Consumption among Chinese Consumers Expected to Accelerate

Private Consumption Projections

The reason we maintain our interest in cracking the Chinese market is represented in this chart.  Projected growth of private consumption, that is, consumer spending in the world’s second largest economy, is expected to reach $6.5 trillion in the next couple years. Chinese consumer consumption will grow from 34% to 43% the size of US consumption.  Source: Boston Consulting Group; Economist Intelligence Unit

AI: For Better or Worse


AI marketing is the future.  But that future both scares us and tantalizes us.  On one hand we hear of malevolent AI data manipulation that targets us to send ads for products in which we have no interest.  We see it as an intrusion into our digital life when we get email ad for a product you have already purchased.  It’s annoying.

By contrast, when the Netflix ‘loading…” message goes away and you are served choices that reflect your viewing habits, it’s a good thing.  Salesforce did a study that found “76% of consumers expect companies to understand their needs and expectations.”

One view is that content personalization means we will never see ideas or products that we would benefit from seeing even if it isn’t something we might choose.  Does the positive side of AI content manipulation keep us in our silos the way our choices of news channels does? Is that a good thing?  Source: Forbes

October Slowdown

Carrier Data - Oct2018

Growth in Chinese smartphone adaption slowed to 5.5 million new subscribers in October, the weakest growth seen in one month since a slowdown in the summer of 2017.  As a point of comparison, the 12-month run rate sits at over 10 million per month.  Still, we are talking about a country with more than 1.2 billion advertising-ready devices and an 80% penetration rate, so what is a million fewer here or there?  Sources: China Mobile, China Unicom, China Telecom

Winners: Mobile & Video

Projected Ad Spending

The latest data on programmatic ad spends support past projections that growth will continue.  These data say that programmatic will increase 76.5% in the next four years.  And they see strong RTB-based spending, particularly when private market placements (PMPs) are included.  PMPs are bound to increase in this environment where brand safety and fraud are concerns because they “take advantage of auction-based pricing while knowing with whom they’re transacting.”

For the first time, Magna Global’s survey reports mobile device ad spending and video format ad spending are both in excess of 50%.  This milestone recognizes the migration of people from desktops to mobile and where their attention is.  Source: AdExchanger

Chinese Consumers Looked Up in October

Cpnsumer Confidence -Oct-18

After a couple months of downward movement, China’s Consumer Confidence Index turned back up.  Likely the down turn in prior months was a reflection of the atmospheric noise around trade and the uptick is a reflection of countervailing noise around expectations for November’s Singles Day, which turned out to be a great success.  The mindset of the Chinese consumer is paramount to the stability of China’s economy.  Sources:; Nat’l Bureau of Statistics, China

Online/Offline Retail Integration Marches On

Online Consumption

A couple years ago Jack Ma Chairman of Alibaba coined the phrase “New Retail” to refer to the seamless integration of online and offline retail with logistics that would allow consumer to buy what they want, when they want and where they want.  He described the end of purity – pure e-commerce and pure bricks and mortar retail.

In a survey of Chinese consumers by interested parties, Walmart, Tencent and JD Daojia, 67% of respondents said they actively use services that deliver goods from local offline stores.  Ma’s vision appears to have been accurate.

In the US there are integrated online/offline services like Stop & Shop’s Peapod that deliver fresh groceries, an app called GrubHub that delivers food ordered online from restaurants and clothiers like Jos. A Bank that have integrated online sales with in-store sales pick-up.  The purity model tends to be fading – look for Fresh Direct to find a storefront partner at some point.

Meanwhile, these data show that with all the talk of online consumption, there is a long future growth line before parody is reached between on- and offline sales in both the US and China.  Source: Enterprise Times

Notes on the Brand Safety Mine Field

IAB Bakers Dozen

An IAB white paper outlines thirteen topics with which advertisers might want to avoid association.  At the website level the list is relatively easy to avoid.  Sites that promote hate speech, terrorism or pornography can be put on a blacklist. Easy enough.  The problem occurs when a legitimate site like The New York Times is covering those subjects as news. The broad blacklist strategy would eliminate a legitimate news operation.  Hence the complication.

The strategy has to be a more refined blacklist – whitelist combination to keep in the legitimate whilst keeping out the other. To better manage your brand’s safety, you’ll have to get contextual.  The context within the site is as important as the overall site, which requires inclusion of an extensive keyword or topic blacklist – whitelist strategy.  Source: MemeBurn

You Ain’t Seen Nothin’ Yet

Singles Day REcord

November 11th was Singles Day in China.  This was the 10th year of a commercially contrived holiday that rolls the West’s Black Friday and Christmas into one, 24-hour, glutinous shopping day.  Every year it breaks the record set by the prior year and this year was no different.  The 27% year-over-year increase puts to rest the current notion that trade concerns might be affecting the Chinese consumer.  Not so, as the gains are attributable to the continuing growth of the middle class and the even deeper penetration of mobile purchasing into the Chinese way of life.

And look for the escalation to continue far into the future.  According to a forecast by the Organization for Economic Co-operation and Development (OECD), “China’s middle class will almost triple from 300 million to 850 million by 2030″ setting up double digit growth for many Singles Days to come.  Source: Retail Dive

China’s Manufacturers Hang onto the Positive

Manufacturing Sector PMI Oct-18

China’s manufacturing sector remained marginally positive in October as it skates around the 50 mark for the second month in a row. May of 2017 was the last time in the past two years that the PMI was under-water at 49.6.

Zhengheng Zhong, director of macroeconomic analysis at CEBM Group commented, “Overall, expansion across the manufacturing sector was still weak. China’s economy has not seen obvious improvement.”  Source: Markit Economics

Challenges to Bringing Programmatic In-House

In-house Tram

To build an in-house agency a widget company will have to commit to entering a new business – advertising.  That commitment includes recruiting and training advertising talent from management to buyers to analysts.  Next the company will need to connect with a demand-side-platform, which comes at a price – 10-15% of the spend if you use a self-serve provider or as much a $20,000, if you license a bidder. Once the data begins to amass a data management platform will be required. It’s cost will scale in relation to the amount of data collected.  And its functionality will require supplementary data from second- and third-party sources.   More money.  Then there is the ad stack, the cost of running an auction and the associated tech fees. Soon it’s real money.  Still want to bring it inside?

Note that with all this talk about the costs of bringing programmatic buying in-house there are in-housers who claim to have shifted lots of budget from agency costs to advertising spend. So there.  One final question for the would-be in-houser; is the internal team building, ongoing training and detail management of the technology worth the savings rather than sticking to your knitting?  Source: Digiday