China’s Tech Giants Move into the Marketing Business, Changing the Game

    China’s high-tech powerhouses Tencent and Alibaba are moving into the digital marketing business. And that has huge implications, opportunities, and challenges for luxury brands and digital agencies.
    Photo: Shutterstock
    Yiling PanAuthor
      Published   in Retail

    Additional reporting by Tamsin Smith

    Attention marketers! Attention luxury brands! China’s high-tech powerhouses Tencent and Alibaba are moving into the digital marketing business. And that has huge implications, opportunities and challenges for both industries.

    On May 29, Tencent, owner of China’s powerful social media messaging and marketing platforms WeChat and QQ, debuted a new digital marketing system at its headquarters in Shenzhen. The new system aims to bring innovation and disruption to the digital marketing industry in China, assisting brands to create better engagement with consumers and gain more growth, according to a report by Chinese outlet Tencent Tech on June 1.

    The launch of Tencent’s new marketing system marks another tech player in China that’s entering the space, which is already crowded with all types of players from top-ranked firms like Ogilvy & Mather and Burson-Marsteller to small and niche ones. Tencent’s major competitor, Alibaba Group, released a “uni marketing” system in mid-2017, followed by the introduction of Jingzhuntong (“京准通”), a similar arm from digital sales platform

    For luxury brands in China, the development of tech giants’ digital marketing arms is something to pay attention to. For a long time, luxury brands operating in China have worked with third-party digital agencies in order to localize their marketing and branding efforts.

    In an article published May 15 by Bloomberg Businessweek, a Chinese advertising veteran argued that “platforms like Tmall and are both setting the rules of the game and providing marketing and media solutions to participants; They are a coach and an athlete at the same time.” And they are also insiders, which is, arguably, an advantage.

    So, is it time for luxury brands to re-evaluate the relationship with third-party digital marketing agencies? Here’s what the two biggest players say they are offering:

    Tencent’s “WE+” Marketing Services#

    “As a complete marketing ecosystem, WE+ will open Tencent’s data, content, technology, and marketing context to users,” said Luan Na, Vice President of Tencent’s Online Media Group on May 29. The service can improve the precision of marketing campaigns and influence consumers’ buying decisions, according to the company. It’s also likely to boost advertising revenue for the parent company.

    Photo: Tencent
    Photo: Tencent

    But Sophia Ong, general manager of strategic partnership and key account service at Tencent Online Media Group, says WE+” is not a threat to digital marketing agencies.

    “Unlike us, agencies are in a client-facing role. We also believe that agencies are equipped with the intelligence, and most importantly the creativity, to help brands improve their business models,” Ong told CampaignAsia on May 31.

    Data intelligence firm eMarketer estimates Tencent’s income from digital ads will climb to 16.6 percent of net mobile internet ad revenues in 2019, up from 12.4 percent in 2017.

    Alibaba’s Uni Marketing Platform#

    Tencent’s major competitor, Alibaba Group, has been investing in and expanding its marketing service since at least mid-2017. They call it “uni marketing;” brands on such platforms as Taobao Marketplace and Tmall can keep track of users’ browsing, buying and paying behaviors in every step and customize storefront based on the data. In this way, brands can improve the customer loyalty and engagement, Alibaba said.

    Alibaba said "uni marketing" system is a plus for both brands and digital agencies in China.

    “Uni marketing is a powerful tool for brands and agencies alike and we take a collaborative approach to enable these partners in our ecosystem," said an Alibaba spokesperson. "In fact, with the insights uni marketing provides about consumer living their lives with Alibaba, it gives agencies the opportunity to deliver more value to their clients than ever before."

    Photo: Alizila

    According to Alibaba’s public relations news site Alizila, the “uni marketing” differentiates from existing marketing tools in the market.

    “By combining its massive data assets, businesses can identify, segment and build tailored content for the best results,” said Chris Tung, Alibaba Chief Marketing Officer during the Cannes Lions International Festival of Creativity in Cannes, France, in July last year.

    Moreover, under its “uni marketing” system, Alibaba will open up to clients its “Brand online dashboard that shows brands how many consumers are interested in their products and where they are in that product lifecycle,” Alizila stated.

    Photo: Alizila
    Photo: Alizila

    Alibaba is China’s dominant digital ad player with the biggest market revenue. In 2017, it gained revenue of 16.36 million, according to eMarketer’s report. The e-commerce firm is expected to score 21.81 million of revenues in 2018 and reach 32.8 million in 2020, the same report said.

    Chinese Digital Agencies Weigh In#

    In China, digital marketing agencies have faced a variety of challenges. Clients hold unrealistic expectations on return on investment (ROI), driving down agencies’ profit margins, and big consultancies and publishers themselves are setting up agencies to compete for brands.

    Therefore, when tech companies start to expand their marketing services and hope to monetize, there may be a good reason for the country’s digital agencies to worry if they will lose clients and profits to them. Brands are already seeing opportunities.

    "Just speaking from the perspective of brands, we are users of marketing services, so when Alibaba and Tencent started to enter the industry, it is a good thing for brands. Now no matter digital agencies or tech companies, they have to work harder to compete for our attention," said a marketing expert of a fashion business in China who spoke on the condition of anonymity.

    Though brands believed the entrance of tech companies could increase competition in the digital marketing arena, some of the marketing players aren’t too worried. “The fact that platforms are creating their own marketing teams could be a good thing,” said Arnold MA, CEO and Co-Founder of London-based digital agency Qumin, “Agencies shouldn’t feel threatened. Their purpose won’t be to become advertising/marketing agencies, nor would they be able to without great expense.”

    Activation Group, a Shanghai-based integrated marketing company serving luxury brands like Louis Vuitton, Prada, Dior and Harry Winston, was similarly unconcerned.

    “Currently, we have extensive cooperation with Tencent, Tmall, JD, etc.— and we are anticipating more good attempts in the future,” said a spokesperson of Activation.

    Other top digital agencies that reached out by Jing Daily declined to comment on this matter as they see it as a “sensitive” issue.

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