ReachMax Report: Big Difference Between 'Programmatic Guaranteed' In China And The West

ReachMax, a China-based independent ad tech firm, finds that the term "programmatic guaranteed" doesn’t mean the same thing in China that it does in the West. That’s among the findings of  “A Guide to Programmatic Video in China,” a report that's the culmination of the company’s insights and experiences with programmatic video over the past two years.

With respect to differences between programmatic guaranteed inventory in the two locales, the report found that in China, publishers are most focused on acquiring premium content, and brand advertisers aim to use the guaranteed model to increase media buying efficiency while controlling media pricing and premium inventory. In the West, programmatic guaranteed is more focused on using programmatic to automate the media-booking process.

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The finding has implications for multinationals doing business in China. According to Charlie Wang, ReachMax COO, the main difference in using the term lies in the issues that programmatic direct/guaranteed aims to handle. For example, “in the West, programmatic direct... is centered around sales process automation so that the media sales team can focus on consulting and building relationships,” Wang explained to Real-Time Daily in an email. “But in China, programmatic direct is not a model preferred by publishers, because media sales locally, are very relationship-driven, therefore publishers don’t want to automate everything. “

Wang explained that China is a very publisher-dominant market and it doesn’t abide by many global standards like ad-serving and viewability. The implication is that ad tech firms operating locally need to be mindful of creating optimal situations for both advertisers and publishers. Wang went on to suggest that ad tech companies that continue to operate on an arbitrage basis will lose trust with both advertisers and publishers.

Among the report’s other findings:

  • Long-tail inventory, non-transparent pricing, loss of direct publisher relationships and non-fixed media share of voice have made many big brand advertisers afraid of programmatic. The report suggests that those issues merely “describe the open exchange or RTB inventory, which is most suitable for performance advertisers.”
  • The programmatic guaranteed/direct model guarantees inventory quality on a fixed price which is a smart and safe way for brand advertisers to try programmatic media buying.
  • Programmatic’s core value lies in the selection of impressions. But  under the programmatic guaranteed/direct model, both the impression volume and price are fixed. The challenge becomes,  how can media KPIs like target rate increase? In order to make it work in the China market, ReachMax promoted its “Volume Multiplier” concept, which is a tool to help “localize”  programmatic guaranteed in China.
  • Prior to the emergence of the programmatic guaranteed/direct model, data was usually bundled with inventory like a black box to the advertisers, who don’t know the exact data set being used on their campaigns. Many advertisers aren’t used to paying directly for data in China. In order for advertisers to place greater focus on data transparency and quality, it’s important that the data and inventory become separate.

Wang maintained that the growth in programmatic for the next couple of years will mainly come from brand advertisers buying premium inventory. “As more brand advertisers start to see the ROI for programmatic, publishers will release more and more premium inventory into the mix.”

Estimates vary on programmatic growth. For example, eMarketer projects reveal that spending on programmatic display in the U.S. will reach $26.78 billion in 2017—that’s just in the U.S., and it’s only display. Spending on programmatically purchased mobile ads was expected to overtake desktop this year by more than $3.23 billion -- representing more than 60% of all U.S. programmatic spending, according to eMarketer.

Predictions on programmatic growth from iResearch indicate that by 2017, almost 30% of all digital ads will be bought in a programmatic way in China. And nearly 50% of all programmatic buys will be premium/non-RTB, as opposed to remnant/RTB. Wang agreed with that prediction.

Wang noted that in 2016, multinational advertisers should expect more data providers to open up access to their data, which he believes will spur more growth in programmatic. More access means that  advertisers will have more data for ad targeting.

“We also expect the programmatic ecosystem will become more focused and transparent. The China programmatic companies have always operated on an arbitrage model that's similar to the ad networks, and this will change as more advertisers demand full pricing transparency.”

Wang said he also expects ad-tech players to become more focused in their offerings, meaning that if they're a DSP then they don’t also offer DMP and ad network services: “This is an issue for the China market because many ad-tech players locally have evolved out of traditional ad networks, so they have multiple products offering a one-stop shop to advertisers. But using those bundled products, advertisers will lose transparency and control in inventory quality and pricing.”

As for header bidding, Wang said that it’s a relatively new trend in China but it hasn’t been adopted locally yet: “The local publishers will need to try it and see if it actually increase overall yields.”

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