• Sunday, May 19, 2024
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BusinessDay

Why local digital ad agencies have upper-hand in China

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International agencies dominate many aspects of China’s marketing industry, but when it comes to digital, local players have the upper-hand, an edge that puts them squarely in the M&A cross-hairs.

One reason local players have thrived is the country’s unique internet ecosystem. Global platforms like Facebook, Twitter and YouTube are blocked by China’s “Great Firewall,” replaced by dozens of local players in a highly fragmented space, made more complicated by the language.

“It’s not just a matter of adapted Facebook and Twitter (campaigns) for China, it’s creating something new for China and that’s something the local agencies have done really well,” said Greg Paull, principal at Beijing-based agency consultancy R3.

Additionally, local agencies were quicker to build digital capabilities and benefited by strong personal ties to media owners who provided them with better rates and deals.

Eager to catch up, holding companies have been gobbling up local digital agencies. R3 calculates about half of the agency mergers and acquisitions in the last two years were in China – and about half those involved digital agencies.

International shops are trying to catch up by hiring locally versus importing foreign talent, but Tony Wang, founder of Beijing-based agency A4A, is pessimistic about that solution, suggesting that many talented Chinese digital leaders want to run their own businesses. “The way things work in China, the really capable people go out and start their own agencies,” he said.

Here’s four hot local digital agencies in China that are worth keeping an eye on. At the rate of acquisitions though, they may not stay independent for long.

Founder Amber Liu notes with pride that he’s never worked at a big 4As-member agency. Rather, his advertising career started with a freelance gig designing presentation slides for an Amway executive, which led to more work for Amway, then other clients. Today his 70-person eponymous shop is a full-service digital agency with offices in Beijing and Shanghai.

International agencies can provide high-level marketing strategies for social media, but falter when it comes to local insights and execution, said Jason Zhan, founder of two-year-old social media agency Vitamine. So, he said, “I founded Vitamine to fill this gap.” He said his background in large, global agencies allows him to “provide that high-level strategy, but at the execution level, I can also understand the consumer insights.”

Successful Chinese digital shops will exploit their knowledge of local consumers and the differences between them and the rest of the world, Zahn said. For example, Chinese consumers are much more likely than Western ones to seek entertainment content from brands (perhaps, because China’s entertainment industry is more nascent, brands have a bigger opportunity in the space).