Thought Leadership

How to Tap Programmatic Potential in APAC

Exchange Wire

Exchange Wire
June 11, 2015

By Francois de Laigue

Four billion people. One and a half billion internet users. One billion social media users. Asia-Pacific represents a large market and enormous opportunity for the digital advertising industry. The region also houses the largest ad agency, Japan-based Dentsu, which generated revenues of more than US$2bn in 2013-2014, according to Advertising Age.

Asia, primarily China, has been the bedrock of some of the world’s largest internet companies. China’s Tencent, Alibaba, and Baidu, as well as Japan’s Rakuten, are all multi-billion dollar companies. Not only have these organisations become global superpowers, many US and European digital advertising companies are seeking global expansion into Asia-Pacific markets – and they do so for good reason. In 2014, Asia saw the fastest year-over-year programmatic growth, at 73%, with a total spend of more than US$500m, according to Magna Global.

Despite the tremendous growth and market potential, however, many of the hundreds of US-based advertising technology companies have struggled to gain traction in Asia the same way they had in the US and European markets.

According to PulsePoint’s Programmatic Intelligence Report, spend on RTB ads served via our platform skyrocketed in Asia-Pacific last year. Spend on mobile RTB ads increased 329% in fourth-quarter 2014 over the previous quarter, while growth on desktop grew 285%.

To ride this growth wave in the region, US and European companies first need to understand the landscape and differences in culture.

Different markets, different players

There are several reasons why doing business in the Asia-Pacific region has proven difficult for Western-centric companies. The Chinese government, for instance, has enforced regulations that make it challenging for foreign companies to enter the local market. China generally lacks audience data and there is limited education and development in the programmatic space. In addition, the region’s vast geographical and cultural fragmentation among countries including language barriers are proving difficult for market players to overcome.

As a result, local Asia-Pacific companies have been able to thrive and grow faster, compared to their western counterparts. Whether it’s search, e-commerce, social, or audience measurement, there are already local Asian leaders to match their global peers. Baidu, for instance, fills the spot that Google has globally, while Alibaba takes the place of Amazon, Tencent is the local substitute for AOL and Verizon, and Miaozhen is the local answer to Nielsen.

The net result is a unique mix of locally grown companies emulating successful global business models that dominate their market, making it even harder for foreign businesses to enter the region.

Different players, different rules

Within the Asia-Pacific region, agencies have stronger direct relationships with marketers compared to those in the US and Europe. Agencies act as media and technology advisors, and initiate limited discussions on programmatic buying. This is particularly evident in Japan, where two agencies, Dentsu and Hakuhodo, dominate the market and own relationships with both the publishers and brands. Without agencies advocating the merits of programmatic, adoption has been much slower in the region.

Four tips for entering APAC:

There is no single guaranteed route to begin working and gaining traction in the region, but to be successful, there are some areas market players should consider early on in their gameplay:

1. Pick your battle

Doing business in China is radically different from doing business in Japan and other countries in Southeast Asia. In markets such as Singapore and Hong Kong, for instance, running servers in a single or a few locations is typically a viable option for delivering online advertising services across the region. Remember, too, that Asia-Pacific is a large market with vast differences between the various local markets.

New market entrants should first identify the country or region they want to focus on. They should then leverage the momentum gained in one part of the Asia-Pacific market to develop in another. There is no one recipe for success, but a focused and thought-out growth plan will be pivotal.

2. Partner right

Identify key players and partner up. In most parts of Asia, agencies have a stronghold on publisher and advertiser relationships. The ability to work with them and having internal teams who are able to converse in local languages are not just critical advantages, they are necessary for success.

Culturally speaking, relationships are very important in Asia-Pacific. Not only do you need to partner with the right companies, you also must be invested in building a mutually beneficial, sustainable business relationship, or risk being squeezed out.

3. Adapt to the market

As Asia ramps up programmatic buying, the different markets have the benefit of learning from early challenges and innovations experienced in the US, such as targeting options beyond the cookie.

Across Asia, audience data tends to be limited, as publishers are typically less willing to share their first-party data in non-direct settings. Companies looking to scale their businesses in Asia-Pacific have adopted models that rely less on audience data and are circumventing this by leveraging contextual targeting.

Contextual targeting is a fundamental building block of advertising and will be more critical than ever. Together, contextual and programmatic data technology will enable smarter audience targeting where first- and third-party cookie data is less prevalent.

According to our Programmatic Intelligence Report, mobile accounted for 79% of all contextualised inventory across Asia-Pacific, while arts & entertainment represented 76% of all mobile ad spend. The ability to offer these data categories will become even more attractive to sophisticated brands seeking targeting and scale.

4. Be mobile and social

Mobile is massive in Asia-Pacific. Our report found that Asia demonstrated the fastest increase in mobile inventory, clocking 192% growth in 2014, while mobile demand also increased 329% year-over-year.

The lion’s share of mobile usage went towards chat and messaging applications, which are very popular throughout Asia, though, the app of choice varied by country. Tencent’s WeChat led adoption in China, while QQ proved popular in Japan. Before attempting to address the potential of programmatic, companies looking to jump into these markets should first ensure their mobile strategy and solution suites are robust across its capabilities in targeting, delivery, and reporting features.

The Asia-Pacific market has grown rapidly. Many players have tried to enter the region, but few have succeeded. However, the opportunity is larger than ever and under-addressed.

While the US market is entering a phase of consolidation, the Asia-Pacific region is opening up for companies on the forefront of adtech and looking for new ways to fuel their growth. In these circumstances, picking your battle, partnering correctly, adapting to the market, and finding an angle can make or break your entry and growth in the market.

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