The Fundamentals of Advertising in China (2019 Guide)

This article originally appeared on the Dragon Social website

Advertising in China can be hell for marketers looking to expand to the Chinese market. In this blog, we’ll cover the various options available for advertising in China; from traditional channels like TV and radio to social media and advertising networks. Some of this stuff can get a bit technical, so if you have any questions don’t hesitate to ask!

Many foreign companies who move into the Chinese market fail to understand how advertising in China differs from their own domestic market. Advertising in China starts and ends with understanding how the Chinese consumer is different and how they behave, but it’s also important to learn about the channels available.  Learn about all this and more in this blog!

China Advertising Laws and Regulations: A Brief Overview

At times it can seem like the attitude of the Chinese government toward the advertising industry is outright hostile. Censorship of advertisement has been prevalent over the years and new regulations are seemingly always right around the corner.

Many entire industries face strict oversight of their advertising including finance, real estate, gambling, mobile games, and others. If your business is in these industries you’ll be more limited in your options for advertising. For more information on these contact our team directly!

The last big government update was a restatement of The Advertising Law of the People’s Republic of China. Below you’ll see a list of the biggest changes that were made as a result of this law (if you feel like you’re even close to coming in conflict with these contact a law firm! This is not legal advice.)

• Misleading Content: false or misleading content is strictly prohibited.
• Superlatives: the use of superlatives in advertisements such as “the most” and “the best” is prohibited.
• National Flag/Anthem: any use of the Chinese national flag or national anthem are prohibited.
• National Dignity: any advertisement which contains anything causing detriment to national dignity or national interests are prohibited.
• Social Stability: advertising interfering with social stability, causing detriment to social and public interests or interfering with social public order or going against good social norms are prohibited.
• Internet Advertisements: Internet advertisements must not interfere with the users “normal use of the internet.”
• Labeling: advertisements must be clearly labeled so users can differentiate advertising and organic content (also applicable to search engines).
• Pop-Up Advertisements: must have a clear method to close the advertisement within one click.
• Tobacco: advertising of tobacco products both online and offline is prohibited.
• Prescription Drugs:  advertising of prescription drugs both online and offline is prohibited.
• Industry Approvals: advertisements from businesses in certain industries now require approval before engaging in advertising. This includes medical treatments, pharmaceuticals, foods for special medical purposes (FSMP), medical devices, pesticides, veterinary drugs, and dietary supplements.

For more information on the details of the 2015 Advertising law check out this blog.

However, it’s not just the government that is keen to regulate advertisements. Tencent, the owner of WeChat, places an extremely high value on its user experience and places a lot of restrictions on advertisements to protect this. Tencent has been making advertising more available to marketers in recent years as it begins to make up a larger share of its revenues.

Tencent has well-diversified revenue streams and has potential to grow each of these categories further

Weibo on the other hand, China’s version of Twitter, derives over 80% of its revenue from advertising, leading them to make it much more marketer friendly. With a variety of different advertisements, competitive bid rates, and a wider acceptance of different media types, Weibo offers a lot more options for marketers than many of Tencent’s platforms.

Sina Corp, the parent company of Sina Weibo, depends heavily on advertising as its main source of revenue.

Given how dependent Weibo is on advertising though you can see why they’d want to make it an attractive platform for marketers.

Digital Advertising in China

Digital Advertising in China is far different from what you’re used to in other countries. The entire digital landscape in China is much more fragmented, with users jumping from app to app and ecosystem to ecosystem making it difficult to track users effectively. China is also dominated by mobile so as we’ve said in other blogs previously: Mobile Comes First in China! 

Social Media Advertising in China

Social media in China is often thought of as just WeChat and Weibo, when in reality there are hundreds if not thousands of social media platforms used throughout China. Nearly all of these platforms offer some form of paid advertisement.

Some of the most popular platforms for advertising include Youku/Tudou, WeChat, Weibo, Xiaohongshu, Douban, Zhihu, Toutiao, and Tieba. There are also a range of more focused platforms that focus on specific niches like Xueqiu, which focuses on investment/finance, and Mawofeng, which focuses on travel.

One of the advantages of social media is that most offer support for video advertisements which are quickly becoming one of the most effective advertising mediums in China. Video is effective as compared to traditional banner ads as it is more eye-catching and offers the ability to demonstrate various product use cases.

Video advertisements can be placed across social media platforms and of course on video-streaming platforms. Tencent Video recently took the lead in the race to become the leading video streaming platform in China, ousting the former leader Youku-Tudou.

Many platforms, like Sina Weibo, also offer boosted content postings, which are also quite effective as they can come off as more organic than banner ads and other forms of advertisement. Combined with KOLs (Chinese influencers), these sponsored posts can have outstanding reach and conversion rates. If you’re interested in KOL advertising we’ve discussed this in further detail on another blog you can find here.

Chinese Search Engine Advertising (SEM)

In China, search engine advertising can be very useful. Unlike in countries like the US and the United Kingdom, Chinese consumers do not have a huge aversion to clicking ads on search engines. However, Chinese search engines do feature a lot of advertising in search results, making competition higher than what you’re used to on Google.

When it comes to search engine marketing most businesses should be focused on Baidu as it still maintains the largest market share in terms of search. Advertising on Baidu is just like advertising on Google, you’ll need to bid for competitive keywords and pay on a PPC basis. If you’re looking for information on organic search you can check it out our guide below:

The Top Companies for Search Engines in China

However, there are other search engines you can consider based on your business. For example, Haosou is often touted as a cheaper alternative for B2B companies looking to advertise as it’s commonly used in the workplace. For more information, statistics, and information on the Chinese search engine scene check out our blog on the topic.

Programmatic Advertising in China/Chinese Ad Networks

Source: Stateofdigital

If you’re an experienced advertiser you almost certainly have some experience with programmatic advertising platforms. The ones you’re likely most familiar with are the Google Display Network (GDN) & Doubleclick Bid Manager (DBM).

Both of these networks allow you to run advertising campaigns across platforms and offer advanced targeting to reach your ideal audience. However,  while the Google Display Network has access to all the advertising inventory in the Adsense network, Doubleclick Bid Manager has access to 81 ad networks, meaning it has a vastly greater reach.

In this section, we’ll cover 3 of the top Ad Networks in China, which are of course owned by China’s largest companies BAT (Baidu, Alibaba, and Tencent). While there are plenty more than these 3, these are some of the most notable, as they control nearly 80% of the programmatic advertising market (as well as a whole lot of other markets which you can see from the image below).

BAT (Baidu, Alibaba Tencent) are the 3 largest internet companies in China. Often compared to the FAANG companies in the USA

In China, programmatic advertising makes up a significant proportion of advertising budgets for most advertisers, as they provide access to some of the most desirable placements and formats. They also provide advanced targeting due to the data that these platforms are able to collect through their various platforms.

This has been particularly valuable for companies investing in short video advertising. As these networks offer access to some of the most attractive placements for short video content.

Amounts in USD (Source: E-marketer)

Programmatic buying makes it much easier for advertisers to market to mobile users as well, as it can allow advertisers to buy placements across various apps to reach the target audience. Due to these many benefits spending on programmatic has been increasing drastically, with USD $22.81 billion spent on advertising in 2018. It is anticipated to reach USD $29.61 billion by the end of 2019 according to e-marketer.

Baiyi: The Baidu Display Ad Network, The Right Choice for Targeting Users on Desktop

The Baidu ad network is called Baiyi (百意投放平台). This can get very technical so I’ll give a brief overview of what is possible on the platform. If you want to learn more you can consult their website here.

The Baiyi Network is capable of helping advertisers run campaigns on PC, Mobile, Transportation (Subways, Taxis, etc.), and Television. This makes the network incredibly powerful for targeting users across platforms. Like most platforms, it uses tags to collect data on users and build out profiles for each unique user based on their interests, behavior, and demographics. Advertisers can use this information to target their audience far more accurately than with one stand-alone platform.

On PC the network covers over 550 million users. The network is capable of advertising on over 600,000 websites which have traffic numbers of over 10 billion users daily. With this massive number of websites you can choose to display ads on niche websites that your target audience is most likely to visit.

For Mobile the network covers 450 million users and over 1.5 million mobile websites & apps. All told these websites and apps generate traffic of 10 billion daily. The mobile network offers a range of ad formats including banner ads, full-screen ads, floating ads, opening advertisements (when a user opens an app), and video ads. There’s a range of variables for each format allowing you to place different types of ads.

Examples of Baidu Baiyi Ad Placements on Mobile

The network also covers some of the top video platforms for video advertisements. However, notably, some of the biggest platforms are missing as they are owned and operated by Baidu’s competitors, such as Tencent Video and Youku-Tudou (owned by Alibaba). IQiYi is present in the network which consistently ranks in the top 3 video streaming platforms.

Like other ad networks audience targeting on Baiyi is quite advanced. You can target users based on interests, keywords, relationship status, geographical information (with real-time location support), industry, device, OS, device price, device type, and a range of other categories.

Baidu Baiyi aims to be a solution for omnichannel marketing campaigns. It’s still being further developed and it is expected to continue playing a major role in the advertising industry in China.

In order to register on the network, you will need a Chinese business license as well as several other documents. As per Baidu’s website “you will need to provide materials including business license, ICP record, industry qualification and so on.” It states that different types of businesses have different qualifications, so you will need to speak to them directly to determine what you require, or you can find a Chinese marketing agency to help with the process.

Tencent Social Ads: Tencent’s Ad Network Covering Everything from the Top Apps in China to WeChat

This is likely the most well-known of the three big advertising networks due to its unique capability to place advertisements on platforms owned by Tencent, which includes WeChat, QQ, Tencent News, and Tencent Video. As some of the most popular platforms in the Chinese digital ecosystem, this makes this ad network very attractive for many brands.

Outside of Tencent’s own products, Tencent also created The Tencent Alliance Ecosystem, which is an ad network which focuses heavily on mobile advertising. However, given the trend in China of mobile being the dominant force for advertising, it makes sense that Tencent would focus on mobile.

The Tencent Alliance is a network of over 100,000 apps that collectively have over 500 million users. Tencent claims that 75% of the top apps have joined the network, and I would trust this claim considering Tencent also owns the most popular app store in China (which the ad network also covers)! 

Examples of Ad formats on the Tencent Alliance Network (the text was translated with Google Translate so forgive any weird grammar)

Utilizing this network allows you to access some of the most popular advertising channels in all of China (like WeChat) with budgets starting as low as RMB 1,000 (~ USD $150). Different types of ads vary in price but allow users to control costs and use formats with different cost structures CPM/CPC/etc.

Another factor that gives the Tencent Advertising Network an advantage is the fact that Tencent has data from user data obtained from its own platforms like WeChat, QQ, etc, which of course it doesn’t share with other networks. Given how much time users spend on Tencent’s platforms it’s likely that Tencent has the most data of all the BAT companies.

With more than 800 million users using Tencent products and third-party applications on a daily basis, this advertising network is incredibly powerful.

All the platforms/networks on Tencent’s Ad Platform

However, a Chinese business license is required to use the network at these price points. For foreign businesses you can work with a Chinese agency to handle your ad buying at lower rates or you can take the big step of opening a business in China

As per Tencent’s official agreement, this is what is required to open an advertiser account on the network:

1. Business license, ID card, and other identification documents and other documents of production and business qualifications.
2. Complete, legal and effective contact information, such as a mailbox, telephone, address, etc.
3. Other necessary supporting documents, including but not limited to product quality inspection certificates, authorization documents, advertisement review forms, etc.

AliMaMa 阿里妈妈 (AliBaBa’s) Advertising Platform: E-Commerce Advertising and So Much More

This one’s name is pretty funny if you know some simple Chinese.  As you might expect, Alibaba’s Advertising platform, Alimama, places a heavy focus on E-Commerce. It is the ideal platform for businesses selling products through Alibaba’s various marketplaces like Taobao and T-Mall.

The platform offers a range of advertising products for use on these platforms and more, the most popular being Train advertisements and Diamond Display Advertisements.

Train advertisements refer to paid placements at the top of search results on Taobao/T-Mall for desired keywords. These can be incredibly effective for sellers on Taobao and T-Mall.

Taobao Train Advertisements

Diamond advertisements have various functions allowing users to place ads on various apps and websites including platforms like IQiYi, Sina Weibo, Netease, and Youku-Tudou. However, there most commonly known for the ability to place display ads on Taobao which can be in the sidebar or even on the homepage!

Alibaba also has other advertising products to further expand its reach outside its main e-commerce platforms. For example, it launched TANX (Taobao Ad Network and Exchange) which provides both an SSP and DSP service for publishers and advertisers. It also has the Taobao Affiliate Network which runs ads only purchased through the Alimama platform.

The Taobao Affiliate Network and TANX, are most comparable to the Google Display Network and Doubleclick respectively. Both networks claim to cover the most popular websites in China, offerings similar functionality to Baidu’s services.

Getting started with these platforms can be difficult for non-Chinese businesses, and each platform that Alibaba offers has different requirements. If you’re looking to get started using these platforms you’ll want to speak with Alibaba directly to see what’s needed or get a marketing consultant to handle it for you.

China Online Advertising Trends

China’s online advertising market has seen tremendous growth in recent years, with revenues reaching approximately USD 100 billion in 2017. In this part, we’ll cover the 3 different types of ad formats that make up the largest portions of a company’s advertising budgets to help guide your advertising strategies in China. For more on trends in 2019, you can check out our blog below.

Top 5 China Digital Marketing Trends (2019)

Source (China Internet Watch)

Search Engine Advertising in China

Search engine advertising seems to be on the decline in China, with smaller proportions of advertising budgets being spent on this ad format. These advertisements made up over 1/3 of online advertising budgets back in 2013, but with the rising popularity of China’s social media, search is becoming less and less of a factor. So much so, that it only made up 22.75% of advertising budgets in 2017 according to iResearch.

According to forecasts made by China Internet Watch, a research organization that monitors various aspects of the Chinese economy, it is expected that search engine advertising will fall even further by 2020 to around 15% of advertising budgets nationwide.

While overall online advertising budgets are increasing and search engine advertising is still a part of most companies’ marketing mix, this data shows that search engine advertising is becoming less of a priority in China going forward. It also plays a bigger part for some businesses over others, for example, for those in B2B, search still plays a massive role.

E-Commerce Advertising in China

E-Commerce advertisements in China are expected to make up nearly 1/3 of total advertising spend in the country. This is no surprise given the popularity of e-commerce in China. According to statistics on Statista (which I always take with a grain of salt),  E-commerce sales made up 28.6% of retail sales in China. Compared to the US, where only 14.3% of retail sales were made online according to Digital Commerce 360.

E-commerce in China is only expected to continue growing as E-tailers have begun moving into other segments traditionally dominated by brick-and-mortar, like groceries and perishable goods.

HeMa is the face of Alibaba’s “New Retail” Initiative aiming to create an Omni-Channel Retail experience

Pinduoduo’s rise to the top of the charts this year also showed us that e-commerce is beginning to take a firm hold in tier-3 and tier-4 cities. These outer lesser known cities have been responsible for huge growth in a number of areas so we’ll likely see E-commerce advertisement spending to continue to see double-digit growth for at least the next few years.

In-Feed Advertising In China

In-Feed Advertising, otherwise known as News Feed Advertising has seen tremendous growth in China over the last few years. In 2017 alone, spending on in-feed advertising grew by 91.5%. It’s expected to continue growing at well over 50% for the next few years.

The most popular platforms for news-feed advertisements are WeChat, QQ, and Tencent Video. There was also huge growth for smaller platforms like QuToutiao, Sina Sports, and Hilamaya FM.

Since these advertisements are Native advertisements, their use depends heavily on the platform they are featured on. That makes understanding the demographics and user behavior of the platform you choose to advertise on incredibly important.

For example, one platform popular with advertisers is MeiYou, an app for tracking menstrual cycles and discussing women’s issues, as the audience on the platform is clearly defined. For advertisers who want to target women, advertising on the platform makes sense.

One issue with News-Feed ads is they tend to be more expensive than traditional banners or other forms of advertising. However, they’ve proven to be quite effective to the point that experts predict that they will make up 35% of online advertising spending in the coming years.

Traditional Advertising in China

While online advertising is the fastest growing segment in terms of advertising spends, traditional advertising channels still make up nearly 50% of advertising spend in China. The entire advertising category saw 5.7% year on year growth in the first 9 months of 2018 according to CTR Market Research.

Online advertising spending saw double-digit growth in many categories while traditional advertising grew by 2.1% YoY, which is still respectable considering how dominant it seems online has become. We’ll cover a few formats in the traditional advertising market below.

Television Advertising

Television advertisements were one of the primary drivers of growth in the traditional advertising industry with spending growing by 3.6% as of Q3 2018. The top 5 industries investing in this format were beverages, pharmaceuticals, food, and cosmetics/toiletries, and alcoholic beverages.

The Display Outside Alibaba’s Double-11 Night Carnival

Aside from these 5, e-commerce companies like Pinduoduo have been investing heavily into TV advertisements to drive users onto their platforms. Alibaba also invests in TV to host its Double-11 Night Carnival, a TV event which promotes the e-commerce holiday Double-11.

A Voice of China Promo with the Iconic JVB Red Can

Viewers of the program can purchase all the items featured on the show through T-Mall and Taobao. The program has huge viewership numbers and features celebrities from China and around the world.

As most familiar with the Chinese market will know the number one player in the TV advertising market is China Central Television (CCTV). According to PWWC, among the top 10 channels in the country 6 of them were owned by CCTV.

In Recent Years, companies have also been investing in sponsoring TV shows rather than buying traditional advertising time slots. For example, JDB, a Chinese herbal tea brand, spent more than USD $120 million on exclusive naming rights to the past 4 seasons of Zhejiang TV’s “The Voice of China.”

Radio & Broadcast Advertising

This is one category that is still performing remarkably well according to statistics released by CTR Market Research. In the first three-quarters of 2018 advertising spend on broadcast advertisements increased by 8.3%, which actually puts its growth rate above some online advertising formats.

Broadcast Advertising is Showing Steady Growth

The total broadcast listener audience is speculated to be between 420 million and 685 million in China. The stability of radio has been carried primarily by the growth of car ownership. Statistics from Seychelles Media Research showed that there are 378 million in-vehicle radio listeners, with more than 300 million of them being considered loyal. This makes the radio listening population in China similar to the size of the entire United States.

Imagine all these drivers hearing your advertisements

Radio has also become more accessible to smaller sized businesses, with many networks now offering small business packages for local enterprises. Overall the top 5 industries in China investing in broadcast advertisements were Commercial & Service Industries, Transportation, Food, Communication, and Finance.

Fortunately, it seems like broadcast is alive and well in China and will continue to be so for the foreseeable future. As more and more Chinese purchase vehicles it’s likely the audience for broadcast will only increase going forward.

Elevator & Movie Theater Advertisements

I bet many of you didn’t realize just how big of a market these places are for advertisements. These two areas have seen tremendous growth in recent years as they claim to advertise to a “Captive Audience,” in that viewers can’t really escape and are forced to watch advertisements placed in these venues (I do get sucked into watching them pretty frequently myself).

We’ll first go over elevator advertising which has gotten to be an absolutely massive market. So much so that the market leader, Focus Media, generated over 12 billion renminbi in 2017. The second largest company, Xinchao Media, has received a USD $300 million dollar investment from Baidu in late 2018.  This kind of market activity shows that this form of advertising is certainly raising eyebrows.

Elevator Advertising is showing the strongest growth out of all traditional advertising channels

However, elevator advertising isn’t as traditional as other traditional advertising channels. Companies providing this form of advertising monitor consumer reactions and behavior via in elevators to optimize advertisements. They can also provide data from consumer devices through NFC and Wifi technology (that’s kind of scary). These LED screens are being placed in elevators in both residential and commercial buildings and are one of the fastest growing segments in the advertising industry.

It’s easy to get sucked in when you’re bored on the elevator

The growth of the cinema industry in China has been propelling investment in theater advertising into a major channel.  As of November 30th, 2018 China had 59,009 movie screens according to the Global Times.

According to market research, The average cinema goer is 24 years old and visits the cinema once every 3 weeks. In terms of gender, viewers are 59% female vs. 41% male. With 86% of viewers holding bachelor degrees this makes theater audiences an attractive target for advertisers.

The proof is in the numbers again, with Theater Video Advertising Spend increasing by 22.6% as of Q3 2018.

The Cost of Advertising in China

Most companies severely underestimate the cost of marketing in China when they begin their initial planning and research. Just because you can get plastic doo-dads cheaply made in China doesn’t mean that everything is cheap. In fact, advertising costs in China are often equal or more expensive than in Europe or the United States.

Getting started can also be incredibly tough and requires a significant time investment. It’s not like Facebook, where you can just sign up throw USD $5 in and see what happens. Almost all Chinese advertising platforms require you to present a list of documents just to get started. Many also have daily budget requirements (they really want you to spend!)

Entering the Chinese market is not for the faint of heart. Chinese companies frequently lose money to gain market share, and if you’re not willing to go toe-to-toe with them you’ll likely lose. That’s not to say you need to get into a spending war, but you need to be prepared for a lower ROI than what you’re used to initially. Through careful testing and patience, you can achieve strong ROI figures, but you can’t expect to just show up in the market and dominate.

Check out this quote from Michael Lin from Mailman X featured on Jing Daily below for some perspective on the budgets of multinational companies:

“For multinational brands, yearly budgets are typically around 100,000 USD on the low end and over 1,000,000 USD on the high end which can cover full digital scopes including SEM, PR, Website, Social, and Media. For a campaign or specific promotion, the budget will be dependent on which channels are used for promotion and what kind of audiences the brand is trying to reach.”

What’s The Best Way to Advertise in China?

So after all this, I hope you seriously don’t think there’s a one size fits all answer to this question. As we said at the top of the post the best strategies are always created with the end customer in mind. If it’s your first foray into China, I always recommended either bring on full-time Chinese staff who understand the market or employing a Chinese marketing agency.

You can be the best marketer in the world and still end up getting crushed in China if you don’t prepare and strategize to make the most of your investment. Anyway, hope this information helps and best of luck to all you marketers preparing to dive in! If you’re looking for more information don’t forget to subscribe to the Dragon Social Newsletter here!