Staff Writer
Jul 6, 2018

How China is leading the way in integration, innovation

In an era of change, advertisers are looking down new avenues for answers.

LEO Digital Network's PARTZ design platform on display at the Taobao Maker Festival
LEO Digital Network's PARTZ design platform on display at the Taobao Maker Festival

With the global market developing at a breakneck pace, the boundaries of digital advertising are being pushed, pulled and restructured on a seemingly weekly basis. If you think international waters are volatile, try keeping afloat in China. The audience is there for the taking—the most recent China Statistical Report on Internet Development estimates an online population of 751 million, with over 95 percent using mobile devices to access the Internet—but the country’s unique Internet ecology and complex media communications environment have placed unprecedented demands on both the adaptability and the agility of advertising agencies.

Consumers are not dead set on any communication platform or device, but what’s becoming a clear universal trait among young Chinese consumers especially, is that they want to be entertained. Brands do not trump the quality of engaging content, which is why it’s becoming so easy for new players to enter the market with a bang.

While WeChat and Weibo are cemented into the social media sphere, niche channels are much more common in China than the rest of the world, with new platforms emerging often. Meanwhile, KOLs have an undeniable impact on any successful campaign, and live streaming and real-time interaction are now commonplace and often integrated with e-commerce, with viewers expected to hit 456 million in 2018. Video sites are also seeing a major influx of users, and the culture of paying for video content is still more commonplace in China than elsewhere.

Off-screen, retail stores are taking O2O integration in stride. On the back of big data analysis, the once isolated test market for “smart retail” and unmanned stores will likely become mainstream over the next few years. And it’s not just companies that are going all-in on new technology, the government is on board as well, planning to construct a US$2.1 billion AI tech park in Beijing within the next five years.

This all adds up to a heap of potential for marketing agencies in China, with adspend predicted to grow to $US132.29 billion by 2020. But along with this upwards shift, inherent marketing logic and long-standing business models are gradually collapsing. According to R3 research, less than a quarter of the 398 mergers and acquisitions that occurred in the marketing circle in the past year came from advertising groups.

With this upheaval in mind, many burgeoning agencies are sketching out a marketing ecosystem for a new era, and it all begins with integration. Multiple players have reorganised multiple subsidiaries into a one-stop shop to serve customers, including 4A stalwarts Ogilvy & Mather, Publicis Groupe, Dentsu Aegis Network; Chinese tech and Internet giants Baidu, Alibaba and Tencent (BAT) and countless consultancies.

The BAT trio, as well as Adobe and Accenture, are moving their strategy towards a closed-loop business logic to establish a strong connection with consumers. This trend is clearly bringing on huge challenges for traditional advertising companies, while also steering them towards the same closed-loop strategy.

A proven prototype for transformation

This new blueprint is reliant on lengthening upstream and downstream industry reach, marking upstream integration as going deeper into product design, business strategy and R&D, while downstream integration expands into media and content—including video, KOL cooperation, and platform dissemination. Consider a framework based not just on industry know-how, but also on consumer insight and judgement, where making products together with clients is a real possibility, and instead of acting simply as a B2B service, agencies offer a broad range of media formats, collaborating with short-form platforms, KOLs and more.

The keyword in all this movement is self-operation. While advertising agencies may have previously banked on third parties to fill in the blanks for them, it’s now becoming essential to close the business loop independently. This full-scale framework mirrors the shift of marketing standards from top-down (client-oriented) to bottom-up (consumer-oriented), and presents a new opportunity for the ad industry.

LEO Digital Network (LDN), China’s digital marketing giant established in 2014, has its own ever-extending upstream-to-downstream family tree to offer as strong example, with their feet planted in every aspect of digital life including digital strategy & data, digital creative, digital media, internet traffic, smart TV, social & entertainment content, and ecommerce, as well as bleeding-edge tech innovation like AI and blockchain, which can provide clients with holistic, consumer-centric, data-enabled and content-targeted services.

The LEO Digital Network ecosystem

The company houses their own creative hot shop—MATCH—and R&D centres which spur the development of AI, blockchain solutions, big data and other burgeoning technologies.  LDN subsidiary Amber China’s “+A” creative hot-shop incubator platform is also exploring new possibilities in product and content innovation, aimed at rejuvenating brand value. “By utilising a whole image as LDN to invest and act in today’s highly competitive industry, we’re continually building our reputation” says LDN CEO Dalton Zheng. Amber strutted its stuff at this year's Cannes Lions, landing a bronze award for Industry Craft for their 'Chop-Chop 2.0 Beef' campaign for Ammeloo.

arkr Group is another subsidiary dedicated to digital innovation in experience, design and immersive interaction, exploring issues in brand building, distribution and consumer acquisition. Meanwhile, the NINJA brand of its innovation incubation platform NIL was invited to participate in the 2017 Taobao Maker Festival, and released its own modular product life design platform, PARTZ, developed independently. FANOX, another subsidiary, signed up as an Alipay technology partner.

LDN’s self-coined "Digital-Driven Business Transformation Ecosystem" has helped the agency land several awards as of late, notably, DMA's “2018 Digital Media Innovator of the Year”, one of Fast Company's 50 “2017 Most Innovative Companies in China”, and Shanghai International Advertising Festival Awards' “2018 Integrated Agency of the Year”.

LDN receiving the "2018 Digital Media Innovator of the Year" award at this year's DMAs.

Tomaz Mok, veteran and co-founder & partner at MATCH, says LDN’s history, "Twenty years ago, someone once asked me a question about why China did not have an advertising group like Dentsu. Today, I can say that it already has, and that is LEO Digital Network."

It’s a complex and rapidly-changing market in China. Traditional advertising companies are suffering pressure from both the upstream and downstream sides of the industrial chain, but integration, collaboration and innovation are clearing the path ahead.

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