In China, the Internet and digital marketing may be booming, but banner ads are being left in the dust.
Online gaming and virtual goods have had a much longer history in China than in the West. People in China use the Internet more for entertainment — playing online games, messaging, downloading music and movies, and shopping — than for work. The practice of spending small sums for virtual items is fairly ingrained. What’s more, China’s Internet use is more geared to mobile rather than the banner-led desktop Web. The Chinese also place great stock in the opinions of online product reviewers. One in five consumers between the ages of 18 and 44 won’t purchase a product or service without first researching it on the Internet, reports McKinsey.
The result: compared to other countries, China has both a low level of display spending per Internet household and a low click-through rate of around .09 percent, per MediaMind Research and PricewaterhouseCoopers.
Chris Jones, executive creative director at Tribal DDB in Shanghai, sees the effect firsthand. He said that with declining click rates, Tribal clients like McDonald’s, Philips, Volkswagen and Johnson & Johnson are investing more in video and social networks than simple banners.
“Right now online advertising spending is doubling every two years, and Weibo (China’s Twitter clone) is driving a shift to social networks as a key channel,” he said. “Online video also continues to rise. With the audience spending so much time on these platforms, they are spending less time on the old-fashioned portal sites. A campaign has more chance if it is mentioned by someone on Weibo.”
Marketing insiders agree that digital word of mouth is more powerful in China than perhaps anywhere else in the world. Online community forums, called BBS sites, are still the top way for Chinese netizens to get information, since the government censors mainstream media.
“The reality is, you have to set aside budget to pay for ‘key opinion leaders’ on social sites and to seed content on BSS, and that takes away from display,” said a Chinese agency executive.
Ironically, display advertising for branding purposes continues to be popular with non-Chinese consumer brands wooing Chinese consumers.
“Banners are not going to disappear entirely,” said Jones. “For instance, our Unilever client demands that they be in the marketing mix for reach. The Chinese online audience is now overwhelmed with choice. It means that brands here have to cut through the clutter with something surprising, something that has shared value. This is the thing: Nobody is going to share a banner. “
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