Staff Reporters
Mar 27, 2018

Brands struggle with China's video-inventory crunch: OMD

TOP OF THE CHARTS: When it comes to both TV and online advertising in China, it's a seller's market.

Online video Inventory shortages are
Online video Inventory shortages are "chronic".

If your brand is aiming to use video to reach your audience in China, you may find the process more difficult than you imagine, as demand currently exceeds supply for inventory on both television and OTV (online TV).

According to OMD China's fourth-annual Transcend report, the inventory crunch comes from "a maelstrom of issues". In addition to high demand, a decline in ratings for local TV has eliminated a source of supply. The top 10 advertisers have all reduced their spending on local TV from 19% to 15% in the past three years, and national TV (CCTV) and provincial satellite channels are also suffering a sharp decrease in ratings.

Unsurprisingly, brands are turning to online ads to offset the shortage. However, according to OMD, inventory shortages are "chronic" in Beijing, Shanghai, Chongqing, Tianjin, Nanjing and Xi’an. Brands' tendency to choose only to buy from BAT (Baidu, Alibaba and Tencent)-owned video sites intensifies the issue.

Ironically, advertiser demand for inventory is also driving people to seek shelter from the barrage by buying subscriptions to ad-free access, further exacerbating the problem. Video sites have increased pre-roll durations from 60 seconds to 90 seconds on hot programs, according to OMD, which adds that clutter has risen by 72% in the past four years and that more than 40% of viewers on BAT video sites are paying subscribers.

Meanwhile, spending on OTT (over the top) video services grew by 160% in 2017, showing the potential of OTT to backfill TV and OTV shortages.

OMD's report notes that MNCs often demand zero or negative inflation for inventory based on
CPM/CPRP buys. Because of this they miss out on premium inventory, and pressing on with this strategy results in reduced reach and a weakened presence in the market. In order to ensure growth, brands must either pay higher prices for premium inventory or reduce their buying criteria to meet their reach and awareness goals, OMD states.

Other findings of note from the Transcend report...

On mobile apps:

  • The volatile mobile app landscape is stabilizing. In most categories, the list of top apps has not changed since the second half of 2017.
  • In the online video category, the top five apps account for 95.7% of all video traffic.
  • With this consolidation, brands can now build long-term relationships with the 'hero' apps by concentrating their spending to tapp into better inventory and creative executions via partnerships.
  • Brands are more likely to choose PDB (programmatic direct buying) as the buying model rather than RTB (real time bidding), allowing them to get guaranteed quality inventory at a pre-agreed price.

On OOH:

  • Innovative out-of-home technology, both in terms of format and tracking, continues to be implemented on a small scale because of high costs and government regulations.
  • Programmatic OOH networks on a mass scale have not progressed. There is little incentive for vendors to invest. They are reluctant to bring absolute transparency to the market in fear of revenue reductions if impressions tracked are lower than expected.

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