specialists in B2B in China and then just call us a bunch of geeks. That was very kind of you to put it like that, but we wouldn’t have it any other way. We could do the glamorous stuff, but it’s not what makes us happy, it’s not what we enjoy doing. We like to do the B2B side of marketing. Maybe we’ll come back on to that in a second.

There have been 14 years for Brandigo in China. Our company founder, Mike Golden, has been in Shanghai for 16 years. He founded the company as an agency called Adsmith. Then we joined forces with an international agency based in Boston, and that’s how we became Brandigo. We’ve been doing B2B marketing, specializing in B2B in China our entire lifespan, if you like.

We’ve got about 20 people in Shanghai at the moment. We’ve got a full artwork and creative departments. There is the account management team, which is led by our PR director or accounts director, and then there are three of us who are part of the senior leadership team. We’ve got the office in Boston as well which has our American President, Matt Bowen, is over there. He has a smaller team at the moment in Boston. One year ago – it’s our one year anniversary – we opened our Toronto office as well.

We’re also part of what’s called theE3 Network. This is a network of multinational B2B specialist agencies. It’s something that has worked really well for us. For example, we have just started working for a finished paper company called UPM, which is way more exciting. It’s actually really more interesting than the paper company might sound to be. But we started to work with them because they have an agency in Finland, whom they worked with for a very long time, and they needed to do something in China. We know the guys from Finland very well from being part of this network, so they come for us for their brand strategy in China. That happens all over this global network, so it’s something that works really, really well for us.

We’re up to about 20 people, really talented bunch. They are much better than I am – all of the day-to-day technical stuff of Chinese market broadening and the account handling and things like that. So it’s a fun place to be.

Big ambitions for this year? We’ve already picked up some great new business. This year, we’ve been working for UK government accounts in the food and drink space but from a point of B2B in China as well. Maybe that would be relevant to chat about later.

The finished paper company that I’ve mentioned, we’ve been picked up by Costco, they’re launching their first physical chain in China and that’s going to be in Shanghai. I think that opens within the next month but don’t quote me on that.

There are really interesting brands and really interesting projects in China. It’s a good time for developing B2B in China I think.

Matthieu David:  Could you exemplify and make it more tangible – what does it mean to work on brand strategy, brand experience, sales enablement? Is it a powerpoint to deliver when you do brand strategy in China when you do brand experience? Or you execute for them, and you do the PR, you organize events, you also organize the Chinese digital marketing presence. You create a mini-program, H5. Could you describe what you do to serve those three missions?

Steven Proud:  The Holy Grail for us, like our agency, is when we have a client that comes to us for all three of those. So we are starting right at the beginning of their journey with them, and we are doing their brand strategy in China. That is literally as it sounds. You are sitting down with senior members of the organization. The way we like to do it, it’s not just senior members of the organization. You have everybody who has something to do with a brand, and you talk about what they want their brand to be and what they want their brand to mean to people. You are auditing the brand assets that they’ve got, and you are coming up with a sustained plan to help them grow what we would describe as a brand. And that brand is how people who come into contact with your organization feel, think, react to you and what it is that you do.

So the brand strategy side of it is the very beginning of that story. It’s taking a well-thought-out strategic approach to creating a brand.

Matthieu David:  I like to understand better about the brand strategy in China. You mentioned your website and presentation that you are really data-driven. You look at data, you look at the research. Would you mind giving us a specific case for us to understand how you work on the strategy? I feel a lot of people can pretend to be strategists to say, “I have a strategy in mind,” actually, because everyone has ideas, everyone has the opinions. But are ideas and opinions really enough to build a strategy? So could you detail a bit more on the how and the different steps to build a brand strategy in China?

Steven Proud:  A good example is an organization, our Boston office if you don’t mind me talking about the Boston office quickly just for this because it’s a recent one and it’s a good illustration. They were brought in by a large healthcare company in the U.S., which is now called SullivanCotter. Beforehand, I think it was called Sullivan, Cotter, and Associates. Again, they are a company that specializes in how healthcare companies pay their staff, reward bonuses, payment structures, added things for the package, all that kind of thing. They’ve been around for a long time in the states, a successful business, but they felt to move into a kind of a new period of healthcare in the U.S. They needed to redo their brand strategy completely.

We did on their behalf a lot of research into what people within that space are looking for from service providers. You are looking at not just the type of services that they provide, but it’s how that service is presented. It’s that customer experience at every stage of the kind of relationship that you have with those companies.

After doing all of that research and looking at what the market was telling us, there were things they were doing very well. There were parts of the brand that was still very successful because it was well known, it was well trusted, it was well-liked, but perhaps it wasn’t quite as future-proof as it could be. So for we took the step then of distilling the key messages that worked really well for it, but upgrading them for modern healthcare practice in  modern industry.

So part of that was coming up with visual assets for the brand. They actually renamed to SullivanCotter and came up with the new logo to go with that as well. And then we came up with a kind of a campaign that launches that internally because you need everybody within the organization to live and breathe a successful brand before it goes to the outside world. If you don’t believe it yourself, if you don’t live and feel it yourself, then your customers and your clients aren’t going to buy into that either. So that was an important part. Then it’s rolled out to the wider world.

So taking that strategic approach, looking at what the market is doing, looking at what the aims of the objectives of the organization are, looking at the future direction of the industry or the space that the company wants to be in and 10-20 years’ time, all ties into coming up with a strong brand strategy that resonates both within and without the organization. It has been an interesting project.

Matthieu David:  You mentioned the strategy as coming from inside the company. Does it mean that you don’t really look at the competition, the competitor, the benchmark to understand the environment?

Steven Proud:  No, not at all. You absolutely look at that. So when I’m talking about some of the research that we are doing, it’s talking to the customer base. It’s looking at what competitors are doing. It’s looking at what client businesses are doing and the direction that their businesses themselves are going in as well, and making sure that the brand that you create for your client is relevant to the direction of the industry and the direction of their customers. So you’re right to pull me up on that. We are absolutely looking at the wider world, the wider environment that our client is operating in, to make sure that that brand is relevant to where they want to be.

Then coming on from that with the strong brand strategy in China, this is where the brand experience side of it comes in now. When we talk about brand experience – you listed some of the aspects of the brand experience earlier – when you’re talking about PR, digital and social, it could be events, it could be activations, those are what we talk about under the umbrella of brand experience. It’s creating those touchpoints for your customers or consumers or potential customers to experience your brand positively. And that could be via a mini-program or H5 if you’re in China. It could be via a conference on events. I know a piece of small DM marketing still has a place these days. So the experience side of it. 

Matthieu David:  I assume that you have many options. You can use H5, AI, or chatbot. You can use a simple website or brochure. Actually, now the brochure is rare so you can get more visibility. How do you prioritize? I feel the challenge now is to prioritize, to know which one to develop and which one not to develop, not to do. Do you have a framework already, some guides on what to decide what to do? Do you brainstorm with a client? Do you like the word “brainstorming”? I’m using it. I’m not sure that one you would use.

Steven Proud:  Yeah, absolutely. I came from London agencies 20 years ago, so I love brainstorming and collaboration and things like that. It’s an interesting question. Sometimes you have to have a challenging conversation with clients. Now, there is no framework. There’s no one-size-fits-all for each client because no one these clients has the same customers.

A long time ago, I worked in the oil sector. We had a client who came to us – it was an oil major – and they said, “We’ve got loads and loads of money. We want to do all of this cool new digital advertising. We’re going to do some really fun Internet stuff.” My challenge to them was, “Okay, that’s great. We can do some really cool stuff. But half the people that you are targeting with this campaign are at sea for nine months of the year, and they can’t access the Internet (as it was back then). So it is a waste of your time, and it is a waste of effort and resources that could be challenged into something that will be more relevant and more effective as targeting that market.”

We get a lot of particularly some of the more overseas companies who perhaps haven’t been in China or worked in China for a long time, and they don’t understand or they’re not aware yet of some of the subtleties around B2B in China, some of the different characteristics of the social media that you can hear, some of the different idiosyncrasies of the digital space here. So for us, there’s a lot of collaboration. But we’re a consultancy; we’re here to give advice. That’s where we add our value. So I have no qualms going into these meetings and saying to the global marketing director of my client:

“You don’t actually want to do that because that’s not going to ultimately achieve what you want to do here.”

You have to be focused, especially in this day and age when marketing budgets are constantly being squeezed. The chief data officer will tell you now that he’s much more important than your chief marketing officer and things like that. There’s this incredible amount of pressure on our industry, so we have to be consultative, we have to add value, we have to push back sometimes on what clients think or would like to do, and agree with them to what is actually going to add value to their campaign and achieve the results that they want.

Then you mentioned “brochures” earlier. Sometimes that’s absolutely the right thing. It’s the oldest-fashioned thing that we have. But if your campaign is centered around, let’s say three or four big exhibitions around China, and you’re going to have foot flow that has thousands of potential customers coming past your exhibition stand, maybe spend less on some Chinese digital marketing like digital campaign because we’ve all got limited resources and come up with a kick-ass piece of brochure work that goes really well with the stand that everybody’s picking up as they go past. That’s just an example of Chinese marketing broadening. But that’s going to be ultimately much more effective.

I guess it’s kind of a long way of answering your question, but there’s no framework or one-size-fits-all. You have to work in partnership with clients to help them with Chinese market broadening. You have to be consultative. You have to agree on what success looks like. That’s a huge thing that I think a lot of agencies perhaps don’t do as well as they can or they should. You have to be giving regular updates, reports, and evaluations, and demonstrate the value that you’re adding. It’s picking the right tools to get each individual job done. Sometimes there are different tools for different jobs, for different clients as well. It’s complex, but that’s why we love what we do.

Matthieu David:  Talking more specifically about channels to reach out to your clients, I talked to agencies in past episodes about marketing agencies, about how to achieve Chinese market broadening, but it was more B2C than B2B in China perspective. A lot of agencies are disappointed with Baidu, for instance, Baidu SEM, Baidu Search, and so on. But I got a sense during that interview with this agency that Baidu was still relevant for B2B in China specifically when it’s a very specific, very specialized segment.

Could you tell us more about the differences you see specifically in B2C and B2B in China– Baidu being one option but TikTok being the opposite option that you will not see used for B2B right now? One of your colleagues said that TikTok would be the big trend of 2019. If you could give us some direction of what is working in B2B and not working in B2C and vice versa. It would be a very interesting topic.

Steven Proud:  I think what you’ve got to appreciate when you’re doing a B2B campaign in China is a lot of what you’re trying to convey or all of what you’re trying to convey is about people’s jobs. It’s the career, and it’s their focus. You’re not necessarily trying to get them to buy more cans of a soft drink. You’re not necessarily always trying to aspire to a certain lifestyle, although the B2B does have its place for that these days. What you’re trying to show are ways that people can achieve their career range or do that job better with what your clients have to offer.

For example, we did a really interesting campaign for an American company called National Instruments. They make these as they sound. They are instruments that go into manufacturing plants and chemical plants, and it helps people to monitor what the plant is doing. So there are safety elements, there are efficiency and productivity that they tap into.

Nobody sits at home watching TV or surfing on their phone, thinking about what the best instruments to measure this widget or this pressure or whatever it is coming through. But if they sat at work and they’ve got a challenge, and they’re researching that challenge, some of the platforms that you mentioned earlier, they’re more likely to spend some more considered time on. So if we can use that, be involved in that conversation and use their time for them, help them use their time, then it’s more effective for us than perhaps a big blanket campaign that a consumer organization might have.

The other thing about B2B in China, there’s a lot of what we do – and coming back to that National Instruments example as well – we are, by nature, a lot more niched. One of the hot trends around B2B marketing at the moment is called ABM (account-based marketing). All that really means is you are dedicating all of your marketing resources onto a very narrow target market.

So, National Instruments came into China. At first, they think that there are X billion people that we can go for and sell loads of stuff to, and it’s going to be great. Well, maybe not. Maybe there are only about 3,000 people who are actually using your products or would be interested in using your products. So rather than covering everywhere, let’s think about how we can narrow things down and use relevant platforms, relevant channels, relevant content that is going to resonate with that very specific audience and change the behavior in the way that you want it to, which is in the end, use National Instruments to incorporate into their operations.

So it’s slightly different for us geeky in B2B in China. We don’t need to have the kind of mass-market approach. We’re not looking necessarily to reach millions of people all in one go. So we have to be more focused, we have to be more targeted. For example, if we are looking at a bunch of engineers, and we know that they’re using Baidu to come up with their solution in Chinese market broadening, then our campaign has to involve Baidu because that’s what they’re doing for their work and that’s where we need to be when they’re thinking about their work.

Matthieu David:  I believe that there’s a very specific website talking about a specific industry. Or even magazines. You may be more in touch with magazines.

Steven Proud:  It ties into some of the interesting conversations at the moment about influencer marketing in China as well. Again, influencer marketing is a hot topic now. We’ve done stuff in campaigns of B2B in China with an academic influencer who didn’t even know they were an influencer.

Matthieu David:  Could you give an example?

Steven Proud:  Again, National Instruments. We had an academic who was in an engineering space and he had about 500 followers. He didn’t even know that he was an influencer in influencer marketing in China. But these 500 followers are making purchasing decisions on factories and engineering plants, and it’s exactly the type of people whom National Instruments wanted to reach in influencer marketing in China.

So rather than spending huge amounts of money on celebrity influencers, we go and work with a specific academic. He’s not necessarily in it for a monetary reward, so you have to make sure it’s something that he/she is interested in or is interested in and wants to speak about. And you’re reaching 500-1,000 people via that medium, who are actually more likely to make high-end purchasing decisions based on your client’s objectives. So even something like influencer marketing in China, we have to be more niched, we have to be more targeted than some of the other types of marketing, the B2C you mentioned earlier.

Matthieu David:  It reminds me of when I was a student, actually. We had a lot of tools for free to use, or databases and so on. Actually, that was like influencer marketing to use the school in order to be in our brain, so that when we begin working, we’re asking, “Oh, we need this database. We need this software. We have learned how to use it. We have explored and we know about it. We know the name.” So it’s very interesting to see actually those results of influencer marketing in China. We were not defined as influences in the past.

What do you see as the most frequent missing parts among the leads or clients you get when you begin to work with them in B2B in China? I can get a sense that a lot of them may not be used to do that much Chinese digital marketing, all to think about sales enablement or brand experience – especially the brand experience, I believe. What’s missing most? Is it that they don’t know their story? Is it that they don’t know their clients? Is it that they don’t have a clear direction?

Steven Proud:  It is not necessarily because it’s multinational companies that we’re working with a lot of the time. Now, I don’t mean “multinational” as big global entities. I mean multinational companies that have a footprint in several countries. So we’re not talking about a company that has an office in every single country in the world like Google or Microsoft would, but companies that operate internationally and are looking to now get a foothold into the China market.

One of the things that we as an agency have to be aware of is the challenges that the client is under. They’ve probably had somebody in the executive suite who has said to them, “We must be doing more stuff in China. That’s your job, go and do it.” And they may have never been here for a start. All they know is they have to sell more units, more widgets, and they have to go back to the executive suites at the annual meeting in 12 months’ time and say, “This is what we did after you told us to conduct Chinese market broadening.”

So we have to work with them, rather than just saying, “We want to be in China,” it’s really distilling what that means, what that looks like, and how that’s going to be successful for them. It’s beneficial for us because we need a clear brief, and we’ll work with the client to come up with that brief. But it’s actually giving them a clear understanding of what it involves to be successful for them here and what that success might ultimately look like, and then how they communicate it back to their home organization.

In the agency world, there are some interesting threats, not just for B2B in China but for agencies all over. One of the big threats is actually management consultancies thinking that they can do a lot of the Chinese digital marketing that marketing agencies can. They’ve already got the ear of the CEO because they’ve done all the great strategy projects and things like that, and now they’re saying, “We can do your marketing as well.” That puts a lot of pressure on agencies and marketers and internal marketing staff as well.

It’s like I said, if you don’t have that clarity, you’re not going to make anybody happy. It’s making sure that they come to China with that clarity of purpose, with a very clear picture of what success looks like and how we’re going to help them achieve Chinese market broadening, and also how we’re going to communicate that success back to their home office, their boss, or their chief executive, to show that it has been successful what we’ve done.

Matthieu David:  We just mentioned how B2B companies could be in terms of marketing and what’s missing. On the opposite, I see two segments of yours among the five you listed on your PPT to segment your clients. One is medical, chemical, manufacturing auto – it can be a lot of B2B. But two of the segments are both B2C and B2B. Would you be able to explain what you did for companies like Samsung, LG, Animoto, Life, and GHA? Because it’s mainly known as B2C, what do you do for that in B2B in China? Do you do marketing towards a distributor? Do you do Chinese marketing broadening towards their partners in China? Could you explain more some of those cases?

Steven Proud:  A more recent example I think that might be of interest to you and your listeners was something that we’ve just finished for the UK government. At the moment, with the disaster that is Brexit – and that is my opinion, not necessarily the opinion of the agency but my personal opinion – there are opportunities for the UK government to grow international trade. The Department for International Trade and Defra (Department for Environment, Food and Rural Affairs) are doing what is called the Great Britain Campaign. They are taking aspects of British engineering, British fashion, and British entertainment around the world.

Now they brought us into work on the Food Is Great Campaign. They selected what they called hero products that they think can use to help with the Chinese market broadening of British food. There were some dairy products, there were some seafood products, and the interesting one was gin. Now, gin is really trendy and popular around the world at the moment.

The campaign that we came up with them very much blurred the lines between the B2C and the B2B in China as you mentioned. We were pushing the key messages to the distributors, to the F&B directors around China, and we were coming up with a series of events, activations, and experiences, all centered around premium craft British gins. Now we’re pushing it on to the trade and the industry, which is the B2B side, but there are also elements of that campaign like WeChat, mini-programs and H5s, and things like that, which creates a pull. So we can’t control that to just the B2B audience, but we’re getting what we saw that as consumers then seeing the content and seeing the campaign and going into the restaurants, the bars, and hotels, and rather than saying, “I’d like a gin and tonic,” they might say, “I would like this British brand gin and tonic please,” because they’ve seen some really cool piece of content and they want to try it. Or we did some influencer marketing in China and they saw the influencer drinking the latest British gin cocktail, and so they wanted to try it.

You’re right in that some of the work that we do blurs the line between B2C, but we’re still focusing on the B2B elements, which is using consumers to create a bit of a pull as well as the push, if you like. Does that make sense?

Matthieu David:  You mentioned in some of the articles, one was the 10-year challenge. When you were duplicating the 10-year challenge on Instagram, the people were putting a picture of 10 years ago and now. You did a 10-year challenge for Chinese digital marketing. It’s very funny to see that we don’t even remember that 10 years ago, there are many websites that had disappeared now. And we talked mainly about WeChat. What are its uses do you see for B2B companies? Would you mind sharing some specific cases of leveraging Chinese WeChat for B2B in China?

Steven Proud:  The thing about WeChat, as we all know, if you’ve spent any time in China, it’s ubiquitous. It’s everywhere, and it’s everything. So even though we’re doing B2B in China, you are missing too many tricks if you are not focusing a lot of your resources on WeChat. If I come back to that National Instruments example I spoke about earlier, and you can’t get a more effective campaign of B2B in China than that.

But WeChat was essential because it’s the tool that the people we’re trying to reach has in their hand the whole time. For example, we talked about we did some work with an academic influencer. But the way that we presented that work was via WeChat and an H5. We also had some kind of interactive mini-programs, and then we had a way to communicate directly with people who could answer. If you had a business problem, you could go into the WeChat for the National Instruments, and you could communicate with somebody, and they would address that problem. So it was a quick real-time tool that the potential customers could use as well.

It’s not necessarily the channel; the channel has to be included. It’s getting the tone of voice right. This isn’t when you’re on your phone on the train, and it’s fun. This is when you’re on your phone at work and you’ve got a problem that you need to solve. WeChat can be both. And I think the users, the people who own the phones, they absolutely know that.

I’m still old-fashioned. Sometimes one of our young designers will send me on WeChat the latest bit of creative. And I’d say, “That’s fantastic! Can you e-mail it to me, please?” and they just laugh at me because I’m old-fashioned. But they’re using it in a work environment all the time, and I suspect most people do. I suspect I’m a minority.  

So it’s not necessarily the channel; the channel has to be included. The platform has to be involved. But it’s the content and the tone of voice and the timing that is the most important from a B2B in China point of view. People aren’t going to waste their time on something. So if you can make that useful to their job and what they’re trying to achieve, as well as making it a positive brand experience for the client that you’re working with that achieves their goals, then you’ve got that channel right, in my opinion.

Matthieu David:  In the prediction for 2019, you mentioned specifically data silo and sharing data among the company. It would be interesting also to have some specific examples of difficulties or challenges you see because of not sharing data within the company, within the team, or not maybe leveraging existing data, issue-specific cases in China.

Steven Proud:  I think my colleague, Christian, actually put it better in a recent blog that he did. When I made that prediction, the thing that strikes me now is that we all know that there’s an incredible amount of data that flows through all organizations, but it’s making sure that that data flows now and is useful – and it links to the customer experience. So these days, organizations and their customers have more touchpoints than we’ve ever had before. There are more ways for your customers to contact you. There are more ways for them to see something that you have done in Chinese market broadening. There are more ways for them to discuss with other people some things that you are doing or have done or they would like you to do. The customer experience now is incredibly broad.

The point I was trying to make there is that if you’ve got somebody in your contact center, for example, who is having customers ring up and complain about an aspect of your product that could easily be fixed by tech support, but that data, their tech support might not know or haven’t been told that 50 people have rung up in the last three days to say this is the problem of our product. So they don’t know to act on that because that data silo is building up.

Customer service has all this awesome intelligence that maybe in 12 months time when they have their big meeting, they will share and present to everybody else, but you’ve lost those 50 customers by then. Whereas, if that data flows quicker and is understood by everybody, it’s not you’ve got the team who can fix the problem almost in real-time, knowing there’s a problem and fixing it, and that infinitely improves your customer experience. They see that their issues have been addressed, they know that there’s another department within the organization that is solving their issue, and it just means everybody’s happy.

When I talk about those data silos, that’s kind of an illustration of how that can work. It has that feedback from the customer at some point in the organization not flowing freely to somewhere else where it could be useful.

You asked about a specific example and maybe a specific example of a brand strategy in China. I think this is a global problem for a lot of organizations at the moment. I don’t think it’s something that’s just specific to China per se. I think there are Chinese companies that don’t do this very well. I think there’s British, I think there’s French, I think there’s American. Everybody’s getting used to the fact.

Everybody thinks it’s really cool to have all of these new ways of collecting data and analyzing data but if you’re not sharing those results and communicating them clearly, then it might be helping your Chinese market broadening, but you’re missing out on so many other aspects that that smart use of data can help your business to do. And that one thing could be to completely revolutionize your customer experience across the entire organization.

Then you’ve come up with a business model that is really compelling and that really stands out from everybody else, and can truly say that we’re a customer-centric organization because nobody in that organization would feel that “Interacting with a customer isn’t my job.” That’s kind of what you have when you have these silos. We don’t hear from customers, and we don’t relate to customers. So the customer isn’t our problem, isn’t our job. And as marketers, we need to be breaking down those walls and sharing data to enable people to change that mindset and break down those walls.

Matthieu David:  My last question would be about what sectors do you see in the B2B segment that have to consider Chinese market broadening which is from the West, those which have to consider China as one of the big momenta? Do you see some specific sectors in China? I mentioned the five sectors in which you are in. Maybe those are some of the sectors where you see momentum but do you see beyond those five? Do you see others which have to do Chinese market broadening and do something in China?

Steven Proud:  Again, I think it comes down to the size of your home market. If you’re in a country like the UK and you see some of the challenges that the UK faces, I think almost all manufacturing sectors within the UK should be looking to leverage what they can move in China in a spirit of partnership, innovation, and working together.

It’s hard actually to pinpoint specific sectors. I would have said automotive until very recently, but automotive in China is going through some trials and tribulations at the moment. Some of the Chinese OAMs are producing some incredibly good products in that space at the moment. And same with the tech, there are many Chinese tech companies that are increasingly leading the world as well.

In terms of B2B, I still think there’s going to be space for things like the higher end consultancy and project management businesses. I think marketing and the type of things that we do is going to have other opportunities still. I think for us as an organization we’re still seeing lots of companies wanting to do Chinese market broadening. I would like, and I would hope that we would see some Chinese companies broadening how they market overseas now. And it doesn’t have to be the big players. I think we might see some of the more mid-market sized companies looking to grow international footprints, and that gives us an opportunity.

I didn’t really answer your question. The reason that I kind of skirted around it a little bit is, for me that’s a really hard one to do. Things change so fast here. It’s one of the beauties of living here, it’s one of the challenges. I think we’re in a state of flux at the moment, geopolitically with what’s happening with the tariffs in the U.S., with what’s happening with the UK and the EU. This is one of the big challenges for businesses everywhere is this uncertainty.

If you ask me to pick a sector which I think the next big sectors would be, I would say maybe some of the life sciences sectors. I would say within the food and drink industry again because one aspect of Chinese market broadening could be Chinese taste, they’re becoming more experimental in what they want to consume. That’s not to say that we’re going to really revolutionize the Chinese diet – that will never happen – but they are willing to try new things, and they are becoming incredibly more health-concious. So companies within that kind of industry will have the biggest opportunities. But it’s a hard one to pick without sounding pessimistic.

Matthieu David:  Thanks, Steven Proud, for your time. Thanks for sharing the experience of Brandigo in China, your experience in China. It’s very useful to understand more about B2B marketing and differences we see in other types of marketing. Thanks very much. Thanks, everyone, for listening.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Podcast transcript #55: Developing creative branding strategies in China is the first one to appear on Daxue Consulting - Market Research China.

Programmatic advertising is buying digital advertising space automatically, with computers using data to decide which ads to buy and how much to pay for them. The programmatic advertising economy has experienced five key development nodes which embraces room for future growth.

How programmatic advertising works

Programmatic advertising is designed to replace human negotiations with machine learning and AI-optimization. The goal is to increase efficiency and transparency to both the advertiser and the publisher. In the early days, since the market had low awareness of programmatic ads, people mistakenly think that programmatic ads is DSP (demand side platform), or that programmatic ads is RTB (real-time bidding). Now, after seven years of development, the Chinese market has a more clear and in-depth understanding of programmatic ads as well as its relationship with DSP, AdX (ad exchange), RTB (real-time bidding) and Non-RTB (non-real-time bidding).

Programmatic vs. Traditional media buying

Compared to traditional media buying, programmatic advertising is faster, more efficient, and cheaper. Programmatic ads could be helpful for the consumption structure development in China by targeting the ads on the right group of people.

Programmatic advertising in China market overview

The selling point of programmatic advertising in China is more about precision and results than automation. China’s programmatic scene is packed with hybrid “one stop shops”: Ad Network + DSP, DSP + DMP, Private Exchange + DSP, etc. Along with these hybrids, there is greater conflict of interest for advertisers due to a lack of boundary/transparency across disciplines. However, advertisers can quickly experiment with programmatic advertising in China without a heavy investment/understanding in technology.

Industrial Chain in China

Despite the emergence of transparency, security and other issues, the budget investment from advertisers on Programmatic Buying has not been substantially reduced. Advertisers are actively seeking to apply private data to advertising optimization and some large advertisers even build their own DSPs.

For publishers, the Matthew effect is more obvious in the supply side. The social, content media and video products of media icons occupy more of users’ time, and more high-quality resources are provided to the Programmatic Buying market through the development of information flow and other advertising products.

The providers (third-party platforms) of programmatic creative received more attention from the market and more and more new independent data service providers entered the market. Due to the strategy adjustments of Baidu and Ali, BES and TANX are gradually turned to internal supply and gradually faded out of the market, which is a good opportunity for other third-party independent platforms.

BATT in programmatic advertising in China

China’s programmatic advertising marketplace has its own dominant players. Baidu, Alibaba,Tencent and Toutiao. They dominate rich search, e-commerce, social, and news and information, respectively.

Unlike in the west, where publishers plug in to a third-party technology vendors to manage the ad sales process, in China, publishers build their own programmatic ad technology. As BAT consists of the dominant publishers in China, they each have their own platform to control advertising, and they operate as silos independent of one another.

Market size of programmatic advertising in China

Programmatic advertising spending in China totaled 151.46 billion yuan in 2018, a 36.6% increase over 2017. It is estimated to reach 196.61 billion yuan in 2019, taking 69% of the total digital display ad spending. In the long run, China’s programmatic advertising market is still in the early stages of development and has a larger room for growth in the future, but its growth model will change from the past high-speed burst growth to medium- and high-speed steady growth.

Rising mobile programmatic advertising in China

Mobile programmatic advertising increased to 125.63 billion RMB in 2018, accounting for 83% of programmatic spending in China. From 2015-2018, the main driving force for programmatic advertising in China was mobile programmatic advertising.

Factors of rapid popularity of mobile programmatic advertising in China

The popularity of mobile programmatic buying in the past was jointly promoted by multiple factors including the rapid growth of traffic of the mobile end, budget restructuring of advertisers, Hero App’s strong demand for cashing and the upgrading of data application ability.

Rapid Growth of mobile devices– In the past four years the number of mobile internet users increased to 829 million from 688 million, with 98% of them accounting for mobile. The sharp growth of traffic became the base of the development of the mobile-end programmatic buying.

More budget from advertiser– Advertisers of APP promotion and e-business are the early advertisers in mobile advertising, and the budget of brand advertisers turned to mobile-end programmatic advertising as well, with the perfection of conditions in mobile-end monitoring.

High willingness of hero APP– With the huge demand for cashing ads without the historical burden, mobile APPs are more easily to accept and more willing to open to programmatic advertising.

Data application ability enhanced– The features of mobile-end provides programmatic advertising with a larger amount of data and richer data dimensions, which enhance the data application ability of Programmatic ads.

RTB vs. Programmatic Direct share in China

Programmatic advertising in China is transitioning from RTB to non-auction-based programmatic direct. However, when it comes to mobile programmatic buying though, RTB is more popular than programmatic direct. 

Advertisers prefer programmatic direct because media icons like BAT can prove high-quality resources as well as premium technology support.

Programmatic video advertising in China

Programmatic video is gaining popularity. In China, programmatic video represented 12.6% of the country’s overall programmatic spending. Some hero short-video APPs like Kuaishou and Douyin are successful in this area. These video ads are information-intensive and are good at attracting target audiences’ attention.

Buying methods– there are four methods for buying programmatic advertising. These four different methods are not competing, but complementary models designed to address the different needs of publisher and advertisers.

Transaction methods among different media and resource in China- In most recent cases in China, the media would cash the long tail traffic that is hard to be sold directly in the open market and sell the high-quality resources through the traditional direct customer channels.

What is Real-Time Bidding (RTB)?

RTB is an auction-based bidding protocol in which advertisers compete against each other to display ads to specific users. RTB offers a lot of capabilities and use of data, vast types of inventory. In China, RTB is gradually losing its position in the programmatic buying ecosystem by facing the pressure from closed ecosystem and media icons. These giants possess rich resources and more right to speak in the industrial chain.

How does RTB work?

When a user visits a page, the browser sends a corresponding bid request. Then the DSP bids on the ad request (impression). If the DSP wins the bid, then the ad is sent to the publisher and displayed to the user. Lastly, the publisher sends an ad request to the ad exchange via the SPP.

Benefits of RTB

Per-impression buying process– Real-time bidding allows brands to bid on individual impressions rather than agreeing to a predetermined fixed price. Buying in real time is cost-effective, reduces waste, and can prevent advertisers from overpaying for media.

Single dashboard- Advertisers and publishers use a single dashboard on their DSP or SSP to control their campaigns, rather than having multiple relationships with different partners.

Easy testing and adjusting– The impression-level data obtained allows advertisers to analyze the efficacy with certain consumers, context, and creativity. This can ultimately lead to a more adaptable strategy.

Insights– Publishers have real-time information about their best-performing segments and know which inventory is more coveted by advertisers.

Ability to sell remnant ad space- As RTB auctions are triggered automatically by the arrival of a target visitor, inventory that was previously unwanted and unsold can always be sold and “saved” from wasting.

What is Private Marketplace (PMP) and how does it work?

Private marketplace is an invite-only variation of the RTB model. It is an auction process in which just a handful of advertisers bid against one another to buy a publisher’s inventory. This method is typically offered by publishers with more premium inventory. PMP combines the advantages of traditional advertising purchasing and Programmatic Buying. Since advertisers in China would like to maximize their own interests, PMP is actively promoted.

Private Auctions (PA) vs. Preferred Deals (PD)

Within the realm of prove marketplaces, there are generally two types of deals in which an advertiser can participate: private auctions and preferred deals.

Benefits of PMP

Transparency on purchased inventory and pricing– The publisher and advertiser both have a very clear idea of what kind of inventory they are buying, what CPM needs to be paid, and the type of creative that is being displayed to users.

First look– PMP is a great way for advertisers to get the first opportunity to purchase inventory before it ends up on the open market.

Integrated buying– The PMP is operated within the RTB ecosystem, meaning campaign data sits alongside other RTB campaigns, giving a holistic view of campaign performance, as well as making global frequency capping and cleaner attribution possible.

Powerful targeting– The PMP can layer on additional targeting. While some publishers use private marketplace to essentially create private exchanges, by pulling their inventory off the open market, others use it as a way to bundle their inventory in novel ways.

What is Programmatic Direct Buy (PDB)

Programmatic direct is a one-to-one media-buying process much akin to the traditional method whereby salespeople met with advertisers in person to strike a deal. It is a very similar model to the private marketplace, with the exception that advertisers and publishers agree on specific inventory based on a fixed CPM. Ads sold through programmatic direct are often tied to premium publishers (think Forbes in west and China Daily in China) who reserve a certain percentage of their inventory they prefer not to sell on the open market because they can demand a premium price from advertisers, who get guaranteed ad space in return.

How does PDB work?

First, an advertiser browses through a shop-like catalogue of websites. They configure flight dates and volume of impressions, then places an order on the platform. Lastly, the publisher audits and verifies the campaign.

Benefits of PDB

1. The ability to automate insertion orders and ad-code configuration can help both publishers and advertisers to improve efficiency and eliminate human error in the entire process.
2. Both advertisers and publishers get more opportunities to control the process and outcome of media buying through real-time data stream.
3. All benefits of PDB make independent companies in China hard to compete with giants as well as get high quality resources

Adtech Platforms in RTB Transaction

What is Demand-side platform (DSP)?

A demand-side platform is a tool or software that allows advertisers to buy ad placements automatically. Main functions provided to media buyers consist of:

1. Create, run and manage many campaigns simultaneously across multiple SSPs and ad exchanges and control them from a single centralized user interface.
2. Auto-optimize (via algorithms) the campaigns to increase ROIs.
3. Use third-party data from DMPs to improve targeting.
4. Provide real-time reporting via advanced analytics.

How does DSP work?

An advertiser signs up with a DSP, that in turn is connected to an ad exchange. DMP collects and manages web browser cookies and help to make buying decisions. When the advertiser reaches the website, an auction signal us sent to the exchange. The exchange then asks the DSP if the advertiser has any ads that might fit the placement. If it does, the DSP sends a signal to enter RTB auction.

How does targeting work in a DSP?

There are several ways an advertiser can run targeted ad campaigns with a DSP, but at the heart of it all is data. The DSP would sync cookies with the DMP to exchange user data, which can then be used for targeting. The DSP could help advertisers to target users based on this data:

Behavioral data- Includes information about the user’s behavior and interests, such as websites they’ve visited, what products they’ve purchased, which ads they’ve interacted with, etc.

Contextual data- Includes information about the website or mobile app, such as USL, categories, and the content on the page.

Demographic data- Includes information about the user’s location, age, job title, gender, and so on.

What advantages do DSPs offer media buyers?

Wide and efficient audience targeting- The DSP provide opportunity to media buyers to reach audiences on a lateral and bilateral basis, so they can reach their target audience more effectively plus reach a wider audience.

More inventory accessibility- The ability to access a larger amount of available inventory and display their ad on a larger number of websites by connecting to a variety of ad exchanges and SSPs.

Free to optimize- Media buyers can manage and optimize the efficiency of their campaigns by adjusting the settings.

Real-time reaction- The ability to react in real-time to certain outside conditions such as weather, news, stock market activity, allowing the media buyer to serv the most relevant advert to the user.

Data integration- The option to integrate third-party data brokers and data management platforms into the DSP to allow media buyers to further optimize their audience targeting capabilities.

The DSP market in China

The self-built Programmatic Advertising platform by media can promote the overall market and the third-party DSPs still have its unique value. Third-party DSPs’ core existing value is to provide cross-media and cross-platform solutions for the advertisers. Part of independent DSPs set transparent transaction as the main focus and improve marketing service capability with differentiated services.

Self-built platforms have stronger control private high-quality ads and traffic resource, and rich accumulation of user data. Part of media programmatic platforms with large traffic consumption and fast growth also began to access external, traffic resources when consuming their own ones.

Main DSP players in China

The top integration platforms in China are:

• YOYI Digital: specializes in the research and development of online precision targeting technology and internet marketing services. It provides both impression-based and performance-based advertising solutions and has developed a network of top publishers in China.
• iPinYou: Beijing iPinYou Information Technologies Co., Ltd is now China’s largest DSP. It has built world class RTB technology and algorithm, proprietary cloud computing platform and patented audience profiling technology. It is established as a leading provider of audience based programmatic advertising technology
• AdSame: AdSame is a digital marketing agency offering advertising, data insight, and publishing solutions. It helps customers to be more concise and efficient in digital marketing. It has extended the business chain to mobile internet advertising and established a corresponding relationship between PC and Mobile users’ data.

The top mobile-focused platforms in China are:

• Limei: Beijing Limei Advertising Co. Ltd. is a provider of mobile marketing solutions in China. It’s targeting capabilities include location, device model, device OS, user Tags, Operators, Wi-Fi, etc. It has also invested in seven professional mobile internet technology development companies.
• Lomark: Media Lomark point is China’s leading local mobile advertising platform. It mainly focuses on the local market, with big data analytics, cloud computing, behavioral targeting technology, crowd recognition technology and other cutting-edge technology model.
• Domob: Domob Network Technology (Beijing)Co., Ltd. is a Chinese advertising platform for smartphones. It devotes to promoting products on the smartphone platform and providing efficient services for branded advertisers. It also provides application developers with product promotion services and benefits.

What is Ad Exchange and how does it work?

An ad exchange is a technological platform that allows the buying and selling of digital inventory. It functions much like the trading floor of a stock market, but for digital display advertising. First, visit the website. Exchange will then announce available bid, evaluating available bidders (advertisers). Real-time auction of all bids occurs. Then the winning bid displayed on website.

The ad exchange market in China

Public and private are two typical types of ad exchange.

The value of the ad exchange platform

Ad exchange makes advertising transactions more efficient. For advertisers, it provides:

• massive, cost-effective media resources and delivery options
• accurate control of ad space and target audience
• single payment source increases efficiency and reduces transaction costs
• flexible price with high transparency

For publishers:

• connects buyers from different industries with various needs
• improve profitability by having better capability on traffic monetization
• improves operations efficiency of trade platforms
• better control of advertisers, ads format, and bid types.

Main Ad Exchange players in China

The top integration and mobile-focused platforms in China are:

• Baidu Exchange Service: Baidu Exchange Service (BES) is a ad transaction platform based on Real Time-Biding protocol, which covers rich resources and targets on wide range of audience. BES provides multidimensional data support for agency companies and DSP platforms
• Tencent AdExchange: AdinALL has been focusing on creating an intelligent and efficient ad-traffic exchange platform that allows advertisers and developers to trade multiple ways for each impression and click. Advertisers can buy inventory in real time from a wide range of media, while developers can get more favorable price and rich ad filled with global brand and performance advertisers.
• Mobvista: Mobvista is a leading global mobile ad network dedicated to helping advertisers, publishers and affiliates achieve goals and maximize revenue. It is specialized in mobile advertising and game publishing. •It operates a worldwide mobile ad network, integrates ad spots from apps and websites covering 236countries.

What is Supply-side platform (SSP) and how does it work?

A supply-side platform is a tool or software that allows publishers to manage, sell and optimize available inventory (aka ad space) automatically. A publisher wants to sell its display space, SSP connects to several different ad exchanges and tells them what kind of inventory is available, and through real time-bidding, inventory is automatically auctioned off to the highest bidder.

Currently, there is few purely independent companies representing the interests of the publisher in the Chinese market. In the domestic market, the boundaries between SSP and ADX are becoming increasingly blurred.

What advantages do SSPs provide publishers?

Automated selling of inventory- SSPs help streamline the process of selling and buying inventory by completely removing manual work from the process, thus publishers can sell all of their inventory to advertisers automatically.

Detailed reporting- The ability to offer deeper insights about the value of their inventory for particular advertisers by giving publishers details on who is bidding, how much their inventory is being bought for, and how much individual advertisers are buying.

Aggregation of multiple networks- The ability to help achieve better yield by connecting to multiple networks, ad exchanges, and DSPs to allow more buyers to take part in the real-time bidding process.

Yield optimization with price floors- SSPs allow publishers to offer their inventory to more buyers and give them better control of pricing by price floors to ensure that their inventory is not sold under certain prices.

Brand safety- SSPs offer better brand safety for publishers by blocking unwanted ads from showing on their website.

Main SSP players in China

Top integration platforms are:

• Tanx SSP : Tanx SSP provides a full range of display promotion services. It provides real-time bidding technology, promotion content controlling, promotion resource management and precise targeting. It has a high-yield product called Window Promotion. It is based on the real-time bidding market and uses the real-time bidding CPM as the billing model.
• AdView : AdView is a leading mobile SSP & exchange headquartered in China. •It has a mobile ad network exchange center and big data computing platform. It supports various mobile advertising forms, RTB real-time bidding, PMP private transactions, and has a database of behavior characteristics of mobile advertising users.
• Adin SSP : Adin SSP is a high-quality supplier side platform in China. It integrates high-quality media resources, and conducts data processing of traffic category definition, media ad space optimization, and inventory orientation distribution. It optimizes diversified inventory to more suitable demanders or puts them in the traffic exchange market for programmatic RTB sales.

Top mobile-focused platforms are:

• Mintegral : Mintegral is the leading mobile advertising platform in Asia. It is powered by AI technology and provides user acquisition, monetization and innovative creative solutions to advertisers and mobile developers worldwide. It has exclusive high-quality APAC traffic resources to help developers grow their mobile app business in APAC.
• PremiumMad : PremiumMad is a mobile advertising management platform with focus on high quality traffic. It provides rich original advertising forms, one-stop inventory management, global and domestic premium brand advertisers and the best quality mobile media resources.
• Yumimobi : Yumimobi is a one-stop ad monetization platform. It provides top demand resources by collaborating with top ad networkers, DSPs, exchanges and direct buyers to provide high fill rates. It provides automatic optimization by multidimensional algorithm to ensure ads income.

What is Data management platform (DMP) and how does it work?

A data-management platform is a technology platform that collects data from a range of different sources, classifies and categorizes it, puts it into different groups (segments), and then uses those segments to achieve certain goals. DMP collects first- party, second party and third-party data from different sources including online and offline data sources. DSP groups certain pieces of data together based on similarities and then uses the segments to target different audiences. DMP activates data and puts in into work.

Who needs a DMP and why?

A data-management platform can be used by advertisers, marketers, and agencies to optimize their media buying processes. Even companies that don’t operate directly in the online advertising space can still greatly benefit from a data management platform.

Ad campaigns Management- Manage online advertising campaigns that involve connecting with other ad-tech platforms (e.g. ad networks, DSPs, ad exchanges, and SSPs, etc).

Conversion rate improvement- Want to increase conversion rates, improve the user experience on their website or apps, and increase brand recognition and conversion rates.

ROI maximization- Want to lower advertising costs and improve campaign ROI across display, mobile, video, and social. 

Personalized Content Delivering- Want to personalize messages and content shown to customers through advertising, remarketing, and other brand interactions to increase engagement.

User information learning- Want to learn more about their existing users and customers to help shape product offers and services.

SCV creation- Want to connect offline data with online data to create a Single Customer View (SCV).

DMPs are growing in importance in China

Getting a DMP in place has become critical for marketers in China. A quarter said having one was a priority, and an additional 62% called it “very important”.  One major reason is to glean product-related information. Advertisers were interested in deriving such data from a DMP.

Main DMP players in China

The top integration platforms are:

• AdMaster : AdMaster is a third-party provider of solutions for marketing massive data in China. It aims at helping advertisers to realize the monitoring and optimization of digital marketing effect as well as improving the overall marketing ROI by technology-driven massive data perception research.
• Miaozhen Systems : Miaozhen Systems is the leading third-party advertising technology company  in China. It has the exclusive Moment Tracking Technology to help advertisers, agencies and publishers in efficiently measuring online campaign impact, and enhance their online advertising returns.
• DAMOPAN :   DAMOPAN is a data management cooperation platform. It realizes insight and analysis of various users and establishes personalized user segmentation and precision marketing. It provides supporting data access, data integration and management solutions. It uses massive data to provide customized services to meet personalized marketing needs.

Top mobile-focused platforms are:

• TalkingData : TalkingData is China’s largest independent Big Data service platform with focus on the mobile Internet. It offers the best-in-class Big Data products. It has advanced data statistics and analytic software to provide the most data-rich, reliable and profound market reports that have powerful insights into the Chinese Mobile Internet market.
• Umeng+ : Umeng+ is a leading third-party provider of universal data in China which provides mobile application analytics solutions. It is focused on providing professional mobile-applied statistics analysis tools, utility components, and promotion services for developers in China.
• More Than Data : More Than Data is a third-party platform with focus on mobile data monitoring and analysis. It has a third-party advertising effect tracking and monitoring platform called Tracking IO. It helps advertisers with mobile advertisements attribution, full process monitoring of promotion activities and anti-cheat system to improve ROI.

Case study: International players in China

iPinYou

iPinYou is an overseas expansion limestone. It is China’s largest DSP with real-time bidding, cloud computing, and audience profiling technology solutions.

InMobi

InMobi is a domestic expansion limestone. It is the world’s leading mobile marketing and advertising platform provider.

What’s next for programmatic advertising in China?

Intelligent marketing will emerge soon

Cloud computing, big data and artificial intelligence has been promoting the development of intelligent marketing. Blockchain technology has begun to solve the transparency and security issues in marketing. With the maturity of technology related to Internet of things, in the environment of intelligent perception, marketing will be more ubiquitous accompanied by the changes in scenes.

Local and medium and small advertisers become a new growth point

With the general decrease in Internet users and channels, local, medium, and small advertisers will become a new growth point of demanders in the programmatic buying market. In the long term, this momentum will not stop. However, in the short term, it still faces the challenges of multiple factors such as the imbalance of regional economic development and the low degree of awareness of advertisers.

Marketing cloud possibility in China

The essence of Mar-Tech is data driving marketing activities, depending on the artificial intelligence, large data and cloud computing supports at the bottom. Mar-Tech‘s rapid development will promote the realization of marketing cloud. The realization of the organic combination of six management modules is an important direction for the future development of the marketing cloud.

Key takeaways of programmatic advertising in China

1. Think mobile, a majority of entertainment is consumed through mobile phones in China. From e-sports to watching movies or reading the news, China’s programmatic advertising ecosystem is catering to mobile advertising.
2. Video advertisements are in. On top of the mobile environment, an increasing amount of content is absorbed through video, such as Douyin (TikTok), or any video watching platforms like Youku, AiQiyi, and Bilibili.
3. Closed advertising ecosystem, Baidu, Alibaba, Tencent and Toutiao operate as silos independent of one another and there is little to no exchange of data laterally.
4. It is just the beginning for automated ads in China. AI and block chain technology will take years to mature in China’s programmatic advertising ecosystem.

Author: Shyaiah Mitchell

Let China Paradigm have a positive economic impact on your business!

Listen to China Paradigm in iTunes

This article The Programmatic Advertising Ecosystem in China | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Matthieu David: Hello, everyone. I’m Matthieu David, the founder of Daxue Consulting and its China marketing podcast, China Paradigm. Today I’m with Shimi Azar, the representative of Spotad in China. You’re in Beijing, and Spotad is a programmatic media buying in China built on proprietary data science technology. I think it would be exciting to know more about what you do in China and the West. You have worked for very prestigious clients that we don’t even understand how they can need an external resource like Instagram, not for China but the world.

You have been in China for many years. You have worked for the Embassy of Israel in China for one or two years, managing social media. And then you joined Spotad in Beijing, representing them and working with Chinese and international companies in China. How big the momentum is for Chinese companies to go overseas and to use Demand-Side Platform? On the other hand, how international companies are using programmatic advertising in China?

Shimi Azar:  I will start with my personal story, how I got to China. A lot of people ask me, “What are you doing in China? How did you get here?” I was an exchange student between the Hebrew University in Jerusalem and the Peking University here in Beijing. I came for one semester. Like a lot of people that stayed in Beijing for many years, whose story is, “I came to see China for two weeks and ended up staying 10 years,” something very similar happened to me. I came for one semester and ended up staying almost eight years now.

After I finished my studies here, I saw that online advertising in China is developing very fast. I remember a very funny incident when I was on campus seven years ago. One of my Chinese friends was holding a very funny looking phone, and I asked him, “What is this phone? What is this brand?” He told me, “Xiaomi.” And I laughed. First of all, the name was funny, and then the phone looks funny. Fast forward seven years later, the huge, booming company is listed in Hong Kong. I’m using its products.

This is what happened to online advertising in China, mainly in tech. I’m sure people can find a lot of information on your website how China has developed in the past few years.

After graduation, I got a job offer, so I decided to stay. I worked for a project from Microsoft for about two years. After that, I wanted to do more with Israel. I joined the Israeli Embassy and managed their social media, the Sina Weibo account, the Tencent, WeChat Official Accounts Platform, the website, etc., which basically gave me a clue of what the Israeli companies wish to do in China. This is how I found Spotad.

Back in 2015, more and more Israeli companies develop technology mainly for the American market, because the Israeli market is too small with only eight million people, so most of the tech companies are developing their products for the international market. But when you develop your products for the international market, it does not necessarily mean it’s good for the Chinese market. You have to go through a lot in order to have your product to customize to the Chinese market.

This is where Spotad decided to hire me. It has been now three years of the company. I joined them at the beginning of 2016.

Matthieu David: Talking about the fact that the solution was not adopted for China, does it mean that the first thing you had to do was to adapt the product for China as part of your mission, or it was more in a sales position for you?

Shimi Azar:  It was everything. From the beginning, in order to register the company, open a business bank account, localize the system, to hire local staff, and to work with local partners, everything had to be done. It was a long and stressful journey, but we made it. It took us about half a year to register the company, open a Chinese entity, open a Chinese bank account, and most importantly, to have the approval from the government to operate online advertising in China.

This was 2016. Data was less an issue, but starting last year, you could see what happened in the U.S. and Europe. Starting last year, data became very sensitive. Storing data, sharing data became very, very sensitive. But we were lucky to get all the approvals already in 2016. Now, I was hired to an industry I was not familiar with, programmatic ad in China. I did some social media, but it doesn’t really count. Online advertising in China is huge. I was not even aware of online advertising in China before. A lot of people are not aware of the industry, of the existence of programmatic ad in China. When Chinese online users are surfing the web on their phones, playing games or using apps and see online advertising in China, I don’t think they think a lot about what’s the technology behind this video ad, banner ad, or native ad that they see on their phones. Actually, there is a whole industry behind this small ad that you see on the phone.

We have so many different players. We have the client on one end, the demand, and then you have the supply, which can be a publisher, an app developer that wants to make money out of its app and sell the advertising space. The biggest one is the ad exchanges in China. It has thousands of thousands of small publishers, medium-sized publishers, large publishers, altogether selling their inventories and space for online advertising in China. So, it’s a whole world.

There are big brand agencies that cannot avoid using this programmatic ad in China. All the biggest agencies in the world today if it’s Ogilvy, if it’s PMG, all the most prominent agencies are using programmatic ad in China in one way or another.

Matthieu David:  What is the current size of your business, could be revenues, the number of clients, the number of people in your team? Could you give an idea to the people who are listening to us, where does Spotad stand in terms of development? At which stage?

Shimi Azar:  You mentioned a little bit before we started the video about the year we were established. It’s officially 2013, but back then we were a creative company, which means that we were creating the banner ads or the video ads for other clients. But very fast, we realized that big money is not in creating the ads, but in serving them. This is where we started working. We hired developers, and we started working on building our own programmatic ad in China. Now, this is very important; we’ll maybe talk a little bit about this later. But in online advertising in China, there are a lot of companies with no programmatic ad in China.

If it’s a big agency, it’s okay, but there are a lot of small affiliates, there are a lot of companies working on arbitrage and just kind of like the middlemen. They don’t really have any programmatic ad in China.

Spotad is very different. We developed our programmatic ad in China for over a year back then. Since 2015, we obviously developed more and more features; we improved the system and the programmatic ad in China. More importantly, we listened to what our clients needed, and according to their needs, we improved the platform.

Everything in our programmatic ad in China is automated, which means that if in the media buying in China, you need people to sit and buy the space for online advertising in China manually. Our programmatic ad in China allows an algorithm, basically, technology to do all the media buying in China, automatically.

So, what you need to do is to better understand your client needs. You need a car; you need fuel. In our case, it’s data. You need a lot of data, the more, the better. Once you take this data and you implement in our system, in our programmatic ad in China, our programmatic ad in China will know to reach the right or more probable client that will click the ads and use your product.

You mentioned AI; it takes me to an AI feature that we added to the programmatic advertising in China last year, a year and a half ago, which learns the behavior of Chinese online users. It can, in milliseconds, decide if I want to do the media buying in China from the publisher or I don’t want to. How does it do it? Using data. Everything happens in a millisecond in the programmatic ad in China.

If you separate media buying in China and programmatic ad in China, in a programmatic ad in China, many cases a big client goes, let’s say Nike goes to CNN, they give them a million dollars, “Display Nike ads on CNN for one week. Here are a million dollars.” Now, in this case, it’s okay. Obviously, CNN is a big publisher, but who is seeing this ad maybe people who are not relevant for Nike. What we’re trying to do is decide in real time like a stock exchange, we decide if to do the media buying in China or not according to the data we get, everything in milliseconds.

Matthieu David:  The number I have is 25 software engineers and data scientists, 20 billion impressions daily from 15 ad exchanges in China. You’re able to analyze maybe of 200 million profiles. Would you mind sharing a bit more about the size in terms of revenue? Secondly, would you be able to elaborate on all the metrics like several clients or revenues to give a sense to the audience of where you are?

Shimi Azar:  I can’t obviously share the revenues in exact numbers. I can say it’s in millions of dollars. This is what I can say.

Matthieu David:  Okay, more than one and less than 10?

Shimi Azar:  Yes. The company managed to stay at the same size, more or less. In the past few years, we hired some staff. We opened the China business and the New York office. At the same time, we had in the media buying in China. Big technology companies are going bankrupt because they got to a size that they couldn’t become profitable anymore, and it just lost a lot of business. This was also something when we were talking about online advertising in China; I wished to share what’s happening here in online advertising in China. But yes, if we’re a small, medium-sized company that’s being very abnormal in the media buying in China because we managed to keep the balance between growing too big and then going out of business, and between shutting down the business, which happened to many companies in our industry.

Matthieu David:  Have you raised money?

Shimi Azar:  Yes, we have. In 2017, we raised about $3.5 million. We have investors in Hong Kong, private venture capital that invested in Spotad.

Matthieu David:  The number I mentioned, like 25 software engineers and data scientists, very easy to understand. But streaming 20 billion impressions daily from 15 global exchanges is not very easy to understand. Could you help us understand what does it mean – 20 billion impressions? In this world of data, when you talk about million, billion, we have no idea if it’s big or small. I have a dozen number; I like to get an understanding if you analyze the behavior of 200 million Chinese online users. It’s a lot, 200 million, but on the other hand, Facebook is like 2 billion profiles. It’s only 10% of Facebook in some way. Could you give us a better understanding of what do you mean 20 billion impressions daily? Does “stream” mean you do media buying in China, or does it mean you analyze? Secondly, 200 million profiles, why 200 million, and why not like 3 billion like Facebook plus some other networks? You have included Facebook as an ad exchange in China in your partner, so we could imagine that the 2 billion from Facebook of profiles.

Shimi Azar:  Yes. Facebook has no ad exchange in China. Facebook is a closed environment. They’re not sharing data. They’re not allowing any external DSP or any programmatic ad in China to do media buying in China. They make more than 90% of the revenue from their ads, and they’re not sharing with anyone.

Matthieu David:  Would you mind, before we go further, what does DSP mean?

Shimi Azar:  Demand-side platform. You have the demand side, which is the client, and the supply side, which is the ad exchange in China or the publisher, in the media buying in China. In the middle, you have a DSP, which brings a lot of clients that have demand to do media buying in China. You have an SSP, the supply-side platform. A DSP, in some cases, will buy from the SSP. The SSP will have a few publishers connected to it and selling their inventory, their space for online advertising in China.

Matthieu David:  I have my own DMP in my company, data-management platform with leveraging data from my clients. I have a lot of data, e-mails, profiles, agenda, and so on, but it’s not enough. It’s not big enough for me to target them with online advertising in China. I know that my clients are very close to the New York Times. So, I’m going to actually try to reach an SSP, which is booming the inventory of the New York Times. In order to get access to this SSP, because maybe New York Times is not big enough to do it the sales, you are going to go through a DSP to be able to target on specific SSP, the Chinese online users you want to target. So SSP is the display, the inventory, where you can do media buying in China. DSP is making it possible for you to buy the space for online advertising in China. DMP is actually leveraging your own data, and then after you can merge data from a DSP and a DMP together in order to target well the Chinese online users.

Shimi Azar:  Perfect. The only issue is that the New York Times is not small, it’s huge. And I’m not sure if they are working independently. All those big publishers, all those big names usually have their own in-house media buying in China that sells their inventory, their space for online advertising in China. Those big clients have to be very careful because this is what we call in the industry the display security for online advertising in China. Both an advertiser and the publisher have to be very careful. An advertiser doesn’t want his online advertising in China to be displayed on websites that had bad content. Nike doesn’t want to be displayed on a website that sells alcohol, for example. This might be an issue. At the same time, the New York Times wouldn’t like a very cheap and shady product, maybe a dating app. It does not want to be connected to any dating app, so it will not allow dating apps to buy ad space on its website. So, you have to be very careful.

In our industry, the programmatic ad in China is a little bit different. The advertiser goes to the DSP, the DSP goes to an SSP or an ad exchange in China and display the online advertising in China using data from a DMP. This is more or less how the structure works. Everything is being done automated, so you don’t need a huge amount of people to do the media buying in China manually. Going to the stock market exchange example that I introduced, a very big feature of programmatic ads in China is the price, how much you’re willing to pay to have your online advertising in China displayed on this publisher.

I mentioned Nike gives a million dollar to CNN, displaying ads for a week. What if I tell Nike, “I don’t need a million dollars. Give me half a million; I can find the exact same inventory spot and save you half a million dollars.”

What I’m doing in the programmatic ad in China is I’m going out with my online advertising in China to bid on the media buying in China, and in real time, I’m displaying my bid. I’m willing to pay half a dollar, $0.60, $1 top to display the online advertising in China because I feel that the client that is now watching the ad might click it. So, the more probability I feel that the client will click the online advertising in China, I will bid a little bit higher.

Matthieu David:  Yeah. Calling that programmatic ad in China.

Shimi Azar:  Exactly.

Matthieu David:  Going back with your numbers, which are for me is not very easy to understand: 20 billion impressions which are streamed.What do you mean?

Shimi Azar:  We talked about SSP. We are actually not working with SSPs. We’re working with ad exchanges in China. An ad exchange in China is the next level. An ad exchange in China will have thousands of publishers, and maybe a few SSPs as well are selling their inventory.

We have a Google ad exchange that’s open for programmatic ads in China to do media buying in China. We have big players in the market like Rubicon Project, MoPub, a lot of names that maybe are not familiar with people that are not aware of the media buying in China. But if you are part of programmatic ads in China, you know those names. Those are really big players in online advertising in China. Each one of them is a whole infrastructure, a whole place that you can do media buying in China and everywhere in the world. If I have a client now that wants to display ads in Russia or Japan or Korea or America or Brazil, those ad exchanges will have inventory in those regions.

Once you have 10 or 15 of the biggest ad exchanges in China, you basically cover the whole world. We have the advantage that we are connected directly with the Chinese ones. This is a story told by itself because it was not easy in China. I think my first week in Beijing; I already met with Baidu. They have their own ad exchange in China, which means they have a lot of Chinese apps connected to their ad exchange in China in selling their inventory. The integration files, everything was in Chinese. We had to translate it to our developers. Even though they have a common language like the coding, they couldn’t really understand a lot of things, so we had to translate everything for them. At the same time, for Chinese clients, we translated the system to Chinese so it will be easier for them.

On the business side, we opened up a Chinese bank account because I had clients that I approached. One of them is very familiar, very famous, but unfortunately, it’s going out of business which is the OFO, the shared bikes. I met them about February or March 2017, where they’re in a full-scale war with Mobike, and they needed more users so what they do –

Matthieu David:  For people watching the video, in one year or two years and OFO is not known anymore, this is a competitor of Mobike. It was very big. Now, they’ve been in trouble for some time. So, you worked for them and other foreign companies. I guess it’s unique.

Shimi Azar:  We had a meeting, and everything was okay. I displayed our programmatic ad in China and our solutions, and they were okay, but then at the end of the meeting, they asked me, “Can you receive RMB?” It was a funny question because you gave your pitch, they said okay, and everybody’s happy. Now, if I was an international company that doesn’t have any presence in China, don’t have a bank account in China, I can’t do business with them. This means losing millions because the budgets were in millions for OFO. They had a very big account. Fortunately, we did have a bank account. I was smiling, and I said, “Sure. We can receive your RMB.” This is a story. We do work with Chinese clients that can pay in Hong Kong dollars, U.S. dollars, or even other places in the world.

Talking about clients, we work on three different business lines. “First China in,” which means bringing a foreign advertiser to online advertising in China. We did it with a few game developers. We did it in 2016 with Uber, which was just on the news for the IPO, which was not very successful, unfortunately.

The second business was “China, China,” which means that we are a Chinese company, we registered in China, we have Chinese staff, we have a bank account, we have servers, let’s compete in the online advertising in China. As I mentioned, we worked with OFO in China. We competed with Chinese DSPs, some of them of hundreds of people and managed to get a budget from them. This was also very, very impressive.

The third one is something that you mentioned, how do Chinese clients see going outside, “China out.” This, unfortunately, on programmatic advertising in China is more downs than ups. It’s still something that is not common. 99% of the Chinese clients, the Chinese advertisers are using Facebook and Google mainly to take several programmatic ads in China as a whole. If you put programmatic ads in China in the traditional media buying, Facebook and Google take about 70% of all the ad revenue in the world, in the global market.

This is why we’re not currently doing China out. We do have some meetings with the potential clients that want to promote their products like Vivo and Xiaomi. Those are mainly brands that believe first in offline advertising. They believe in first, open a shop in some country, and then they hear from you. But they are considering doing more digital, they’re considering doing a more programmatic ad in China or media buying in China, so I’m positive that this will happen sometime hopefully soon.

In the sense of the online advertising in China in the supply side, I mentioned Baidu. We also work with Tencent. Baidu has an ad exchange. Tencent has an ad exchange. More interestingly, it’s ByteDance. TikTok took over the world. The company grew very fast, very big, and they have their own ad exchange in China now. What we see is that a lot of the businesses of programmatic ads in China is disappearing or going a little bit down. Again, mainly because of the reasons that I mentioned earlier in the conversation, because companies grew very big and then suddenly they don’t have enough business, so they had to shrinkor, in some cases, go bankrupt.

Another player in the international market is Amazon. Amazon is also growing very, very fast, and they now have their own ad exchange in China. They want to make money, same as Facebook and Google; they want to make money out of an advertisement. They just launched their ad exchange, I think, at the beginning of this year or the end of last year.

Matthieu David:  Interesting, because Google put money in JD.com in order to compete with Amazon because they know that Amazon is competing with Google on online advertising in China. That’s consuming actually with Amazon’s ad exchange in China.

I’m a bit stubborn, and I like to really understand what do these 20 billion impressions mean, streaming 20 billion impressions daily? What does it mean streaming 20 billion impressions daily from 15 ad exchanges in China for Spotad?

Shimi Azar:  What is an impression? An impression is, when a Chinese online user opened the app or a website and saw an online ad in China, this counts as an impression. This is an impression. When you’re connected to 10 ad exchanges in China, the number of impressions of each ad is enormous.

For example, let’s say Baidu has a billion impressions a day or 200 million impressions a day, which means that they have ads displayed 200 million times a day to all Chinese online users. I’m using an app, and I see, on average, 20 to 50 online advertising in China a day when I’m playing my phone. You take all those numbers together, and this is the inventory that they offer us to buy. Baidu tells me, “I have 200 million impressions a day. Come and bid on it.”

Matthieu David:  Once it’s streaming, that means you check out the inventory and the price. That’s what you mean by streaming, right? That you see all those placements for online advertising in China. When you say streaming, what does it mean? Does it mean that you analyze online advertising in China? Do you mean that you extract the price of it? So, you mean you display online advertising in China on those 20 billion?

Shimi Azar:  We’re not displaying online advertising in China. Obviously, we’re not buying all of it because a lot of it is useless for us. In China, for example, we have first-tier cities, second-tier cities, and third-tier cities. A lot of advertisers are not even interested in third-tier cities, so that takes 40% of all the impressions. Some advertisers are not interested in Android; they want to target only iPhone users, so that takes another 50% of the inventory. Out of those 200 million available, we bid only maybe about 20 million. Out of this 20 million, this is where our programmatic ad in China kicks in. We use the data to see if the Chinese online user that’s now opening the online advertising in China and going to see an ad is a Chinese online user we want to display the ad.

We use it in a lot of different ways. Usually, we have our database, our own DMP, which consists of a few million, hundreds of million Chinese online users, where we have tags. Wetag the Chinese online users. We obviously don’t know who you are, we don’t know your name, we don’t know where you live, but your IDFA, the unique code of your phone is available. This unique code, we can say very basic information. We can say which city you live; we know which phone you’re using. Maybe, in some behavioral, you downloaded a lot of gaming apps so that we can tag you as a gamer. I can tag you as a Beijinger, gamer, try to guess your age and things like that. This kind of information allows us out of these 20 million impressions that we get daily, the inventory that we get daily, how many of them we actually think that are gamers for our game developer that wants to get more Chinese online users and go after them. This is how it works.

Now, we work with different clients from very different industries. We have a lot of E-commerce in China. Traveling is always big clients. You have gaming, which I think is number one. Currently, a lot of Chinese game developers actually are doing very well. This is the impressions. This is basically the number that we can buy a day. It doesn’t necessarily mean we do it. We don’t want to do that. It’s useless. It’s exactly the opposite of what we want to do. We want to be more targeted, but this is the inventory available.

Matthieu David:  Then, the other number you mentioned, 200 million profiles of Chinese online users. What do you mean by 200 million profiles? You analyze in terms of behavioral analysis, what does it mean 200 million?

Shimi Azar:  This is the advantage that big companies have like Facebook and Google. They can process more; they can work with more, they get more information because they have more Chinese online users. We can get Chinese online users once they maybe click or install an app we have. We can get their code or IDFA number from their phone and store them in our database and say, “This phone downloaded a game, downloaded three games, is a gamer.” We put him as one of our 200 million databases.

Matthieu David:  The 200 million profiles of Chinese online users actually are within your own database. This is a fact which is proprietary to you in terms of database inventory. So you say that you have 200 million IDFA, right? What you say IDFA, to know which phone it is, to identify which phone. And then you can be based on this, analyze much more profiles of Chinese online users. As you said, it’s a gamer or not a gamer, but this is proprietary to you. The 20 billion impressions you stream are not proprietary to you because you stream from ad exchanges in China. These 20 million profiles of Chinese online users are proprietary.

Shimi Azar:  You mentioned earlier in the conversation that DMP, which is an external data provider that the advertiser works with and we, in many cases, can use their data. This number, the 200 million, doesn’t mean a lot. We get most of our data from third-party data providers. They enrich our system and allow us to do better targeting.

Matthieu David:  Talking about the differences between China and the West. I feel when we talk about China and the Internet, Baidu and other players, the topic coming very often is that it’s not very reliable. You pay, and you don’t know really for what you pay, or you pay, but actually, it’s a fake ad in China. What’s your feedback on this? I don’t know if some players say that because they want to complain or if it’s a reality. What’s your feeling compared to Google and other players?

Shimi Azar:  Let’s go put it out, it’s called a fake ad in China. You cannot easily avoid it, but you can avoid it. There are companies in the industry that’s doing the verification, and they’re doing the fraud detection, and you can integrate with those companies to ensure that you’re not buying this fake inventory and traffic. Some companies will avoid working with those companies because, for them, it’s losing business. We obviously work with them. We scan the traffic, the inventory that we get. We make sure we are not buying a fake ad in China.

On top of this, in the past year or two, there is a big trend that’s going viewability. There are companies that ensure the advertiser that they bought a space for online advertising in China was viewable, which means human, or at least this was shown somewhere. Not like, as you mentioned, a fake ad in China. It’s, a million dollar and no one saw your ad. You say, “I displayed the online advertising in China, but no one actually saw it.” There are companies that allow you to do so.

Going back to 2016, we worked only with ad exchanges in China because we believe and we see that ad exchanges in China like Baidu and Tencent will not sell you fake ads in China. They have their own internal tools to detect if there are any problems with the traffic. Once you work with an SSP, which is smaller and maybe not as reliable as those ad exchanges in China, then you have the risk because the SSP wants the money, obviously and they will sell you fake ads in China. They will not check what they’re selling.

I had incidents where a sales manager of an advertiser in China asked me to buy fake ads in China because they need to spend budgets. He cared on his own commission, probably. He said, “I have half a million you want to spend, I need to spend it now. The more, the better. I don’t care if it’s being displayed or not.” Obviously, the answer was, “Sorry, we don’t do that. Even if we want to buy fake ads in China, we can’t. We don’t do that.” But it happens.

Now, comparing to the West, a lot of people ask me about the West. I’ve been managing the Chinese operations in the past three years. We did have campaigns overseas but not in the scale for me to be an expert on the West and share the insights from there.

Matthieu David:  I want to understand how do you charge with your programmatic advertising in China? Do you charge a percentage of the money spent? Do you charge a retainer every month? How do you charge your plan?

Shimi Azar:  Percentage of media buying in China. If an advertiser spends a million dollar in our programmatic advertising in China for one month, then we will take a percentage. It can be 10%, 15%, 20%; it depends on a few factors. If, for example, the client used the self-serve options, which means we give them access to our programmatic advertising in China, they have an in-house media buying in China, and they are using the platform to do the media buying in China, or if he doesn’t, and he wants us to do it for them and just send them reports, we can also do this but we will charge a little bit extra.

Matthieu David:  10%, 15% seems pretty high actually in online advertising in China. Is it higher than spending it directly on Baidu? I feel it’s a bit higher than agencies do when they spend the budget on Baidu. I had more in mind like 5%. Is it right for me to say that?

Shimi Azar:  In the media buying in China, 10% is very low, actually. The average will be 15% and up. Some people, some companies will charge even 20%.Think about what you’re getting in for this 10%; you’re getting programmatic advertising in China that helps you save much more than this 10%.

Matthieu David:  Is there a minimum budget to spend on programmatic advertising in China? Otherwise, you wouldn’t take the client?

Shimi Azar:  Yes, of course. I get some requests for opening an account for $500 or $1,000. For those, it’s not that we don’t want the money, but it’s for us to open an account to train the client on the programmatic advertising in China and the time we spend on it, it doesn’t make it worthwhile for us. So we do have a minimum. We try to educate the clients that they will have to spend money if they want to have results.

If we’re talking about the difference between China and the global market, let’s take the client side. We talked a little bit about the supply side of it, the ad exchanges in China. If we’re going to the other side, if we’re going to the advertiser, we see that in the U.S. and Europe, clients understand they need to spend money to see results. If I go to a foreign client now and I told them, “You have to have a $10,000 budget for testing,” which means that we do the media buying in China, we create AI algorithms, we implement all the data. Then after maybe two or three weeks, you start seeing results.

In China, it doesn’t work like that. In China, Chinese clients want to see the result as soon as possible and with very low budgets. If I had a client that spent $500 in two days, and then he sent me a message complaining, “I don’t see as many installs as I wished for.” I answer, “What did you expect? I told you in the beginning, we need time and we need a budget. It’s not magic. We’re talking about a lot of data.”

Matthieu David:  In order to know what your audience is, who your clients are, where they are, what they like, you need to display on different SSP ad exchanges in China. You need to display also different formats. The issue may not come from the SSP or the ad exchanges in China. It may come because of the format of the online advertising in China, because of what’s written on display, because of the message. So, you have to certainly do a lot of A/B testing with the content on the creative side, which was your original work, original businessbefore Spotad.

I think there’s a bit more than simply the display in the sale, there’s creative as well to try. In order to elaborate a bit more, what’s the minimum budget you would suggest to test the programmatic advertising in China? Let’s say when you have views up to 20,000 U.S., and you cannot conclude anything; you don’t see a momentum beneath, you don’t know how to do, your creative is not good enough. Would you please give us a bit of idea of how to interact with programmatic advertising in China in terms of the budget?

Shimi Azar:  It depends on different geographies; the traffic in the U.S. can cost five times more as in China. The budgets are changing accordingly. I would say in China, if a client will give us a test budget between $5,000 and $10,000, and will give us time to process the data, in two to three weeks, we’ll be able to know what’s working and what’s not.

All this A/B testing that you just mentioned, our programmatic advertising in China knows how to process this automatically, which means the A/B testing we put, for example, on one campaign, two banners, two video ads, and one native ad. We have this list and start to do media buying in China. After three or four days, when the programmatic advertising in China is getting all the data, how many clicks the creative got, how many clicks the banner got, how many creatives the video got, and what was the price? The programmatic advertising in China by itself knows how to optimize. Optimize means, “I see that the video is getting much more clickable, much more popular. I will allocate more of the budget toward the video.” Everything automatically.

Matthieu David:  How many displays? If I want to work with you for USD 10,000, how many displays, and how many videos, how much content do I have to create for you, and in which format? If I want to work with you tomorrow in Spotad, what do I need to bring to you?

Shimi Azar:  We have an Excel sheet that we share with the clients to have all their information, where they type their geo, which cities, which countries they want to display online advertising in China, ad sizes. We follow the sizes that are very common in all of the worlds. Online advertising in China is a little bit different. Some of the ad sizes are not available in the West, but in China, you can see those maybe weird sizes.

Matthieu David:  The displays size, sometimes with a banner. This size is very standard, actually in the world, especially in the West, but online advertising in China is a little bit different, is what you say. Okay.

Shimi Azar:  Correct. China, it’s following some of the guidelines from the West, but not only. We’ll have all the ad sizes as an option for the client. Most of the times, we run a campaign with at least minimum three different sizes, in the beginning, to see what’s working and what’s not working. Again, the more, the better if a client provides a video, banner creative, obviously it makes our lives much easier.

We do have an in-house graphic designer. A lot of the companies in our industry they have a creative library where they create their own creatives. Something that became very popular in the past year is playable online advertising in China for gamers. The ad will basically be a mini-game that you can play. If you are happy with it, you just click and download the game itself.

Matthieu David:  Is different from online advertising in China? Is it different between the West and China, the gaming, or it’s global?

Shimi Azar:  It’s global in the sense of gaming. I think E-commerce in China is very strong. A lot of different clients are spending a lot of money. The infrastructure of E-commerce in China grew significantly. It’s no more only Alibaba and JD. There are other places, Xiaohongshu and NetEase Kaola, even fresh vegetables and fruits, apps that are becoming huge and have budgets to stand on media buying in China. We see a lot of clients from E-commerce in China.

Matthieu David:  If I want to work with Spotted tomorrow, I need to prepare five different online advertising in China and different formats. It’s enough to test.

Shimi Azar:  Or you can give us one PSD, and we will have our in-house graphic designer create online advertising in China for you. We have one in the West, one in China that we work with that helps us.

Matthieu David:  Then there’s a big viable of the creative, the content. How do you make sure that the test has been run on a good creative enough, good content enough? Because you’re a software company, so shouldn’t it be your work to assess if the creative is good enough if the content is good enough? But still, you’re running a test on those online advertising in China were very strong and very important viable is the content or the creative. How do you deal with that? Is it sometimes you have some feedback from the software, none of them are working because it needs a creative, which is a problem. How does it work?

Shimi Azar:  This is a very interesting topic because some of the advertisers are very sensitive regarding the creation of their online advertising in China. I’m going back to 2016; my first client here was Uber. Uber has everything created in-house, they have their fonts, they have the colors, and we were not allowed to change whatsoever. If we want to make a small change, even in size, we had to send back the creative, tell them we need this in a different size. Then we’ll work on it in-house and then send it back to us. That kind of clients, we can’t really do anything. We’re programmatic advertising in China; we are less than the funnel. You have the advertiser; it goes to an agency. The agency creates all the materials, give it to us, and we serve it. We are already past the creative.

Some companies don’t work with the agencies, they come directly to us if it’s maybe medium, small size, and they don’t have any in-house creative graphic designers. So they ask us, “Can you create something for us?” What we do is have the graphic designer come up with the best solution, get approval from the client. In most cases, they say, “Okay, look, let’s go with this.” We take a few different options and see what is more popular, what’s getting more clicks and go with that. It’s also A/B testing; we also do in a creative.

Matthieu David:  Talking about differences between the West and China, there’s always a question I have with regarding the online advertising in China: censorship. We are in a country where you have an organization and administration censoring some other content. How does it work in this industry where actually you can display very easily contain all over the web? Do you have some guidelines to follow? It’s a mystery for a lot of people. It looks like it’s very open, but on the other hand, there’s a limit.

Shimi Azar:  This is a creative approval process. Some of the ad exchanges in China are very sensitive, are very strict. I can give you Tencent as an example, where we upload the creative in our platform, it’s not approved automatically. What happens is the creative is being sent to Tencent. Now, I don’t know if they have it manually checked or AI automated check, but it takes about a couple of hours for us to get approval. They actually check each one of the creatives that we upload to the system to check the there is nothing wrong with it.

Matthieu David:  Facebook is doing it as well; you cannot display the ad immediately with Facebook too.

Shimi Azar: But this is media buying in China. It’s a little bit different; it’s not programmatic advertising in China. Facebook doesn’t. The whole idea of programmatic advertising in China is everything is moving fast. And then you talked about China and censorship; it’s not only that. Of course, there are some rules, and we obviously obey the rules. Some of them are also applicable to the West because, for example, adult content, alcohol, drugs, any kind of illegal content is forbidden.

In China, you have the additional government-sensitive content that you are not allowed to display, obviously. On the ad exchanges like Tencent that I said, they’re very strict. Put all those laws aside; even if the creative doesn’t display the game’s name that the user can see very clear, it can also be disqualified. They’re very strict. They want all the online advertising in China to be displayed on their apps very nice, clear, and good. They don’t want bad content. This is how they control it.

Baidu, on the other side, is much more flexible. If I have a new client, I’m going to Baidu platform online; I create an account for this advertiser. If it’s a well-known advertiser, it will be on their white list and will be approved automatically, which means that all the creatives from these advertisers will be approved automatically and I can start the campaign in one minute, not a problem. If it’s not on their white list, they will ask for documentation, the business license, and sorts of things. Then they will go through a process and approve it. Then again, after they approve it, all the creatives are okay, good to go.

We talked about fake ads in China, but there are also a lot of companies that are doing fraud in the sense of changing the redirection, which means that they pretend to work with a client, display the ad, but once you try to click on it, the ad will redirect you to something else. This is a very big issue. It’s like the mouse and cat game. We always have a problem, and there’s suddenly a company that’s being established with programmatic advertising in China in order to prevent this problem.

But I’m happy to say that I see in at least the past year, that there are much less fake ads in China. There’s more safety in programmatic advertising in China for media buying in China. There are so many companies doing verification, viewability, and advertisers can feel much safer in the programmatic world today.

Matthieu David:  There are different lines, and each line seems to correspond to a campaign. Is the campaign designed by the user itself and by which kind of content, what kind of objective? Is it CPM, number of views, maximum bid, and so on? Also, you got the name of the campaign, you have the maximum budget, and then it’s giving you the results, impression, and so on. That’s how you canA/B testbasically because you see the different version of different online advertising in China. Is it the way it works?

Shimi Azar:  The same as creative, it really depends on the advertiser. Some of the advertisers come with exactly what they want. Some of the clients will come and discuss the campaign with us and ask us according to your experience, what works better, what should we do, how much budget, etc. Some of them give us a free hand and just give us money, and do what you know how to do it best. That’s it. So, it’s very different because the clients have different demands.

Matthieu David:  I think the business intelligence you put yourself to end result to say, “Hey, this campaign is outperforming the other one, you should put more budget into it and so on,” is it the intelligence you provide? I saw some pop-up coming on the screen you shared on the top right.

Shimi Azar: This is something that Spotad is working on. It’s something that we will implement soon. We got a lot of feedback from our clients, and we always work to improve our programmatic advertising in China. We want to get it to the point where everything is being automated, and everything will require one click. We want to have a process where the client comes with goals, and our system automatically will give them the solution to reach those goals. Along the way, our programmatic advertising in China will maybe have some issues, and they will have pop-ups telling the client, “Okay, look, we need to change this and this in order to improve the performance.”

It’s still fully automated, but also interacting with the clients, informing the clients what needs to be done and just getting the approval, but everything is fully automated. You can look at it as Google Maps. When you put a destination, say, “I want to get from Beijing city center to the Great Wall,” the map will show you the best way to get there. Along the way, they might be some car accidents, traffic jams, so the system will offer you different ways to get to the Wall. This is what we are trying to do in the programmatic advertising in China. We have pop-ups that will tell the clients, “This happened. Let’s make these adjustments to improve performance.”

Matthieu David:  Could you define what prescriptive advertising campaign is?

Shimi Azar:  Like what I just said now with the Google example. This is the perspective, this is where the client gives us, “I have a million-dollar budget, I want 100 new users, what is the best way to get it?” Our programmatic advertising in China will give them a prescription. Exactly.

Matthieu David: I think these words come from Facebook with a look-alike campaign. A lot of people what they don’t realize is that when you spend on Facebook, you have different ways of spending the money on online advertising in China. I know it’s not an ad exchange in China, but you have different ways. It’s an inspiration to understand, actually, how programmatic advertising in China can work, and you can work. You can target very precise Chinese online users to say, “I want to target Chinese people in New York.” This is very targeting Chinese online users.

You can upload your data, and that’s I want you to talk about look-alike audience. You can upload your data, e-mail, phone number, name of people and say, “Hey, I want to target Chinese online users who are similar to those ones.” Facebook ad acts as a brain; it will look at some parameters. Among all the parameters, you can have hundreds of thousand parameters they can rely on every profile to find patterns and identify those patterns and target those Chinese online users. I have struggled to find very similar tools like Facebook in China. I know Tencent is doing a little bit but not as powerful and easy to use as Facebook. When you talk about look-alike audience, could you elaborate a bit more?

Shimi Azar:  Yes, we talked a little bit about it at the beginning of the talk about the DMP, which we have our own in-house, but we rely mostly on third-party DMPs. The problem with the BAT is that they’re not allowed to share data. According to their strict rules and laws, Baidu and Tencent will not share any data with you.

Matthieu David:  BAT stands for Baidu, Alibaba, Tencent.

Shimi Azar:  Right. DMPs that do have data and they do sell it. I’ll give you an example, I’ll give you a campaign that we did for one of the airlines here in China and they wanted to target university students. For us, as the first step, is to have the location. What we can do, actually, very precisely is to target latitude and attitude. What we do, we target areas that we know there are a lot of universities, that’s one. But other than that, that’s already a lot of precise targeting but not perfect.

What we want is to get more information about the user. What we can do, we go to the third-party DMP, they have a segment that called students. How do they know that there are students? Probably, those are users that download maybe educational apps or searched somewhere on studying abroad, etc. Everything is being stored, and then they can enrich our bidding and saying, “We are using this data from the third party. We pay a little bit extra for this.” The clients pay a little bit extra, but we can get to those users.

Facebook and Google allow it. You can also get it in programmatic advertising in China. You can also have it in third-party data providers that will enrich your platform. It’s also possible on the programmatic advertising in China. Obviously, as mentioned before, Facebook and Google are huge. They control online advertising in China, but that doesn’t mean that there’s not enough room for a more different type of technologies or companies to work in the programmatic advertising in China as well.

Matthieu David:  You say, in one of your slides a top source of traffic and you mentioned InMobi, Baidu, Tencent.

Shimi Azar:  Those are the ad exchanges in China.

Matthieu David:  Could you tell us what you see in terms of top sources of traffic, new momentum? You talked about Douyin. Clearly, we know that Douyin is getting momentum. Could you elaborate more?

Shimi Azar:  ByteDance basically, the Toutiao is booming. As an ad exchange in China, it got a lot of business from online advertising in China before, because they had the most popular news app in China, the Toutiao. This is its number one app for last year, but after Douyin took over the world, obviously, they realized the potential of monetizing the app. Monetizing the app means displaying online advertising in China on the app, which is a free app but again, you just have to watch ads. They grew massive.

Every client that wants to grow in China, not only China, will try to get their online advertising in China on this app. In order to do so, they will have to contact ByteDance advertisement department and negotiate deals on displaying online advertising in China. They have like Facebook, similar to Facebook and Google; they have their own in-house ad exchange in China that you can log in and start buying ads. It’s a little bit different than Facebook, different rules, different regulations, also different from what the local clients would like to see in the sense of the content of the app of the ads. All in all, ByteDance is definitely what I will say, which is the biggest player coming up this year in China.

Matthieu David:  How do you predict?

Shimi Azar:  At Spotad, we are aware of this. We got their integration files, and we are now working on it, in order to integrate and allow our clients to do media buying in China on ByteDance.

Matthieu David:  What do you predict for the rest of the year until 2020? What do you think is going to change in online advertising in China?

Shimi Azar:  I hope that more Chinese clients will try to use programmatic advertising in China for online advertising in China. I think games will definitely use it. Google and Facebook do have a lot of inventory, but they don’t have 100% of the inventory. It’s very important for the game developers to reach more and more potential clients, and they will use programmatic advertising in China in order to do so. This is what I predict. This is what I hope that the Chinese ecosystem will go towards more and more similarity between the West and China.

I remember one of our co-founders was coming to China, to one of the conferences in 2016. After the conference, he told me, “Look, China is two years behind the West, in the sense of how they understand the technology, how they approach the technology, etc.” But today, the E-commerce in China has reached the West, they’re doing a lot of the similar and even maybe more than what you can find than the West. I think that an example will be Amazon and JD. I know JD and Alibaba as ad exchanges in China were in the market way before Amazon was and offered their potential clients a lot of data they have.

I had a meeting with JD, and I was very impressed with their system because think about all the data they have, they have all those people searching for products. So, they can target very precisely. They can target female between the age of 20 and 30 that searched shampoo in the past two weeks. There’s a lot of good data. I’m guessing Amazon is doing the similar to Alibaba and JD right now.

If China uses to copy the West and then move to copy and to improve, and now moving to innovate, we’re definitely in a space that the Chinese are trying to innovate, and we see the West copying from China. We already reached this.

Matthieu David:  Still, a very different way JD and Alibaba doing it as much as Google and Facebook do in the West, which are E-commerce in China in one side, and the search engine and social media on the other side.

Thank you very much, Shimi, for your time. Thank you very much for sharing with us. Congratulations on everything you’ve achieved, starting, and developing a tech company in China. I feel it’s not easy because the environment is very, very different. Congratulations on the integration, the Chinese ecosystem.

As a comment, we know some very big companies, listed companies, which have a hard time to make it in China to create a network and so on. I’m not going to mention names, off I’m going to be mentioning to you. Congratulations for yourself to be able to do it when big, large listed companies cannot make it in there.

Thank you very much. I hope you enjoyed it.

Shimi Azar:  Thank you. Have a good day.

Matthieu David:  Thank you, everyone.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Podcast transcript #37: Rising ad tech in China is completely reshaping the industry is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

MATTHIEU DAVID:  Hello, everyone. I am Matthieu David, the founder of Daxue Consulting and its China podcast China Paradigm. Today we are with Eliza Mao. So, you are business development or customer success director? 

ELIZA MAO:  I am the Customer success director.

MATTHIEU DAVID:  The Customer Success Director of SPLIO. I mixed with your previous, I think, position you had at SPLIO initially. So this Customer Success topic within SPLIO; it is a customer platform in China, a company with 5 offices as I understand in the world, about 500 clients and a team of 130 people. A lot of funding I found online like 10 million yuan of funding and in China for a while, you got funding from DPI, Armundi, BNP Parisbas. For those who are French, they know about it. For those who are not French, it’s a bit less known, but they are pretty famous investors, actually in France. Splio has acquired recently a company called Gowento if my information is correct and what SPLIO is doing is about designing and managing a loyalty program in China if I am correct and this is something I would like to understand better? How much of the software you are, how much of the Saas you are, and how much of a service company you are.

To be totally honest, initially, my idea of SPLIO was a mailing list. For me, it was about managing emails, managing mail lists a bit like Mail Chimp and then one day I looked at your company more precisely, and I saw like it’s much bigger actually. It’s a technology program, and I want to understand the changes as well. I feel it has changed over time; your focus and I feel the topic is much larger than it was initially. So thanks Eliza for being with us today and feel free to correct anything I said which was not correct.

ELIZA MAO:  Ok so SPLIO is a software company. We provide a Saas platform. We originally yes, we started from email marketing automation, and now it has extended. We have brands first to understand where they buy, how often they buy and we help brands to build and orchestrate omnichannel journey in China because mainly before we used to e-mail only to connect to consumers, but now with technology advancements and especially in China there are so many touch points. And we get direct access to customers, and we need to really work on their attention and on top of that we provide end to end expertise for helping brands to build their strategy for their CRM strategy, their data integration part and also the daily operation.

MATTHIEU DAVID:  Ok, could you tell us about your business in China? How many clients are you working within China? I’d like to have an idea on the size of the sector; a better view of what you do in China currently. 

ELIZA MAO:  So in China, we are working mainly with B2C clients, retailers in fashion, cosmetics, skin care. We help them either to build their loyalty program in China from scratch, or they might already have a loyalty program in China that is set on a global or is set a long time ago with no change, and they might still use the e-mail as a key in their global system. So we help them to adapt their loyalty program in China using the right channel to talk to the Chinese audience in the way that they prefer.

MATTHIEU DAVID:  I see. You say ‘’adapting’’, ‘’adapting from the West to China’’ what are the first initial steps to adapt, for foreign brands, for overseas brands; it could be whatever. If you think there is a differentiation between European and American then it could be interesting as well, but what are the first steps that a company has to understand when it has to adapt its loyalty program in China, retention program?  

ELIZA MAO:  Well first I think the main challenge is on the omnichannel journey in China, on the data part because compared to other markets, China has more touch points and people use different communication tools. Like for example in China, WeChat is the main engagement channel, and people rely heavily on WeChat, for both online and offline and they need to bind the customers including their purchase, including their actions and behaviors. They need to bind every purchase and action behaviors into one single customer view and make sure that their loyalty and user journey is at the same level wherever the customer goes. This is the first thing.    

MATTHIEU DAVID:  When you say there is more touch point, why do you say that? If you say that about China, I immediately think about the QR code. If you look in the West, you have apps in the West, websites in the West, retail in the West, but the thing which is big in China which is very small in the West is QR code. What do you mean when you say we are more touch point? Is it more than QR codes? What is it? 

ELIZA MAO:  I think well first of all in China you have WeChat and in WeChat you have many services. You have mini apps, and it’s not only a communication tool. It is a service portal that connects brands to a customer that you don’t have anything that’s out of China. Also, there are different social platforms, and they have different marketplaces in China. We have Tmall, JD.com and they have a strong traffic with KOLs their campaigns. People read a lot of recommendations, and people will go to those platforms to check for this, and they go to their online Chinese store to purchase as opposed to offline to experience.   

MATTHIEU DAVID:  I see before we dig deeper on the different touch points, I would like to focus on one specific thing. The one you worked on specifically at SPLIO as far as I understand mailings and when I arrived in China it was 10 years ago and I started my first business ages ago, and I realized that people were not receiving my e-mails. The segmentation about promotion e-mail, about an e-mail from friends and so on was already sophisticated by people like Gmail now, and that was already the case by 6 or 7 years ago when you were promoting some businesses people were not actually receiving it because I was going in a very specific mailbox. It would not open. What is your view on e-mailing currently? Is e-mailing necessarily bad in China or there is still something to do with e-mails?    

ELIZA MAO:  I wouldn’t say e-mailing is dead in China. I think in some industries people are still used to using e-mail, especially when you book tickets or when you go to travel. So for specific industries this is still needed, and people want to read it in terms of e-mail because it has no content and it has no display especially on the top, but in others; in ours the speakers of usage of WeChat or SMS and the change is going that in our link for some promotional retails is much lower than this and you now actually it is not in the dream of Chinese people. People don’t think of e-mail as their main communication channel.   

MATTHIEU DAVID:  Yeah I think that’s the thing. Before we… when referring to this talk or this situation I was thinking about what people were doing or what Chinese were doing initially when you had… you didn’t have WeChat, and you had e-mails so does it mean that the primary reach toward Chinese clients like 6 or 7 years ago was more SMS, direct calls as much as e-mails? Would you say that Chinese from the origin has not been used to actually interact that much with e-mails so what reached the clients initially 6 or 7 years ago?   

ELIZA MAO:  Honestly speaking the whole CI concept is new in China, and with the explosion of the mobile and the technology this kind of CI grows with the communication boost. So it’s not about, “Okay we used to have lots of… and it is gradually becoming using SMS or WeChat.” In between this, they grow at the same time, and people are jumping into this era.  

MATTHIEU DAVID:  I see.

ELIZA MAO:  because the e-mail was mainly connected with their websites and not like the current ecosystem like it’s all connected.

MATTHIEU DAVID:  Let’s now look at the trendy parts of engagement with clients and customers, which is mini-programs on WeChat and those who don’t know much about the industry in China. Mini programs are programs made within WeChat which can be responsive enough, which can be open with functionalities, mobile payment and so on from WeChat. So have you been able to integrate with your software mini-programs and all those different touch points you were talking about to our audience and so on; have you been able to bring this western tradition within the ecosystem with the API of WeChat and so on and how have you made it?

ELIZA MAO:  Yeah so we are a global company with the global solutions compared to other big players yeah, we are more adapted to China because we have or are connected with the local ecosystems and including the native connected there on WeChat.

We are doing tuition with a multiple service count and multiple mini-apps so we can chat all the users and followers on the WeChat system and connect them to their online and offline purchases including their Tmall, JD.com including from their posts and basically every interaction that you can track. It can be consolidated into our customer platform in China to have a single customer view, and we can design the user journey using different touch points.

MATTHIEU DAVID:  I feel that you are talking online or on video or YouTube, not yourself, but SPLIO about Spring. Spring is a software you are using? Is it?   

ELIZA MAO:  The toy that we used to call Spring, but now we want to have a single way to have the same name as the company name so

MATTHIEU DAVID:  So it’s SPLIO now. I see. I looked at a video, and within the video, we can see that you can indeed track from every client, the profiling of every client and so on so individually you were showing the age, what this person bought and so on. What can you track in China which is different than what you can track in the west? We are talking about WeChat of course; we are talking about interaction with Weibo. How does it materialize into the platform? What additions?

ELIZA MAO:  Well basically WeChat hasn’t really used it because as I said it’s not only a communication channel; a personal communication channel, but you have a brand service account and an annual service account you can link your main apps as a different service, you can have tour reservation system, you can have your e-commerce. You can have an e-commerce channel, and you can have our membership center embedded on your WeChat, and you can also have different pages.

Other than that you have the different type of messaging through your service account including your customer service, including your broadcast if your service account is once a week and including your tempted message; you can… meaning you can react on a 48-hour window once the follower interacts with your account. So this is already a lot of things to track. You can track a lot of their reaction to your campaigns. They are interested in your post, and they are interested in different services.

MATTHIEU DAVID:  I find that what you are saying is that WeChat is actually a very easy platform to get information from the client, inputting itself. You are not leveraging WeChat with what we have put as comments and so on. This is what the client asked, put them into your customer platform in China through the mini-program because WeChat is actually very close to every Chinese because it is the app that they mainly use. Correct? 

ELIZA MAO:  Yeah, gathering information s, but also our one on one communication. This can be done through a segment of broadcast or messages, or most people are still doing the broadcast or followers with the same mail broadcast every week and then I think this trend should be because the older it is getting lower and lower because it is quite crowded n WeChat and we always recommend you use the segment groups for… we want to understand your customer’s personalized service and relevant information to keep them thinking that you are adding value to them.  

MATTHIEU DAVID:  A quick question: I remember that segmentation was limited to like 5 or 10 groups before in which it was limiting the segments. Is this the case?   

ELIZA MAO:  no. On our customer platform in China, you can leverage the function of target modules so you can segment into different or as many groups as you want. You can use all the information of the followers if you can get if they are already bound and you can use their purchase information for other channels; or if they have bought at a certain level offline. All this information can be used for segmentation and communication on WeChat. 

MATTHIEU DAVID:  Okay talking about your cases. I looked at two documents you have online; loyalty guide and logic tool kit, and I saw a lot of western cases, but they have not many Chinese cases. Could you tell us about some Chinese cases that you have worked on and you would like to emphasize on how to design the loyalty program in China and actually it has been implemented after?   

ELIZA MAO:  I think because this whole CI loyalty; if you are trying to buy online, on Chinese online stores, the loyalty is quite limited because it is quite new with all the known brands and local brands grow.

The most successful ones are big players with different types of logical for example, they pay their logic remote, the biggest online payer is Sahara doing great including JD+ all the video platforms and they have resources, and they have ways to play different games. They have to cooperate with different platforms, and they really provide really exceptional service, but brands can learn a lot from those players as well.

For example, JD+ have reached above 10 million numbers, and they have a very high renew rate above 80-%. That is quite close to Amazon Prime, and if you look at all the service they provide you can see they really understand their customers and you know they have already done a good job on their delivery on the logistics so they have to invest more to increase the gap between their member and their normal customers, so they have an option in the IT to do the online delivery, to pick up and return. So they really think about what their customers need and putting a competitive advantage in their service for their customers.

Also, there are some offline players like Nike, who is doing great with the community approach and which is really focusing on offline. They do a lot of tailor-made loyalty programs in China. They give real autonomy for their locals to add the differentiators so that they can follow people. This is something that a lot of brands can learn from. They can have a base loyalty program form global, but they need to give autonomy to the local to adapt to the local customers and cooperate with the other platforms that have the resource.  

MATTHIEU DAVID:  When you say cooperate I saw that more and more brands are afraid cooperating with the giants like Alibaba especially. What is your feedback on that because you say to collaborate, but how can you collaborate with someone who has all of that? How can you collaborate with someone actually has all the power, and if you don’t spend marketing on his platform, you are not going to drive traffic? What’s your feedback? What is your analogy on this? 

ELIZA MAO:  This would depend on the traffic. If they really have a focus on their Tmall data or not; because Tmall is still traffic; a traffic place for e-commerce and usually more than it can be 40-80 and for some brands on Tmall; more than 80% of their customers are new customers, and it’s not… you cannot say it is a loyal customer base and you need to really work a lot to engage with those Tmall customers.

How do you connect to them because usually people spend 1 purchase on Tmall and these are not loyal on that because they just try new things and they are not connected to your brands, and you need to make sure that you leverage the benefits from those giant ecosystems; with ALI, but you need to make sure that you really have your strategy and make sure you have the private link to your customers and give them an Omni-channel journey in China.

MATTHIEU DAVID:  And to think it is difficult to get a direct link on Tmall.  

ELIZA MAO:  yeah that’s why you need to have a place where you can have like the interface with your end customers and not only Tmall to do… you can use Tmall to do your promotions, and you can work with them on different campaigns to get the traffic, but after those customers buy how do you connect with them? How do you want to communicate with them using your advanced strategy? That is the key point.   

MATTHIEU DAVID:  Okay. You talk about Nike as an example of a  good case of loyalty program in China and retention programs; would you like to be a bit more specific about what they have done in specific cases you think have been successful or inspiring?

ELIZA MAO:  So Nike; they don’t have what we call a typical consent here. They have a community approach. They have the Nike Plus app, and they want to put all their customers into communities into their own platform with all the courses, with all the training, and they don’t do that like promotion communication like you need to age this product or that. They just have the people with the same interest, and they want to grow this thickness and belonging to do a lot of community advancement, and it takes lots, and it’s not something that everyone can do. You are creating a community, and it takes a lot of resources, but we can show that because also like brands like the customer, they are also trying to do a similar thing. It’s quite a way to grow the younger generation, especially Nike. 

MATTHIEU DAVID:  So basically, you are analyzing that generating the retention program through the creation of the community and more specifically through apps; many, many mini-programs actually in China. Are you talking about the running app of Nike?

ELIZA MAO:  Yes.

MATTHIEU DAVID:  Okay I see

ELIZA MAO:  Also they have different campaigns; different seasonal campaigns that are brought by mini apps and linked with their account so they have a different challenge that they gather people and they invite friends to participate.

MATTHIEU DAVID:  I see and when you have this mix of offline and online, like an app running a Chinese online store and then you want to drive… you are going through your phone, and you want to sort of drive to your shop afterward. How can SPLIO help? How does your software help in connecting online and offline? You are talking a lot on your website about Omnichannel journey in China. If I can ask you to be more creative about offline and online, how does it work with very specific cases? 

ELIZA MAO:  So we help brands to bind their customer data. We can use loyalty programs in China as an entry, and to make sure that every customer goes to offline when they go online you have the delivery; you have a list of numbers. Usually in China we use mobile phone as a unique identifier, and you have your solar database once you are identified, we bind their phone numbers through a mini app or a service account, and you bind using the unique identifier to bind all their purchase and their actions and also if you the offline or online events you can tag them into the customer database.

MATTHIEU DAVID:  Ok, so does it go through a QR code in China? How do you do?

ELIZA MAO:  If it is offline you can have a QR code to easily access your service account or your mini app or the membership loyalty program in China to incentive your customer to join the membership program, and if you go to carry out campaigns you can also connect them to your membership. So you can identify all your new recommends through any channel you can to track the source of your follower base and membership scores and then you have all your purchase for offline and online; a one day purchase and you want them to uninvite themselves so you can accumulate all their purchase histories. 

MATTHIEU DAVID:  I see. In order to understand better the clients, B2C; are you still using what we call GSP, BMP? They are fitting platforms that are immerging platforms; is it mature enough in China? Is it something that you are using, and is it an industry that is actually effective? There are a lot of questions about GSP. I don’t know if you are using it for your clients?   

ELIZA MAO:  So, we work with a partner who is focusing on those areas that some customers; they want to build a DSP on themselves and our customer platform in China is connected to that, and we are very focused on customer data so we provide a reporting business the intelligence on the customer data, and they can extract those segments, and they can do their own analysis and integrate with their own systems.

MATTHIEU DAVID:  I see and what about DSP (Demand Side Platforms)? Have you been reaching the data of your clients through DSP in China? Is it something you feel that is important? 

ELIZA MAO:  Not in recent cases. Usually, we work with Pandas on that, but we are not a director in charge of that area.

MATTHIEU DAVID:  Okay. Recently, SPLIO was a speaker at Turner Connect, which is a conference about e-commerce, about consumers in China. Would you mind sharing some of the key findings you have been talking about?

ELIZA MAO:  So it’s mainly about China and China ecosystems and how to do a loyalty program in China and what are the things to do and what are those things to avoid.

MATTHIEU DAVID:  Okay, so what are they? Maybe we have already covered some of them.

ELIZA MAO:  Yeah so, for example, we already talked about WeChat, we already talked about… and also China or Chinese consumers are a bit different from what we usually see in Europe and we need to understand that the Chinese customers are now in a phase that they are very enthusiastic to try new things, very enthusiastic in reading all the reviews and recommendations as well and that is why we always say when you enter China you need to make sure your QL strategy is right, you need to make sure you are talking to your customers with the right message and also personalization is very key. You need to have different strategies for your new customers and your existing ones. Essentially when you do loyalty, compared to out of China, Chinese people are relatively less sensitive on the data and especially with the easy registration process, it is not that hard especially when you have an offline presence.

The recruitment conversion rate can be high when you give them the immediate attractive benefit right away and with a simple process, but also Chinese; more than half of them don’t know the difference between the different loyalty programs, and you need to work on the retention part. How do you make your loyalty program in China standout? How do you make your end-user have a deeper experience to know that this is adding value, and they want to keep engaging with your loyalty program in China?    

MATTHIEU DAVID:  I see. You are talking about a member, and I would like to have an idea of how to compare with the west, and in your presentation you said that 5% of engagement in retaining clients could increase by 55% profit of the company which is basically maybe 25% of cost of acquisition in the client so you don’t have to pay it anymore so maybe you increase by 25%, actually; your profit. Would you be able to share some data about the opening rate, about basically engagement on the loyalty campaigns in China compared to the west?

ELIZA MAO:  You mean for the marketing loyalty campaigns in China?

MATTHIEU DAVID:  Yeah for the loyalty program in China and retention.

ELIZA MAO:  So it really depends. It depends on your budget, on what channel and what kind of promotions and if this is… it can be really high. For example, if you have a client who is doing a WeChat campaign using the campaign, it can be a percentage of their progress, and it can amount two or three times more than the average. Also you…

MATTHIEU DAVID:  10% commission rate, or are you saying 1000 interactions? I mean precertification? You have 200 people buying.

ELIZA MAO:  Yeah, but they can be a small audience.

MATTHIEU DAVID:  I see with the communication on this push notification; I remember that some time ago a lot of discounts. Do you feel there is still a lot of discount or its unique products to buy, which makes it that there is some scarcity of the product? So your basis is buying it because your window opportunity is very narrow. Is it more about the price; the price is lower? Is it more about the novelty? The product is new or what is the best interaction in China you have seen so far in terms of the number of sales?

ELIZA MAO:  Usually if you do the campaign on WeChat we suggest that you do the customized product or the seasonal ones or the co-branding in China because you need to have something different from other online channels, like online Chinese stores, and with the brand house campaigns and you can be a pop-up, it can be a pop-up store on WeChat that people think this really speaks to them with their QL’s and they cannot buy it anywhere, but also there have to be promotions related if it is more about the equipment.

MATTHIEU DAVID:  Sorry, go ahead.

ELIZA MAO:  New followers; they focus on more on recruitment because we want to sell some discounts or promotions, but for your new products or existing customers, customer boost is still a very good and attractive way to do some customization, do some highly exclusive events to some co-branding products. 

MATTHIEU DAVID:  So a pop-up store on WeChat; is it an H5 website? Is it a website dedicated to this event, this purpose? Is that what you call a pop-up store on WeChat? 

ELIZA MAO:  Yes this is a pop-up store on Wechat, and it also can be a mini app.

MATTHIEU DAVID:  Okay, I can be a mini app; any program within WeChat. So this is basically again a platform or a format dedicated to specific events. That is what you call a pop-up store on Wechat?  

ELIZA MAO:  Yes.

MATTHIEU DAVID:  And not the brand works of it, I see. When you say co-branding in China, since I was in China, I saw a company named Disney doing a lot of co-branding in China, teaching in Taiwan. I’ve seen some major companies doing co-branding, but which ones have been so far very successful for you? I am not sure all of them have been very successful. Which ones would you see are very successful in co-branding in China?

ELIZA MAO:  When I say co-branding in China  I mean all of them… for example, if you do some loyalty; the benefits and the award can be the co-branding in China for that and not only you need to have the really the big co-branding product. You can have the design part as a co-branding effort. 

MATTHIEU DAVID:  Sorry, what do you mean by design?

ELIZA MAO:  I mean, we see a lot of brands doing their co-branding design.

MATTHIEU DAVID:  Okay, I see so there is a designer that is working together on the product. I see. I understand; designing the logo, designing and putting together the product.  

ELIZA MAO:  Yes, it’s more of a marketing campaign like Unigrow is doing lots of work and many efforts with other brands and 

MATTHIEU DAVID:  Okay, I am taking some notes of what you say to go back on it. What would be a bad conversion rate in China? You said 20% commission rate for so many clients. On the other hand, would you have some numbers about the average conversion rate you should expect when you engage a loyalty campaign in China; an engagement campaign with your current database of clients? Do you have metrics?

ELIZA MAO:  I think, and as I said it really depends on the different industry, your different strategies and if you have really a big focus on offline, I think offline conversion rate can be much higher because you have offline stores. You have the staff to promote, and for example, if you are in fast fashion that mainly has 80 or 90% from your offline you can have 80 or 90% of the normal rate, and with the 5-10% it’s already on the redemption rate, and it’s already very good and if you have a very strong focus on your online mainly your Tmall or your WeChat store, 5-10% normal rates is already good and then we require a much higher participation on redeemed rates to have efficient loyalty campaigns in China. 

MATTHIEU DAVID:  Okay and in terms of frequency, do you have some directions when you meet with a client on the frequency of campaign you should organize or how often should you be in contact with your client? I know that the campaign in terms of the industry I believe that if you are in a fast industry, it would be every day to offer them lunch or something, but maybe to pick one segment like frustration or I am not the one you are familiar with. What frequency would you advise?

ELIZA MAO:  As you said it depends on the customer purchase frequency and firstly we usually suggest that clients that do their consolidated data because usually they don’t have a consolidated view of how often their customer buys and we help them first to have that because you might only get data that they go to your store, but they don’t know that they actually track your other channels very often and once you have that you understand that is your customer base; maybe you think your customer is buying from you one in three months, but actually they look at your products before they go to the second purchase they are already checking on the second ones.

So this is something that we help brands to improve for example, Skin Care once renounced and at which stage you should give them a communication to especially when you know what kind of product they buy and what kind of information they are looking for and what actions they already show interest in their WeChat service account and you can incentive them with the promotion, but also give them information and advice that they should be interested in the regular basis. That is the whole process of designing using touch points.  

MATTHIEU DAVID:  I see, going back on the methodology you have. I think it’s very interesting. You are looking at how many times a current customer is going on the website and are interacting with the app and every touch point you were mentioning and say, “Oh, the customer isn’t coming very often, but you do a campaign call every 6 months, so maybe we can consider a campaign every 2 months because they come 3 times every 6 months, on average.” So basically they interact with you 3 times, so they are looking for information 3 times. Is it a correct understanding of what you are saying?  

ELIZA MAO:  Yes, so including their purchase and including their actions. So if they buy on offline and then buy on Tmall and they buy n your JD before you don’t know they are the same person and now once they are bonded, you know that they buy in different channels, but they might go to one place to look for information soon the WeChat on the broadcast you also can track if one of your customers is really sharing and are kind of the ambassadors of your brand, and you can know that they are interested in which type of product also. You can react to that.  

MATTHIEU DAVID:  You are tracking the identity of people through the phone is what you are saying. When you say the phone as an identifier, is it the phone number or is it the device? 

ELIZA MAO:  It is the phone number as the identifier, and if they are not bound it will be their ID of the service account or the UNI ID of the mini-app usage because you can identify them as one follower between the service accounts and the mini apps. 

MATTHIEU DAVID:  Yes. Alibaba has been commercializing a new way of tracking the users, which is this unique identifier from Alibaba. Alibaba for being present so much over the web that they have been able to collect and actually align all the information and correlate all the information of one person all over the web. Have you been experiencing the information from Alibaba?

ELIZA MAO:  It is mainly about your loyalty campaigns in China, and we work on the first candidate mainly and Alibaba currently; they don’t give you all the information. They are holding the data.  

MATTHIEU DAVID:  but they can target for you. They tell, “We will target those people very quickly because we have all this data, but we keep the data.”

ELIZA MAO:  Yes, exactly.

MATTHIEU DAVID:  Okay, I see. Do you have to retain clients; your clients to not to do too many loyalty campaigns in China? Do your clients tend to want to do too many campaigns, or are it the opposite? What is your feeling about usually brands and interaction with customers; do they want to do too much or too less interaction?

ELIZA MAO:  I want to say too much. I will say they still want to do them… they still don’t put enough efforts on their personalized loyalty campaigns in China. They want to do broadcasted to all. They want to have their regular campaigns to all their audience to make sure that everyone gets the information, but I think this is also risky in some cases because you abuse the communication that customers might get annoyed.

MATTHIEU DAVID:  In terms of personalization; it has been hard sometimes now that it’s not as hard as before. Re-targeting has been hard in the west, and I saw that you are using for your own use UpStaff in order to do some marketing information with your own clients. What are the tools that you can use in China? Is re-targeting big in China? Are tools existing to re-targeting and easy to use and much as a Facebook pixel, as much as LinkedIn pixel? From my own understanding so far, it is not as easy in China as it is in the west to re-target your clients by putting a pixel in your website. What is your view on that?

ELIZA MAO:  Yeah, I think it is also growing in China. There is also the… it is kind of similar to Facebook that you can upload your data to do re-targeting, and there are some agencies who are trying to do the re-targeting with the customer base and the media data. The train is for sure going… that is key I think for the next phase of the big data.

MATTHIEU DAVID:  So look at a campaign for… we don’t know what it is or it’s a word from Facebook where you upload the data from your current customers and you re-target them on Facebook because Facebook has all that data regarding everyone, so you are able to upload the e-mail and then find the person on Facebook re-targeting your message. Which platform is now offering that in China?  

ELIZA MAO:  Tencent.

MATTHIEU DAVID:  Tencent is doing that now in China, and Alibaba is doing that also, or it’s mainly Tencent?

ELIZA MAO:  Mainly Tencent who I know.

MATTHIEU DAVID:  Mainly Tencent; interesting. So another topic in terms of engagement and retention with clients which has been big in the west, but I do not see it in China yet, so that is your topic. We talk about innovation in China a lot. Now it is innovation from the west which I do not see in China. It is all the subscription-based models like bit box where you receive a sample. You try it and then you can buy the product. Have you seen something happen in China; this new way of interacting and testing a product? So to remind people what they are saying to us.

The Box model Subscription based model is you receive a sample; like every month you will receive a sample; a lot of cosmetics to try them and then you are able to purchase them on the website actually of this box; this box website and offer discounts and offer a price. Have you seen something similar in China?       

ELIZA MAO:  To describe it; they were doing the play box out of China in the US, which is quite successful. In China, I have not seen successful cases like that that have to pay a vast fee on the box of samples, but a lot of brands who do the sampling like a gift or additional benefits for their status of the members and knowing that it’s not yet paid boxes. It is not yet the thing that the customer really wants to buy. I don’t see it as very high conversion in the beauty sector.   

MATTHIEU DAVID:  What about sampling samples?

ELIZA MAO:  Chinese love them, especially there are a lot of skincare brands who use the sample to recruit members. It’s a very good trend because people can try and especially when you buy a certain type of product that the brand has, and they want to extend their product to a promotion that was sent with the sample of another product line for customers to try.  

MATTHIEU DAVID:  I discussed with a brand some time ago I thought 4 years ago; a very big brand and they were saying that when they arrived, online retail in China was not as developed as now; the retails were using the shop; the sellers in the shop were using the samples to be like a discount, so they were saying, “Oh, buy these products. I will put these samples in for you, and you get more, actually.” Have you seen the use of samples being more mature with a rich strategy on it and how do you use samples with online channels, like online Chinese stores, because you still have to send to someone the sample to try? Have you seen anything happening, or is it still mainly offline?

ELIZA MAO:  Online is the same when you buy, and they will have different use on given what kind of samples and sometimes they use that as an incentive. If you buy this amount, they will give you a nice bag with different small samples. It is already a very common online tool, often used by online Chinese stores.

MATTHIEU DAVID:  okay a little bit like a discount or get more for the same price and less about a trial, a test of the product?

ELIZA MAO:  It is also about the trial because for some brands they want because on Tmall usually, we buy the hot product of the brand. We don’t know much about this brand, and this is very crucial when you can add your product sample of other product lines to promote your product and not only on the one product sales push.

MATTHIEU DAVID:  I see okay. Thanks so much for all this sharing of all this information and if you would like to add to the audience who have listened to the interview about SPLIO, customer platform in China and about engagement and loyalty programs in China.

ELIZA MAO:  I would say the key message is the successful loyalty program is not only to build your purchase behavior, but also to build a positive attraction along the journey that is willing to invest efforts in every touch point and to make sure that the level of service is the same in the Omnichannel journey in China.

MATTHIEU DAVID:  Yeah which is not easy and we have seen a lot of brands that disconnect between offline and online and the same client can be in a shop and going online and not connecting; still a problem in 2019. 

ELIZA MAO:  Yeah.

MATTHIEU DAVID:  Thank you very much, Eliza, for being with us today in this new episode of our China business podcast, China Paradigm, and I guess we will see the video very soon. Thank you very much.

ELIZA MAO:  Thank you very much. Have a nice day.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Podcast transcript #17: Build a successful loyalty program in China is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Matthieu David:   Hi, everyone. I’m Matthieu David, the founder of Daxue Consulting and its China business podcast, China Paradigm. Today I am meeting with Dmitry Shklyar.

For some reason, you have implemented in China, and one of my clients was interested in better solutions, so the reason why we met was when I looked at your LinkedIn profile I found actually I didn’t know that you had been in contact with them for so long. You have the Learning  2007 and 2009 which was back when Learning was becoming to become more international and during the Olympic games in China, so it was a big time for sports brand, so you have been what we say, a China veteran.

You have been an entrepreneur in China for a long time; more than 12 years now. You have observed the Chinese market and been involved with China and the rest of the world especially, I still by your LinkedIn profile when we talked about in preparation that Sofya made on paper a lot with Russia as well; between Russia, China and also Israel.

So, you are currently monitoring Eastidea as we can see on the logo behind you and you are representing different companies, including SCREEMO and And reality. As I understood, Eastidea is representing those companies, and generally speaking, is representing tech companies in China. In China, some things are okay. They have big partnerships and tech companies especially in AI and also for SCREEMO; out of door advertising, OTO – I don’t happen to know which one it is; if it’s online or offline. So, the first question is what I said correct?

Dmitry Shklyar: Yes, 100% of what you said is correct. It is true. The first time that I come to work with China was I think was around 2006 and that time I was still a student at university, but I got the chance to work for the Olympic committee and different federations in Russia at that time. When I was starting with the Chinese, I had a degree in the Chinese economy, and I think it was my first approach to China when actually I reached the labeling company for that time I was dealing of course with sportswear. I like the profession, I like sports, and I dealt with sports and lots of other things as well. In Shanghai, we played volleyball in the Shanghai tournament league, etc. We had the team as well.

Actually, we had like now, we are gathering again, and we like sports so much; very much and it was the first approach to China where actually Learning was the first stage when we could actually start with the product. I mean, I started from there with the product and working for the people who were introducing their interest of the Olympic committee, and we started as entrepreneurs in China with the Learning Company. It was really tough; it was really long-term relations with them. I think maybe we dealt with them for like three years and at that time for the journeys to go outside of China. It was kind of staff; not a lot of people understood why we were doing that, but we saw a lot of potential in the product even if it took 12 years, 13 years to a topic, that time the quality already was really satisfying. The design and everything was good. I mean not as good as maybe the most famous brands where you can tell them by their fingers, but we found out that it had really great potential.  It was a great connection made with Shaquille O’Neil and so on.  

I don’t want to do like too much at a time, but this was the first step, and I mean after maybe… I had some several years of coming back to China, and I was studying, developing myself in terms of sales, commercials, learning a lot about how to do digital marketing in China and many other things and then at the end of 2013 I actually came back to China while raising in investment funds and starting to do the new business here in China-related stuff, without going into detail and this was my second step here in China where I actually opened retail stores in Shanghai because it was related to the high-end profession and during my operational; during my time when I was acting as the CEO of this company I realized that the retailers are actually facing a lot of difficulties out to increase the turn-out of our customers inside the stores.

I mean you can do a lot of digital marketing in China, a lot of digital activities where the other channels reach. You think it might be a profit for a business, but when you start a business in China and especially in retail and not on a big scale; like, opening a few channels or chain stores, etc. those journeys become to be really heavy in terms of how to get the lead, the cost of the leads are super high and then realize that in order to focus on how to do the online digital marketing in China for a channel which is actually a huge role then you have to understand how to deal with all those channels; how to create multi-channel networks etc.

And you have your own burn rate and you understand that, okay you have this limited amount of money; you have to hire people, you have to find the place to import, and you have to move a lot of things around, and then there are people sitting here who are telling you, “Look, you have three months to reach an agreement so you start to think absolutely different and you say okay, “You know, instead of interacting online, let’s interact with the customers on site” and that time I figure out for myself that all the interactive things lead to indoor digital signage and for the technologists for the digital signage in China might be the appropriate key for success and in spite of the day by day business in stores, and it is going to be great channels for the indoor advertising and starting this advertising, I actually start to dig more and more deeper into the subject where technologies can really change the future of retail and the future of advertising because one, this is my personal point of view; I mean some people can accept that somebody and say, “Okay, it’s not true”, but for me content is always the king.

It doesn’t matter what kind of technologies you will do, or the companies do. The important thing about how branding for the customers is really important. What do we offer and how we would follow up with the results that we are getting through the advertising and through the activity in the stores?

So, usually a lot we see daily is like either the static and nice picture with a lot of co-direction messages, “Come and scan the store and you will get something” and blah, blah, blah or you have some ladies dancing on the beach, and that’s okay. Well, you do some [inaudible 08:30], but it’s not something that will help you follow up with the results and at this point actually one of my good friends from high school, Luke Zimmerman; the founder of SCREAMO from where I was actually advertising in the country got in touch with him, and we realized that there are a big potential and marketing challenger doing the co-interaction and marketing solutions between screens and mobiles inside the stores and the first time that we… we took actually what we got from China with this product and us also Barcelona; MWC, where we did a nice presentation of the product, and the CCN wrote back and who was a very famous guy, he did some little bit about the story that we were doing and immediately after 2 days we got a phone call from the people from a Bank who were interested in the implementation of this in China.

So it was a lot of like; a big chain from like different things which happened let’s say in the really few… a short time of 3 or 4 months we brought it back to China with the solution. So, in 2015 when we started the way with our tech solution in China, we understood that was a huge demand for the technologies related to the communication, but the thing is that nobody knows how to actually follow up and instead… it will not be enough only to have this tech solution in China, but as well need to give a lot of push and support for the customers actually how to create the right content and it was quite challenging because we didn’t at that time we didn’t understand and even now sometimes, we don’t really understand what features or design or what animation or let them cut some kind of a [inaudible 10:26] will be eye-catching for the Chinese customers because from province to province some features in design or communication can be… and customers need to be considerate and considerate based on the holidays, vacation – I don’t know, local trends, so it is huge, huge work behind not only just providing this tech solution in China and saying, “Okay done and done.”

So, yes we have done a lot of… not a lot, but many successful cases here and if you are talking about the business; on the business side with the technology we have got SCREAMO, and we put our solution to Shanghai, Coca-Cola; a laboratory for Coca-Cola, the location in Shanghai when actually all that they can come from Coca-Cola and learn about different technologies. We have done some marketing for example, in terms of solutions for their brand.

Moreover we established great relations with the Shanghai media group where it was about just to implement our solutions within SCREAMO and going on this direction I decided to follow up with my… to establish my company by name is Eastidea Solutions where at the beginning the first focus was actually on taking to be a like kind of a business integrator where technologies or software developers from overseas who want to reach the Chinese markets, but they want to do this in a way a bit different than just going for some information period or looking for the BC on the Chinese markets because we find out that after meeting a lot of investors, private investors or even their big brands and actually what everyone is looking for and this is like from our experience, this is where we see the most results is given the fact that first of all, the companies who want to – I mean especially the start-up’s. Let’s say the early days; this is the early focus where we are working with those companies and when they start to be faced with a lot of difficulties, so they are starting from the location of… let’s say they are the core of the company to develop the Chinese markets or the product for the Chinese markets and it’s becoming to be very cost effective and let’s say time-consuming and three months difference is not enough for private companies to do let’s say the breakthrough and to get the right position in the Chinese markets in terms of technology.

So what is our policy and for today, if we after doing some research and understanding the market needs and understanding the company, there is a great mesh between the customers and the partner’s pipeline and in China, if you see in this product, there might be let’s say we will have a positive result and within a very short time, we can get in a [inaudible 14:00] to sign with customers in the long term and providing technologies we will start to bring those companies into the Chinese market.                    

Matthieu David:   What I am trying to understand with this company is; did you sign the contract with… you have an extra activity on the Chinese market, and you use them exclusively, and then you sell for them, and you invoice with your own company for them, or it’s a retainer; how do you work with them? What is your typical contract? 

Dmitry Shklyar: Okay, so the typical business approach is we found your product is interesting for the market. We know what to do with your product, and basically, we will focus on let’s say major industries is like indoor/outdoor media and retail and all the interactive things for the inter-businesses even for the bank, for the smart regimes, retailer, etc. If you see those technologies really have a scalable mode; you can really scale it easy. It is easy to deploy, and we say to the guys, “Okay guys, you don’t have to relocate your team to China.

Actually, if China becomes to be your expansion with our team on board, usually we can dedicate up to 2 or 3 people to the company needs and the company at a start-up has to pay us the monthly basis let’s say the market pay for the service we provide them in a bundle. It would be digital marketing in China, the legal part, sales of what is important and we say like this, “Okay for the first year following our relations we start to generate revenues for your business and this revenue will actually come to our company in China. After we evaluate all the KPI’s which was done, you can take a decision and say okay, from the next year I would like to take maybe your team to my company because they already know the product and so on and so actually either we can actually to move our people because you are hiring to work for this company directly.” If the company has decided to move to China, and we have the ways for the company to set up all the necessary things or they say, “Okay guys. I see that everything works perfectly.

Now let’s move to the model of let’s say of articulated partnership or revenue share model or something like that. You continue to sell our product on the side and we just support you, the product itself and the piece” and then we are developing the markets together. So we don’t take equity. We just do business to business. We say, “Okay, we help you to get into the market. You pay us for this. We don’t take any commissions or any interest or whatever. After a month we are sitting down with all the CEO’s and when all the KPI’s are done, you decide either can move by yourself or with the team.      

Matthieu David: After one month?

Dmitry Shklyar: No, after one year. Yeah, one year. For some countries, 1 and other companies, 1 and a half. So the idea is, and this is where we started to develop the company which the name is Eastidea and we found out that after let’s say after years of operation we started to get more and more requests from our customers for additional technologies like if you are talking about the VR technologies or let’s say the AI technologies etc. so we brought in other companies. One of them is a company Addreality as AI based digital signage in China.

Matthieu David: Can you give us some examples?

Dmitry Shklyar: Yes, absolutely. So, what is actually digital signage in China? Digital signage is all the indoor and outdoor media, digital screens which are operated by some digital content systems. I mean you go to any retail stores. You see all the screens inside the subway or airports; those are the digital media spaces which are operated by different software providers. So, some of them are just doing a simple job when you can just upload some video or features onto the platform.

Let’s say the content management platform, and that’s it so, what they do…. People are earning money like a business. So, you own your own digital media spaces, and you have your sales team, and okay, we have different locations, but they are in Shanghai, and this is the price for time grouping and so on so let’s do the money.  We found out that these conditions are really let’s say – I am trying to find a good word – I don’t like the word opportunity. I like the word attached to it so here in our case, the digital signage in China becomes to be a great platform where we can collect a lot of Chinese data from the consumers behavior so inside the stores, on the streets, let’s say subways and then marketers who are placing the content on the screens. They would like to understand the pressure for the retail business and what people really like; how do they like the content with this screen and how this advertising really influences on their let’s say choices inside the stores and they want to understand as well the media content, and they want to understand how many people saw this advertising and what was the conversion rate, let’s somebody played on the screen or I don’t know, walked directly to things that were advertised. They would just come in and check something or let’s say for their own life so actually; we converted the screen; just a regular screen on the screen and let’s say you have… we are using mobile phones, right?

So a mobile phone is an interaction between let’s say you like the person and let’s say the platform so right now they know almost everything about what do you prefer, what was your last product etc. So what we are doing; we are actually doing the screening, but for the big screen we can interact with many people at the same time. We can take the estimated numbers of visitors in different locations and provide it to the marketers and data on the behaviour of customers inside the store by let’s say special technology like face recognition and we can actually see how and sorry, and based on this selective Chinese data information we actually deliver the content on the screen based on what actually our let’s say through our frameworks, we see who respond to the screen; if it’s men, women or kids – who coincide with our advertising. This is what we do.  

Matthieu David: Simple question about this targeted advertisement; you may not have only one person. You may have a man, woman, young person or young guy; how can you harmonize and absolutely to show them in common when you have different faces on your screen?

Dmitry Shklyar: Okay this is a good question so we develop and this is where we come in with technology. We develop our own engine, which actually works with simulation. Let’s say even the system will see let’s say… people usually need to understand that the camera, let’s say if you get talking about the technology, the simple camera has an angle; the viewing angle, right?

So in front of the viewing angle based on the many tests that we have done already and this is what we see; the reaction of people and usual cameras can catch up to at a maximum of 8 people, then at the same time and in front of all the screens or front of the big screen, for example. Some people consider that if you put a camera in the shopping mall and you put a big screen, the family will go, but no, usually it doesn’t work like this, but if you are talking about the smaller spaces like retail stores or even the subway usually in front of each big screen it should be usually 8 people watching the screen and let’s say bam, you’re watching 8 people.

So, based on this and the assumption of this number what we say is if it recognized among those 8 people who are watching the screen right now and if the cover is 200 milliseconds, it’s just you can imagine I do like this or just look on the screen. It has already caught up on all the features and based on that building up of the campaign so with the 8 persons who are standing in front of the screen what the system will recognize, and we will set up a rule with marketers of this advertising and we will say, “Okay, if an amount of 8 people will be male, then we will deliver the product for the male and if among those 8 let’s say 5 ladies and 3 of them will be under the age of 30 we will deliver the content which we will specify as the content for the young generation and if it is the older generation, we will deliver the content for the older generation” and this is what we call the computer vision and a lot of algorithms behind.

So, in that case, marketers; they just need to set up a plan let’s say they say, “Okay guys, on those locations” or let’s say right now we have over 25 000 stores operated on our platform already.

Only in China, we connected plus minus only over 1 year over 7 platforms with our tech solution in China so right now what we actually can see is that this market; they are interested in. This is the best interest that we would like to have and to understand what is going on in the stores because, for many of the time, marketers let’s say it’s like a lot of non-understanding of how to interact with the customers. Let’s say we know a lot about the online, but with the offline, it’s totally let’s say… companies invest billions of dollars just if you are talking about the software and the digital signage in China based on PWC the latest report and I think the size of the market is around 20+ billion dollars and only the software; the market side is about 4 billion dollars.

So, China is developing rapidly. You can find as well a solution for what our Chinese developers are doing right now. You already have the digital family, and this is the future that we really like. Imagine, let’s say I want to greet my wife for our anniversary. We are walking on the street, I just take out my widget, I see the empty screen and we are on the street, and I just want to extend her a very nice picture message of the street by just say by seconds to deliver a message on the street, on the big screen. When I press time, I just can set up a time and then while I am pressing, I say, “Happy anniversary” or “Happy birthday” no the screen.          

Matthieu David: Or the address on the corner so it could tell you, “Here’s the address. Come to meet with me,” which would make it easier to be found and seen. There is certainly a lot of potential in that. On the opposite, how come we don’t see that everywhere? I mean, it is very rare, so far. I see some interacting screens in some places in Shanghai. One is Hong Kong Plaza. There is a street where people interact, play with the screen.

Dmitry Shklyar: This is where we started, yes.

Matthieu David: So my question is, are we talking about the future or are we talking the present? Are we talking about something which is implementing now where we find models that are really a momentum on it and companies have found a way of interacting, and in this case, I would be interested to know some specific cases? You mentioned Coca-Cola, Shanghai media Group or are we still talking about something experimental; something which is in the making and we haven’t found a very, very duplicable model where we can find it anymore? What is your feedback because so far, I have seen it, but I have seen it rarely?

Dmitry Shklyar: First of all, I do agree with you. So, about interactive technologies like for example what we offer with SCREAMO; those solutions were not precisely scalable as we wanted it to be in China because of the different technologies and the lack of let’s say arrangements on the technical side with our customers so then it became to be for us a product which is based on event marketing for the customers at the point of sale.

This is the one approach, and what we are doing let’s say with the reality is actually on a daily mode, a system operated screen and the usual visitor or let’s say the shopper; when he goes inside the mall he will never understand, and this is a very good thing here – he will never understand that somebody is trying to push him hard on the irrelevant content on the screen.  He will just see the screen, and he will understand that there might be something interesting for him, but marketers; they know it that there is the potential audience. We have to push this content. You won’t see any big cameras watching at you and say, “Hey, stay for a while. Look on the screen. Tell us what you are interested in.” It is generic. It is always going to be like this, and it happens backstage on the software so even now, for some locations we are talking about big players; they like this technology and investing a lot of research, time and money.

Why? It is better to monetize the advertising and all the digital content, and this is why all these technologies for the face recognition; we are now it has even become more important to the customers want to buy and not by how many loops you place in the content, but how many people saw the advertisement or the content of the screen and those technologies become more and more relevant especially in the targeted advertising so what you will see everywhere right now mostly 80% will be direct advertising where people just buy the space or marketers and the head of digital; they will install the screens inside the store and say, Okay we have a marketing plan to broadcast different brands. I don’t know visuals like video clicks or something related to the sales, and this is done, but more and more companies, especially in the cosmetic industry. For them, it’s much more interesting and this is where they have the really great success so far that when they are pushing the targeted advertising on the screens because in the mostly branded stores or other substitutes or with different names; for the, it is very important because they  

Matthieu David: Is it what you call problematical advertising?

Dmitry Shklyar: Yeah, it is a part of problematic advertising, exactly, but there is a slight difference here for different industries, yeah.

Matthieu David: For those who are listening to us and don’t know what problematic advertising is, it is when you display an advertisement which is targeted at the audience which is around it. It could be online, it could be offline, but what is new is that it’s also now out of the door and so also some way offline even if it’s to be     

Dmitry Shklyar: You are right. You know that let’s say the definition. In some case and not in some cases, but this is where it actually is problematic advertising to indoor and outdoor media is actually that all advertising will become to be not just to pay in advance let’s say for one week or two weeks to place some content on the screen, but the next step to be the bidding system. When the big players like Google, they are speaking for those solutions, but the one we think is missing right now is the providers; meaning that the screens need to be connected to one network when all the screens via online deliver to you all the necessary Chinese data they actually start to sell the screen advertising for the big people through online, and this is what we are actually setting up right now with all the big companies here right now including the pre-manufacturers and including the big corporates who are in the business like media companies.

Not only in China, but as well as in Hong Kong and sooner or later we will hit those markets with those technologies, but that is like you, me and all our clients who are not I this industry are mostly home. The advertising is part… they really understand for what I was looking for, and I was sitting up during the night looking for some nice – I don’t know – digital, or a new model or for other brands and then I discovered I was searching later on the phone so it becomes to be like this and what is important to highlight here, and this is where you come for the next step. We do not do any personalization. We do not collect any personal data, so we are really focusing on DDPR standards where we do not provide any personal Chinese data information, and this is what is important to understand.       

Matthieu David: So, we see that it’s not in the mainstream, so those screens are not mainstream. They are not everywhere. Would you have some cases that have been successful in terms of monitoring? Not necessarily the case from SCREAMO, but the case where O2O; interaction with the screen has been successful, and I understand from a business tech perspective what you increase by those screens is engagement. Its how much time they spent engaging with the screen so they can engage more, remember better and spend more time in front of the screen. We have seen some trials with WeChat; using WeChat; the shake from WeChat.  

Dmitry Shklyar: Back to the future I mean…

Matthieu David: So tell me a bit more.

Dmitry Shklyar: Yeah, yeah, absolutely. So, probably about the cases; yes, we do have the cases and first of all right now as well we have big cases in terms of the product that we are involved in, but one of the projects is related – you will be surprised, but not too much to the retail side, but it is related to the tech technology, okay so right now together with the Israeli and the Chinese parts of the big companies. I am not allowed to say the names because we are under NDA, but actually, right now, we are finishing to build up a future, okay. It is going to be a huge location in China/Israel. It is going to be a terrific place when the people can come with their families and enjoy the nature, to enjoy the greenhouses and to go and understand how the nature and in the new technology environment, how the crops are developing and so on.

So this is where we do implement as well digital signage in China based on face recognition functions when we actually can predict in advance which content we would like to show to different categories of visitors in store inside those centers; in the innovation town that number one and number two is that we have done already successful or we are doing [inaudible 37:07] where we are running projects with supermarkets. Right now those supermarkets in China let’s say they are Moscow, but the main idea of this product is that we actually we are helping brands to increase their sales or their revenue within the time when using this AR based technology inside the stores; digital signage in China, by almost 2.6% on the terms of sales.

It is a really huge number without putting too much investment on the marketing side and how does this work; easily. When you have the cashier area where you are coming to pay the bill, and we think I mean together with the marketers for the supermarkets, most people would like to purchase, and they hate to wait, and usually it will be either to go to buy some tea because like to drink black tea, for example, and like cognac or whiskey under way discounted sales. So what we will do, or let’s say lady all this small accessories for daily use let’s say like this, what we will do actually is we will put a little space in front of there, where you put all the products on the trail, and the lady takes it. There is a 21-inch screen with a camera which recognizes who are the visitors that are going to pay right now in the same area. The system, by itself, will offer them a great discount offer with a message, “Hello. You were starting with our special offer. You have a large chance let’s say to get one bottle and get one for free right now; if you do it right now” and then you will see over the counter. Like 15 seconds and then you click, and somebody will bring you a special offer.             

Matthieu David: You said it’s not very costly so I don’t want to miss it. You say it is not very costly and it’s increasing by 2.4%. Could you tell us…? If I am running a coffee shop I am like 4 or 5 coffee shops in Shanghai, and I interviewed an entrepreneur in China who will have 5 coffee shops in China, and I go back to her and tell her this solution where you can retain the client, you can target them and so on. What kind of amounts do we talk about to implement your solution?    

Dmitry Shklyar: Yeah, I mean, you know this is a good thing that you have to [inaudible 40:03]. They have to understand. Otherwise there is friction. I will tell you exactly. The main cost here is to be mainly by the screen. This one, I mean you can convert the normal screen to the tech screen. The screen is so they like you know it’s like a toy; you can do with it whatever you want, but not the TV screen. Not the screen that you put at home because those screens are not usually appropriate for the indoor activities when you need to run them at let’s say 12.7 or no, they are rarely used, but let’s say 12.7 and the screen is usually I mean let’s say the assumption is the screen you can buy within the $1000, okay? I will talk numbers [inaudible 40:55] understand.

Then this screen has to be supported either by the under box or the windows. It depends on the complexity of the content; if the people want to put it on the screen. Usually, people choose Android or Windows, so this is most common.   Some companies still use Windows, but it has become more and more complicated in terms of scalability of the business.

Matthieu David: About Android; is it easy to implement in China? Do you have any limitations on Android in China?

Dmitry Shklyar: Absolutely not because there are usually those screens that come already with the Android on board, okay and manufacturers already have licenses for the Android that they are sending together with the software. What we will do from our side on Android operation system or Windows we will just install our own media player with all the features on board and the camera; you don’t need to buy a personal camera. The camera is coming together with the screen already, so let’s say hardware always will be over 80 or 85% from the cost of one location. Yeah, because of software… this is the true number. If somebody will tell you that you pay for software much more than you pay for the hardware, it is not true.

Usually, the hardware takes the biggest budget, okay? The rest you will do… we will support. This is where we come to help with these kinds of technologies. For our customers in China, we do the system integrator support as well meaning that we will help the brand purchase the screens because we understand the technology, we understand the pricing of the market and we can bundle the solution even in terms of design because today it’s not an object to buy the screen. It has to come with a nice solution. This is what you will see. It’s an amazing job. I am still learning about, and the companies that are coming to us is [inaudible 43:12], but I must tell you that designers for these brands are doing a super good job.

Do you see how they are trying to build up all this – the reality and feeling and this is how they do the promotions for the new brand’s, and it’s really exciting, and it’s beautiful. So, for those kinds of things, of course, they will pay a lot more for the design and features, but they will use the cheaper screen, but if you are talking about let’s say coffee shops or a cosmetic beauty boutiques etc. so usually the price for one should not exceed let’s say $1 500, and this will be sure high if I tell you already.             

Matthieu David: So one will be 1500 US. Do you have the screen and the solution itself?

Dmitry Shklyar: Exactly and so if you do, I mean they really need to understand how this screen works, how much it generates for them in revenue and imagine this that you don’t have the big space, but you have a lot of STU. Screens are a good place to sell your stock on the best sites, and that is how you can bring them online as well.       

Matthieu David: Technology-wise, the first one is maybe I am going to ask this other question at the same time; the first one is doing you only use the voice recognition or do you use the Bluetooth, the Wi-Fi, Chinese data you can collect with a phone because everyone has a phone and secondly, you mentioned at the beginning when we were talking that one of the difficulties with China is technological. It is not about the market, it’s not about the regulations which actually I am a bit surprised because I thought regulation would be a slow one, but you said it is about technology so I would like to understand a bit more about why technology is initial in China which as a fact, it’s a case of why Google would be very [inaudible 45:33]. They are not present here. They have regulation and then after the new standards and technologies that have been developed within a Chinese market which makes it more difficult for them to re-enter or to make bigger China even if they could now, it could be more open. So two questions: do you own your facial recognition and I am talking about [inaudible 45:55] and secondly what are the technological slower with China, and you mentioned this as an area to change markets.    

Dmitry Shklyar: Sure, so let me recap for the first question. Face recognition is not only the figure that we are embedding in our engine solution, number one. We do work with Wi-Fi in order to provide information to marketers. We do that. We do the software, and I mean this system we can connect any kind of devices including the mobile phones, the tablets, the screens even the sound system in the store into the one platform and using the face recognition Wi-Fi technology we actually can make the sound in the store; the music because it is a cloud platform, we can search all over the stores for one brand, and this is what we are doing right now in China. We worked with a guy from the Box Music, and we do with them our relations for two years. They are extending their music license content, and I will be there for the advertising.            

Matthieu David: So may I interrupt? So you say that… Music, depending on who is in the shop, depending on what phone is in the shop, but what kind of data in China do you get from the phone?  Do you get the data on Spotify or music or Apple music, or?

Dmitry Shklyar: The music… the sound or the music content that you hear when you get inside the store. This sound is broadcasted from somewhere. Some people can use a discount key, the USB and this is what we know what [inaudible 48:16] everywhere and most of the people are trying to save money on the licensed content, and they are trying to stream it form like I don’t know, whatever, but it’s not allowed when you do the B2B. You have to provide licensed content music, and this is where those guys; our partners. They are providing licensed content music. They upload it to our platform and the platform is supports because it is a cloud version so you can actually spread it all over the different stores everywhere like let’s say you have the coffee stores which are everywhere and you can play the same music; the same location I guess using our cloud, and just we provide the special tablet or the player for this.

You just connect with a jack to the amplifier and done – it works, but everything you control on the cloud. So for some of the customers if they want to do like special content, let’s say for different events inside the store. Let’s say they want to greet – I don’t know – like CVIP customers or they want to let’s say they want to play some special music when there are more ladies in the store so the face recognition become s to be as well a trigger sop once recognised, remember I told you and mentioned that if we see the number of people standing in front of the real screen life so if more of them are female then what we will do is just change the music to whatever is relevant for the females and we can play like let’s say Frank Sinatra; nice music.

Something I don’t know, “Only You” or whatever. If it’s going to be men, then we can change it immediately to make people feel like more like okay or something more relevant. So it works through the triggers, so we use a lot of triggers on the platform and this is like our own developed platform where we connect all kinds of devices, and they will be communicated in between meaning you can use it inside the store or your phone and in real time we can change the environment by making several places on the mobile because everything is in the cloud so you can do whatever you want. So, face recognition, yes. Wi-Fi yes. Also, when we have an interaction between the Wi-Fi and all these kinds of devices. Everything is doable.         

Matthieu David: That is a reason to ask that we may not be conscious when you mentioned the small device which is now [inaudible 51:03] public areas where there is business to transportation and train stations and all department stores which is actually trying to connect with the Bluetooth of each phone to note where you are so it is geological sign your phone, not much more, but it adds to the traffic and to where you go.

It knows how much time you spend in each location and the thing is that because now you have more and more of what I am at now which is a Bluetooth headphone, people have their Bluetooth open, so more and more people have their Bluetooth open so now it’s more and more trackable and I think 4 or 5 years ago it was more digital so that beacon is that you are using to see where people are and how many people are I in front of the shop.

Dmitry Shklyar: Yeah, I mean, you are amazing.  You know everything. About the beacon system, about beacons in China, I agree with you; 3-5 years ago the technology was kind of a hit, but nobody wanted to use it too much because when you have so many beacons to my location, you are lost.

Now, beacons in China have been upgraded to the new version which is, of course, more expensive. People are not using them so much, but again, I think there is much more important issues with Google because where they want to be connected together because a lot of – I remember it was a big story that Google wants to implement more and more beacons in their daily life because this is how they would get all the Google news as worldwide to be connected better, but I  think in China for the beacon technologies; I didn’t see too much really because everywhere when people want to implement beacons in China especially in a private area, it is definitely used, but Wi-Fi is really working because this information you can use immediately. It is not personalized with data in China because each one has its own… perhaps you want to be connected to Wi-Fi, but marketers need to understand what advertising is shown on the screen and we see what makes it around the screen, we can put some nice advertising on the browsers to the same method as the owners and then when they are online they can see something they already saw on the screen.

It’s like we are trying to keep it open, and this is where we come to the challenges in China, with this question. The technology is like this: so, you know there is assaying – I don’t know if the saying is acceptable by all the people, but if you are talking about – you know, everybody knows Alibaba, and everybody says okay you call there and they will find everything that they need and so on. Yes, it is true. Amazing platforms and a wide variety of different products, but there is a very important thing to understand. When you do business its business meaning that the product; the package will look very nice and perfect, but when it comes to the technology and attention to the hardware and if the customers really don’t get into the details about what to use and what is the – I don’t know – the provider and so on. Usually the manufacturers that make the production cost cheaper and to sell them products on the higher price so if a customer does not really care about all the internal parts he will get what he will get, but if he needs it for the professional use and it is standard, and you don’t want to drop them down you have to negotiate with all those manufacturers or the providers and as well the factories and plead your needs and test it.

It’s not like you bypass something and you just implement so this is where the hardware has to meet the software needs, and this is where in China we are trying to for all our existing customers and the future customers… we are doing the perfect match. We check something before it will be shaped or transformed within the stores.       

Matthieu David: Why is it more difficult in China? You said that China was a bit more difficult in terms of technology, and you had some technological areas to enter the Chinese market. My understanding of what you were saying initially was that we don’t use may be the same language of coding; we don’t use may be the same for instance there is a Google API inside there, you can use it. You are more talking about hardware, and why is it more difficult in China? 

Dmitry Shklyar: Okay, so yeah, it’s okay. I will explain to you why. We don’t see the problem here in China with the coding or developing the software. The guys here are really doing a good job so the software in China. We know the good parts, and we know about the bad stories of developers in China. I mean they are open, and you will find all the relevant stories even related to Google, for example.

We do see the problem even here in China is about the final quality or let’s say the delivery of the final point of delivery. I mean everyone, including you and me; every entrepreneur in China,  if you want to buy some final products, you will expect that this product will have a long lifetime. You don’t want to change this product after 1 month or 1 year or a few months because you have already paid for this and now the products even in China are not as cheap because people think that if you buy it in China, it will be cheap. I mean all the professional equipment still has its cost even for China, and the installation cost and the maintaining cost is not even in China anymore. I mean, I can tell you that if something is happening to say on my side on location and I have to go to my support technical guy, I might pay him for one visit in this location, it doesn’t matter what he will do. I have to pay him at least 600.

Matthieu David: It’s about $87.00 or $80.00.

Dmitry Shklyar: A month, so think about that. Okay I have hardware and software and everything runs, but then you have to compound everything a little harder because everything in this industry we have to combine software and hardware all the time together, and then I guarantee you, it doesn’t matter how good it is; 3-4 months something happens to this product even in a professional situation, so this is what I am trying to say.

The terms of when we meet the technology with the software, I mean on my side the technology is the hardware and the software, and when we meet them together we have to specify, and we have to high standards and the quality of the delivery; what people will get at the end and this is let’s say and so far, we are winning this competition in China everywhere so forget about the space events and everybody who talks about technology and so on. Look at the delivery. Deliveries are always the best face of your product in China. So this is where we are coming into the picture, and we satisfy our customers with the delivery, and this is very important.       

Matthieu David: All the countries?

Dmitry Shklyar: More or less so it’s something like that.

Matthieu David: Would be not to wrong, not too bad, not too wrong.

Dmitry Shklyar: In this case even the Chinese so this is where right now we start to have much more let’s say not only international customers, but local customers because they understand that when we talk to them we make them see and they know that the [inaudible 01:00:26] version is not going to work with us because right now it’s because all this politics and economics; people even in China they are trying  all the time and I mean this is one of the most of the economy in China; if they do a very good product meaning that it will never be changed within 3 years so they have to change them as a product, and this is where the difference of mentality comes from.

Matthieu David: So you don’t see difficulties with something like regulations, different types of developing software, but this is not a big difficulty for you. It doesn’t seem to be a big barrier.   

Dmitry Shklyar: it’s like this: in order to avoid any difficulties in regulations in terms of the software developers, this is what we say, “Guys, we are new to the company in China. Follow the rules as to applications under it what you allowed to do and what you are not allowed to do, if there is something with the company related to the personal data in China, working and so on so it starts at the industry where the customers want to get into the Chinese market, but if you come with the company here; the regulations and what you have to do and all the relevant information and you are done, but of course, with all due respect with the Chinese regulations which are coming outside of China and they don’t want to obey the local rules, it’s going to be troublesome so definitely need to understand if let’s say the company solution would not interfere with the local regulations.

So far, I didn’t meet any of these cases where the customers say, “Okay, we have come here to try to do the business, but I am not allowed doing it because of it.” Well, the bureaucracy is the instrument of controlling the whole country with 1.3 billion people, so this is the instrument when you have to follow up with the rules. That’s it. I mean          

Matthieu David: We talked about the device. We talked about the software. We talked about infrastructure. I feel there is one brick we haven’t talked about which is a missing brick which is the companies that are going to design the campaign which is going to design the engagement where they are. Do you feel its natural enough or do you know some companies which are naturally specializing in that? What’s the development stage of this industry on the service side; the ones designing?  

Dmitry Shklyar: Thank you very much for this question. So, I think this is where actually this industry is coming to be interesting even for our company because when it comes to the terms of the content creation, of course, let’s say production; video production, advertising production, video agencies or yeah ; both of the companies who are working with the big brands if you are talking about the international brands – I don’t know – like, let’s say Coca-Cola; they do cooperate with the 4A companies like – I don’t know – public and all the rest.

Those guys are taking care of all the events, activities, the content development and so on and they are setting all the budgets for the different – for the right locations, and they are delivering the right results, but more and more companies and those companies actually becomes to be the sole providers or the companies who are providing those for manager software, for providing the screens so it’s closing so actually the brand itself either provides the content  because some of the big ones; they are not allowed to or are not certified to develop their or any kind of, because it is billion dollars business or either the guy says, “Okay you are the professional. You know how it works. You know we trust them…” You know, many companies do also outsourcing. They will say, Okay in terms you know how the system operates and why shouldn’t we recommend you agencies from your side who will prepare for us based on our provided media material special content like gaming content – I don’t know – visual content, etc.” So yes, absolutely so we are comfortable as well, and kind of you know connecting different companies to one project, and it becomes to be, because the company wants to see the final deliveries of the solution. It is complicated. It is not an easy business.

Many people will ask why the business is so difficult, but I don’t… when you like what you do, and the people understand that you are a professional for each part of this chain, it is not difficult at all because all the brands are actually working like this and this is their motto, actually. This is how they are creating the experiences for the retail spaces, for the digital museums and even subways, airports; everywhere so this is where come to the visual solutions and the AR.        

Matthieu David: I see. We have come to an end; already 1 hour. Thank you very much for your time, Dmitri. Thanks for your participation in this new episode of our China podcast, China paradigm. Congrats on what you do. I think it is very, very important for tech companies in China to have someone in the country because opportunities go fast, the market is changing very fast, and China is very different from the rest of the world and really need some people to represent them and to work with them. Thank you very much, Dmitiri. Wait; Dmitri or Demetri?  

Dmitry Shklyar: I tell you actually Dmitri is a Greek name. It comes from the innocent Greek, so when you spell the name because like I was born in Greece, I have like a long story. So usually when you say the name in Russian, it looks like, Dimitri. So yeah, but when you write it, you just write DM. So this is why when you read it in English it is Dimitri because to use the correct fragment so yeah. Sorry about that.

Matthieu David: I can say Dmitri then. Okay. Thank you very much for having participated in this new episode of our China podcast, China Paradigm. Have a good day. Bye-bye.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

This article Podcast transcript #23: what is the future of digital signage in China? is the first one to appear on Daxue Consulting - Market Research China.

Highlights of this episode include:

• The minimum budget to be active online in China
• WeChat’s ecosystem in China
• How do you configure a chatbox and what can it be used for?
• Livestreaming in China, is it still hot for social commerce?
• How to turn followers into sales
• Minimum spending per day on advertising in China
• Conversion rate during promotions in China

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article [Podcast] China Paradigm 39: How to run a successful social commerce campaign in China is the first one to appear on Daxue Consulting - Market Research China.

Highlights of this episode include:

• Understanding demand-side platform, supply-side platform, and programmatic advertising
• How ad platforms target users
• Differences in China and the West in advertising
• What is the minimum budget of programmatic advertising
• How to ensure the creative content is good enough, including a story with Uber as a client
• Difference between programmatic and prescriptive advertising

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article [Podcast] China Paradigm 37: How to master programmatic advertising in China is the first one to appear on Daxue Consulting - Market Research China.

Programmatic advertising has paved its way in China’s advertising market, with rapidly growing market size and revenue. This article will be focusing more on real-time bidding (RTB), which is one of the methods to achieve programmatic ad buying, in order to provide a better picture of the role and influence of personal data in China’s programmatic advertising market. Real-time bidding is achieved by the interaction of demand-side platforms, real-time bidding exchanges, supply-side platforms, and ad publishers, to be explained in more details later in this article.

Key findings:

• China’s programmatic advertising market is at a starting stage yet fast growing compared to that in Canada, the US, and UK
• The programmatic ad landscape is more blurry in China, where internet giants BAT dominate the DSPs, SSPs, while also serve as large ad publishers
• Personal data is both the driver and inhibitor of programmatic advertising under China’s unique tech landscape
• This market in China is less transparent, which requires collective efforts from all of the players

What is programmatic advertising?

Programmatic advertising is “the use of software to automate the process of online ad buying and selling. It can be done either through Real-Time Bidding (RTB) on open exchanges or private marketplaces or by the direct purchase of guaranteed or fixed-rate deals”. Firstly, RTB is the process where publisher inventory is placed into an Ad exchange and many buyers will enter an auction and bid in real time for the impressions they choose.

 In a private marketplace, publishers can control the buyers they allow to bid in a smaller auction; this gives both seller and buyer more exclusivity and control. Finally, publishers and buyers can also enter a one-to-one agreement, determine a price upfront and see set allocations of inventory earmarked for one buyer. This is called programmatic direct.

Compared to traditional manual buying, where advertisers need to negotiate with human salespersons for advertisement prices and placements, programmatic buying allows advertisers to use data analytics and technologies to decide where and when mobile advertisements are placed. This digital, automated and systematic approach in China can greatly enhance the efficiency of advertising transactions, expand the transaction scale and optimize the effectiveness of advertising. It is advantageous for advertisers, who can better segment audiences and reach target audience more accurately. For the media, they can price the same advertising differently according to various time and regions and sell to different advertisers. Besides, advertisers who purchase advertising positions and run advertisements through programmatic buying will also receive effective feedbacks from media platforms.

Contact us for any question on the Chinese market

Programmatic advertising is growing rapidly in Mainland China

The development of programmatic advertising in China still lagged that in the US and UK. Compared with the US and UK, the number of publishers in China is also limited, which could restrain large-scale competition and spending.

Nevertheless, programmatic buying has already nestled its way into the advertising industry in China, whose market size and revenue have both been growing disproportionately. The market size of programmatic buying ads is expected to reach RMB 67.09 billion in 2019. With a 7-year CAGR of 98.63%, programmatic ad buying market is growing rapidly. According to iResearch, in the long run, China’s programmatic buying market has promising prospects. Medium to high growth rate is expected to continue (iResearch, 2016). This is owing to rapid growth of the number of internet users and the amount of time they spent on the internet, as well as the continuous improvement of the online advertising industrial chain and the increasing maturity of advertisers, agents, and media.

China’s Programmatic Buying Market Size (RMB Billion), 2012-2019

As shown in the figure, the revenue of programmatically purchased display ads was also growing fast for the past 5 years and is expected to reach RMB 26.3 billion in 2017. Likewise, the proportion of programmatically digital display ads in a total amount of display ads is 60%, as shown by the red line. Though this number is still quite low compared to those in Canada, the US, and the UK – where 81%, 78%, and 77% respectively, of digital display ads would be traded programmatically, the growing proportion shows a promising Chinese market.

Spending of Programmatically Purchased Display Ads in China

Digital display ads include everything from publisher-erected APIs to more standardized RTB technology; includes ads on e-commerce platforms, advertising that appears on the desktop, mobile phones, and other internet-connected devices.

The process of programmatic ad buying through RTB

As mentioned, programmatic advertising can be done either through real-time bidding (RTB), private marketplaces or direct purchase. However, the rest of this article will be focusing more on RTB since it better demonstrates the role of personal data in programmatic advertising in China clearly.

In recent years, real-time bidding has become an important way to achieve programmatic advertising – in 2017, programmatic digital display ad spending through real-time spending in China account for 36.5%.

Distribution of programmatic digital display ad spending in China in 2017

Programmatic ads buying process

Real-time bidding is achieved by the interaction of the demand-side platform (DSP), real-time bidding exchanges (RTB exchanges), and supply-side platform (SSP). SSPs enable web publishers (online/ mobile advertising) to manage their advertising space inventory, fill it with ads, and receive revenue. SSPs send impressions (advertising traffic) to Ad exchanges, where DSPs purchase them on marketers’ behalf, depending on marketers’ advertising needs.

Firstly, as shown by the left side of the figure above, the data management platform (DMP) gets raw data from marketers/advertisers and through other channels, such as internet companies or data crawling. Through data analysis, DMPs find target users, analyzing their natural attributes (e.g. ages, gender, occupations, income, and etc.) and social attributes (e.g. social interaction, hobbies, location, purchase intentions), then draw accurate user portrait based on data analysis results. Specifically, users’ behavior and preferences are analyzed and based on that, they are given different data labels (e.g. “keen to travel”; “makeup lover”). After that, when the real-bidding begins, DMPs can supply labels or tags to DSPs and RTB exchanges immediately.

On the right side of the picture, the process of how publishers show specific ads to specific users is shown. It is common nowadays that big internet giants in China like Alibaba, Tencent, and JD analyze their own users and draw user portrait based on various things from browsing history, device data, consumption behavior to their interests and preferences. For instance, Tencent gives each user over 300 data labels. Users are often identified by their unique device ID, to be shared among different platforms without violating their privacy or disclosing personally identifiable attributes.

For instance, take real-time bidding on Tencent AdExchange (owned by Tencent) to explain the actual real-time bidding process in China; when a user sends an access request to the publisher (eg: a request to watch a video on Tencent Video (video streaming platform owned by Tencent)), the publisher will transfer this user’s device ID or cookie immediately to Tencent AdExchange. Knowing the user behavior and data labels represented by the specific device ID, Tencent AdExchange sends bidding requests to DSPs whose advertising demands are in accordance with these data labels. Through a matching of labels on the demand side (marketers/advertisers) and supply side (users), the DSP who responds with the highest bid will get the right to expose its advertisement to a specific user.

The whole process of real-time bidding only takes about 100 milliseconds, which means as a user, when you click on a video, after 100 milliseconds, an advertisement based on your preference or the things you may be interested in is displayed to you. This also explained why some Chinese consumers complain that after they browsed something on the website, later when they shop in an e-commerce platform, similar content or products are promoted to them on their homepage.

Programmatic advertising landscape in China dominated by big players, mainly internet companies

DSPs – the programmatic buying market in China is mainly dominated by 3 giant internet companies — Baidu, Alibaba, Tencent, which collectively known as BAT. To be specific, Alibaba alone accounts for about 60% of all programmatic advertising. When counting Baidu and Tencent in, the BAT companies take up about 90% of the market. Their dominance position is expected to continue. For example, with regard to net digital ad revenue (net ad revenue is revenue after companies pay traffic acquisition costs (TAC) to partner sites), BAT represent 62.4% market share in 2017, and is expected to increase to 69% in 2019. BAT serve as main DSPs in China; beyond them, major independent DSPs include iPinYou, Limei, and AdSame.

Net Digital Ad Revenue Share in China, by Company, 2016-2019

SSPs – similarly, since China is a mobile-first country in terms of internet access, most SSPs are major apps, such as Youku and Tencent Video both providing video services and live streaming services. There are few independent SSPs in China because large publishers prefer building their own SSPs to sell traffic at the highest price possible, while small publishers typically sell their ad inventory to big ad networks like the BAT.

Domestic ad exchanges

Alibaba, Tencent, Sina, Baidu and other domestic internet icon companies have built their own Ad Exchange platforms, which on one hand, provided plentiful high-quality biddable resources, and on the other hand, had relatively rich and complete functional modules and connected with a number of third-party DSPs in the market. Below are 2 biggest Ad exchanges, owned by Alibaba and Tencent.

Taobao Ad Network and Exchange (TANX)

TANX is owned by Alibaba, and is one of the earliest and largest real-time online advertising exchanges in China. Publishers, merchants and DSPs are participants of TANX, as well as third-party data and technology companies, who serve as DMPs, enabling participants to identify potential customers.

With the help of DMPs, TANX leverages rich consumer data collected from China retail marketplaces and utilize its proprietary algorithms to select online advertising inventory automatically for participants. It also makes a prediction on click-through rates and conversion rates of advertising. Apart from increased consumer targeting efficiency, TANX’s transparent pricing of advertising inventory upgrades marketers’ ROI. Alibaba has sizable revenue from advertising, most from providing ads services to merchants on Taobao and Tmall (both owned by Alibaba) to improve performance. In 2016, Alibaba began to expand its business. Cooperating with AdChina, an advertising technology company who serve as both SSP and DSP in China, Alibaba provides programmatic advertising services to brands. They have also built an enterprise-level DMP, allowing a number of large advertisers and agencies to have a chance to tap into Alibaba’s user data, under the management of Alibaba and AdChina. They are expected to build the largest mobile ad exchange in the China market.

Tencent Ad Exchange (TAE)

The staggering scale of Tencent’s audiences paves the way for its Ad exchange platform – Tencent Ad Exchange (TAE). Since Tencent dominance in social media platforms, 25% of Chinese mobile internet users are involved in Tencent’s platforms, such as WeChat, QQ, Tencent Video and Tencent News, which allows Tencent to have a wide coverage and insight into user behaviors. With 871.6 million monthly user accounts on WeChat, it has become the most popular social networking platform among all age groups. The ads can be presented on WeChat within seconds, which is equal to Facebook’s news feed. In terms of monetization, however, Tencent tends to take a slow but safe way. Concerned about user experience, it currently only shows one ad per user per day on WeChat.

The role of personal data in China – driver and inhibitor of programmatic advertising

On the one hand, personal data drives the development of programmatic advertising market. As aforementioned, users’ personal data is the cornerstone in drawing user portrait and forming data labels. Thus, plays a vital role in programmatic advertising. Through matching of data labels between demand side and supply side, customized advertising and precision marketing can be achieved and real-time bidding can be realized in such a short time.

Nowadays, both DMPs and DSPs own abundant data sources. For example, iPinYou (Chinese name: 品友网络公司), a leading DSP in China, has more than 3,000 user attribute labels, and Adsme (Chinese name:传漾科技), the forerunner of Chinese intellectualized digital marketing, collects one billion cookies and divides them into 33 large classes, 168 medium classes, and 857 small classes. Based ownership of large-scale data then through data mining and big data analysis, these companies are able to extract in-depth data (e.g. consumer behaviors, lifestyles) from mass and trivial data (e.g. content contact marks, consumer behavior data), achieving the overall portray of target consumers.

On the one hand, RTB exchanges also need user data and through big data analytics, user behavior is analyzed in order to understand which companies with advertising needs are most suitable for each spot from advertising publishers. Then, those suitable companies can enter the bidding. On the other hand, the unique tech landscape in China inhibits data sharing and aggregation thus can somehow hinder the development of programmatic advertising.

Since China is a mobile-first market for internet access, digital advertisers have followed consumers by investing in mobile ad formats. In 2017, 79.9% of programmatic outlays were dedicated to mobile advertising. According to iResearch, mobile programmatic purchasing has become and will continue to be the main development accelerator of programmatic purchasing in China. The share of programmatic purchasing via mobile surpassed that via PC and will continue to grow in a higher growth rate. This gives BAT huge opportunities to leverage their advantage in the mobile market into programmatic advertising. BAT has a huge advantage in the mobile market since they have developed, invested and acquired companies in various industries, providing apps ranging from transportation, entertainment, mobile gaming, to mobile payment and etc.

To sum up, consumers spending more time on their digital platforms, they get hold of the larger scale of aggregated data in various industries and rich dimensions. These data have become valuable assets and competitive advantage for BAT and other big service providers, thus, consumers are not keen on sharing data outside of their own ecosystems. Even within their own ecosystem, data sharing is very strict and limited. This means small players have difficulty gaining large-scale data. According to iResearch, in the short term, substantive action is still difficult to be implemented with regard to data opening. This trend will probably help BAT to maintain their dominant position yet inhibit the development of programmatic advertising in China.

Alibaba’s ecosystem

Tencent’s ecosystem

Potential challenges of programmatic advertising in Mainland China

Contact us for any question on the Chinese market

Lack of high-quality, large-scale, and integrated user data in China

Generally, advertising companies or various platforms can obtain data from several channels. Internet enterprises, mobile network operators, Ad exchange, advertisers, and third-party data management companies are common data sources for advertising companies. However, in the Chinese market, it is difficult for an advertising company to get high-quality, large-scale, and integrated user data. As aforementioned, although giant internet companies like BAT hold large-scale data, other companies have no chance to acquire it from them even for those in cooperative relationships with BAT. Mobile network operators (MNOs) in China operate their business in their own particular regions separately, resulting in dispersed data. In addition to data from internet enterprises and MNOs, data from advertisers and third-party suppliers also tend to be scattered. This opens opportunities for relevant companies such as MNOs to monetize data in a legal and acceptable way that is visualized and organized without violating users’ privacy.

The lack of transparency in pricing can be costly for Chinese marketers/advertisers

The second obstacle for programmatic advertising in China is about transparency. Traditional ad networks make money through arbitraging. They buy low and sell high, which is not the way DSPs are supposed to work, most of whom should charge a transparent service fee. Though ad tech players that buy low and sell high also exist in the U.S., it is more non-transparent in China.

The main reason is that the Chinese market lacks third-party validation. According to Digiday, big Chinese publishers typically do not allow external measurement companies to access their inventory.

In addition, China has a different tech landscape – the line between a SSP and a DSP (or even a DMP) is blurry in China. According to Accenture, China’s DSPs, due to its initial resistance to transition into an exchange inventory, adopted a hybrid model, DSPAN, where it is common for companies to own a DSP and an ad network. This type of model allows picking from a fixed ad network publisher list to fulfill the needs of an advertiser, while also buy inventory through the exchange for performance-oriented advertisers. As a result, DSPs were given preference to sell their own ad network inventory to buy on the exchange, undermining brands’ interests and yielding financial losses. ADBUG’s 2017 Q1 China Media Report states that “…out of 12 billion impressions verified in the Real Campaign, China saw an average of 29.5% invalid traffic and only 25.5% viewability rate on personal computers and mobile websites”. The role of programmatic advertising is to reach out to target customers at the right time and place. However, the above numbers show that the effectiveness of programmatic advertising is not high in China; consequently, the profit and brand reputation of companies with investments in digital advertising in China can get impacted.

Daxue Consulting leverages unique experience and data extraction capabilities to support your advertising strategy in China

PR and Advertisement businesses in China require strong and reliable knowledge on the overall market and on the culture and custom of its customers. Daxue Consulting conducts all the market research and consulting services you might need to develop your PR and advertisement business in China. To know more about digital advertising in China, do not hesitate to contact our project managers at dx@daxueconsulting.com.

This article The programmatic advertising landscape in China: how personal data and user portrait come into play is the first one to appear on Daxue Consulting - Market Research China.