Jenny Chan 陳詠欣
May 22, 2017

Programmatic conflict in China: Sociomantic points out kickback problem

Ivan Zhou from Sociomantic advocates for a 'right to audit' clause in programmatic contracts.

Ivan Zhou
Ivan Zhou

The following Q&A with Ivan Zhou, m‎anaging director for Greater China at Sociomantic Labs, is part of a series on conflicts of interest in China's programmatic advertising market.

Earlier, Fugetech weighed in to argue for the meta-DSP model as well as reporting deliverables of more dimensions—a response to iPinYou's statement on why being involved in both PDB (programmatic direct buying) and RTB (real-time bidding) is not a "conflict". Also, Hdtmedia reinterpreted its DSPAN (DSP and ad network) dual role as a "stock broker" recommending media buys with upside potential. 

This interview, originally conducted in Mandarin, has been edited for clarity and brevity. 

You've said that there is a real problem people have overlooked in the ongoing programmatic debate?

The industry supply chain in China is too long, masking a long-running kickback or rebate scheme. The highest kickback can even be more than 50 percent of the total cost. If an advertiser spent 1.5 million in total, maybe only 100,000 or 200,000 was spent on buying media via programmatic means. The rest could be spent on rebates.

You are fighting with human nature, because if people can make that kind of money, why wouldn't they?

I think this is the first problem. The second is advertisers not auditing how much money is spent on the above. If the advertisers themselves are not doing audits, then we cannot blame others. Of course, there may be a knowledge gap among advertisers, giving other companies chances for these disgraceful acts.

There is no need to stare at your accounts every second, as long as you have access to a real-time report of your programmatic campaigns. If you are hearing from someone else's mouth via a Powerpoint or Excel sheet, then I can only say you are not very concerned about your budget.

In Mandarin, we call this 甩手掌柜, meaning 'a shopkeeper who asks others to work but does nothing himself'.

Is it really fair to blame this on the advertisers though?

Advertisers should really take control and ask for the right to audit. Of course a very large advertiser can do that. But even for medium- and small-sized advertisers, you can ask some very basic questions. You can also push to have it written in contracts warning against kickbacks and rebates.

I feel some of China's advertisers are not like those of the United States or other markets. They may be easily hoodwinked, and they do not have a union. The voice of one advertiser is very small, but if a lot of advertisers band together, that will make a statement.

I think the reason for the whole programmatic ecosystem becoming like this is the lack of a push from advertisers. If they do not join together to do this, it will be more chaotic.

Ultimately, we all need a clean and transparent ecosystem. This is also about survival of the fittest. An agency or a vendor or a media owner that does not add value to the supply chain will be eliminated. If you used to rely on rebates, rely on guanxi, rely on things that are not right, you do not add value and you will be pushed out. This is sure to happen. Step by step.

Money is the strongest force. So, like drugs, nip it at the source.


Campaign China

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