Everyone Knows Ads Should Run on Quality Media. So Who Defines "Quality" Now? | What Changed Advertising ③

Advertisers judge by sales conversion; ad tech firms put the efficient use of data first; agencies are scrambling to sign up as many media outlets as they can. Traffic still matters, but narrow audiences and long-tail demand are worth more and more.

For as long as anyone can remember, advertising has worked one way: the client sets the brief, the agency makes the creative and buys the media, and together they reach as many target consumers as effectively as they can. That model is now under enormous strain.

People in the business have never been this confused, or this unsure of themselves, about consumer insight — the foundation and the core of the entire industry.

A more mobile life changed everything. As consumers hop between screens and spend their time and attention however they like, the marketer's article of faith — the money goes where the consumers are — has lost its target.

That the age of TV advertising is finished is now close to industry consensus. But in a digital marketing landscape this dizzying and this complicated, nobody yet has a clear answer to what actually works.

The search has been on for at least three years. Judging by what is happening now, and by our interviews, the anxiety has not gone away. What has changed, fundamentally, is every role along the chain.

Brands that always handed marketing content to their agencies are building in-house teams and making it themselves. Agencies may have entered their most research-and-development-minded era yet, setting up data labs, incubating startups, building data platforms. Media outlets that once sold nothing but time and space now have to do creative work, because clients want ads that "fit the outlet's own tone and style." And Facebook, the face of social media, suddenly finds itself lined up opposite Google.

That is why we are running this series. In four articles we will look at how each role in the advertising chain has changed, and how each is rewriting the rules. This is the third.

In 2010, China's entire internet advertising market was worth 32.55 billion yuan. A single channel, Hunan TV, took in 2 billion yuan in ad revenue in 2009. And even in decline, CCTV's annual ad auction still presold 15.9 billion yuan worth of inventory in 2013.

Ask a marketer five years ago which was the best media buy and you would have got one answer: television.

"Best," in a sense, meant "biggest" — the place where an ad reached the most people. CCTV was, once, beyond argument, which is why its annual auction was crowned "a barometer of the Chinese economy." The United States was no different: ABC, NBC and CBS between them covered almost the whole population.

"In the past, this field of ours was very simple. Many brands were after the mass audience, and everybody learned about brands by watching TV," said Rob Norman, global chief digital officer at GroupM, recalling the 1990s, television's golden age. "Traditionally our understanding of advertising was that it emphasized scale, and that once you made it, you could use it again and again."

Now everyone knows that no medium can monopolize attention any more.

Five hundred thousand iOS apps, 10,000 official accounts, 21,000 news and information websites, hundreds of video sites — numbers that may be out of date by the second. That is the scattered digital landscape marketers face.

"We have reached the point where the creative has to follow the medium. You can no longer make one ad, put it in one medium and reach everyone. Instead more pieces of content reach different consumers," Norman said. Marketers broadly agree.

Yet a recent report from the research firm TNS found that only about one in three marketers in China feels confident about handling consumers' media touchpoints. Advertisers are still asking the same questions: where are the consumers, and how do we hit them?

Turn that confidence index around and it says something simpler. There is no longer any agreement on what counts as a quality media buy.

The shift among consumers is plain enough. Young ones in particular want things tailored to them, so interests, culture and shared values are what pull people into groups — and those are the criteria they use, deliberately, to go looking for information, content and media of their own.

Whether the splintering of media into vertical niches is the cause of that demand or its result is hard to say. What is certain is that "quality" now means many different things. The long tail is worth more than it was.

This has produced a new way of thinking. Instead of reaching as many people as possible through every channel, every method and every impression, the new view is to subtract: get precision by cutting out everyone who is not the target. The heart of that approach, or at least its first step, is working out which media are genuinely valuable and genuinely suited to the brand or product.

"Quality inventory can be judged from several angles: location or app, content or program, channel, time of day," Xu Weichong, head of digital foresight at Carat China, told QDaily. "How much each dimension matters depends on the brand and its target audience."

Programmatic buying is seen as one answer to the quality question. In plain terms, it uses data and a set of algorithms to decide which platform an ad should run on, what price is fair, and which time slots are worth most. About half of China's digital media budget is now bought programmatically, driven largely by performance advertisers such as e-commerce companies. For brand advertisers, programmatic accounts for roughly 20% of the budget.

But Huang Xiaonan, founder and chief executive of iPinYou, one of the programmatic providers, sees a catch: everyone in the business now says data matters, yet in practice they still do not let the data decide. "An agency may go on experience, decide that Medium A is better than Medium B, and insist on A." She calls it the agencies' inheritance problem.

Advertisers who used to leave these calls to media buying agencies like Carat and GroupM now disagree with them more and more often. "We'll tell the agency straight out that we don't think it's the best fit — the price, say, or which official accounts to use, whether to repost or commission something original. There's a lot of discussion now, and sometimes it's an argument," said Dong Xin, marketing head of the e-commerce division at Mondelez China.

Agencies once held mountains of third-party data, and that data governed their buying. Now the data is out in the open. Advertisers can watch conversion rates on e-commerce platforms in real time and collect plenty of consumer data; read counts and comment counts on Weibo and WeChat are there for anyone to see. So advertisers can now make up their own minds.

One case Dong Xin likes to cite is the custom packaging campaign Oreo ran on Tmall this year, which let shoppers color in their own designs. "The conversion rate was far higher than a normal promotion — nearly 10 times higher on the day." In August the brand followed up with a Tmall livestream featuring the singers Da Zhangwei and Xue Zhiqian. "Usually with a livestream we look at views and clicks. On Tmall we see first-hand sales data. We can see what the campaign did to sales, so we can see whether it worked." Which is why, for Dong Xin, Tmall counts as quality media.

So the definition of media now stretches far past its old boundaries. Anything that gathers people and attention qualifies.

Seen that way, the "quality media platform" GroupM launched for programmatic buying in early September looks rather like protesting too much. Wu Jun, managing director of media buying at GroupM China, said the first wave plugged in more than 60 media properties. As for how they were picked: "First, the sites where GroupM clients concentrate their spending, because we want to cover what most clients need — QQ.com, for instance. Then the verticals: parenting, cars, beauty, a lot of O2O. Video had to be in there, because 99% of advertisers now want video."

Which properties can actually be plugged in depends mostly on who is willing to open their data to GroupM. Under those conditions, "quality" ends up being defined by the outlets that own the ad slots.

Lin Jie, vice president of Huawei's consumer cloud services, thinks his quality inventory is the phone lock screen. "Huawei shipped 240 million handsets over the past two and a half years, and about 23% of those buyers paid more than 2,500 yuan for a mid- or high-end model." Li Xiao, who runs international channels at Tencent's channel business unit, said Tencent had opened up the Tencent News app and Kuaibao, plus pre-roll inventory on the season's hit dramas. Chen Xiao, vice president of sales at iQiyi, likewise put series and hit dramas inside the quality bracket.

That does not mean they agree on what quality media is. Zhang Xiaojuan, managing director of Xaxis China, thinks the judgment is hard because one outlet contains both good and bad inventory. "A quality outlet doesn't mean quality inventory, because quality outlets have long-tail slots too. And an outlet that isn't top-tier still has good slots."

Take an app with more than 100 million daily visits. It is generally considered quality media, but an ad on its third or fourth screen, or further back, is not quality inventory. The reverse holds too: a niche app with modest overall traffic may have a splash-screen ad worth buying, because that one slot soaks up a lot of the traffic. Or put it more plainly: a high-traffic portal has its own dead corners, and a low-traffic official account can still produce a post read 100,000 times.

In the end it comes back to good content. When The Mystic Nine passed 9 billion views, the new phrase going around the industry was "content unicorn."

But content unicorns are rare. Beyond that scarce supply, advertisers are looking for new ground. Along with traffic, they now care about outlets with a hold on one particular audience: say anime and manga fandom and people think of Bilibili, which now has 22 million daily active users; say hippie subculture and people think of Vice. To some extent, that is also why advertisers have warmed to countless small official accounts.

Bilibili recently added an "advertising" section, filled mostly with video ads that are inventive or provocative enough to talk about. Chen Hanze, a Bilibili vice president, told GroupM's digital forum that the site wants users and ads to "get along better, live with each other, coexist." Most of the videos there are still uploaded by ordinary users, but Bilibili may well open the section to advertisers later.

Vice China is also trying arrangements beyond banner ads, such as letting an advertiser appear as a "content sponsor" in its regular video reporting.

"A brand's audience now happens to be the same readers we talk to every day," Vice China chief executive Zhou Yaohua told QDaily. "What we want in the end is to work with brands. But our emphasis isn't on sponsored content — it's on content that sounds like Vice. Then brands come to us because they fit the story we want to tell."

As distinctive audiences make these outlets more valuable to advertisers, the outlets have gained the upper hand in the conversation. "We have complete control over the content," Zhou said. The team that makes sponsored content at Vice China is the same team that makes its journalism, because "Vice makes sponsored content the way it makes content," by its own rules.

Gong Yingqi, who founded the product-recommendation site Qingdan at the end of 2014, has found the same thing. Ten months after launch, she says, Qingdan was taking native advertising from Listerine, Triumph and Whaley TV. Most of the agencies that came to her had been "sent by the advertiser," and they gave the site plenty of room on the content itself. The Triumph piece started not from the product but from how to wear a bra properly; the Listerine piece never mentioned the brand at all, because both sides agreed that "getting readers to see why mouthwash matters" — mouthwash in general, not one brand — was the more useful goal.

As Rob Norman puts it, advertisers have loosened their grip on the creative because "media know better what their readers like. Media people today have to think harder than they used to, and they're capable of moving into creative work, which helps us rethink what media can do."

E-commerce is worth watching too. Once treated as nothing more than a sales channel, it is now a marketing arena for more and more brands. Juhuasuan may be the clearest case. Its role inside Alibaba today bears little resemblance to its original job of group buying and clearing inventory. What turns up on Juhuasuan is no longer only cheap goods but a growing number of attention-grabbing ones. Liu Bo, Juhuasuan's general manager, describes it now as "China's largest marketing platform."

Nike, which had never touched Juhuasuan, chose it this year for the debut of three limited-edition cherry-blossom sneakers. In April, P&G put 17 imported products on the platform at once.

E-commerce delivers exposure, traffic and actual purchases, which advertisers find hard to resist. "By the time a consumer is on an e-commerce site, they're already in a shopping frame of mind, so it makes more sense to show them an ad tied to buying," Dong Xin told QDaily.

The research firm eMarketer predicts that Alibaba's online advertising revenue will pass Baidu's this year to lead the Chinese market, reaching US$12.05 billion, or about 80.36 billion yuan.

Put it all together: advertisers used to want big exposure on big platforms, and now they want small exposure on countless small ones. Traffic still counts for a lot. What they want more is the right audience.

Brands are testing this in more places — official accounts, livestreaming sites. Dong Xin's sense is that advertisers are probing much harder at what the right medium is.

On the question of what quality media is, the positions have hardened. Advertisers judge by sales conversion. Ad tech firms put the efficient use of data first. Agencies, having lost their authority, are in a hurry to write new rules for judging media, and one way to do that is to fence in the outlets everyone already considers good and sign them up. And the outlets themselves no longer lead with traffic: they have more say over what the advertising looks like, and they want advertisers to respect it.

Then, just as everyone was warming to precision marketing, a fresh doubt arrived. In August, Procter & Gamble, the world's largest advertiser, said it would change how much it spends on Facebook, and cut back on precision targeting in particular, because the results had not lived up to the promise.

The market will settle it. In the next and final article in this series, we will look at search advertising, represented by Google, and social advertising, represented by Facebook, and ask which one is the better picture of advertising's future.

Cover image from Visual China