The document summarizes trends in the Chinese digital advertising industry. It discusses how national TV channels are gaining share from local channels. It also discusses how online TV inventory is facing shortages as more advertisers move spending online. Finally, it discusses the growth of vertical e-commerce platforms that cater to niche customer segments.

2. NATIONAL TAKEOVERS
NationalTV and provincialsatellite channels
resurgeto gain share fromlocalchannels
INVENTORY WARS
With more advertisers movingto buy online TV,
premiumPC OTV inventoryis facing shortages
A DIMINISHING DISPLAY
Bannersfalloutof favor as videoadstriumph
The Trends
MASS MOMENTS
WeChatmoments becomes volume reach
tool
THE DATAOLIGARCHY
BAT continue to hoard data curtailing bigdata
dreams
INCREMENTAL
PROGRAMMATIC
Digital buyingmoves closer to pureprogrammatic
by implementingad-servingtechnology
CURRENCY EXCHANGE
Digital mediapropelsnew media currencies
forward
OUTDOORPROGRESSION
Out-of-Homeevolvesintothedigital ageto
develop better formatsandmeasurements
VERTICAL COMMERCE
ExplosiveE-Commerce growth meansthere is now
roomfor sites cateringto nichesegments

3. National Takeovers
Consumers no longer care where they get content, but are drawn
to wherever the hottest content is. While overall time spent on TV
has decreased, banner shows like Running Man and I’m a Singer,
are still capable of pulling in audiences. However, Local TV (LTV)
channels with limited budgets and relatively low content creation
capabilities are seeing their audiences dwindle even further.
For clients that still rely on TV to reach their audiences, National
TV (NTV) and vital Provincial Satellite TV (PSTV) now play an even
more important role. The entry price for premium position on
national channels has reached a historical high, with bids of over
RMB 500 million per sponsorship.
0
100,000
200,000
300,000
400,000
500,000
LTV NTV
TV Spending
2013 2014 2015
-3%
+5%
RMB
Million’
Advertisers will continue to rely on the powerful influence of NTV and key PSTV. With new content restrictions potentially crippling some
of their star shows and OTV channels attempting to create their hit shows, NTV, and PSTV channels will need to up their content game.
Advertisers will need to balance their need for brand-building channel presence on NTV and efficient buys on Local TV.

4. Inventory Wars
With consumers spending more time watching online video,
Online TV (OTV) inventory is increasingly sought after by
advertisers. Its hottest battlefield is in premium inventory for Tier
1 and 2 markets: average prices there have risen to levels on par
with TV. Despite mobile OTV’s proven efficacy over PC OTV ads
and equitable pricing on both mobile and PC, advertisers
continue to prefer buying PC inventory, exacerbating an already
squeezed marketplace.
Advertisers should take advantage of cheap mobile inventory in
Tier 1 and 2 while they can. For OTV platforms, it will be necessary
to create new formats to increase inventory.
Source: MMMS 2014-2015; 2015 China Digital Audio and Visual Consumption Development Report
24% 15%
76% 85%
2014 2015
OTV Timespent
Mobile Timespent %
PC Timespent %
49%
62% 72%
77%
96%
79% 71%
54%
2012 2013 2014 2015
OTV Reach
Mobile Reach %
PC Reach %

5. A Diminishing
DisplayDisplay banner ads have steadily fallen out of favor with
advertisers. The average click-through rate of display advertising
is merely 0.04%, making this measure irrelevant for campaigns.
The traditional display banner is not coming back. Its share of
spending on digital will only decrease as other formats such as
video ads increasingly take up more shares. The importance of
display as a medium has diminished, but with programmatic
buying will live on as a long tail means to target specific
consumer groups with higher accuracy.
Advertisers should leverage programmatic buying to make
display investment more efficient and divert investment into
video and other creative formats on digital to drive
effectiveness.
20%
27% 32%
41%
67%
62% 54%
46%
13% 11% 14% 13%
0%
20%
40%
60%
80%
100%
2013 2014 2015 2016
Spending Percentageby Format
Video ads % Banner ads % Other format %
Source: iResearch Ad spending monitoring 2013-2015; Double Click Display Benchmark

6. Mass
MomentsSince launching last year, WeChat advertising has
opened up its Moments advertising space to the
wider market through a self-service platform. With
697 million monthly active users on the platform, a
WeChat Moments ad can not only reach a wide
audience, but a targeted one. Using Tencent’s data
bank of user behavior, not only can advertisers
target via typical demographics filters, but also
people who have purchased products on their
platforms, or by their in-app game purchases.
WeChat is moving towards a Facebook-like model,
pursuing smaller advertising dollar per ad but with a
bigger base. With CPMs as low as 50RMB, WeChat
advertising is now not only a viable media for many
SMEs but a cost efficient and effective way to reach
their audiences.
Advertisers should include
WeChat video ads as
part of their mass
communication strategy
to build reach and
awareness given the
ability to target and
retarget users.

7. The Data
Oligarchy
Last year, we finally saw advertisers and marketers make some strides forward
regarding implementing Big Data into their marketing plans. Most of their dreams of
Big Data driven decisions have proven unattainable. In a world in which data is meant
to be ubiquitous, the data flow seems to have been dammed up. The reality is that the
oligarchs of data: Baidu, Alibaba and Tencent are still very cautious about sharing any
consumer data with advertisers or agencies. Advertisers have yet to reap the benefit of
the data BAT posses. However, with more and more strategic partnerships being
signed with BAT, this year may finally be the year the data floodgates open enabling us
to have more precise and targeted buying.
With the opening up of data walls,
DMPs will become critical. Advertisers
need to ensure they have data
strategies and systems in place to best
utilize the flood of data available to
them.
BRANDS

8. An estimated 60% of digital buying in China is said to be programmatic.
Programmatic buying in China is often a poorer cousin of its Western
counterpart, often hampered by the lack of transparency, data availability
which crucially lead to difficulties in building DMPs. In the past year, to
combat this, the industry has moved from purely using ad-tracking to buy
ads to ad-serving—a step towards pure programmatic. Prior to this, digital
buying relied on post-campaign tracking to deliver campaign performance.
Today, with better technology, advertisers can plan ad-serving ahead and
maximize efficiency in the delivery process by collaborating with media
publishers such as BAT. The ability to target specific cookies through ad-
serving takes us a step closer to pure programmatic buying.
Incremental
Programmatic
Advertisers need to leverage the cookie information including
demographics, browsing behavior and even purchase behavior to plan
ad-serving ahead of the campaign. This will minimize campaign
wastage and achieve the highest efficiency.

9. Currency
Exchange
Advertisers need to balance a fine line between
measuring everything and understanding which
currencies track to business results. Data may not
always translate to knowledge to make better
buying decisions.
Last year, Nielsen joined the online ad tracking race and
began to offer digital tracking and multi-screen planning
services. Inevitably, as more digital tracking vendors and
digital measurement agencies enter the market, new
measurement currencies will come into play as they try to
differentiate themselves. KPIs such CPVM (cost per viewed
thousand, which tracks viewable and fraud free impressions)
and TA click through rates aim to help us measure
performance better.
Perhaps the question should be instead, which of the many
new currencies available will remain after the dust has settled.
After all, 50 years later, TV is still being bought and measured
by GRPs. Marketers already inundated with data may be
looking for that single measure to help them make decisions.

10. Outdoor
Progression
Advertisers need to be prepared for the digitalization
of OOH by exploring new technologies such as AR,
NFC, and iBeacon to enhance creative impact, achieve
better targeting and tracking.
Out of Home is experiencing a resurgence as they attempt
to bring their media into the digital world. No longer
static, OOH can now mean mega digital screens paired
with advanced technologies such as augmented reality
that allow advertisers to have in-depth interaction and
engagement with consumers.
Out of Home accountability is also improving, with
enhanced targeting through better data on demographic
profiles by the site. We are already able to monitor the
reach of OOH displays by using NFC to identify mobile
phones passing by. With audience recognition either by
facial recognition or via mobiles already possible, shortly,
OOH buying will become programmatic: introducing
automation and optimization into the OOH buying
process.

11. Vertical
Commerce
In addition to being present on the largest E-commerce platforms in
the world, advertisers should not ignore the power of smaller E-
commerce verticals, which offer more precise targeting and
engagement opportunities.
Predicted to reach $911 billion USD in 2016, the Chinese e-Commerce
landscape is shifting towards its third phase development. In the past
decade we’ve moved from an auction-based model to large-scaleB2C
and now customized sites for particular interests.
Attracted to niche sites and apps because of customized choices, in-
depth content, and a sense of community, we’ve seen a rapid growth
of vertical E-commerce sites which are a combination of online
community and shopping platforms. These shopping platforms include
platforms like Jiyoujia.com—a site for homewares with 576,000 visitors
per day and Benlai.com—a healthy grocery shopping site with 275,000
visitors per day, have increased in popularity. SpecializedE-commerce
platforms will mushroom to satisfy the unique needs of their
audiences, which are now often overlooked on big platforms.
Source: iResearch iUsertracker Mar 2016, eMarketer Retail Ecommerce Sales in China

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