Being a worldwide industry problem, China’s digital advertising market seems to be one of the worst affected ones. Chinese  internet is the second most popular advertising media after television and was estimated at $55.48 billion by the end of 2018 according to China Daily. Unfortunately, advertisers’ losses could account for up to third of that amount, mostly lost to non-human traffic and fraudulent CTR (click through rate).

The report by Miaozhen Systems, released about a year ago, claims that auto and telecommunications were hit the worst with up to a third of the traffic being non-human, i.e. generated by bots and crawlers, while food & drink and the fast moving consumer products industry saw the lowest rate at 8.52% and 11.88% respectively.

…many local computers still run on Windows XP that is no longer supported by Microsoft. Bots can infect such machines much easier and, in fact, a proportionally larger share of fraudulent traffic seems to be coming from lower tier cities where more people still use older Windows OS.

How do the losses occur exactly? A small piece of malicious software, a “bot”, is placed on a host computer from which it visits various sites in the background without user noticing anything abnormal with their machine. It’s even harder to spot for advertisers because it shares the real user’s unique “cookie” identifier.

Other pieces of software can stack hundreds of ads on top of each other on a website, or place the entire website into a small pixel on a page. This way, it would seem that a particular ad was displayed while, in fact, it was never seen by a visitor.

CPC (cost per click) ads are also affected as such bots can be smart enough to mix real clicks with the “fake” ones, making it harder to identify as a non-human activity.

There are number of reasons why China is one of the worst affected markets. First, many local computers still run on Windows XP that is no longer supported by Microsoft. Bots can infect such machines much easier and, in fact, a proportionally larger share of fraudulent traffic seems to be coming from lower tier cities where more people still use older Windows OS.

Second, not all the fake traffic is caused by bots, some is accounted for search engine crawlers. Since search engine market in China is much more fragmented than in the West, there are simply more crawlers visiting each site.

A third reason that is also specific to China is the fact that many people would willingly install special traffic software on their systems in order to attract more followers to their social media profiles, making their social activity appear more popular. However, such programs would do many other things without user’s knowledge or consent, effectively plugging such computer into a larger bot network.

Lastly, there is a lack of habit and willingness to go after the offenders and many in the industry still consider this problem to be the necessary evil that nothing much can be done about. Although, there is a technology in place to combat the problem, its adoption in China has been slow.

A new alarming trend is the increasing proliferation of online fraud in the growing mobile space. Android is by far the most popular mobile OS in China but the official Google Play store is not the usual place to go for apps. Most people would go to many smaller apps market which exercise very little control over quality.

While, at the moment, most non-human traffic in China is still PC based, it is reasonable to assume that with more people using Android devices to access internet, the worst of mobile advertising fraud is yet to come.

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In this post, we are going to review the primary routes for promotion and advertising on Sina Weibo. There are three basic ways to promote a brand on Weibo:

• Weibo Fans headlines (粉丝头条)
• Weibo Fans pass (粉丝通)
• Weibo Micro task (微任务)

Weibo Fans Headlines

This is the simplest way to promote a post by pushing it to the top of followers’ feed. At present, Weibo charges 2.37 RMB per post to be displayed above others in the feed for 24 hours. There is 40% discount for any posts that mention anything related to Weibo itself.

Making a post more prominently displayed can be an effective way to attract clicks from brand followers by having them notice the content as soon as they log in. The obvious disadvantage is the fact that it only improves your content’s visibility with your existing followers and does little to acquire new ones. On the other hand, the price for this type of promotion is fairly affordable.

Fans Pass

This type of promotion involves an ad campaign and can be initiated and managed with an ad account. The ad account opening process requires local ID and usually takes about 3 days to complete the approval process.

There are two pricing models: CPM (cost per thousand impressions) and CPE (cost per engagement) which are determined by automated bidding process, similar to the familiar Google Adwords.

CPM prices start at 5 RMB per CPM and can be increased by bidding up with 0.1 RMB increments.

“E” in CPE type of Weibo advertising stands for “engagement” that can be either click, a forward, a like or a follow. The initial price is set to minimum 0.5 RMB per CPE and can be increased at 0.01 RMB increment. The final price will be ultimately determined by quality of the content and competitive offers. If the price is set too low and the content is not engaging enough, the ad may not receive enough exposure, so setting the right bid and making adjustment to the content takes a bit of tweaking.

Weibo ad account provides some analytics tool to judge the effectiveness of an ad campaign but finding the right combination of all the parameters takes some skills and experience.

Micro task

The third type of promotion, which is also unique to Weibo, is called Micro Task and involves engaging KOLs, or Key Opinion Leaders.

KOLs are basically people with a lot of followers and are considered to be authority figures in their areas of expertise. Some KOLs have millions of followers which enables them to broadcast a targeted message to a very large audiences.

Depending on a specific industry, Weibo offers a range of KOLs to choose from. Typically, those with the largest following are more expensive to engage.

Working with KOLs requires opening an account and paying a deposit that is currently set to 2,000 RMB for companies. Once a suitable KOL is chosen, you can set a task (hence the name of this feature – “micro-task”) that normally involves posting your content in KOLs account that should appear at the time of your choosing and remain visible for a set period.

Depending on a specific KOL and the type of promotion task he/she receives, the price is set by Weibo automatically.

Individuals (as opposed to companies) can also use micro-task to promote posts. There is no deposit for individual account and you pay as you go per each task. On the other hand, individuals can’t pick KOLs that will be assigned by Weibo automatically.

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Also, the type of banners ads  that are considered to be more effective in China tend to be flashier and more animated, something that Western users typically find most annoying.

According to polling by iResearch China, the ad’s relevancy is the most important factor in user’s decision to click it (36.5% indicated that as the main factor), followed by the quality of the copy (34%).

32.5% of respondents indicated that promotional info, such as discounts, coupons or attractive pricing prompted their clicks. Finally, great visuals and sound effects is what attracts 31.4% of people.

Much less visitors were clicking an ad based on frequency – only 15.3% clicked an ad because they have seen it multiple times. However, that is still a fairly high number that makes retargeting (remarketing) a highly effective strategy for serving banner ads in China.

Different types of banner ads in China and their effectiveness

Banners on ecommerce sites

According to various data, banner ads on Chinese ecommerce sites are, by far, the most effective. According to iResearch, nearly 8 in 10 users paid attention to those ads and over 60% of users routinely click them. Since such advertising is often highly relevant to users who are searching for specific products, those results are not surprising.

Banners on portals and search engines

Over 70% would notice ads on portals and search engines and over half would click them which makes it the next best channel for placing banners ads in China after ecommerce sites. Such high numbers are explained by the fact that there is a higher degree of intent and interest on the part people who are searching for a specific term or visit specialized websites.

Banners on video sites

Although about 70% of visitors to video sites like Youku or PPTV notice the ads, they are the most disliked types of banners ads in China. Another research from Tencent Penguin Intelligence found that the majority of internet users aged between 16 to 20 did not watch video ads, and 11.6% even said they were “intolerable.” These types of ads are mostly disliked on mobile. With the typical length of a pre-roll ad on Youku being about 1 minute, those finding are hardly surprising.

Banners on social media sites

In general, banner advertising on social media sites such as Weibo is often considered ineffective. Another research by Kantar, discovered that a dismal 13% of visitors on those sites liked such ads while while 24.2% said they were put off by them with 42.1% simply ignoring them. In our experience, post boosts work much better in social media due to their higher relevancy to users’ interests.

Mobile banner ads

Mobile ads is the fastest growing sector which offers the most potential. New mobile ads networks are improving efficiency, although the industry is still in the experimentation stage. Many networks are still looking for the best ways to monetize and the prices may vary widely. One of the biggest problems with mobile ads is the fact that they often get clicks by accident. This, in part, is caused by limited “real estate” of the small mobile phone screens. On the other hand, larger smartphones and “phablets” offer more potential.

Ads on gaming sites

The biggest problem with these type of banner ads in China is the relevancy – it is hard to figure out precisely who would be interested in checking out the latest fast food restaurant offer while playing a game. Even though the marketing reach with gaming ads can be quite large, CTR is often low. Most effective banner ads on gaming sites and mobile games often feature new games and related apps installs rather than unrelated or broad subjects.

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Eight years of Facebook’s absence in China gave more than enough time for local competitors to emerge and, ultimately, dominate the market. While some of the earlier Facebook Chinese clones fell into relative obscurity, WeChat and Weibo took the lead and have reached the position of almost unrivaled dominance.

Does that mean that Facebook marketing in China is doomed forever? Not necessarily.

First of all, there is still a significant Facebook audience who uses VPN to access the platform regularly. The exact number is unknown because Facebook doesn’t release statistics of users by country outside of US. Even if they did, VPN itself, by definition, makes it impossible to find out the actual traffic origin. It is however, safe to say that the vast majority of Chinese expat population still uses Facebook. The same is also true for a large proportion of sophisticated English speaking Chinese urbanities.

This means that if a company is looking to target this type of audience, Facebook marketing in China can still be an effective tool. Examples of common products and services advertised on Facebook in China include expat services (health insurance, visa services etc.), VPN services, local events and venues targeting foreigners and upscale Chinese and so on.

Secondly, Facebook never abandoned hopes of reentering the market with Mark Zuckerberg embarking on a charm offensive with the goal to make that happen. He has visited China multiple times and had personally met with the Minister of Propaganda, China’s internet czar as well as Premier Xi Jingping himself. Mark Zuckerberg has even mastered a decent of level of Chinese surprising a lot of people by delivering speech in Mandarin in front of Chinese student audience followed by questions & answers session.

In this well publicized and mercilessly mocked photo, Zuckerberg was photographed running in Beijing despite Beijing’s Air Quality Index climbing past 300 on that day:

Most analysts believe that Facebook return is just a matter of time, although it is unlikely to threaten the current local market leaders.

In fact, if Facebook ever relaunches in China, it will be a much more sanitized version of the network, forced to play by local rules that regulate everything from the content to who can use it for advertising. Chinese Facebook will most likely be quite different compared to the type of platform we are familiar with today.

If that eventually happens, advertisers considering Facebook marketing in China will have to go through similar approval process as it is the case for local platforms like WeChat, Weibo or Baidu with locally registered business being favored compared to foreign ones. On top of Facebook’s own guidelines, advertisers will have to comply with much stricter Chinese regulations that, over time, tend to get tighter rather than relaxed.

It is also very likely that Facebook, rather than going to China alone, will have to partner with a local company, perhaps even with one of its current competitors. This is often the case of large western companies entering Chinese market and is even more common for business in the areas social media or messaging like LinkedIn or Line.

Two more factors make Facebook return to China ever more likely: first, bringing back a censored and government-friendly version of Facebook will constitute a big victory for Chinese internet authorities, second, Mark Zuckerberg indication of his willingness to compromise.

In any case, if Facebook is allowed back in China, it will most certainly become another effective marketing channel. Moreover, the competition for advertisers’ dollars (or rather yuan) is also bound to intensify, hopefully resulting in more options and features from the existing channels like Weibo, Baidu and WeChat.

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Although, Baidu, Alibaba and Tencent, collectively known as BAT, account for the major part of China’s overall digital marketing ad spend, there are also other online channels where ads are bought and served. Outside of China placing such ads is typically done via programmatic deals through third party platforms. Unfortunately, due to several reasons, China programmatic ads ecosystem is a generation behind western markets.

On the other hand, there are signs that things are beginning to change. Top Chinese tech companies have been aggressively buying US ad tech firms which have already developed the right technology. Also some of the well-known services that connect advertisers with publishers via DSP (demand side platform) and SSP (supply side platform) are beginning to enter Chinese ad tech market.

Here are the main reasons why Chinese ad tech still plays smaller role compared to other forms of digital marketing:

#1: Technology

Technology is one of the reasons that many Chinese publishers are not offering ad spaces to advertisers via ad exchanges. Those domestic companies hasn’t yet open their APIs so advertisers could run programmatic ads via third party platforms.

#2: Government regulations

Publishers are bound by restrictive Chinese digital marketing regulations that limit their ability to accept many types of advertisers. This is especially the case concerning foreign advertisers. Such companies should go through a complex verification process before being approved to run ad campaigns in China.

#3: Publishers’ market fragmentation

For the majority of publishers in China it is still not common to work with third party SSPs to sell ad spaces. Many publishers tend to build their own ad exchanges or simply sell ad spaces directly to advertisers on contract basis.

#4: No common standard

Largest tech companies such as Baidu, Tencent and Qihoo have developed their own ad exchanges protocols which are not open to real time bidding ad exchanges. This makes plugging publishers inventory into third party SSPs very complicated and inefficient. The situation is even worse for mobile traffic.

#5: Influence of BAT

Largest publishers like YouKu are already owned by one or multiple Chinese tech giants making it more natural for those publishers selling their ad inventory to their owners. At the same time, due to absence of an efficient ad exchange system, small to medium size companies find it much easier selling their inventories to Baidu or Tencent’s own ad systems rather than doing it via smaller SSPs.

#6: Seller’s market

For the time being, publishers have little incentive to explore new channels to sell their ad space inventory as it remains primarily seller’s market where demand outstrips supply. This why many publishers prefer to deal directly with advertisers rather than using third party ad exchanges.

#7: Fraud problem

Unfortunately, when it comes to programmatic ads, fraud, in its many forms, is still a serious problem with Chinese ad tech. While it is, undoubtedly, a global problem, the underdeveloped state of programmatic ads in China makes it even worse. In our upcoming post we are going to look into different types of digital fraud in more details.

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In the last 3 years, online advertising revenues in China have been growing at the rate of about 40% on year to year basis and show no signs of slowing down in 2015. According to iResearch, it is projected that this year, the total market will reach 216 billion yuan (almost $40 billion), up from 154 billion yuan in 2014.

Advertising with search engines is still the most popular choice (36.6% of the market), followed by ecommerce ads and brand graphic ads (banner advertising) at 24.1% and 17.2% respectively.

In those two categories, the leading providers are Baidu which holds about 60% of search engine market and Taobao, one of the ecommerce properties of Alibaba.

The infographic also features the results of surveys which were intended to find out what type of improvements users would expect in China digital advertising market in the future. One third of the respondents would like see more correlation between the ads and their interests. This further underscores the need for marketers to learn more about their target audience in order to improve their advertising ROI.

Here is the full infographic:

China Digital Advertising Market

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Popular mobile apps from ecommerce giants like Taobao, Alibaba and Jingdong have made shopping directly from phones a fast, safe and convenient experience. Not surprisingly, mobile advertising has been highly effective to reach tens of millions of those users and the new infographic from Go-Globe backs up those notions with some great visuals.

Besides the obvious facts concerning the size and the reach of this market, I’d like to point out a few figures that I find particularly illuminating:

• Video and mobile coupons are, by far, the most popular advertising formats. This could be explained by the fact that videos tend to be the most popular digital content in general that is also easily consumed. On the other hand, the popularity of coupons is probably due to their high practical value and ease of use;
• 78% of Chinese users are more likely to click on a mobile ad vs. only 33% of UK and 29% of US users. What it basically means is that mobile advertising is more effective in China than in those countries by more than twice;
• Only 7% of users is China prefer not to be targeted by mobile ads vs. over 50% in both UK and US who would rather not see them.

Here is the full infographic:

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Here are some of the highlights that I find most interesting:

• China outspends any other country in Asia Pacific on digital ads which in 2013 reached 13.23 bn dollars or approximately 11% of the worldwide spending;
• Banner ads remain the most popular type and stand at 30.2% of all types digital display ads. Keyword search ads are next at 28.5% which is still behind US share of 47.1%;
• Baidu and Taoabao are the largest online advertisers in China by revenue standing at 22.25 bn RMB and 17.22 bn RMB respectively. Together they represent over half of the entire market;
• Largest online ads spenders are Pingan, Chinese insurance giant, followed Volkswagen, P&G and Shanghai GM;
• Four top sectors by online display ads are transportation, online services, real estate and food & drink;

This is the infographic:

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