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5 Interesting Observations on E-Commerce Media Buying in China

  |  June 17, 2014   |  Comments   |  

E-commerce media buying in China differs greatly from other forms of media buying, such as portals. Here are five thoughts about the state of e-commerce media buying in the Chinese market.

E-commerce is one of the fastest-growing sectors within digital in China. And as a media agency, we have observed more and more client requests to invest on these particular channels. However, the e-commerce media buying model is drastically different from portals and OTV. So, I'd like to cover some interesting observations about working with Chinese e-commerce channels in recent months.

1. E-Commerce Channels Do NOT Consider Themselves Media

So to hell with all your media buying processes! Spot plans? Never heard of them! CPM buy? Don't think so, CPD only! Third-party tracking? Not happening! Ad spot impressions/click estimations? Don't have them! Homepage ad spots? Not selling, reserved for our own promotions!

The single most painful point of working with an e-commerce channel is the utter disregard of digital media buying standards, because they simply do not consider themselves media. This has a lot to do with their revenue model. The "content" provided by e-commerce channels leads directly to a transaction, while the content on portals and OTV channels does not. Hence, e-commerce channels get the majority of their income from consumers, not brands. With that said, they are a lot less flexible (and cooperative) when it comes to media sales.

2. C2C E-Commerce Offers More Mature Ad Products and Data Analytics Than B2C Channels

The biggest e-commerce giant in China is Alibaba, with more than 90 percent of C2C market share (Taobao), and approximately 50 percent of B2C market share (Tmall). When it comes to media sales, Alibaba has the most mature ad products compared to other B2C players like JD and Yihaodian. Both Taobao and Tmall offer standard display ads and search display ads, as well as external biddable formats. All of their ad formats can be booked directly using the shop owner's account. In term of data analytics, there are a couple of tools to track both internal and external ad performance.

The other two popular e-commerce channels JD and Yihaodian are nowhere near the level of maturity as Taobao/Tmall. This has to do with the C2C roots of Taobao, where much of the ad products were targeted toward small and medium-sized businesses (SMBs) or individual shop owners. Hence, the ad platforms are designed to be self-sufficient without the need for an ad sales account manager.

3. Brands Are Increasingly Using E-Commerce as an Awareness Channel With Direct Linkage to Offtake

Traditionally, media planning aims to cover the highest proportion of target audience on a particular media. Hence the marketing budget has always followed consumers from one popular touch point to another, i.e. from print to portals, and portals to online video. In recent years, e-commerce coverage for the average Chinese netizens has risen to rival that of OTV as well as search.

So with ever growing pressures for marketers to tie digital marketing efforts to the bottom line, brand marketers are embracing campaigns hosted directly on e-commerce channels. This strategy also allows consumers to go through the marketing funnel within a single platform, hence speeding up the path to purchase. It also allows brand marketers to go beyond marketing metrics such as impressions, and move into sales metrics that link directly to business results.

4. Consolidation of All E-Commerce Investment Through a Single Entity Is Essential to a Better Media Rate

For some traditional fast-moving consumer goods (FMCG) brands, e-commerce may be treated just as another offline sales/trading channel like supermarkets and convenience stores. In this case, e-commerce investment often comes out of the product sales/distribution budget. However, for savvy digital marketers that want to run an entire campaign on the e-commerce channel, the investment will come out of the marketing budget. For the first case, the investment is often direct from brand to e-commerce, while for the latter case, the investment will often go through media agencies. With these two difference sources of investment, brands are rarely getting the best media rates due to a smaller sum. Hence, it's best for the brand to consolidate the two separate budget streams into a single bigger lump to negotiate a better deal.

5. The Worse a Brand's Traditional Sales Channel, the More of an Emphasis They Place on E-Commerce

This is an especially interesting point that I have observed from some of my clients. International brands just entering the Chinese market and brands in which the entire product category is weak in China tend to place a lot of emphasis (and budget) on e-commerce. This is due to the fact that the distribution sales channel is an immensely complicated ecosystem in China. While Western markets are dominated by bigger supermarket chains like Walmart and Carrefour, the ecosystem in China greatly differs across the tiers. So for brands that cannot afford to increase their traditional sales channel, they will instead make e-commerce the emphasis.

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Charlie Wang

Currently digital director for Mindshare Beijing, Charlie has over five years of experience covering both IT consulting and ad agency industries. He was previously technical director at Tribal DDB Hong Kong, where he led the implementation of analytics and technical innovation across digital campaigns. His previous experiences include data analytics director at Bizcom Consulting in Beijing, and business intelligence analyst at Deloitte Consulting in the U.S. Charlie's project portfolio includes digital analytics, digital campaign production, marketing data integration, as well as large scale data warehouse implementations. He has worked on numerous digital accounts including: McDonald's, Manulife, Wrigley's, Smart Communications, Financial Times, and Friso.

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