Invite colleagues
Once again, my Saturday is dominated by staking out a comfortable position in my local coffee shop, sipping coffee late and pondering the future of Chinese marketing. Actually, an activity I look forward too as I can reflect on my crazy week and various customer meetings. I have found that there tends to my themes common to many of the meetings I have with clients, Agency partners and even some informal meetings with friends in marketing. This week was no exception and I found the main topic of interest was "performance marketing".
There are two large branding clients calling for pitch's in Sept that have a performance marketing element so I found myself briefing our partners on U2Mee, our affiliate platform for customer analysis, segmentation and targeting. Performance marketing campaigns in China have typically been a hit and miss affair. There has been a history of Web Unions in China supporting CPA (cost per action) campaigns but given their core focus was on CPC (cost per click) where this payment model formed most of their revenue (note to self: future post on click fraud in Ad Networks) the CPA campaigns were not high of their minds and fundamentally failed to make money for their publisher partners (affiliates) and led to a poor experience for their advertisers (merchants).
As a result, whilst many organizations would benefit from performance marketing (both on the affiliate and merchant side) their is much work to do in undoing the general perception that their is no money in this form of advertising in China. I guess, to be honest I also fell into the camp of skeptics a year ago where the effort needed to make affiliate marketing work outweighed the potential commercial benefit. But things are changing... and those who recognize this will enjoy the fruits of this new period in Chinese digital marketing.
I can hear you now, what's changed?
Well the biggest factors would be the increasing number of companies coming online with products to sell. We have SME's as well as large MMC and large Chinese domestic firms (such as BuyNow.com) entering the fray. However, the B2C eCommerce market in China is still in its infancy and although merchants in China are adopting eCommerce, they have not yet applied eCommerce as their principal channel to grow their business and therefore pave the way for eCommerce as a whole. Moreover, the lack of trust is one of the factors inhibiting the B2C commerce growth in China. Consumers usually limit themselves to only large companies or brands.
The number of internet users in China is now greater than the entire population of the United States, after rising to 338 million by the end of June. China Internet Network Information Center (CNNIC) reported in August that China added 40 million users in the first six months of 2009 to reach a total of 338 million Internet users by June 30, up 13.4% from late 2008. Domestic broadband users hit 320 million by June 30, accounting for 94.7% of total Internet users. And the main statistic that supports my claim that affiliate marketing will become a core digital marketing channel was the CNNIC's claim that eCommerce had improved; the number of Internet users shopping online grew by 14 million in the first half of 2009 to 87.88 million. A total of 23.7 million Chinese were using online payment services by June, up 4.8 percent points from six months ago.
So why then do we not have a Affiliate Marketing eco-system evolving?
There are many reasons that I can think of but the main ones I would say are:
- Lack of (professional) Affiliate Networks & providers
- Lack of local knowledge in developing affiliate programs/offers
- Lack of confidence by affiliates (publishers) that the commercial opportunity exists
- Lack of trust (although as the CNNIC nubers imply this is changing) in buying online
I have taken these points into consideration and over the past year and have had the team at SinoTech Group work quitely on a new platform (U2Mee) for Chinese companies to proactively go out and market their goods, services and products online.Even without an ecommerce backend, we can assist them in providing sales and not just clicks and leads. The other side of the coin is working actively with the publisher to make sure that they can make money off a CPA offer. It is a partnership... it can be a publisher that is only interesting in selling an ad unit upfront and does not care what goes into it but a publisher that is interested in getting more revenue yield per ad unit.
The old short term vs long term perspective ... and this educating task not to be taken lightly and I have found few publishers in China are willing to take a 'risk' and run CPA even when sell through rates are low.. I have had many smart and successful Internet leaders tell me that CPA won't work... This model would 'destroy' their CPD (cost per day) ad unit selling model and once they go down this path there is no turning back... I guess time will tell when the advertiser can get a marketing model that aligns to their sales goals... But one thing is for sure.. their are folks trying performance marketing (publishers) and clearly the large advertisers will continue to push for ROI based campaigns and away from simple media buys on a CPD basis.
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