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GroupM report on China: Key facts you need to know about the world’s second-largest economy

GroupM, the world’s largest media investment group has released its first-ever Spotlight on China report which analyses the digital prospects of the world’s second-largest economy.

According to the report, China remains the world’s largest contributor to new ad dollars. Its $90 billion ad market is second only to the US and has doubled since 2010.

For marketers, China presents both exciting opportunities and formidable challenges.

Some of the key findings from the report:

98.3% of all Chinese netizens have transitioned to the mobile era

China’s mobile internet use has reached 788 million people, a number that represents a 4.7% increase compared to 2017, and accounts for 98.3% of all Chinese netizens.

Chinese mobile users prefer a large screen. In the current mobile phone market in China, more than 80% are larger than five inches. On average, they spend 289 minutes per person, per day on their devices. As mobile penetration expands, so too does the infrastructural foundation of mobile internet. For instance, 4G’s availability reached 70% in 2018.

According to data from the National Bureau of Statistics, nationwide online retail spending grew by 23.9% in 2018. Additional analysis of the figures reveals 25.4% growth in online retail sales of physical goods which is 18.4% of the total retail sales of consumer goods.

Spending on improving health and lifestyle among the increasingly affluent middle class has continued to rise, stimulating growth in sales of midrange to high-end products and imported goods. Secondly, consumers in lower-tier cities are also looking for more, better, and increasingly distinctive products.

It is predicted that the stimulatory effect of consumer spending on China’s economic growth will continue to increase while the demand structure continues to improve.

It is common for people living in the major cities of China to make payments through mobile. Alipay long ago surpassed PayPal as the world’s largest mobile payment platform.

In addition to Alipay, which enjoys 53.76% of mobile payment market share, there’s WeChat Pay, which holds 38.95% of the mobile payment market. Besides online payment, mobile payment has also broken through to offline payments via QR code scanning .

Enabled by mobile payment, most content and platforms can directly link to end sales on one of the Chinese online retail sites like T-mall or JD.com (and others), accelerating the purchase process and experience.

Selling to 310 million (and counting)

Cashless lifestyles and heavy reliance on mobile phones have given birth to “Social e-Commerce,” “Live Stream and Short Video,” “New Retail,” “e-Sports Marketing” and other business models that are leaping ahead of other markets. Entirely new ways to produce and distribute creative and content have emerged to meet the needs of different consumer segments.  

Big internet platforms such as BAT (Baidu, Alibaba, and Tencent) are helping brands create more direct conversion opportunities through the creation of a unified marketing retail environment that covers all sectors. They are also building a wider range of channel marketing content resources to help brands create more direct conversation opportunities.

Breaking the boundary between communication and sales, social commerce is now considered one of the most effective ways to deliver performance. It refers to a model derived from engaging in e-commerce in social media environments.

China’s social commerce market was forecasted to be worth RMB ¥1.14 trillion in 2018, growing to ¥3 trillion by 2020. Social commerce use was estimated to reach 310 million people in 2018, a figure that represents more than one-third of China’s internet population.

KOLs (key opinion leaders) or influencers exist in almost every category. Because of their expertise, high-quality PGC (professionally generated content), and large fan base, their influence is tremendous to the group.

Most KOLs are managed by MCNs (multi-channel networks), who act as investors, facilitating KOLs from content production to monetization. This is a notable difference when compared to the West, where MCNs function more like an agency.


Group M: Spotlight on China

Professionals like KOLs make content, MCNs manage resources, and the media platforms create the assurance that a purchase can be eventually realized.

China ad spending equivalent to 22.4% of the global digital ad market

Mobile advertising accounts for nearly 70% of digital advertising in China.

Chinese internet giants BAT own more than half of the digital ad market share in China. In 2017, Alibaba’s advertising revenue exceeded 100 billion RMB, ranking first. The total advertising revenue of BAT accounts for more than 60% of the overall digital advertising market.

With traditional, non-targeted display ads’ effectiveness declining, the industry may evolve towards more precise targeting of these ads, and increase use of formats with richer creative content, like video.

Media buying modes differ between China and Western markets. Instead of RTB for display ads in most foreign apps, Chinese apps typically adopt CPM, CPC, and CPD for ad buying, possibly because of their preference to hold ad pricing power on their own and avoid hostile bidding.

The Chinese market was forecasted to increase digital advertising spend by 26.5% to $62.55 billion in 2018. To further put this in context, eMarketer predicted in November 2018 that digital would account for a whopping 64.8% of China’s total media ad spending by the end of 2018 and represent 22.4% of the global digital ad market.

Risks include not only invalid traffic, poor viewability, and inappropriate brand context (brand safety issues), but also privacy and ad blocking. Many advertisers are starting to use new data monitoring technologies to reduce risk, and to ensure that their ads are viewable.

“Reshaping marketing paradigms”

According to the report, “In the foreseeable future, the above trends will continue to drive dramatic changes in people’s perceptions of themselves, their interactions and their relationship with the world.

This will result in severe fragmentation and diversity of the channels through which people obtain information and content,” which in turn, will continue “to overturn and reshape marketing paradigms.”

The GroupM: Spotlight on China report intends to help readers interpret these issues from different angles to improve marketing effectiveness in China.

Click here to download:
GroupM: Spotlight on China

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