Ad china 2012 china digital media scene_en

2012 CHINA DIGITAL

MEDIA SCENE
Brought to you by AdChina
January 2012
www.adchina.com/en/us
Sina Microblog: @AdChina易传媒

Dear Partners,

We start off the year 2012 with great excitement. In the past five years, the category of
technology-driven internet advertising has grown from 0% to 8% of the total internet
Introduction advertising spending in China. We estimate this number to double in 2012. Our confidence is
based on the daily work we do for our clients, who are the largest 1,000 advertisers on the
China market. Last year we upgraded several of our products, such as the cross-media
planning system eTV2.0, and our clients’ satisfaction has risen dramatically. They have
responded by increasing their project requests exponentially.

An important agenda of AdChina in the past two years has been to expand our advertising
operating platform both to the supply-side (media) as well as to the demand-side (agency and
advertisers) of the value chain in China. Today, 200 online and mobile internet publishers are
using our supply-side platform ASP, and 4 of the 6 largest international 4A media agencies in
China are using our demand-side platform ADP to manage their advertising operations.

We’re launching this 2012 Digital Media Scene Report with the aim to provide a practical
digital outlook for the coming year for our clients: what are the new digital media trends in
China and around the globe? What are the investment opportunities that no one should miss?
Jing Pan
During the process of preparing this report, we referenced a lot of domestic and overseas
research reports, interviewed our clients and overseas collaborators. We also sponsored a
VP of Marketing, AdChina
Harvard Business School project on “the Future of China’s Technology-driven Advertising” in
Sina Microblog: @Jing潘静 Q4, 2011. All in all, we hope you’ll find this report useful.

Last but not least, we wish you and your loved ones a happy Lunar New Year and prosperous
Year of the Dragon. May you find great health, happiness and success!

Yours,
AdChina Team

2

AdChina is the leading technology-driven integrated internet
advertising platform in China
The core advertising operating
Supply-side Demand-side
system
Ad operating system For PC and mobile internet Ad operating system for
for publishers agencies / advertisers
A
P
d
u A
v
b - Processing 1 billion requests / day g
- Advertising placement on 400 PC e
l -Workflow mgmt e
publishers and 10,000 mobile r
i -Publisher advertising mgmt -workflow mgmt n
-Data mgmt publishers daily t
s - Matching the right ads with the c
i
h most appropriate audience i
- Media planning/buying s
e - Automated company workflow e
mgmt - Cross-media planning e
r s
- Generating financial reporting data r
s
for mgmt decision-making s
- Data collection
- Report & analysis

- 100 premium online - 200 additional campaigns - 4 of the top 6 international
publishers are using ASP per month 4A groups in China are
- 80 mainstream mobile - 300 campaigns at any using ADP
publishers are using ASP given time
- 4000 historical campaigns

AdChina is China‘s leading integrated internet advertising platform. A leader in online advertising space in China, AdChina provides the
technology platform and creates the marketplace for publishers, agencies/advertisers, as well as other third party players with a
comprehensive range of digital advertising technologies, online user data solutions, and audience management systems. By end of Q3
2011, on a monthly basis, AdChina platforms have access to over 457 million or ~90% of total Chinese internet users across PC internet
and mobile internet. AdChina was founded in Silicon Valley in 2007.

3

[ PART 1 ]
2011-2012 Digital Media Outlook
- Chinese internet population exceeded 500 million in Jan. 2012. Driven by government policies,
[ 1.1 ] General short term growth comes from urban and long term from rural markets.
- Chinese internet advertising budget as percentage of total is ½ of that of the developed market.
We estimate dramatic growth in 2012.

- 20% of the display ads to be placed through 3rd party platforms by 2014 in China. Dramatic
[ 1.2 ] Display Ads
growth to happen in 2012 driven by client confidence based on proven result and cautious
economic outlook.

[ 1.3 ] Mobile internet - Internet visitation through mobile devices accounts for 1% of the non-search & eCommerce total.
- APP marketing to become mainstream and LBS commercialization at the inflection point.

[ 1.4 ] Video - Online video to grow significantly. TV and internet overlap exceeds 50% in the top 60 China cities.

[ 1.5 ] Social Media - Social media user growth to slow down. Social media marketing approaches and measurement
metrics to diversify.
- Coming soon: AdChina “Microblog Marketing Manual: Today & Future”
[ PART 2 ]
2012 New Digital Technology Outlook
SoLoMo, HTML5, Augmented Reality, NFC, QR code, Open Platform, Interest Graph

4

[ PART 1 ]
[ 1.1 ] General: Winning on internet = winning the current & future consumers
[ 1.2 ] Display Advertising
[ 1.3 ] Mobile internet
[ 1.4 ] Video
[ 1.5 ] Social Media

[ PART 2 ]
SoLoMo, HTML5 ， Augmented Reality, NFC, QRcode, Open Platform, Interest Graph

5

Users(millions)

PC
internet

Mobile
internet

Rural

Data source: CNNIC China Internet Statistics2009-2012

China internet population exceeded 500 million; rural growth drives long term outlook
- Government policies are the main drivers. “The National 12th 5-year Plan” indicates that information technology
construction for the rural areas is the main focus of rural development in China in 2011-2015.
- The urbanization process also accelerates the progress.

Bandwidth upgrade and 3-screen development brings opportunities for new internet
applications, hence drives urban internet growth in near term
- “Broadband China” strategy is part of “The National 12th 5-year Plan”. The internet bandwidth in urban cities will be
upgraded and the prices will drop dramatically. “3-screen project ”will continue to be important.
- Online video, cloud services, and internet TV will proliferate accordingly and change urban internet users’ behaviors.

6

Social media continues growth, mobile to drive social
- Growth for traditional social networking and microblogs will slow down. User
fatigue starts to appear.
- Mobile social isto take off. Weixin* as the killer APP, will lead the next social
networking tide.

Social media
coverage

Social media and online
video are not yet saturated
Online video
coverage

China data source:
CNNIC29th China US data source:
Online video to take the lead in digital advertising Internet Statistics comScore Nov. 2011
Jan. 2012
- Consumer online video usage will increase dramatically in 2012, driven by: 1. higher speed and
lower price of broadband; 2. the Bureau of Radio & TV’s administrative order to limit certain
entertainment content on TV.
- Advertisers will shift significant advertising budget from TV to internet video. However the online
video sites may not be able to absorb all the additional budget because most advertisers only
command the traffic from tier 1 and 2 cities, which only accounts for 30%** of the total online video
sites’ traffic. 3rd party display advertising platforms which are able to offer solid cross-channel
media planning and data solutions will thrive with the opportunity

* Weixin is the mobile instant messaging application offered by Tencent weixin.qq.com
** AdChina platform data, Jan. 2012 7

avg. time spent China’s netizens spend almost as much time on internet as on TV
hours/day

TV
Internet

Broadcast
Newspaper

Magazine

CMMS Summer 2007 – Summer 2011

Winning on internet = winning current & future consumers
28% of internet users are below 20 years; Younger users (age: 13-45) spend more time on internet than on
30% are 20-30 TV, especially in Tier 3 & 4 cities
avg. time spent
hours/day (age:13-45)

Internet

TV

CNNIC 29th China Internet Statistics Report Jan 2012 StarcomMediaVest Group “China Yangtze Study: Oct. 2011
8

Internet advertising is under-invested in China
- Most Chinese advertisers think that internet marketing is a high priority. Their investment decision is
held back by the fact that there are not enough reliable digital marketing partners who can offer
measurable services as on TV.
- The mature internet advertisers are increasing their budget significantly in 2012 to occupy resources
and build customer assets on internet before more competition comes in.
- The London Olympics, proliferation of smart phones, and internet’s expansion to the smaller cities and
rural areas will bring new opportunities to internet marketing in 2012.

China’s internet ad spending as % of the total media budget is ½ of that in the US

China data source ： GroupM “This Year, Next Year, China Media Forecasters” , Sep. 2010;
U.S. data source ： eMarketer 2010 data, published in Mar. 2011

9

[ PART 1 ]
[ 1.1 ] General
[ 1.2 ] Display Advertising ： Ad placement through 3rd party platforms to become mainstream
[ 1.4 ] Video

[ PART 2 ]

10

China display ad as % to total digital spending will grow to 43% in 2014

eMarketer Nov. 2011

Display ads to become highest priority for Chinese advertisers
Global perspectives:
-Google to increase investment in display advertising, especially in 4 areas:
- Technology to simplify media buying and ad placement
- Ad space engagement capabilities
- Advertising evaluation mechanism
- Advertising operations system for media owners to effectively manage traffic monetization and media planning
China scene:
-After the rise and fall of eCommerce fever in 2011, advertisers now have a clearer perception on budget allocation and
KPI setting for brand advertising and performance-based advertising.
-After trial and testing, the Chinese advertisers have become used to looking beyond PV and clicks to evaluate digital
advertising. Branding lift and target audience coverage efficiency are to become standard metrics.
-Advertisers request display ads to be better combined with social media marketing.

11

43% advertisers plan to spend more than 25% of their digital Ad placement through 3rd party
budgets in / through? ad networks
platforms is a top choice for
US advertisers
- US advertisers widely recognize the value
of ad networks, DSPs*, and ad
exchanges for delivering better results
and saving budget.
- The generally low economic outlook
further promoted advertisers’ adoption of
3rd party platforms.

- DSP is still in its starting stage in China.
25% of advertisers planned to increase their ad network budget
- AdChina DSP is probably the only DSP
developed for China market with world-
class standards.
- 4 of the top 6 international 4A media
agencies in China adopted AdChina DSP
to manage their advertising operations in
the past 2 years. We estimate significant
growth in China’s DSP business in 2012.

AdChina platform ad placement
is widely recognized by
Chinese advertisers
ValueClick “Advertiser Survey 2011”
- On average, every client has placed more
based on 400+ senior U.S. advertiser than 4 ads with AdChina.
Feb. 2011 - We estimate that at least 20% of the
internet ads will be placed through 3rd
party platforms in China by 2014.

*A DSP(Demand Side Platform) is a system that allows digital advertisers to manage multiple ads through one interface. Utilizing a

DSP, marketers can manage their bids for the ad space, the pricing, and the data that they are layering on to target their audiences. 12

China branding ad network market will double every year till 2013

iResearch 2010-2011China ad network development report
May. 2011

Chinese advertisers utilize 3rd party display ad platforms mainly for branding
- The Chinese advertisers need the platforms to deliver ads to massive audiences and
across hundreds of websites easily. Publisher quality is a high priority.

The Harvard Business School research students provided the following POV:
- It’s a massive offline market in China. Advertisers recognize 3rd party platforms’ abilities to
maximize the reach to consumers, collect data and conduct eCRM to drive offline sales
- The Chinese digital market is sophisticated but not complex. Advertisers are good at
prioritization. That’s why it’s hard for the market space to support multiple types of 3rd party
platforms to develop. Chinese advertisers prefer platforms that can provide to them practical
solutions and proven track records.

Harvard Business School“China’s Technology-driven Advertising Study”, Dec. 2011 13

The top 3 factors in The top factors in choosing a media partner
choosing a media partner:
- Performance/ROI
- Audience targeting
- Price

US advertisers value Behavioral targeting (66%) is believed to be one of the most important
types of audience targeting
data-driven advertising
capabilities
- The ROI from behavioral targeting
may vary significantly depending on
the technological capabilities to
process large-scale data and conduct
multi-dimensional analysis
ValueClick “Advertiser Survey 2011”
Based on 400+ senior US advertiser
Feb. 2011

Harvard Business School“China’s Technology-driven Advertising Study”, Dec. 2011 14

[ PART 1 ]
[ 1.1 ] General
[ 1.3 ] Mobile internet ： It’s a war. And it’s starting now.
[ 1.4 ] Video

[ PART 2 ]

15

Mobile advertising has great potential. Tablets are the future stars
- Mobile internet user growth CAGR is much higher than PC internet in the
comparable period. Smart phone proliferation and decrease in telecom fees are
the main drivers.
- Tablet computer growth was significant in 2011 and provides new marketing
opportunities in the next few years.
- 1% of the AdChina online platform visitation (non-search and eCommerce) are
from mobile devices at the end of 2011. While the according number from the
previous year was only 0.04%. 44.5% of the mobile devices’ traffic are from
iPads at the end of 2011.
End of 2011

356MM
CAGR 48%

2007
50MM *Base: mobile internet users
AdChina “2011China mobile internet research report”
Jul. 2011
CNNIC 29th China Internet Statistics Report Smart phone changing the world
Jan. 2012
- AdChina research indicates that 58% of the mobile users
are using smart phones.
- 74% of mobile internet users access internet everyday
using smart phone and 87% use installed mobile internet
applications

16

55% of app users use apps longer than 1 hour/day
9% heavy users use apps more than 5 hours/day
APPs are already among
the most important
consumer touch points
- Consumers use APPs as time fillers
and on a frequent basis

APPs are highly fragmented 55% mobile users use more than 5 apps, up by 31% YOY

- Number of apps on the global market :

App Store & Android Market Dec. 2011

AdChina “2011China mobile internet research report”
Jul. 2011
17

42% of mobile users use LBS* because of convenience
Convenience
LBS: it’s beyond check-
Social needs in and sharing
Fashion - As user needs change, new
marketing opportunities around
Coupons LBS will emerge.

Enfodesk Dec. 2011

LBS might be the next killer marketing application
In 2011a lot of major digital media owners (Sina, Jiepang, Shanda, Tencent, Dianping, etc.) upgraded their
LBS services. New applications include:
-Coupon downloads
-eCommerce
-Location-based social networking
-Quick response (QR) code scanning

*A location-based service (LBS) is an information or entertainment service which is accessible with mobile devices

through the mobile network and which uses information on the geographical position of the mobile device. 18

Chinese mobile internet
users are more willing to
receive mobile ads than
the US counterparts Awareness of mobile ads
Statements

- 61% of Chinese mobile users are willing to
receive ads for rewards or freebies.
- 53% of the Chinese mobile users used a mobile
coupon to purchase a product offline.

*Base: smart phone owners

Actions after noticing a mobile ad

*Base: smart phone owners
who have noticed advertising on their smartphones
Google/IPSOS/MMA (Mobile Marketing Association) Our Mobile Planet Nov.2011

19

[ PART 1 ]
[ 1.1 ] General
[ 1.4 ] Video ： Cross-screen is the gold mine for digital marketing

[ PART 2 ]

20

67% online video users are below 30

Online video user base
continues to grow
- User composition of online video is much younger
than the general internet.

End of 2011

325MM CNNIC 29th China Internet Statistics Report
CAGR 15% Jan.2012

2007
160MM

CNNIC 29th China Internet Statistics Report
Jan-Nov. 2011
Jan. 2012
Online video monthly time spent increased 57%

Online video is an addictive
medium
- According to data from Youku.com (the largest online
video website in China), the online video users’ time
spent on TV decreased by 63.3%, frequency dropped by
56.4% after they started to watch video online.
- The longer a user uses online video, the more the media
behavior changes.

iResearch iUserTracker Jan-Nov. 2011

21

Cross-screen usage increases year by year
TV & internet user overlap is above 50% TV & internet overlap reached 63% in tier 1 cities
TV only users decreased year on year

China National Resident Survey, 2008-2010 CC11SUAC Mar. 2011
60 top Chinese cities, sample age: 15-60

TV and internet complement each other well in terms of reach
Internet complements TV reach during day time
TV complements internet reach during the night time

CMMS2009A~CMMS2010A
22

Pre-roll Interactive pre-roll

Interactive pre-roll
is coming comScore Data for in-stream Video Advertising Jul. 2011

- Interactive pre-roll works well with long video content and to engage young audiences.
- Interactive pre-roll is a hot new format on the US market in 2011. AdChina introduced the format to China in Q4 2011
after collecting enough data to prove its value to Chinese advertisers.

23

[ PART 1 ]
2011-2012Digital Media Outlook
[ 1.1 ] General
[ 1.4 ] Video
[ 1.5 ] Social Media ： The market is looking for a practical social media marketing book

[ PART 2 ]

24

Online social media user growth slowed down
- Mobile social networking is reaching its critical mass. Weixin active users reached 30 million. Nov. 2011

390MM

iResearch iUserTracker
Jan-Nov. 2011

2011.10
350MM

Social media marketing is at its
early stage in China
- Less than half of the advertisers use
social media for marketing purposes in usage of social media
marketing
China while 80% do so in the US.
- Social media marketing is heavily reason of social media
under-invested in China. marketing

Grant Thornton Booz &Co Buddy Media
“International Business Report” Campaigns to Capabilities
Nov. 2011 Social Media &Marketing
Oct. 2011

25

Social media marketing metrics US advertisers are most
concerned about

Chinese advertisers’ urging
question: How to effectively do
micro-blog marketing

Coming soon: AdChina
“Micro-blog Marketing Manual:
Chief Marketer Today and Future”
“2011 Social Marketing Survey”
Oct. 2011

- Limited by the availability of technology and tools, social media
marketing is mainly evaluated by the number of followers and forwards
currently

26

US advertisers widely use social media for brand building

Booz & Co Buddy Media
Campaigns to Capabilities
Social Media & Marketing
Oct. 2011

Planning out of the box to unleash the power of social media marketing
- Advertisers need to build the strategy and working process to utilize social media to engage
with customers, conduct CRM, building word-of-mouth, and collect market insights

27

[ PART 1 ]
2011-2012Digital Media Outlook
[ 1.1 ] General
[ 1.4 ] Video

[ PART 2 ]

28

AUGMENTED OPEN
REALITY PLATFORM

Mobile SOLOMO MARKETING Social

HTML5
STANDARD QUICK RESPONSE
CODE INTEREST GRAPH

NEAR FIELD
COMMUNICATION

29

SoLoMo: connecting the digital and real world
So-Mo: Connecting with the
consumers at real time
More and more consumers are
using mobile devices accessing
social media, checking out micro-
blogs and checking in to share their
thoughts and activities with friends.
Social
Where word-of-
mouth and viral
content fly

Mobile
Connecting
Lo-So: creating word-of-mouth O2O online with
offline
Consumers today
are eager to express
themselves. Social
media is their stage.
Local Mo-Lo: driving consumers to the stores
Generating
Posting pictures and sales and LBS to direct
checking-in to share shopping consumers to the
shopping experiences
nearby stores and
experiences are outdoor.
common activities.

30

Two-dimensional code/quick response code:
scan it, and you’ll know

Consumers are scanning every code they can access

Newspapers Product Webpages Fliers Outdoor TV Postcards
packaging

QR code scan enables

Sharing Check-in Accessing APP
on social product download
media information

Online/Mobile Mobile Coupon
Shopping payment download
Please try and scan the QR code
above : )
31

Augmented reality: adding new possibilities to
marketing ideas

Combining with QR codes:
bringing life to the creative
- Through scanning the QR codes
on magazines, packages or other Combining QR
media, the users will be presented
with animated content.
scanning with LBS
- Through scanning the QR code at
the store front or outdoor ads, users
can see virtual content added to the
environment they are in.

Augmented reality marketing is not widely adopted yet in China
- There are limited mobile applications in China with augmented reality functions.
- The market is expecting the big fanfare event. AdChina targets to be the clients’ technology enabler.

32

Near Field Communication: the future star

Fast and safe data exchange without touch or connection line
-The latest Android 4.0 system includes the Near Field Communication (NFC) technology named Android
Beam. Users can easily exchange webpages, maps, and game data at near range with each other.
- The NFC technology creates new creative possibilities to APP marketing and enables new interactive
experiences for consumers.

33

HTML5: an upgrade to user experiences

HTML5 will dramatically enhance mobile experiences:
faster, bringing more powerful functions, and better compatibility
- According to AT&T, 85% of all smart phones being sold in 2016 will support HTML5
- HTML5 can help marketers to deploy the same creative or campaign easily on mobile devices with different
operating systems

34

Open platform: integration & fragmentation

Integration Fragmentation
- Through open platform, the user can utilize multiple - Open platform decreased the entry barrier for
services through one single platform, i.e. sharing video developing applications, services, and websites.
content to social media, and doing shopping on social A lot of new players will come into the market and
media. provide more choices to the users.

35

Interest graph: the next hot thing

Vertical social networking: based on interest
- Through interest graph, users can get to know people beyond “6 degrees
of separation”

Augmented social networking: stronger media influence
- Media based on interest graph push content to users according to their interest.
Such content could be highly valuable and attract loyal users.
- Fashion industry could be the first one to adopt this technology for marketing.

36

Please follow us on Sina microblog:

@AdChina 易传媒 @ 易传媒 ASP @ 易传媒 App 营销方案 @ 易传媒 LBS 营销平台 @ 易传媒 Solutions @ 易传媒 CircleA

@ 闫方军 Alan @ 郑靖伟 @ 程华奕 @ 易传媒 -celia @Jing 潘静 @ 王帅民
易传媒 CEO 易传媒 COO 易传媒 CTO 易传媒 CMO 易传媒市场营销副总裁易传媒媒体副总裁

Our World Class Advisory Board

David Rosenblatt Michael Galgon Rick Thompson William A. Sahlman
-CEO, Double Click -Principal Advertising -Founder, Playdom -Senior Associate
-President, Google Strategist, Microsoft -CEO, Adify &Flycast Dean, Harvard
Display Ads -Founder, aQuantive Business School
-Board member, Twitter

37

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