Jenny Chan 陳詠欣
Apr 21, 2016

Digital China Report: The dark side of digital marketing

Constantly evolving tech platforms and a practice of hitting digital campaign targets with false metrics have made online marketing in China a hairy business. Practices that have evolved in other markets to prevent ad fraud are often circumnavigated in this market.

Misleading practices: Fast-evolving technology and a race to meet targets trigger fraudulent tricks
Misleading practices: Fast-evolving technology and a race to meet targets trigger fraudulent tricks

For instance, the use of key performance indicators (KPIs) is common practice to track the performance of digital investments. In China, however, this has evolved into a ‘KPI-only doctrine’ where only the aspects of the campaign that contribute to and track the stated KPIs are managed. This results in third-party monitoring solutions reduced to proof-of-performance tools, says Jamo Woo, founding partner and managing director of Carnivo.

Due to a lack of in-depth knowledge about customers and their motivations, most brand managers do not know if their campaigns will be able to attract users. “This uncertainty is painful and counterproductive to their own career progress,” says China-based agency practitioner Saurabh Sharma, who prefers to leave his company out of this conversation. “So brand managers tend to work closely with media that promise to help them deliver on their KPIs.”

“They still look at these platforms as a source of eyeballs. By that I mean “you give us X money and we will put you from of Y million people,” says Sharma.    

“You don’t want to bite the hand that feeds you: it’s a cash game,” states another industry source from a B2B firm who preferred to remain anonymous.

This works fine from a KPI and career-advancement standpoint in the short term, as most brand managers do not stay in their companies for more than three years anyway, says Sharma.

The problem is, this does not move products. As these brands are not doing anything relevant to users or based on real user insights, most end up looking the same. “They are all visible, but no one stands out, and sales and revenue suffer,” says Sharma.  

Tune in all this week for an in-depth look at the state of mainland digital marketing.

Compounding the problem, data barriers erected by Chinese media owners for self-protection are too high, says Carnivo’s Woo. This results in third-party, cross-platform monitoring that does not work effectively. “If marketers cannot obtain accurate answers, there would be no professionalism, not to mention respect for data analysis,” adds Woo. “Despite the merits of it, marketers don’t want to pay a fee for these professional services and are still dependent on rather subjective judgments.” 

Dubious key opinion leaders 

Peter Bakker, commercial director for Asia at King Content, questions the subjectivity in the practice of using key opinion leaders. “While in many countries the concept of paid blogging has raised a few eyebrows, the usage of KOLs [key opinion leaders]—some of whom have huge followings—is commonly accepted in China. This has allowed brands to build numerous followers without substantial content.”

While some brands claim to use unpaid KOLs, the truth is all KOLs receive some form of payment-in-kind and are paid in cash to spread and seed branded messages. For many brands in China, having 100,000 sketchy followers seems to be better than having 20,000 real fans. 

“When one’s peers and bosses are all active on these digital platforms, you gotta let them see that you are visible,” says Woo. 

Online fakery is the consequence of two key activities. One is using KOLs who in turn may pay for fake followers to support their high-price tag.

The major concern of marketers working with KOLs is ensuring value in the exchange and in making sure that the KOLs are not already overexposed. In the case of more prominent KOLs, the perception is that they are becoming too costly.

The regular price per KOL post is less than RMB1,000 (US$150) for ‘small KOLs’ (accounts with under 100,000 followers), according to a survey undertaken by Totem Media. ‘Medium KOLs’ (with follower counts under one million) appear to be valued at around US$770 to US$1,240 per post. ‘Large KOLs’ (with between one and five million followers) are priced above US$3,100 per post.

In digital marketing, attribution (the identification of user touchpoints that contribute towards an outcome) is crucial. In China though, the practice is in a ‘terrible’ state, says a source. “Marketers don’t have time to look at each piece of viral content and spot inconsistencies,” adds the source.

In this regard, Asterio Gutierrez, co-creative head at Fred & Farid Shanghai, believes that user-generated campaigns are “the worst”, describing recent campaigns by multinational beer and sports brands to back up his claim. 

Tracking fraudsters and zombies

Andrew Collins, CEO of Mailman Group, shared the results of a report that potentially proves fake engagement on the Dubai tourism board’s Weibo account. The study outlined that fake engagement can be spotted in social media accounts that demonstrate the following behaviour: abnormal repost rates and times (for example, reposts made simultaneously on accounts by different users); repeated comments; inconsistent engagement count.

In the case of the Dubai tourism board’s Weibo account, Michael Lin, account director at Mailman, says he noticed that a large portion of engagement (590 forwards, 58 comments) in one problematic post stemmed from accounts that Sina had deleted in 2015.  Checking further, Lin found that the last three of the fans who forwarded this post all typed the same responses down to the emoji. “These zombie fans almost always only forward content from verified accounts—another red flag.”

This is a problem even on private platforms, such as WeChat. Watch out for a sudden spike in follower numbers on subscription accounts, says Judy Liu, co-founder and GM at Curiosity China. In WeChat, a brand’s fan base typically grows gradually.

It is much harder to evaluate a KOL’s performance. “Just because a user has a verified cellphone number, it does not mean they are legitimate,” says Liu. “On Taobao, you can purchase packages from zombie-fan providers who register thousands of phone numbers—many from the unlikely location of Xinjiang.”

“It’s not just the KOLs themselves using these zombie fans: even media agencies are buying them with the clients’ budgets,” says a source in a content marketing agency, on the condition of anonymity. “A few years ago, things are still very manual; now the fakery is getting more organised.” 

Another industry source whose wife is one such KOL says that fashion brands have the most budget to hire KOLs, so “all the digital agencies are going after the money”, he says. 

The big multinational agencies (termed the ‘4As’ in China) are doing “the right stuff”, but when they outsource the work of managing KOLs to small local specialist firms, kickbacks and rebates become an issue, says another source.

Chris Baker, MD of Totem Media, says these problems are not addressed adequately because brands do not want to admit, much less share, that they rely on the use of paid influencers in brand building.  

The problem with SEO

Perhaps the safest best in China right now is search engine optimisation (SEO) and driving traffic to online shops, says Timothee Semelin, enterprise account director of marketing solutions at LinkedIn Hong Kong. “That’s why Baidu and Alibaba are getting 70 percent of digital ad spend in China.” 

Brands need to be aware, though, that Baidu search results will prioritise companies that Baidu has invested in. Moreover, Baidu’s algorithms don’t yet factor in website quality as it applies a simple methodology of ‘the more you pay the higher you rank’, says King Content’s Bakker.

Remus Li, SVP of ecommerce at Sasa International Holdings who stressed that he was providing his personal opinion and not that of his firm, says Baidu’s market share in China is so high partly because its sales-driven attitude is more aggressive than other search engines. “Baidu’s ad-sales strategy doesn’t match actual user behaviour,” says Li, speaking from past experience. 

Early this year, Baidu apologised for seeking to exploit boards in its medical discussion forum, Tieba. According to the Financial Times, Chinese netizens had called out the firm for replacing a volunteer moderator of its haemophilia-themed board with a private hospital that was accused of providing substandard care. The search engine giant issued a statement in which it promised to cease the commercialisation of forums and downplayed the incident. Lu Fubin, head of Baidu Tieba, was quoted as saying, “of more than 10,000 online forums on medical issues, around 60 have been commercialised.”

David Ip, global business advisor of Qihoo 360, says Baidu is “trying to minimise their wrongdoing”. “This is a moral issue. The negative image and loss of trust can last for three to five years, similar to the auto industry where people find it hard to forget safety scandals,” he says.

While Ip was eager to put down his company’s main rival, he points out an irony in the market. “In order to formally advertise on Chinese verticals, high-risk industries like aviation and pharmaceutical brands need a lot of documentation to just buy a display banner ad or a search keyword. This is perhaps an obstacle to doing things the proper way.” 

Digital waste

Some marketers are forced to allocate extra budget, up to 30 percent more, to account for possible waste in digital marketing, says Qian Dejun, CEO of PLTFRM. According a Baidu report, out of 10 million invalid impressions recorded per day, five percent is artificially generated by humans while 49 to 65 percent is by machines. 

“Cheating greatly hinders the healthy development of the digital marketing industry,” says Tenly Wu, chief product officer of AdMaster, who has been tracking abnormal traffic since 2008. “Today, nearly eight years later, cheating is still rampant. And programmed cheating will always be the most efficient way of cheating. These allow cheaters to create up to 700 fraudulent impressions every hour,” he says.

This phenomenon will change as the Chinese market matures, concludes Sharma. “Marketers will need to rethink the way they have been ‘achieving’ customer engagement in the past: there will no longer be any shortcuts to sales growth,” he adds. “When the (growth) tide runs out, we will discover who all have been swimming naked.”



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