Jenny Chan 陳詠欣
Jul 26, 2016

3 tech companies that may advance location-based ads in China

Despite smartphone ubiquity, location-aware marketing has not taken off in China. We look at the reasons why, and some companies that may change the picture.

Getui has amassed location data in China by embedding its code into various apps
Getui has amassed location data in China by embedding its code into various apps

The Pokemon Go phenomenon has brought attention to location-aware apps, but in China, such intelligence is still largely underused by marketers.

Pokemon Go debuted in Japan three days ago with McDonald's Japan becoming the first brand to use ‘sponsored locations’. This has led to some perhaps overly optimistic predictions about how the game will help SMEs such as coffee shop franchises or convenience stores.

But even if Pokemon Go itself doesn't pay off, location-aware advertising continues to have great potential. Especially in China, where mobile payment penetration is at its unprecedented height according to eMarketer statistics, the distance between online and offline purchases is "closer than ever", pointed out Wei-Chong Khor (许炜崇), head of digital futures at Carat China. 

Yet three factors have slowed the progress of location-based marketing in China thus far, according to Khor:
  • A lack of open geographical data that can be used for targeting
  • A lack of the right media inventory
  • The immaturity of technology that turns massive amounts of raw location data into understanding of specific audiences at scale

IP addresses which have been the bedrock of desktop location targeting still work well when you target cities and countries, but fail miserably when you try to target stores or aisles within a store. The problem is compounded in markets like China where IPs are dynamic or the use of VPNs is significant, said Rohan Philips, Asia Pacific VP of products and strategy at Xaxis.

In the view of Ofri Cohen, managing director for Hong Kong and China at Emarsys, location intelligence is considered an advanced technology, thus used at the highest level by big players like WeChat.

One reason for slower adoption by smaller enterprises may be the fact that Chinese companies in general are reluctant to rely on third-party technology capabilities, especially when it requires sharing their most valuable assets – their customers’ information.

"The Chinese, in most cases, will prefer to develop such technology internally rather than outsource. However, doing this independently when you don’t have the budget and capabilities of a giant cooperation will always take more time," he explained.

A handful of ad-tech companies specialising in the collection, aggregation and distribution of location data may be paving viable paths for all brands.

For example, xAd, while relatively new in China, has done work in the US for the likes of Columbia Sportswear. Columbia incentivised mobile users around its retail locations to go in-store to take advantage of an exclusive Omni-Heat jacket offer after targeting them with a localised message.

The message provided contact details as well as driving directions specific to the nearest store, which saw a clickthrough rate 52 percent greater than industry average, according to an xAd case study, and demonstrated consumer interest in visiting a bricks-and-mortar location to try out the jacket in person.

"xAd could be a real game changer in China if it works well with Baidu Maps," said Khor.

Another company, PlaceIQ, is trying to tackle the immature-tech challenge with its own programming language, PIQL, created in April 2015 for data analysts to define requirements for marrying location and behaviour data (often purchase signals like ad interactions) from a big data pool.

PlaceIQ is not physically present in China yet, but a partnership with one of the local data giants to enter the market is possible, predicted Khor.

Getui, a startup founded in China, is the only company among the three discussed here that has part ownership of location-data sources, pointed out Khor. It achieves that ownership by planting its SDK in one billion mobile phones in China, mostly in non-BAT (Baidu, Alibaba, Tencent) apps—430,000 of them—and serving real-time push notifications.

Both 'cold' and 'warm' data are analysed to customise these notifications, said Getui founder and CEO Fang Yi (方毅). Cold data refers to relatively fixed attributes such as gender, age, residence and occupation that form a characteristic user portrait. Warm data refers to more timely attributes such as GPS locations and currently-active mobile applications, forming a 'recently interested' chart.

"Obvious precision marketing opportunities surface when cold and warm data points are combined for multi-dimensional analysis," Fang said.

This, coupled with the company's geo-fenced PMP (private marketplace) which delineates a specific area to deliver ads, largely overcomes the first two challenges (geographical data and media inventory) mentioned above by Carat's Khor.

For example, consider a fictional consumer, Lisa, who has visited a hospital frequently and also installed an app meant for expecting mothers. We can safely judge that Lisa is pregnant in her first trimester, which translates to opportunities to target her with ads for pregnancy supplies, milk powder, and post-natal products available in her residential area.

Leveraged correctly, location intelligence can be a strategic tool for marketers to provide relevant and contextual tie-ins for consumers. It enables the rise of "true O2O marketing", said Gary Chang, global senior marketing manager at Rakuten, adding that "existing so-called O2O services are actually not online to offline (or vice versa), but more like web to mobile". 

'Web to mobile' does seem less location-sensitive than what is called for, said Shann Biglione, chief strategy officer at Publicis Media Greater China. From the consumer standpoint, that sensitivity requires relevant mobile apps to be open, beacons to have access to one's location and ad formats ready to serve, which is not always the case. And subsequently, the more geo-fenced a brand is, the smaller its reach is, Biglione added.

However, alongside the opportunities driven by location-based marketing, if associated challenges are met, Khor expects this space to be "booming" in China in the near future.

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