Rethinking Mobile Advertising in China

Mobile Advertising Lags China’s Smartphone Explosion
Angela Doland
Advertising Age
January 24, 2014

Reporting from Shanghai, AdAge‘s Angela Doland writes a thought-provoking piece on how mobile e-commerce continues to outpace the growth of mobile advertising in the world’s largest smartphone market. As a percentage of all e-commerce, mobile is creeping into the double-digits, reaching as much as 21% during major holiday promotions.

At the same time, after years of effort, the most optimistic projections would have mobile advertising reach 3% of total ad spend in China this year. Given that Chinese users spend some 40% of their media consumption time staring at their mobile screens, you can understand the frustration of the advertisers.

Mobile Advertising Done Right

On the one hand, this trend should not surprise us. History teaches that effective advertising techniques for any new medium emerge only after an often extended period of trial and error. E-commerce initially grew much more quickly as a percentage of Internet-based revenues than advertising, and advertising was slow to find purchase in print news, radio, and television.

What this suggests is that the problem is not whether advertising can be adapted to mobile. The problem, rather, is that advertisers have yet to find an approach that makes the channel compelling.

Mobile Ad 1.0

There are three ways to approach mobile advertising. The first is to approach it as another channel for online advertising. This is where you talk about text-based advertising, display banners sized for the mobile screen, mobile search-based advertising, and ways to insert clever ads into music, videos, books and games consumed on a phone or tablet. Let’s call this “Mobile Advertising 1.0.”

My experience is that this has been the common approach in China, but that the challenges involved in making it work across three carriers, a half-dozen operating systems, hundreds of devices, and thousands of apps have made it difficult to get economies of scale. This alone might, in fact, explain why we are yet at such low numbers. Would it be easier with one carrier, one phone, and one operating system? Indeed. But I suspect that is not the real problem.

Perhaps, instead, we are misunderstanding the channel, and need to rethink how we do things. Back in 2006, I was in the room when my friend and former client Ian Chapman-Banks explained to a Japanese reporter that the reason that mobile advertising was having so much trouble was that we had failed to understand the value proposition.

Mobile Ad 2.0

Ian’s point (and I am paraphrasing heavily here) was that advetising as we know it was based on reaching out to chunks of people with similar characteristics at a given point in time. Mobile, Ian noted, had the ability to enable us to deliver a specific message to a specific person at a specific location and specific time.

In other words, what was keeping mobile advertising from being effective was that we were not using what made it fundamentally better than mass media advertising. This is the first time in history that advertisers could reach a person of their choosing at the time and place of their choosing, and all advertisers seemed to worry about was where to stick the banner on a small mobile screen.

Mobile advertising would be effective, Ian implied, when we figured out a way to make these capabilities work for the advertiser. Clearly, we are still looking for that combination, yet given the speed with which mobile is evolving and the innate conservatism of the advertising industry, this should come as no surprise. The key was to experiment and to keep experimenting.

The Mobile Ad 2.0 argument, then, is that if we want to figure out how to make mobile work for the nearly 1 billion mobile users in China (not to mention the rest of the world,) we have to experiment. Ian, who at the time had a generous marketing budget at his disposal, had allocated 10% of it to what he called “R&D:” money to try new channels of advertising and marketing that would not be evaluated alongside traditional channels, but that were just there to make sure that when something new worked, the company would be ready to exploit it.

So we aren’t at Mobile Ad 2.0 yet, but if we stick with it, we will get there eventually.

Is there a Mobile Ad 3.0?

Late last year I wrote a post that summarized why there are a number of ways to approach social media, each of which is guided by the marketing or technology silo from which one has emerged: practitioners who come out of advertising see social media as an advertising medium; people who come out of direct marketing see it as a direct marketing channel; PR people see it as a means of delivering messages; and so on.

What is different with mobile is that, in part because the challenge in putting mobile to work is, at the moment, much more technically intensive, the companies, departments, and agencies playing in that field have been those with lots of money. In short, it has been the advertising people. For that reason, we tend to talk about mobile as an advertising platform.

That exposes an assumption that is not necessarily supported by the facts. Zooming out of our ad-focused myopia one step further, then, we have to ask this: does mobile marketing need to be advertising-based, or are we missing something?

It’s Mobile Marketing, Jim, But Not As We Know It

In addition to allowing us to target an individual based on habits, time, and location, mobile also allows us to engage that individual in a conversation at a specific time and place. Mobile market research is based on that premise, and some of the early results hae been promising. As long as market researchers do not bombard us to the point of insensitivity with intrusive polls, and provided that we make it worth someone’s while to respond (good information is never free), this is likely to be a fruitful channel for some time to come.

Mobile has great value for point-of-sale applications based on near-field technology that go beyond completion of a sale. I walk into a hotel, and I am already getting notes on Foursquare about specials in the coffee shop. That’s a good start: it would be better if those specials were relevant to my dietary needs (e.g., “hi, David! We have great vegetarian options for you today!”)

Or how about direct-response on demand? When driving from city to city, I could tell Google’s Waze app on my phone that I needed a Sinopec station, and it would tell me distance, directions, prices, and offer me a coupon for stopping in.

I could go on, but you get the point. If there is a Mobile 3.0, and I think there should be, the opportunity is to start from the targeted user’s wants, needs, location, situation, and time, and work backward to the advertiser. This demands an intermediary who can make the match, of course. That’s why I think services like Criteo are going to translate well into the mobile space, and, in the long run, so will Baidu and possibly Tencent. The real gold rush will be for those companies who have the mass of advertisers on the one hand and the mass of users on the other.

Hence, Baidu’s ongoing interest in mobile. IF there is a single Chinese company that should make mobile advertising 2.0 or 3.0 happen, Baidu is it.

No PR Playground

What I am still trying to figure out, though, is where public relations has room to play in mobile. I have heard a few ideas, but I don’t see anything compelling so far. Classic advertising and classic PR don’t yet have roles to play in mobile to the degree that advertising does with online and PR does with social.

Yet every time I sit down and watch another compelling mobile technology demonstration, I am reminded that the tools we are creating today will be hopelessly antiquated, irrelevant, or both in five years. At some point, we are going to figure out how to make a connection between a company and a mobile user work out well for everyone. But we aren’t there yet.

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A Quick Thank You…

…to Michael Galeotto, who was kind enough to include Silicon Hutong in his list of worthy Chinese bridge blogs.

As he notes, and as readers will acknowledge, I don’t post here daily. I figure that my readers, like me, have lots to do and read in their lives, and I try to post here only when I have something to say that I figure is worth reading.

…and to you. For every article I post here, I still spike (reject) two others. I will continue to do that, because I figure it is the least I can do to thank you for eleven years of paying attention to this forum.

A quick note – in order to make this blog available to people in China without a VPN, I will be shifting servers in early April. If you are following, you should experience no change. But if you are following me through, please note that you will probably need to change your settings when I make the switch to a site.


Update: Added a link to Michael’s post.

China’s Great Innovations: Way More than Four

The 50 Greatest Breakthroughs Since the Wheel
James Fallows
The Atlantic

October 23, 2013

Doing book research (and shifting as much of it from my bookshelf to Evernote as possible), I came across this little gem that had escaped my attention while I was on the road last fall.

James Fallows turned to some experts to help him come up with the 50 greatest post-wheel innovations, and while each deserves a book – or at least a long chapter – the list is intriguing for several reasons. My favorite: counting the innovations that first came out of China.

From the top 50, they are:

  • 43. The abacus
  • 17. The compass
  • 14. Gunpowder
  • 6. Paper
  • 1. Moveable type printing

Two points fascinated me. First was printing press showing up on top, and the fact that the article does not ascribe an origin to the invention. People who have studied the history of Chinese innovation understand that the movable-type printing press was invented in China by Bi Sheng some 400 years before Johannes Gutenberg and Laurens Janszoon Coster argued about who of the two of them was first. History will out, though, and China gets credit for the most important innovation since the wheel.

Speaking of wheels, a sort of honorable mention on the list goes to the wheel barrow, a simple device created in China that allows a man to move heavier loads than he can carry without the aid of an animal. And I always search these lists for acknowledgement for China’s invention of investment casting, a process that turned complex metalworking from a handicraft to a mass-production process.

But these are quibbles. The point that the article brings home is that China was once far more innovative than we – and, indeed, Chinese – give it credit. While taking credit for four great innovations, China deserves credit for at least five, and probably more.

The perpetual challenge, of course, is how to make it innovative again. And to that theme we shall return in due course.

Clarity for China’s Growing GMO Debate

Texas Hill Country
Doing Agronomy 101
0902 hrs 

The debate over genetically-modified crops is reaching the boiling point among Chinese policy-makers, and the past several months have witnessed a spate of media coverage on the issue suggesting that the two sides are taking their case public to try to sway the issue.

One would hope that the science will win out in the end, but in the meantime I am doing a deep-dive on the GMO issue to a) understand where the scientific consensus lies, beyond corporate positioning and activist FUD, b) understand China’s interests in the area, so that I can c) start making some calls as to where this will go in the region.

Which is important because where China falls on GMOs is critical to the special interests cheering from the sidelines on both sides. As a massive and growing consumer of the world’s agricultural products, a ruling by China on GMOs either way could determine the future of genetically-modified crops worldwide. Yet as an increasingly important exporter of processed food, China does not want to get too far ahead of the world on the issue.

There are a ton of superb, science-based resources on GMOs, and Dr. Cami Ryan at the University of Saskatchewan has compiled an incomparable list of those resources. Some are technical, but most are highly accessible even for those of us who haven’t taken a science class since our freshman year in college.