Welcome to the Digital Marketing Inner Circle

Firstly the term, "Performance Marketing" is a general term that has over the years been used to describe just about everything in marketing. Mostly, this definition relates to online marketing and advertising programs in which retailers and service companies; also known as affiliates or publishers are paid when a specific action is completed, such as a sale. Therefore the term 'performance marketing' has become synonymous for ad networks. However, I have a broader views of this and in my 're-definition' of this term, I  also include Search, eDM and Social Marketing as these too can be performance based and given there is a move towards integrated campaigns. I believe this 'redefining' is appropriate and timely for digital marketing in 2010.

With traditional display advertising, advertising fees are paid up front and do not depend on a specific transaction taking place. Department store magnet John Wanamaker once said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” This statement has become quite clique but actually does highlight the problems with using non-measurable (or poorly understood) marketing mediums.

In performance marketing, advertisers and marketers only pay for successful transactions. Each transaction is based on a consumer taking a defined action, such as making a purchase from the advertiser, signing up for a subscription or even completing an online form. The trackability of performance marketing isn’t based on estimates. It’s based on actual results; meaning that a marketing program’s effectiveness is accurately determined, down to the mouse click or user action.

 The State of Performance Marketing in China

Here in China, using CPA (cost per action) methods are not new. Although I would assert that  CPA generally has a poor reputation among the online Publishers and Advertiser community.

The most common action would be that of the 'click' (CPC) and search engine marketing (such as for Baidu and Google SEM) and Chinese Ad Networks (such as Emar and Haimar) have dominated the space here. But the reportedly high levels of click fraud have resulted in Advertisers becoming sceptically about the merits of this form of action (predominately on the Ad Networks). 

CPM (cost per thousand impressions) is gaining some popularity (because of Ad Networks such as Ad China) for Advertisers but in most cases it is not really CPM as the Ad Network purchase the ad units on a  CPD (cost per day) basis and they arbitrage the inventory to the Advertisers on a CPM basis. Apart from U2Mee, there is not really a mature CPS (sale) type Affiliate Network in China.

Email marketing is a resilient marketing form and proves quite effective in China. The lists can be purchased but given the huge amounts of spam the best lists are qualified and generated (maintained) by the Brands themselves. As an example of this, Accor Hotels have been using SinoTech Group to send out eDM and help develop email enrollments for their eDM database. When using this qualified list, we see opening rates 30-35% better than using a purchased list (targeted to a specific demographic).

Where are we headed with performance marketing?

So as CMO's look to justify their marketing spends, many will turn to performance marketing practices as the measurabity provides evidence of campaign outcomes being met (or not). Further, the general understanding of digital by Marketers working within the Brands is improving. I am seeing an acceptance that budgets need to go online (although it is generally low- 5-15% of the overall marketing budget) and that there are a greater variety of options available in digital than simply purchasing an ad unit for a month or so.

In summary, I predict we will see more companies using outcome based digital marketing in 2010 (as a proportion of their digital allocation) that at anytime in the past and this will result in a flattening of the CPD rates for the Portals/Vertical publishers in the premium inventory.

I also see an increase in the keyword values on Baidu (for SEM) as more advertisers move into search marketing. I don't think the rates for keywords will change much on Google as the competition from new search engines this year will provide a balance to their keyword prices.

There will be an increase of the number of affiliate programs (as eCommerce takes off) but the resistance to CPS campaigns by the mature Chinese online publishers will result in a new bred of websites develop providing a 'shopping experience'. These virtual malls or shopping sites will be fueled by combining a number of synergistic affiliate programs. I would like to think that these new sites will be developed by new entrepreneurs but I guess as the first set of sites show effective monetization the larger sites will start to offer a 'separate' brand or channel to capture this revenue as well.

Anyway, these assertions are simply my thoughts about the direction of the Chinese  digital media landscape. I would be interested in knowing what you think. Please log in and post a comment.