Dr Mathew McDougall is recognised worldwide as a leading expert on online advertising and online marketing analytics. He founded the SinoTech Group in Beijing after identifying a need in the Chinese market for an integrated digital advertising platform. He currently acts as SinoTech's group CEO & executive chairman.
Beckley: Given the number of years in China, describe how you have seen the development of digital marketing in recent years, and what you think we can expect in the years to come.
McDougall: Over these past few years the digital market has continued to transform and evolve. China's online advertising market continues to be very much driven by the top 500 enterprises and multinational advertisers. However, in terms of shifts and changes we will see in this market, I believe we will have more SMEs adopting digital marketing, and will see search marketing becoming mainstream in 4A/ digital agency campaigns and cost-per-action (CPA) advertising deals becoming more frequent (using Chinese/international affiliate networks).
Beckley: What's hot and what's not? In your views what will lead the way mobile, online video, UGC, social media, etc.?
McDougall: This is a difficult question, and one that getting a lot of interest from Venture Capital, M&A firms and digital market watchers. However, from my perspective, I believe video will become a dominate form of advertising in the next few years as traditional ads transition from TV to online. Moreover, I believe search marketing will gain traction. Baidu and Google are both the major benefactors of this trend and they will only getting bigger in China. Mobile for me is still in its early stages, and yet to show returns for branding and call to action advertising.
Beckley: In your view, how many years do you think it will take China's online ad business to overtake the U.S., and what effect will it have globally?
McDougall: I cannot see China over taking the U.S. market in the foreseeable future. Although China is seen as a rapidly developing, the U.S. market is also continuing to grow (although not at the same rates). Overall in the U.S., Internet ad revenue is forecasted to double from $25.5 billion in 2007, to $51.1 billion in 2012. During this period, internet advertising will grow about eight times as fast as advertising at large. In fact, IDC predicts that Internet advertising will become the number two advertising medium in the next five years, outpacing newspapers, cable and broadcast television (direct marketing will be number one). Therefore, not just China and the U.S. will have major shifts in spending… the whole world will be seeing more digital media advertising.
Beckley: There are some amazing developments in China. Do you see the potential for Chinese businesses to internationalise and if so when would you see this happening?
McDougall: Sure, Chinese companies are already internationalising. You just need to look at the NASDAQ to see a number of successful Chinese companies in the internet space. Further, a number of new software start-ups are developing innovative technologies rather than trying to reverse engineer or copy western ideas. I am very bullish on Chinese business being able to take their technologies to the West. The cautionary note for those Chinese companies wishing to do this is to remember that the government monitors these businesses closely, corporate governess and local business practices need to be known and understood, just as it is for Western companies entering China.
Beckley: SinoTech Media is just a little over 14 months old and already employs 150 staff and is on-track to employ 500 staff this year. You have offices in Beijing, Shanghai, London, San Francisco and New York. What has led to your success, and what can we expect in the future?
McDougall: As Group CEO, I am far from thinking we have "made it" and continually talk about having considerable more work in front of us. Now is the right time for a new innovative technology and digital marketing group. The 2008 Beijing Olympics is a catalyst for big things to come in digital advertising in China, and is already beginning to stimulate the growth of China online advertising. Further, based on the largest and fast-growing internet user population, the boom in the overall China economy, and the continuing online media consolidation and growing ecommerce activities, I believe the Chinese internet advertising spending will experience continued high growth for at least the coming five years and SinoTech Media will benefit.
Beckley: Lastly, what would your advice be for businesses entering the industry either as a start-up or for an international business launching in China.
McDougall: This question has no short or simple answer. Many multinational companies have found business conditions in China vastly different to the home territory, and the rules of engagement difficult understand. My advice to anyone wishing to venture into China to start a business would be to appreciate the local business practices, assume nothing, and always look for new ways to always value to your customers.
Paul Beckley is the VP of DMG World Media's technology sector in Asia.