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ad tech in China

Podcast transcript #37: Rising ad tech in China is completely reshaping the industry

Find here the full  China paradigm episode 37. Learn more about Shimi Azar’s story and ad tech in China and find all the details and additional links below.

Full transcript below:

Matthieu David: Hello, everyone. I’m Matthieu David, the founder of Daxue Consulting and its China marketing podcast, China Paradigm. Today I’m with Shimi Azar, the representative of Spotad in China. You’re in Beijing, and Spotad is a programmatic media buying in China built on proprietary data science technology. I think it would be exciting to know more about what you do in China and the West. You have worked for very prestigious clients that we don’t even understand how they can need an external resource like Instagram, not for China but the world.

You have been in China for many years. You have worked for the Embassy of Israel in China for one or two years, managing social media. And then you joined Spotad in Beijing, representing them and working with Chinese and international companies in China. How big the momentum is for Chinese companies to go overseas and to use Demand-Side Platform? On the other hand, how international companies are using programmatic advertising in China?

Shimi Azar:  I will start with my personal story, how I got to China. A lot of people ask me, “What are you doing in China? How did you get here?” I was an exchange student between the Hebrew University in Jerusalem and the Peking University here in Beijing. I came for one semester. Like a lot of people that stayed in Beijing for many years, whose story is, “I came to see China for two weeks and ended up staying 10 years,” something very similar happened to me. I came for one semester and ended up staying almost eight years now.

After I finished my studies here, I saw that online advertising in China is developing very fast. I remember a very funny incident when I was on campus seven years ago. One of my Chinese friends was holding a very funny looking phone, and I asked him, “What is this phone? What is this brand?” He told me, “Xiaomi.” And I laughed. First of all, the name was funny, and then the phone looks funny. Fast forward seven years later, the huge, booming company is listed in Hong Kong. I’m using its products.

This is what happened to online advertising in China, mainly in tech. I’m sure people can find a lot of information on your website how China has developed in the past few years.

After graduation, I got a job offer, so I decided to stay. I worked for a project from Microsoft for about two years. After that, I wanted to do more with Israel. I joined the Israeli Embassy and managed their social media, the Sina Weibo account, the Tencent, WeChat Official Accounts Platform, the website, etc., which basically gave me a clue of what the Israeli companies wish to do in China. This is how I found Spotad.

Back in 2015, more and more Israeli companies develop technology mainly for the American market, because the Israeli market is too small with only eight million people, so most of the tech companies are developing their products for the international market. But when you develop your products for the international market, it does not necessarily mean it’s good for the Chinese market. You have to go through a lot in order to have your product to customize to the Chinese market.

This is where Spotad decided to hire me. It has been now three years of the company. I joined them at the beginning of 2016.

Matthieu David: Talking about the fact that the solution was not adopted for China, does it mean that the first thing you had to do was to adapt the product for China as part of your mission, or it was more in a sales position for you?

Shimi Azar:  It was everything. From the beginning, in order to register the company, open a business bank account, localize the system, to hire local staff, and to work with local partners, everything had to be done. It was a long and stressful journey, but we made it. It took us about half a year to register the company, open a Chinese entity, open a Chinese bank account, and most importantly, to have the approval from the government to operate online advertising in China.

This was 2016. Data was less an issue, but starting last year, you could see what happened in the U.S. and Europe. Starting last year, data became very sensitive. Storing data, sharing data became very, very sensitive. But we were lucky to get all the approvals already in 2016. Now, I was hired to an industry I was not familiar with, programmatic ad in China. I did some social media, but it doesn’t really count. Online advertising in China is huge. I was not even aware of online advertising in China before. A lot of people are not aware of the industry, of the existence of programmatic ad in China. When Chinese online users are surfing the web on their phones, playing games or using apps and see online advertising in China, I don’t think they think a lot about what’s the technology behind this video ad, banner ad, or native ad that they see on their phones. Actually, there is a whole industry behind this small ad that you see on the phone.

We have so many different players. We have the client on one end, the demand, and then you have the supply, which can be a publisher, an app developer that wants to make money out of its app and sell the advertising space. The biggest one is the ad exchanges in China. It has thousands of thousands of small publishers, medium-sized publishers, large publishers, altogether selling their inventories and space for online advertising in China. So, it’s a whole world.

There are big brand agencies that cannot avoid using this programmatic ad in China. All the biggest agencies in the world today if it’s Ogilvy, if it’s PMG, all the most prominent agencies are using programmatic ad in China in one way or another.

Matthieu David:  What is the current size of your business, could be revenues, the number of clients, the number of people in your team? Could you give an idea to the people who are listening to us, where does Spotad stand in terms of development? At which stage?

Shimi Azar:  You mentioned a little bit before we started the video about the year we were established. It’s officially 2013, but back then we were a creative company, which means that we were creating the banner ads or the video ads for other clients. But very fast, we realized that big money is not in creating the ads, but in serving them. This is where we started working. We hired developers, and we started working on building our own programmatic ad in China. Now, this is very important; we’ll maybe talk a little bit about this later. But in online advertising in China, there are a lot of companies with no programmatic ad in China.

If it’s a big agency, it’s okay, but there are a lot of small affiliates, there are a lot of companies working on arbitrage and just kind of like the middlemen. They don’t really have any programmatic ad in China.

Spotad is very different. We developed our programmatic ad in China for over a year back then. Since 2015, we obviously developed more and more features; we improved the system and the programmatic ad in China. More importantly, we listened to what our clients needed, and according to their needs, we improved the platform.

Everything in our programmatic ad in China is automated, which means that if in the media buying in China, you need people to sit and buy the space for online advertising in China manually. Our programmatic ad in China allows an algorithm, basically, technology to do all the media buying in China, automatically.

So, what you need to do is to better understand your client needs. You need a car; you need fuel. In our case, it’s data. You need a lot of data, the more, the better. Once you take this data and you implement in our system, in our programmatic ad in China, our programmatic ad in China will know to reach the right or more probable client that will click the ads and use your product.

You mentioned AI; it takes me to an AI feature that we added to the programmatic advertising in China last year, a year and a half ago, which learns the behavior of Chinese online users. It can, in milliseconds, decide if I want to do the media buying in China from the publisher or I don’t want to. How does it do it? Using data. Everything happens in a millisecond in the programmatic ad in China.

If you separate media buying in China and programmatic ad in China, in a programmatic ad in China, many cases a big client goes, let’s say Nike goes to CNN, they give them a million dollars, “Display Nike ads on CNN for one week. Here are a million dollars.” Now, in this case, it’s okay. Obviously, CNN is a big publisher, but who is seeing this ad maybe people who are not relevant for Nike. What we’re trying to do is decide in real time like a stock exchange, we decide if to do the media buying in China or not according to the data we get, everything in milliseconds.

Matthieu David:  The number I have is 25 software engineers and data scientists, 20 billion impressions daily from 15 ad exchanges in China. You’re able to analyze maybe of 200 million profiles. Would you mind sharing a bit more about the size in terms of revenue? Secondly, would you be able to elaborate on all the metrics like several clients or revenues to give a sense to the audience of where you are?

Shimi Azar:  I can’t obviously share the revenues in exact numbers. I can say it’s in millions of dollars. This is what I can say.

Matthieu David:  Okay, more than one and less than 10?

Shimi Azar:  Yes. The company managed to stay at the same size, more or less. In the past few years, we hired some staff. We opened the China business and the New York office. At the same time, we had in the media buying in China. Big technology companies are going bankrupt because they got to a size that they couldn’t become profitable anymore, and it just lost a lot of business. This was also something when we were talking about online advertising in China; I wished to share what’s happening here in online advertising in China. But yes, if we’re a small, medium-sized company that’s being very abnormal in the media buying in China because we managed to keep the balance between growing too big and then going out of business, and between shutting down the business, which happened to many companies in our industry.

Matthieu David:  Have you raised money?

Shimi Azar:  Yes, we have. In 2017, we raised about $3.5 million. We have investors in Hong Kong, private venture capital that invested in Spotad.

Matthieu David:  The number I mentioned, like 25 software engineers and data scientists, very easy to understand. But streaming 20 billion impressions daily from 15 global exchanges is not very easy to understand. Could you help us understand what does it mean – 20 billion impressions? In this world of data, when you talk about million, billion, we have no idea if it’s big or small. I have a dozen number; I like to get an understanding if you analyze the behavior of 200 million Chinese online users. It’s a lot, 200 million, but on the other hand, Facebook is like 2 billion profiles. It’s only 10% of Facebook in some way. Could you give us a better understanding of what do you mean 20 billion impressions daily? Does “stream” mean you do media buying in China, or does it mean you analyze? Secondly, 200 million profiles, why 200 million, and why not like 3 billion like Facebook plus some other networks? You have included Facebook as an ad exchange in China in your partner, so we could imagine that the 2 billion from Facebook of profiles.

Shimi Azar:  Yes. Facebook has no ad exchange in China. Facebook is a closed environment. They’re not sharing data. They’re not allowing any external DSP or any programmatic ad in China to do media buying in China. They make more than 90% of the revenue from their ads, and they’re not sharing with anyone.

Matthieu David:  Would you mind, before we go further, what does DSP mean?

Shimi Azar:  Demand-side platform. You have the demand side, which is the client, and the supply side, which is the ad exchange in China or the publisher, in the media buying in China. In the middle, you have a DSP, which brings a lot of clients that have demand to do media buying in China. You have an SSP, the supply-side platform. A DSP, in some cases, will buy from the SSP. The SSP will have a few publishers connected to it and selling their inventory, their space for online advertising in China.

Matthieu David:  I have my own DMP in my company, data-management platform with leveraging data from my clients. I have a lot of data, e-mails, profiles, agenda, and so on, but it’s not enough. It’s not big enough for me to target them with online advertising in China. I know that my clients are very close to the New York Times. So, I’m going to actually try to reach an SSP, which is booming the inventory of the New York Times. In order to get access to this SSP, because maybe New York Times is not big enough to do it the sales, you are going to go through a DSP to be able to target on specific SSP, the Chinese online users you want to target. So SSP is the display, the inventory, where you can do media buying in China. DSP is making it possible for you to buy the space for online advertising in China. DMP is actually leveraging your own data, and then after you can merge data from a DSP and a DMP together in order to target well the Chinese online users.

Shimi Azar:  Perfect. The only issue is that the New York Times is not small, it’s huge. And I’m not sure if they are working independently. All those big publishers, all those big names usually have their own in-house media buying in China that sells their inventory, their space for online advertising in China. Those big clients have to be very careful because this is what we call in the industry the display security for online advertising in China. Both an advertiser and the publisher have to be very careful. An advertiser doesn’t want his online advertising in China to be displayed on websites that had bad content. Nike doesn’t want to be displayed on a website that sells alcohol, for example. This might be an issue. At the same time, the New York Times wouldn’t like a very cheap and shady product, maybe a dating app. It does not want to be connected to any dating app, so it will not allow dating apps to buy ad space on its website. So, you have to be very careful.

In our industry, the programmatic ad in China is a little bit different. The advertiser goes to the DSP, the DSP goes to an SSP or an ad exchange in China and display the online advertising in China using data from a DMP. This is more or less how the structure works. Everything is being done automated, so you don’t need a huge amount of people to do the media buying in China manually. Going to the stock market exchange example that I introduced, a very big feature of programmatic ads in China is the price, how much you’re willing to pay to have your online advertising in China displayed on this publisher.

I mentioned Nike gives a million dollar to CNN, displaying ads for a week. What if I tell Nike, “I don’t need a million dollars. Give me half a million; I can find the exact same inventory spot and save you half a million dollars.”

What I’m doing in the programmatic ad in China is I’m going out with my online advertising in China to bid on the media buying in China, and in real time, I’m displaying my bid. I’m willing to pay half a dollar, $0.60, $1 top to display the online advertising in China because I feel that the client that is now watching the ad might click it. So, the more probability I feel that the client will click the online advertising in China, I will bid a little bit higher.

Matthieu David:  Yeah. Calling that programmatic ad in China.

Shimi Azar:  Exactly.

Matthieu David:  Going back with your numbers, which are for me is not very easy to understand: 20 billion impressions which are streamed.What do you mean?

Shimi Azar:  We talked about SSP. We are actually not working with SSPs. We’re working with ad exchanges in China. An ad exchange in China is the next level. An ad exchange in China will have thousands of publishers, and maybe a few SSPs as well are selling their inventory.

We have a Google ad exchange that’s open for programmatic ads in China to do media buying in China. We have big players in the market like Rubicon Project, MoPub, a lot of names that maybe are not familiar with people that are not aware of the media buying in China. But if you are part of programmatic ads in China, you know those names. Those are really big players in online advertising in China. Each one of them is a whole infrastructure, a whole place that you can do media buying in China and everywhere in the world. If I have a client now that wants to display ads in Russia or Japan or Korea or America or Brazil, those ad exchanges will have inventory in those regions.

Once you have 10 or 15 of the biggest ad exchanges in China, you basically cover the whole world. We have the advantage that we are connected directly with the Chinese ones. This is a story told by itself because it was not easy in China. I think my first week in Beijing; I already met with Baidu. They have their own ad exchange in China, which means they have a lot of Chinese apps connected to their ad exchange in China in selling their inventory. The integration files, everything was in Chinese. We had to translate it to our developers. Even though they have a common language like the coding, they couldn’t really understand a lot of things, so we had to translate everything for them. At the same time, for Chinese clients, we translated the system to Chinese so it will be easier for them.

On the business side, we opened up a Chinese bank account because I had clients that I approached. One of them is very familiar, very famous, but unfortunately, it’s going out of business which is the OFO, the shared bikes. I met them about February or March 2017, where they’re in a full-scale war with Mobike, and they needed more users so what they do –

Matthieu David:  For people watching the video, in one year or two years and OFO is not known anymore, this is a competitor of Mobike. It was very big. Now, they’ve been in trouble for some time. So, you worked for them and other foreign companies. I guess it’s unique.

Shimi Azar:  We had a meeting, and everything was okay. I displayed our programmatic ad in China and our solutions, and they were okay, but then at the end of the meeting, they asked me, “Can you receive RMB?” It was a funny question because you gave your pitch, they said okay, and everybody’s happy. Now, if I was an international company that doesn’t have any presence in China, don’t have a bank account in China, I can’t do business with them. This means losing millions because the budgets were in millions for OFO. They had a very big account. Fortunately, we did have a bank account. I was smiling, and I said, “Sure. We can receive your RMB.” This is a story. We do work with Chinese clients that can pay in Hong Kong dollars, U.S. dollars, or even other places in the world.

Talking about clients, we work on three different business lines. “First China in,” which means bringing a foreign advertiser to online advertising in China. We did it with a few game developers. We did it in 2016 with Uber, which was just on the news for the IPO, which was not very successful, unfortunately.

The second business was “China, China,” which means that we are a Chinese company, we registered in China, we have Chinese staff, we have a bank account, we have servers, let’s compete in the online advertising in China. As I mentioned, we worked with OFO in China. We competed with Chinese DSPs, some of them of hundreds of people and managed to get a budget from them. This was also very, very impressive.

The third one is something that you mentioned, how do Chinese clients see going outside, “China out.” This, unfortunately, on programmatic advertising in China is more downs than ups. It’s still something that is not common. 99% of the Chinese clients, the Chinese advertisers are using Facebook and Google mainly to take several programmatic ads in China as a whole. If you put programmatic ads in China in the traditional media buying, Facebook and Google take about 70% of all the ad revenue in the world, in the global market.

This is why we’re not currently doing China out. We do have some meetings with the potential clients that want to promote their products like Vivo and Xiaomi. Those are mainly brands that believe first in offline advertising. They believe in first, open a shop in some country, and then they hear from you. But they are considering doing more digital, they’re considering doing a more programmatic ad in China or media buying in China, so I’m positive that this will happen sometime hopefully soon.

In the sense of the online advertising in China in the supply side, I mentioned Baidu. We also work with Tencent. Baidu has an ad exchange. Tencent has an ad exchange. More interestingly, it’s ByteDance. TikTok took over the world. The company grew very fast, very big, and they have their own ad exchange in China now. What we see is that a lot of the businesses of programmatic ads in China is disappearing or going a little bit down. Again, mainly because of the reasons that I mentioned earlier in the conversation, because companies grew very big and then suddenly they don’t have enough business, so they had to shrinkor, in some cases, go bankrupt.

Another player in the international market is Amazon. Amazon is also growing very, very fast, and they now have their own ad exchange in China. They want to make money, same as Facebook and Google; they want to make money out of an advertisement. They just launched their ad exchange, I think, at the beginning of this year or the end of last year.

Matthieu David:  Interesting, because Google put money in in order to compete with Amazon because they know that Amazon is competing with Google on online advertising in China. That’s consuming actually with Amazon’s ad exchange in China.

I’m a bit stubborn, and I like to really understand what do these 20 billion impressions mean, streaming 20 billion impressions daily? What does it mean streaming 20 billion impressions daily from 15 ad exchanges in China for Spotad?

Shimi Azar:  What is an impression? An impression is, when a Chinese online user opened the app or a website and saw an online ad in China, this counts as an impression. This is an impression. When you’re connected to 10 ad exchanges in China, the number of impressions of each ad is enormous.

For example, let’s say Baidu has a billion impressions a day or 200 million impressions a day, which means that they have ads displayed 200 million times a day to all Chinese online users. I’m using an app, and I see, on average, 20 to 50 online advertising in China a day when I’m playing my phone. You take all those numbers together, and this is the inventory that they offer us to buy. Baidu tells me, “I have 200 million impressions a day. Come and bid on it.”

Matthieu David:  Once it’s streaming, that means you check out the inventory and the price. That’s what you mean by streaming, right? That you see all those placements for online advertising in China. When you say streaming, what does it mean? Does it mean that you analyze online advertising in China? Do you mean that you extract the price of it? So, you mean you display online advertising in China on those 20 billion?

Shimi Azar:  We’re not displaying online advertising in China. Obviously, we’re not buying all of it because a lot of it is useless for us. In China, for example, we have first-tier cities, second-tier cities, and third-tier cities. A lot of advertisers are not even interested in third-tier cities, so that takes 40% of all the impressions. Some advertisers are not interested in Android; they want to target only iPhone users, so that takes another 50% of the inventory. Out of those 200 million available, we bid only maybe about 20 million. Out of this 20 million, this is where our programmatic ad in China kicks in. We use the data to see if the Chinese online user that’s now opening the online advertising in China and going to see an ad is a Chinese online user we want to display the ad.

We use it in a lot of different ways. Usually, we have our database, our own DMP, which consists of a few million, hundreds of million Chinese online users, where we have tags. Wetag the Chinese online users. We obviously don’t know who you are, we don’t know your name, we don’t know where you live, but your IDFA, the unique code of your phone is available. This unique code, we can say very basic information. We can say which city you live; we know which phone you’re using. Maybe, in some behavioral, you downloaded a lot of gaming apps so that we can tag you as a gamer. I can tag you as a Beijinger, gamer, try to guess your age and things like that. This kind of information allows us out of these 20 million impressions that we get daily, the inventory that we get daily, how many of them we actually think that are gamers for our game developer that wants to get more Chinese online users and go after them. This is how it works.

Now, we work with different clients from very different industries. We have a lot of E-commerce in China. Traveling is always big clients. You have gaming, which I think is number one. Currently, a lot of Chinese game developers actually are doing very well. This is the impressions. This is basically the number that we can buy a day. It doesn’t necessarily mean we do it. We don’t want to do that. It’s useless. It’s exactly the opposite of what we want to do. We want to be more targeted, but this is the inventory available.

Matthieu David:  Then, the other number you mentioned, 200 million profiles of Chinese online users. What do you mean by 200 million profiles? You analyze in terms of behavioral analysis, what does it mean 200 million?

Shimi Azar:  This is the advantage that big companies have like Facebook and Google. They can process more; they can work with more, they get more information because they have more Chinese online users. We can get Chinese online users once they maybe click or install an app we have. We can get their code or IDFA number from their phone and store them in our database and say, “This phone downloaded a game, downloaded three games, is a gamer.” We put him as one of our 200 million databases.

Matthieu David:  The 200 million profiles of Chinese online users actually are within your own database. This is a fact which is proprietary to you in terms of database inventory. So you say that you have 200 million IDFA, right? What you say IDFA, to know which phone it is, to identify which phone. And then you can be based on this, analyze much more profiles of Chinese online users. As you said, it’s a gamer or not a gamer, but this is proprietary to you. The 20 billion impressions you stream are not proprietary to you because you stream from ad exchanges in China. These 20 million profiles of Chinese online users are proprietary.

Shimi Azar:  You mentioned earlier in the conversation that DMP, which is an external data provider that the advertiser works with and we, in many cases, can use their data. This number, the 200 million, doesn’t mean a lot. We get most of our data from third-party data providers. They enrich our system and allow us to do better targeting.

Matthieu David:  Talking about the differences between China and the West. I feel when we talk about China and the Internet, Baidu and other players, the topic coming very often is that it’s not very reliable. You pay, and you don’t know really for what you pay, or you pay, but actually, it’s a fake ad in China. What’s your feedback on this? I don’t know if some players say that because they want to complain or if it’s a reality. What’s your feeling compared to Google and other players?

Shimi Azar:  Let’s go put it out, it’s called a fake ad in China. You cannot easily avoid it, but you can avoid it. There are companies in the industry that’s doing the verification, and they’re doing the fraud detection, and you can integrate with those companies to ensure that you’re not buying this fake inventory and traffic. Some companies will avoid working with those companies because, for them, it’s losing business. We obviously work with them. We scan the traffic, the inventory that we get. We make sure we are not buying a fake ad in China.

On top of this, in the past year or two, there is a big trend that’s going viewability. There are companies that ensure the advertiser that they bought a space for online advertising in China was viewable, which means human, or at least this was shown somewhere. Not like, as you mentioned, a fake ad in China. It’s, a million dollar and no one saw your ad. You say, “I displayed the online advertising in China, but no one actually saw it.” There are companies that allow you to do so.

Going back to 2016, we worked only with ad exchanges in China because we believe and we see that ad exchanges in China like Baidu and Tencent will not sell you fake ads in China. They have their own internal tools to detect if there are any problems with the traffic. Once you work with an SSP, which is smaller and maybe not as reliable as those ad exchanges in China, then you have the risk because the SSP wants the money, obviously and they will sell you fake ads in China. They will not check what they’re selling.

I had incidents where a sales manager of an advertiser in China asked me to buy fake ads in China because they need to spend budgets. He cared on his own commission, probably. He said, “I have half a million you want to spend, I need to spend it now. The more, the better. I don’t care if it’s being displayed or not.” Obviously, the answer was, “Sorry, we don’t do that. Even if we want to buy fake ads in China, we can’t. We don’t do that.” But it happens.

Now, comparing to the West, a lot of people ask me about the West. I’ve been managing the Chinese operations in the past three years. We did have campaigns overseas but not in the scale for me to be an expert on the West and share the insights from there.

Matthieu David:  I want to understand how do you charge with your programmatic advertising in China? Do you charge a percentage of the money spent? Do you charge a retainer every month? How do you charge your plan?

Shimi Azar:  Percentage of media buying in China. If an advertiser spends a million dollar in our programmatic advertising in China for one month, then we will take a percentage. It can be 10%, 15%, 20%; it depends on a few factors. If, for example, the client used the self-serve options, which means we give them access to our programmatic advertising in China, they have an in-house media buying in China, and they are using the platform to do the media buying in China, or if he doesn’t, and he wants us to do it for them and just send them reports, we can also do this but we will charge a little bit extra.

Matthieu David:  10%, 15% seems pretty high actually in online advertising in China. Is it higher than spending it directly on Baidu? I feel it’s a bit higher than agencies do when they spend the budget on Baidu. I had more in mind like 5%. Is it right for me to say that?

Shimi Azar:  In the media buying in China, 10% is very low, actually. The average will be 15% and up. Some people, some companies will charge even 20%.Think about what you’re getting in for this 10%; you’re getting programmatic advertising in China that helps you save much more than this 10%.

Matthieu David:  Is there a minimum budget to spend on programmatic advertising in China? Otherwise, you wouldn’t take the client?

Shimi Azar:  Yes, of course. I get some requests for opening an account for $500 or $1,000. For those, it’s not that we don’t want the money, but it’s for us to open an account to train the client on the programmatic advertising in China and the time we spend on it, it doesn’t make it worthwhile for us. So we do have a minimum. We try to educate the clients that they will have to spend money if they want to have results.

If we’re talking about the difference between China and the global market, let’s take the client side. We talked a little bit about the supply side of it, the ad exchanges in China. If we’re going to the other side, if we’re going to the advertiser, we see that in the U.S. and Europe, clients understand they need to spend money to see results. If I go to a foreign client now and I told them, “You have to have a $10,000 budget for testing,” which means that we do the media buying in China, we create AI algorithms, we implement all the data. Then after maybe two or three weeks, you start seeing results.

In China, it doesn’t work like that. In China, Chinese clients want to see the result as soon as possible and with very low budgets. If I had a client that spent $500 in two days, and then he sent me a message complaining, “I don’t see as many installs as I wished for.” I answer, “What did you expect? I told you in the beginning, we need time and we need a budget. It’s not magic. We’re talking about a lot of data.”

Matthieu David:  In order to know what your audience is, who your clients are, where they are, what they like, you need to display on different SSP ad exchanges in China. You need to display also different formats. The issue may not come from the SSP or the ad exchanges in China. It may come because of the format of the online advertising in China, because of what’s written on display, because of the message. So, you have to certainly do a lot of A/B testing with the content on the creative side, which was your original work, original businessbefore Spotad.

I think there’s a bit more than simply the display in the sale, there’s creative as well to try. In order to elaborate a bit more, what’s the minimum budget you would suggest to test the programmatic advertising in China? Let’s say when you have views up to 20,000 U.S., and you cannot conclude anything; you don’t see a momentum beneath, you don’t know how to do, your creative is not good enough. Would you please give us a bit of idea of how to interact with programmatic advertising in China in terms of the budget?

Shimi Azar:  It depends on different geographies; the traffic in the U.S. can cost five times more as in China. The budgets are changing accordingly. I would say in China, if a client will give us a test budget between $5,000 and $10,000, and will give us time to process the data, in two to three weeks, we’ll be able to know what’s working and what’s not.

All this A/B testing that you just mentioned, our programmatic advertising in China knows how to process this automatically, which means the A/B testing we put, for example, on one campaign, two banners, two video ads, and one native ad. We have this list and start to do media buying in China. After three or four days, when the programmatic advertising in China is getting all the data, how many clicks the creative got, how many clicks the banner got, how many creatives the video got, and what was the price? The programmatic advertising in China by itself knows how to optimize. Optimize means, “I see that the video is getting much more clickable, much more popular. I will allocate more of the budget toward the video.” Everything automatically.

Matthieu David:  How many displays? If I want to work with you for USD 10,000, how many displays, and how many videos, how much content do I have to create for you, and in which format? If I want to work with you tomorrow in Spotad, what do I need to bring to you?

Shimi Azar:  We have an Excel sheet that we share with the clients to have all their information, where they type their geo, which cities, which countries they want to display online advertising in China, ad sizes. We follow the sizes that are very common in all of the worlds. Online advertising in China is a little bit different. Some of the ad sizes are not available in the West, but in China, you can see those maybe weird sizes.

Matthieu David:  The displays size, sometimes with a banner. This size is very standard, actually in the world, especially in the West, but online advertising in China is a little bit different, is what you say. Okay.

Shimi Azar:  Correct. China, it’s following some of the guidelines from the West, but not only. We’ll have all the ad sizes as an option for the client. Most of the times, we run a campaign with at least minimum three different sizes, in the beginning, to see what’s working and what’s not working. Again, the more, the better if a client provides a video, banner creative, obviously it makes our lives much easier.

We do have an in-house graphic designer. A lot of the companies in our industry they have a creative library where they create their own creatives. Something that became very popular in the past year is playable online advertising in China for gamers. The ad will basically be a mini-game that you can play. If you are happy with it, you just click and download the game itself.

Matthieu David:  Is different from online advertising in China? Is it different between the West and China, the gaming, or it’s global?

Shimi Azar:  It’s global in the sense of gaming. I think E-commerce in China is very strong. A lot of different clients are spending a lot of money. The infrastructure of E-commerce in China grew significantly. It’s no more only Alibaba and JD. There are other places, Xiaohongshu and NetEase Kaola, even fresh vegetables and fruits, apps that are becoming huge and have budgets to stand on media buying in China. We see a lot of clients from E-commerce in China.

Matthieu David:  If I want to work with Spotted tomorrow, I need to prepare five different online advertising in China and different formats. It’s enough to test.

Shimi Azar:  Or you can give us one PSD, and we will have our in-house graphic designer create online advertising in China for you. We have one in the West, one in China that we work with that helps us.

Matthieu David:  Then there’s a big viable of the creative, the content. How do you make sure that the test has been run on a good creative enough, good content enough? Because you’re a software company, so shouldn’t it be your work to assess if the creative is good enough if the content is good enough? But still, you’re running a test on those online advertising in China were very strong and very important viable is the content or the creative. How do you deal with that? Is it sometimes you have some feedback from the software, none of them are working because it needs a creative, which is a problem. How does it work?

Shimi Azar:  This is a very interesting topic because some of the advertisers are very sensitive regarding the creation of their online advertising in China. I’m going back to 2016; my first client here was Uber. Uber has everything created in-house, they have their fonts, they have the colors, and we were not allowed to change whatsoever. If we want to make a small change, even in size, we had to send back the creative, tell them we need this in a different size. Then we’ll work on it in-house and then send it back to us. That kind of clients, we can’t really do anything. We’re programmatic advertising in China; we are less than the funnel. You have the advertiser; it goes to an agency. The agency creates all the materials, give it to us, and we serve it. We are already past the creative.

Some companies don’t work with the agencies, they come directly to us if it’s maybe medium, small size, and they don’t have any in-house creative graphic designers. So they ask us, “Can you create something for us?” What we do is have the graphic designer come up with the best solution, get approval from the client. In most cases, they say, “Okay, look, let’s go with this.” We take a few different options and see what is more popular, what’s getting more clicks and go with that. It’s also A/B testing; we also do in a creative.

Matthieu David:  Talking about differences between the West and China, there’s always a question I have with regarding the online advertising in China: censorship. We are in a country where you have an organization and administration censoring some other content. How does it work in this industry where actually you can display very easily contain all over the web? Do you have some guidelines to follow? It’s a mystery for a lot of people. It looks like it’s very open, but on the other hand, there’s a limit.

Shimi Azar:  This is a creative approval process. Some of the ad exchanges in China are very sensitive, are very strict. I can give you Tencent as an example, where we upload the creative in our platform, it’s not approved automatically. What happens is the creative is being sent to Tencent. Now, I don’t know if they have it manually checked or AI automated check, but it takes about a couple of hours for us to get approval. They actually check each one of the creatives that we upload to the system to check the there is nothing wrong with it.

Matthieu David:  Facebook is doing it as well; you cannot display the ad immediately with Facebook too.

Shimi Azar: But this is media buying in China. It’s a little bit different; it’s not programmatic advertising in China. Facebook doesn’t. The whole idea of programmatic advertising in China is everything is moving fast. And then you talked about China and censorship; it’s not only that. Of course, there are some rules, and we obviously obey the rules. Some of them are also applicable to the West because, for example, adult content, alcohol, drugs, any kind of illegal content is forbidden.

In China, you have the additional government-sensitive content that you are not allowed to display, obviously. On the ad exchanges like Tencent that I said, they’re very strict. Put all those laws aside; even if the creative doesn’t display the game’s name that the user can see very clear, it can also be disqualified. They’re very strict. They want all the online advertising in China to be displayed on their apps very nice, clear, and good. They don’t want bad content. This is how they control it.

Baidu, on the other side, is much more flexible. If I have a new client, I’m going to Baidu platform online; I create an account for this advertiser. If it’s a well-known advertiser, it will be on their white list and will be approved automatically, which means that all the creatives from these advertisers will be approved automatically and I can start the campaign in one minute, not a problem. If it’s not on their white list, they will ask for documentation, the business license, and sorts of things. Then they will go through a process and approve it. Then again, after they approve it, all the creatives are okay, good to go.

We talked about fake ads in China, but there are also a lot of companies that are doing fraud in the sense of changing the redirection, which means that they pretend to work with a client, display the ad, but once you try to click on it, the ad will redirect you to something else. This is a very big issue. It’s like the mouse and cat game. We always have a problem, and there’s suddenly a company that’s being established with programmatic advertising in China in order to prevent this problem.

But I’m happy to say that I see in at least the past year, that there are much less fake ads in China. There’s more safety in programmatic advertising in China for media buying in China. There are so many companies doing verification, viewability, and advertisers can feel much safer in the programmatic world today.

Matthieu David:  There are different lines, and each line seems to correspond to a campaign. Is the campaign designed by the user itself and by which kind of content, what kind of objective? Is it CPM, number of views, maximum bid, and so on? Also, you got the name of the campaign, you have the maximum budget, and then it’s giving you the results, impression, and so on. That’s how you canA/B testbasically because you see the different version of different online advertising in China. Is it the way it works?

Shimi Azar:  The same as creative, it really depends on the advertiser. Some of the advertisers come with exactly what they want. Some of the clients will come and discuss the campaign with us and ask us according to your experience, what works better, what should we do, how much budget, etc. Some of them give us a free hand and just give us money, and do what you know how to do it best. That’s it. So, it’s very different because the clients have different demands.

Matthieu David:  I think the business intelligence you put yourself to end result to say, “Hey, this campaign is outperforming the other one, you should put more budget into it and so on,” is it the intelligence you provide? I saw some pop-up coming on the screen you shared on the top right.

Shimi Azar: This is something that Spotad is working on. It’s something that we will implement soon. We got a lot of feedback from our clients, and we always work to improve our programmatic advertising in China. We want to get it to the point where everything is being automated, and everything will require one click. We want to have a process where the client comes with goals, and our system automatically will give them the solution to reach those goals. Along the way, our programmatic advertising in China will maybe have some issues, and they will have pop-ups telling the client, “Okay, look, we need to change this and this in order to improve the performance.”

It’s still fully automated, but also interacting with the clients, informing the clients what needs to be done and just getting the approval, but everything is fully automated. You can look at it as Google Maps. When you put a destination, say, “I want to get from Beijing city center to the Great Wall,” the map will show you the best way to get there. Along the way, they might be some car accidents, traffic jams, so the system will offer you different ways to get to the Wall. This is what we are trying to do in the programmatic advertising in China. We have pop-ups that will tell the clients, “This happened. Let’s make these adjustments to improve performance.”

Matthieu David:  Could you define what prescriptive advertising campaign is?

ad tech in China

Shimi Azar:  Like what I just said now with the Google example. This is the perspective, this is where the client gives us, “I have a million-dollar budget, I want 100 new users, what is the best way to get it?” Our programmatic advertising in China will give them a prescription. Exactly.

Matthieu David: I think these words come from Facebook with a look-alike campaign. A lot of people what they don’t realize is that when you spend on Facebook, you have different ways of spending the money on online advertising in China. I know it’s not an ad exchange in China, but you have different ways. It’s an inspiration to understand, actually, how programmatic advertising in China can work, and you can work. You can target very precise Chinese online users to say, “I want to target Chinese people in New York.” This is very targeting Chinese online users.

You can upload your data, and that’s I want you to talk about look-alike audience. You can upload your data, e-mail, phone number, name of people and say, “Hey, I want to target Chinese online users who are similar to those ones.” Facebook ad acts as a brain; it will look at some parameters. Among all the parameters, you can have hundreds of thousand parameters they can rely on every profile to find patterns and identify those patterns and target those Chinese online users. I have struggled to find very similar tools like Facebook in China. I know Tencent is doing a little bit but not as powerful and easy to use as Facebook. When you talk about look-alike audience, could you elaborate a bit more?

Shimi Azar:  Yes, we talked a little bit about it at the beginning of the talk about the DMP, which we have our own in-house, but we rely mostly on third-party DMPs. The problem with the BAT is that they’re not allowed to share data. According to their strict rules and laws, Baidu and Tencent will not share any data with you.

Matthieu David:  BAT stands for Baidu, Alibaba, Tencent.

Shimi Azar:  Right. DMPs that do have data and they do sell it. I’ll give you an example, I’ll give you a campaign that we did for one of the airlines here in China and they wanted to target university students. For us, as the first step, is to have the location. What we can do, actually, very precisely is to target latitude and attitude. What we do, we target areas that we know there are a lot of universities, that’s one. But other than that, that’s already a lot of precise targeting but not perfect.

What we want is to get more information about the user. What we can do, we go to the third-party DMP, they have a segment that called students. How do they know that there are students? Probably, those are users that download maybe educational apps or searched somewhere on studying abroad, etc. Everything is being stored, and then they can enrich our bidding and saying, “We are using this data from the third party. We pay a little bit extra for this.” The clients pay a little bit extra, but we can get to those users.

Facebook and Google allow it. You can also get it in programmatic advertising in China. You can also have it in third-party data providers that will enrich your platform. It’s also possible on the programmatic advertising in China. Obviously, as mentioned before, Facebook and Google are huge. They control online advertising in China, but that doesn’t mean that there’s not enough room for a more different type of technologies or companies to work in the programmatic advertising in China as well.

Matthieu David:  You say, in one of your slides a top source of traffic and you mentioned InMobi, Baidu, Tencent.

Shimi Azar:  Those are the ad exchanges in China.

Matthieu David:  Could you tell us what you see in terms of top sources of traffic, new momentum? You talked about Douyin. Clearly, we know that Douyin is getting momentum. Could you elaborate more?

Shimi Azar:  ByteDance basically, the Toutiao is booming. As an ad exchange in China, it got a lot of business from online advertising in China before, because they had the most popular news app in China, the Toutiao. This is its number one app for last year, but after Douyin took over the world, obviously, they realized the potential of monetizing the app. Monetizing the app means displaying online advertising in China on the app, which is a free app but again, you just have to watch ads. They grew massive.

Every client that wants to grow in China, not only China, will try to get their online advertising in China on this app. In order to do so, they will have to contact ByteDance advertisement department and negotiate deals on displaying online advertising in China. They have like Facebook, similar to Facebook and Google; they have their own in-house ad exchange in China that you can log in and start buying ads. It’s a little bit different than Facebook, different rules, different regulations, also different from what the local clients would like to see in the sense of the content of the app of the ads. All in all, ByteDance is definitely what I will say, which is the biggest player coming up this year in China.

Matthieu David:  How do you predict?

Shimi Azar:  At Spotad, we are aware of this. We got their integration files, and we are now working on it, in order to integrate and allow our clients to do media buying in China on ByteDance.

Matthieu David:  What do you predict for the rest of the year until 2020? What do you think is going to change in online advertising in China?

Shimi Azar:  I hope that more Chinese clients will try to use programmatic advertising in China for online advertising in China. I think games will definitely use it. Google and Facebook do have a lot of inventory, but they don’t have 100% of the inventory. It’s very important for the game developers to reach more and more potential clients, and they will use programmatic advertising in China in order to do so. This is what I predict. This is what I hope that the Chinese ecosystem will go towards more and more similarity between the West and China.

I remember one of our co-founders was coming to China, to one of the conferences in 2016. After the conference, he told me, “Look, China is two years behind the West, in the sense of how they understand the technology, how they approach the technology, etc.” But today, the E-commerce in China has reached the West, they’re doing a lot of the similar and even maybe more than what you can find than the West. I think that an example will be Amazon and JD. I know JD and Alibaba as ad exchanges in China were in the market way before Amazon was and offered their potential clients a lot of data they have.

I had a meeting with JD, and I was very impressed with their system because think about all the data they have, they have all those people searching for products. So, they can target very precisely. They can target female between the age of 20 and 30 that searched shampoo in the past two weeks. There’s a lot of good data. I’m guessing Amazon is doing the similar to Alibaba and JD right now.

If China uses to copy the West and then move to copy and to improve, and now moving to innovate, we’re definitely in a space that the Chinese are trying to innovate, and we see the West copying from China. We already reached this.

Matthieu David:  Still, a very different way JD and Alibaba doing it as much as Google and Facebook do in the West, which are E-commerce in China in one side, and the search engine and social media on the other side.

Thank you very much, Shimi, for your time. Thank you very much for sharing with us. Congratulations on everything you’ve achieved, starting, and developing a tech company in China. I feel it’s not easy because the environment is very, very different. Congratulations on the integration, the Chinese ecosystem.

As a comment, we know some very big companies, listed companies, which have a hard time to make it in China to create a network and so on. I’m not going to mention names, off I’m going to be mentioning to you. Congratulations for yourself to be able to do it when big, large listed companies cannot make it in there.

Thank you very much. I hope you enjoyed it.

Shimi Azar:  Thank you. Have a good day.

Matthieu David:  Thank you, everyone.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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