In a 2012 survey of marketers operating in China, 23 per cent of respondents intended to spend most of their increased budgets on online video channels during the year . This figure is even higher when marketers were asked about fast moving consumable goods (FMCG) brands.
In 2011, the Chinese government announced editorial restrictions regarding the content of entertainment shows and commercials that could be broadcast on television. As a direct result of this policy, many popular television programmes simply migrated to online video sites, taking their audiences with them. Some online video sites in China are evolving into television channels that give the broadcaster more flexibility over distribution and content: over 60 per cent of Chinese internet users watch online videos every day.
Figure 1: Bar graph illustrating scale of the Chinese online video market. (Sourced from China internet watch May 2015)
In 2014 there was a reported 76.4% rise in transaction value of the Chinese online video market from the year prior. This was valued at RMB 23.97 billion (US$3.88 billion). It is highly likely that the Chinese government will soon impose tough regulation on online video content, but politicians will find it hard to prevent Chinese people from downloading pirate copies of uncensored programmes.
Many brand managers believe the second most important driver of this movement of programme content in China was the introduction of the mixed-reach model by Miaozhen (a subsidiary of Millward Brown) in December 2011. The mixed-reach model method allows advertisers to work out the optimal budget allocation between traditional television commercials and pre-roll online video ads so that desired goals could be achieved in terms of audience reach. Traditional marketers use the method most often as a tool for planning and measuring results of campaigns. The use of the mixed-reach model in China for planning budget allocations across broadcast and online media is still in its infancy, but most FMCG brands in China already use the model to improve the efficiency and impact of their cross-screen campaigns.
Digital marketers need to add the mixed-reach model to their portfolio of skills for planning advertising campaigns for television and online video. There is, however, a note of caution to be struck. With the expansion of online video to include popular television programmes, website channels oversold their inventories. This policy reduced the effectiveness of pre-roll advertising, due to market saturation. This factor needs to be taken into account when measuring viewing outcomes where the budget for the pre-roll ads was worked out using the mixed-reach model. Marketers operating in China must apply additional metrics when analysing the effectiveness of their online video campaigns. Marketers need to measure the brand recall rate and the view-through rate for their pre-roll ads. In order to stand out from their competitors’ advertising campaigns, marketers should also consider using other formats, including sponsorship, viral videos and branded video content.
It is instructive to compare Chinese people’s behaviour when engaging with social networking and online video sites. The Chinese tend to show loyalty to social networking sites, as they need to invest time and effort into building up their personal web of contacts. Conversely, Chinese people display low user loyalty to specific online video sites because traffic is driven by the content held in the inventories of the sites. There are currently over 20 online video sites in China. The relative popularity of these sites depends on the quality of the content available to view on each site. As yet, there is no clear winner in this online video sector.
This article is released as part of China digital marketing mini-series. To to learn more about the Chinese online video landscape please view our service online advertising. To contact us please use the contact information at the bottom of the page.