The truth about “mobile advertising” in China

The truth about “mobile advertising” in China

November 27, 2013

by Francis Bea

Francis Bea is the content market manager at PapayaMobile. Francis writes about the intricacies of the global mobile advertising industry and analyzes industry trends for AppFlood.

With China’s mobile tech scene under the microscope as of late, we’ve recognized that the interest in mobile ad tech has gradually been shifting from the West to the East. But what do developers interested in breaking into China actually know about the mobile ad tech scene behind the Great Firewall? It turns out China is still a mystery and there are plenty of misconceptions.Chinese “channels” outshine Chinese mobile ad networks

Mobile ad networks in the traditional Western sense do exist in China. For example there’s DoMob, MadHouse, and MobiSage. And then you have the essential Chinese Android app stores, albeit hundreds of them. But because major sources of traffic behind the Great Firewall originate from top 20 channels including Tencent (HKG:0700), Baidu (NASDAQ:BIDU), Qihoo (NYSE:QIHU), and Kingsoft (HKG:3888) to name a few, developers looking to promote their apps in China generally turn to ad networks as a second resort for three reasons.

First, ad networks’ reach is small compared to traffic sourced from major Chinese channels. Qihoo 360 alone has a whopping 461 million monthly active users across all of its platforms.

Second, in a country of joint families where it’s common for friends and family to live within close proximity, word of mouth is marketing gold. To have a shot at becoming viral, developers will try to strike deals with the major channels in an effort to launch their apps with a bang and ensure maximum reach.

Finally, if a developer has closed a deal with a major Chinese channel, that channel will threaten lawsuits to force out pirated versions of the partnered app from all Chinese Android app stores.

How does mobile advertising work?

Generally, to break into China, approaching channels like Qihoo, Kingsoft, and Baidu is done individually. Because ad deals in China are often hammered out face-to-face, which entails meeting with the channel’s BD team member and negotiating favorable terms for both parties, promoting and publishing apps is very much a relationship-driven industry.

This is where a partner or localization company like Yodo1, AppFlood, and iDreamSky come in with pre-existing relationships and the expertise to negotiate these otherwise complex deals. These companies have helped developers get their apps into dozens among more than a hundred Chinese app stores.

While ad spending and mobile advertising go hand-in-hand, channels that are interested in your app typically won’t ask you for money up front – that is unless all you’re looking for with your app is inclusion into the channel’s app store. They’ll seek 30 percent and 40 percent of in-app purchase revenue generated in the country (others will ask for 50 percent) and may even ask for exclusive publishing rights. Since in-app payment via credit cards isn’t a popular option in China, we can’t forget that the carrier billing provider (be it China Mobile, China Unicom, or China Telecom) will take an extra 30 percent.

In exchange for giving away a total of 70 percent or 80 percent of in-app purchases, a developer’s app will be distributed not only in the channel’s mobile app and proprietary app store, but the app may also be promoted within the channel’s web and desktop channels.

But if revenue sharing isn’t your cup of tea, you have a couple of options in addition to getting your apps into Chinese app stores. You might turn to traditional ad networks in China like DoMob and pay out of pocket for a cost-per-install or cost-per-acquisition campaign to promote your app in banner ads. However, don’t expect quick and mass adoption of your app. You might even be able to negotiate a performance advertising deal with the major channels like Baidu or Qihoo, who will sell traffic if the price is right.

What do major Chinese channels look for?

Of course, even if your first choice is to get your app promoted by these channels (despite the revenue share), cutting a deal is easier said than done. At the end of the day, there’s a stark difference between the quality of the apps that major channels promote – for example, Baidu bid on and won the rights to publish Plants vs. Zombies 2 in China – and the apps promoted by other alternative Chinese app stores and ad networks. Larger channels have the clout to be selective, and tend to seek out top-caliber apps.

This means that these channels will decide whether or not to promote your app based on a few criteria including the app’s revenue generated overseas (for foreign developers’ apps), current trends in mobile app consumption in China, feedback from the channel’s test team, and of course pre-existing relationships.

While all I’ve done is skim the surface of mobile advertising and app promotion in China, the mobile industry is quickly evolving. Ideally, for China’s mobile ad market to consolidate, we’ll want to see a Chinese ad network on par with AdMob, who is plugged into not only ad networks but also major channels. However, don’t expect consolidation to arrive in the near future. China’s mobile ad industry lags behind the West by several years, and Chinese channels are protective of the massive volume of traffic that they own.