A Matter Of Timing

Digital media’s big sales push worldwide may center on how easy it is for marketers to measure the performance of online advertising campaigns, but such issues tend to get pushed to the side in China, home to the world’s largest internet population.

Most online advertising in the Middle Kingdom, much like neighboring Japan and Korea, is not priced by how many people have seen an ad, or how many people were intrigued enough to click on it, but how long an ad is posted on a site.

There has been no shortage of forecasts over the years predicting the demise of a pricing model criticized as an antiquated old media legacy by detractors, but the reason selling by time has flourished in China is because that’s the way most online advertisers, usually small and medium-sized companies with limited resources, like it.

Cost-per-day (CPD) not only has the benefit of familiarity, but with credible data thin on the ground it also provides a relatively reliable way of gauging the reach of a digital campaign.

However, while the way most online ads are bought and sold in China has hardly changed, underlying trends, such as the country’s swelling internet population, are now encouraging brands to think harder about who they want to reach and be more selective in their online media plan.

Increasingly noticeable over the last six months, improved search functionality is also driving traffic deeper into websites, away from the home page which tended to attract the majority of advertising, creating new opportunities for targeted buys.

At the same time, a slowing economy, combined with increased use of rich media ads which are more expensive to produce, should also get brands paying more attention to measuring their return on investment.

New hybrid model
A hybrid model is emerging, where premium slots will still be sold on cost-per-day, but torso positions will increasingly be sold by CPM, says Mathew McDougall, CEO of digital advertising company SinoTech Group. Lower-level inventory will eventually be sold entirely by performance-based measures such as cost-per-action, something some large verticals are already trialing. “That’s a momentous mind shift from six months to a year ago,” McDougall says.

Increased investment in paid search should drive a greater awareness of alternatives to a CPD buy, as it has done in the US, where paid search accounts for over half of internet advertising. In China however, paid search is still some way from overtaking display, according to the latest estimates from Media Partners Asia.

Not everyone thinks the time is right for moving away from CPD, however. Tencent, already one of China’s biggest internet companies thanks to its phenemonally successful QQ instant messaging platform, wants to ramp up advertising revenues, and as a challenger brand is differentiating itself by investing in research that it can share with brands that want to advertise on its site.

“I think we’re the only site in China that’s analyzed the behavior of our audience, psychographically as well as demographically, and matched that behavior to categories of heavy and light internet users,” says SY Lau, Tencent’s EVP of online marketing and corporate branding. Tencent still makes most of its money from games and selling virtual items, but it is making strong headway in advertising, overtaking NetEase, one of the three big portals, in ad revenues last year.

Tencent's audience focus
This research will continue into 2009, with a digital touchpoints study comparing how people behave at Tencent’s different properties, from entertainment and news sites to gaming and chat, giving advertisers more depth on how context affects their communications. The CPD model however, as one that everyone understands, will stay in place.

“What we are not doing is changing the paying-by-day model,” Lau says. “We are saying we have found a way, a filtering tool, to ensure that your buying-per-day concept will deliver you even more appropriate sets of audience.”

This is an edited extract from a full-length feature published in the Q4 2008 edition of The Asia Media Journal.