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Mobile's momentum is an unstoppable wave

2016.01.15

Early in December, iPinYou completed a Rmb500 million (US$78 million) round of pre-IPO funding, generating an en- thusiastic response from domestic Chinese investors despite widespread concerns of an economic slowdown and a jittery stock market. China’s largest DSP programmatic-buying platform plans to launch its IPO later in 2016, also on a domestic exchange.

 

The decision to seek investment from domestic investors rather than international markets and an overseas IPO may have surprised some, given the current economic climate, but CEO Grace Huang says it was a natural move after weighing up various “push and pull” factors  and doesn’t reflect any lack of ambition for international expansion.

 

“The market in China has a very close fit to the business model iPinYou presents,” she says. “Our market share and position are more easily perceived in China than in the US. As US investors are not living in China they find it hard to understand how this market is different from the US.” The demand and pace of growth in the Chinese market can be “very hard for people in the US to comprehend”, she says.“The market in the US is much more stable,” she says. “In China, the whole movement and shift in budgets from non-programmatic to programmatic has just started. There is huge potential for growth in our market. These are things I’d need to sell very seriously to the US investors.”

 

Furthermore, Huang adds that there are fundamental differences in the way the programmatic market is set up in China. “The US market is too fragmented and too dominated by Google,” Huang says. “In China, the market started with many more sophisticated players, like ourselves. “We do everything on the demand side. We have a whole series of products on the demand side, whereas in the US, what we do can be divided by about eight companies.”

 

Crossing the divide

Huang studied for her MBA at UCLA Anderson School of Business, while iPinYou’s CTO Xuehua Shen has spent over a decade studying and working in the US. She says this gives the seven-year-old company an edge in forming a bridge between markets explaining China to the West and assisting domestic brands looking to venture into other markets. “We are very ambitious about international markets, I am personally a big believer in cross-border markets,” Huang says. “We are going to be very dedicated to building business in this area.”

 

The company will name a new president of international business in January. This new excutive will be based in the US and charged with targeting both international brands trying to get a foothold in China and Chinese brands going overseas. This will build on the accom- plishments of iPinYou’s Border X team, headed by Shen, which has been making significant progress in ecommerce over the past year. 

 

Mobile goes exponential

The top growth area on Huang’s radar, however, is mobile advertising. “This year and next year the pressure to monetise mobile will be huge,” she says. “I think it is going to be a premium year for mobile advertising. We are all prepared for that.” The fact that China’s mobile remains one of the largest data mobile assets that have yet to be significantly leveraged before “created more pull” to the company in looking at its funding and IPO plans. “The consumer side has progressed a lot in the last year,” she says. “But mobile advertising is at a very early stage. It’s the equiva- lent to 2005 for PC in terms of revenue and ad spend.”

 

Huang sees 2016 as the year that mobile catches up, as a wave of momentum from consumer behaviour and marketers’ growing awareness sweeps ad spend into targeting smartphone users. She expects to see “a gradual build” throughout the year rather than a sudden shift, but adds she is convinced the evolution will be undeniable and permanent. Mobile advertising brings a number of challenges, not least the volume available, but Huang says the format is ideally suited to pro- grammatic buying. “Inventory is less than PC, so there is a need for much more targeted adverts,” she says. The growing number of internet users who only access the web via their smartphones also makes it easier to identify unique individuals without the need to connect their profiles on multiple devices. “The whole ID system is much more personally stable,” Huang says. “Mobile is all about mobile traffic and mobile data. We have the best access to inventory and data in China. We can do the magic of matching more relevant adverts to the consumer.” Having sought out “very big data partners we can work together with”, iPinYou is prepared to ramp up its capacity to meet the new demand. “Our ability to activate the data is going to be greatly improved,” she says. “We are ready to leverage the data and market the data.” 

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