Mobile Advertising Lags China's Smartphone Explosion
Consumers Prefer to Shop on Their Phones But Ad Budgets Aren't Following Them Yet
In China, the world's biggest smartphone market, mobile commerce and payments are heating up fast.
When e-commerce giant Alibaba sold $5.7 billion in goods during its annual 24-hour megasale Nov. 11, 2013, 21% of orders came from mobile devices. A year earlier, that figure was only 5%.
Alibaba, which outsells Amazon and is preparing for one of the hottest IPOs of 2014, would seem to have nothing to worry about. Yet it's looking nervously over its shoulder at mobile-savvy rival Tencent, whose all-purpose phone app WeChat has 272 million monthly active users and is moving into m-commerce and payments.
The Alibaba-Tencent rivalry – with each making new investments and encroaching on each others' turfs -- is spurring along China's mobile commerce and payments industry. It's the latest sign of China's quick shift to mobile, a change that mobile advertising is struggling to keep up with.
"Yes, mobile advertising is growing, but the spending is still behind when you compare it with other channels that people spend significantly less time on," said Sascha Engel, deputy head of digital and national head of Digital Lab, Ogilvy & Mather China. For now display ads and mobile-ready websites are common, but he expects to see more geo-fencing and location- and time-relevant ads soon.
Figures on mobile's percentage of total ad spend in China vary – McKinsey & Co. put it at 1% in 2012 and projected it would reach 3% in 2014. A 2013 eMarketer report blamed long download times and a lack of reliable tracking data for the lag but said the China mobile audience has now become too large for marketers to ignore.
Low spending on mobile ads is an issue elsewhere too, but the numbers around China's smartphone usage make it especially striking.
Of China's 618 million internet users, 81% access the Web from cell phones, according to the China Internet Network Information Center. About 3 out of 4 first-time internet users go online with a smartphone. And there's still room for growth – less than half the country is online.
Those with internet access are devotees of mobile commerce: A report last year by GlobalWebIndex said 55% of Chinese online users bought something using their mobile phone in the last quarter of 2012, compared with 37% in South Korea and 19% in the U.S.
In China's less developed cities, e-commerce is popular because local malls are lackluster. And many people there went straight to mobile internet, never getting accustomed to desktops. M-commerce is a great way for brands to reach them.
Alibaba, which runs eBay-like Taobao and Amazon-like Tmall, has given away free smartphones to vendors as part of a mobile startup package. It also bought a stake in Sina Weibo, a Twitter-like social network that competes with Tencent's popular mobile app WeChat, which blends aspects of Facebook, Instagram and WhatsApp.
At times the Alibaba-Tencent mobile wars seem comical: Alibaba invested in a taxi-hailing app called Kuaidi Dache, while Tencent backed a similar app called Didi Dache.
There are concerns the rivalry might be affecting campaigns. Mobile agency Fugumobile created a Tencent Wechat channel for New Zealand's Anchor milk brand and linked it to Alibaba's Tmall shopping center – but starting about two months ago, the link was no longer technically possible, Fugumobile Director Ravi Shankar Bose said.
Beyond Alibaba and Tencent, other major e-commerce players are getting in on the mobile action. JD.com, which sells everything from baby formula to iPhones, ran TV ads highlighting a feature of its mobile app: shake the phone to get coupons. They show people in different walks of life -- a hairdresser, an acupuncturist -- getting in on the shaking action.
"So far it's only a campaign to encourage people to download – we are on phase one," said Gregory Wu, digital marketing VP of 180China, the agency behind the ads. He can envision mobile apps encompassing the entire consumer journey – browsing product info, looking at an item from every angle, discussing it with friends on social media, buying it. That's still down the road.