It’s Hard to Keep Facebook Down, Even for China

The closest thing to water in the digital universe is Facebook.  One can try to wall it off, but it will seep into everything, even places that have been waterproofed.  Hence, the news from The Street and from Pivotal Research that Facebook, which has been banned from China since 2009, yielded $5-$7 billon in advertising revenue from the country during 2018, is proof of the theory.  China is the fifth largest contributor to Facebook’s ad revenue behind the US, Russia, Turkey and Canada.

Facebook’s work around is its link to Meet Social, a Chinese company that is estimated to have placed tens of thousands of daily ads on Facebook.  There’s the leak.  And there’s the key any China successful strategy – it’s best to connect with a local company as many big Western companies doing business in China have.  Source: CCN.com

Advertising in China was up 5.2% in 2018

Ad spend in China increased in 2018 by 5.2%, up to $92.7 billion.  Like in the US, the digital and out-of-home gains are coming at the expense of declining traditional TV advertising.  Much of the Internet spending is driven by e-commerce, as would be expected.

Patrick Xu, CEO of GroupM China and WPP China comments that “Improving the quality and personalization of brand marketing is also increasingly important and will be a strong driver of growth in the advertising ecosystem.” Source: Shine

Changing Chinese Consumer Confidence

China’s Capital University has analyzed the country’s changing consumer confidence by breaking down elements of the overall number to better understand the effect the country’s consumer debt issue and its slower economy, due to trade concerns, are having.  The effect is significant with declines in three central areas of consumer interest.  It’s the kind of pull back that like a boulder rolling down hill, gains speed until something stops it.  Right now, the only thing that could act as a break is an end to the trade war with the US.  Chinese indebtedness will remain as an accelerator well into the future. 

Wang Tongsan, a member of the Chinese Academy of Social Sciences, a government affiliated think tank said,  “Overall, the downward  pressure on the economy is going to be the bigger

[in 2019]

.”

Though the economy is expected to decline, projections are that growth will continue at a 6% – 6.5% rate for 2019 – still, a great number by Western standards. Source: South China Morning Post

Mixed Feelings

A survey of 200 marketing execs in Europe reveals mixed feelings about bringing digital marketing operation in-house.  On the surface these marketers are making the shift to in-house because they don’t trust their media agencies to be fully transparent about the process and its results.  They want more control.  Hence, a vast majority have moved some or all of their operations in-house, which forces them to face the talent issue.  While most express confidence in their team, almost as many express concerns about finding the skills they need.

The kicker is that 63% of those surveyed believe that moving digital marketing in-house is a passing trend.  Source: SearchEngineJournal.com

China Nearing Tech Leadership

Rarely do we get the insight from someone at the very center of the Chinese technology world who also has firsthand knowledge of Silicon Valley.  For a better understanding of the Chinese world view listen to the following interview with Kai-Fu Lee, a venture capitalist from Beijing who in the past worked for Apple, Microsoft, and Google.  He talks about China’s big leap in innovation, the secret sauce the West assumed the Chinese would never be able to emulate.  According to Lee, the Chinese challenge to the West is all but over. Source: WNYC

https://www.wnycstudios.org/story/kai-fu-lee-chinas-race-future

The Shifting Dynamics among Chinese Consumers

A new survey in China by Nielsen for luxury e-commerce mall Vipshop and Tencent reveals that some purchasing patterns among Chinese consumers have adjusted.  First and second tier cities, which led the way to consumerism for the country, are now populated by consumers who are less veracious, more price sensitive and less premium brand conscious. Whereas, the third and fourth tier cities, which are now responsible for more than half of luxury goods sales, are where the first and second tier cities used to be: in search of top brands and higher quality products.

The high cost of living in the bigger cities is the main driver for the shift along with a new level of consumer maturity.  The smaller cities, still large by Western standards, have been the targets of infrastructure improvements by major resellers like Alibaba and JD.com.  They have opened those markets to the choices and luxuries that their bigger neighbors have experienced for the last decade.  Third and fourth tier cities are making up for lost time.  Source: 199IT.com

Consumer Protection Comes to Chinese eCommerce

China eComm Peercent

All new industries get a grace period from regulation as authorities catch up to the new reality.  Social media in the US will likely face government regulation in short order after a decade of freewheeling.

New regs from the Chinese government reflect the end of that grace period for eCommerce operators who have had no regulation until now in spite of tremendous growth in the five years ending in 2017 and 40% plus growth projections for the end of this year.

There are three types of operators recognized by China’s new law: platform operators, operators on platforms and online sellers.  Here are four areas covered by the new law:

  • IP protections are strengthened by requiring that e-commerce businesses must be licensed by the State Administration for Industry and Commerce.  Unlicensed entities face potentially strong fines and copyright thieves will be identified.
  • Regulations regarding unfair competition limit the market power of companies that have either a user or technical advantage over their competition by “prohibiting platform operators from imposing unreasonable restrictions, conditions, or fees on merchants.”
  • E-commerce platforms will now share responsibility, along with individual merchants, for the sale of counterfeit goods sold on their sites with heavy fees for transgressors.
  • Consumer rights get new protections.  Sellers are required to disclose selling rules and “cannot assume consent from the consumer.”  In addition, merchants must protect consumers from fake reviews regardless of origin – outside contractor or incentivized consumer.

Assuming these rules are enforced, it is a good day for intellectual property owners, for competition and for consumers.  Source: Dezan Shira & Associates China Briefing

http://www.china-briefing.com/news/china-new-e-commerce-law-businesses-ready-new-compliance-norms-2019/

Toughest Regs from the Biggest Player Rules

Regulation

The nature of government or quasi-government regulation is that the biggest player with the toughest regs rules the day.  Examples: The Texas State Board of Education has inordinate power over the history taught in US text books because of the size of the Texas market and California has the same leverage over auto emissions because of the size of its market.  California often supersedes national regs.

In the digital marketing space the biggest, badest dog today is European Union with its General Data Protection Regulation (GDPR).   In 2020 a set of GDPR-like regs go into effect from California. Because it’s difficult to follow privacy rules for every individual jurisdiction, the tougher of the two will be the standard.

Advise: Except the toughest privacy rules from the biggest market as your company’s standard rather than trying to piecemeal it.  Source: New York Times Review of Books

Why Mobile?

82%

Mobile has two advantages over the web for advertisers. First it’s where the shopping eyeballs are.  Data suggests that 82% of shoppers check their phone before buying in a store.  Combined with all the mobile sales where the consumer never leaves their phone, the place to be visible is where your customers are right before they purchase. And mobile is that place whether the purchase is made online or on premises.

Second, the in-app environment carries inherently less fraud because, unlike the web, every app has gone through some level of verification by either Apple or Google in order to get into their respective download stores.  Add to that third-party quality assurance from companies like comSore or Nielsen Digital Data Ratings and trust in the mobile ad process is enhanced to levels comparable to the best, best practices on the web.

Viewability is an issue in mobile.  That’s because each app has to carry a SDK that allows for viewability, which means the vast majority of existing apps are likely not equipped.  But even that’s changing; the VAST 4.1 format has viewability designed into it.  The gap is about to be closed.   Source: Marketingland

For Game Developers: A New Revenue Balance

Favored In-Game Ad Formats

2018 saw a major change for in-game advertising. According to a DeltaDNA survey of 336 game developers, the number of games getting at least 40% of revenue from advertising is up 15% while the number getting more than 81% of its revenue from ads has jumped 29%.  That changes the balance of revenue tracks streaming into the genre.  The purity of free-play gamers has been shifted by the reality of income.

The graph shows that rewarded video ads are, by far, the preferred in-game ad format.  Source: VentureBeat