TubeMogul fully licensed in China, promises to not take positions on sell side

TubeMogul is now fully licensed (after obtaining its ICP - Internet Content Provider permit) to operate in China, having grown its salesforce in Shanghai to six people and its R&D office in Chengdu to 50 engineers.

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Clockwise: Zheng, Salop, Schotland, Wang

The buy-side platform entered the Chinese market quietly in Q1 2016 under the leadership of China MD Jeffery Zheng (郑伟达), positioning itself as "the first independent DSP in the market” (So do at least 26 other firms, according to this RTBChina lumascape).

"In China, many people, both trade media and clients, link us with other local DSPs. However, we feel that most local providers are actually just ad networks that don’t offer the same level of transparency as we do," Zheng said. "Our entrance marks the first time an independent DSP is allowing users to plan, buy, measure and optimise their entire ad buy on a single software platform".

TubeMogul’s VP for Asia, Susan Salop, claimed that the company is the only one that is "holistic and accountable".

If the company fulfils its premise of being a 100% focused buy-side platform with no media inventory of its own (which is one conflict of interest said to be stunting the Chinese programmatic scene), then its product, considered mature and user-friendly by objective observers, is likely to build on the 15 advertisers that it has now.

Today, the office boasts a roster of clients in the Greater China region, including Airbnb, Samsung, Acer, Lilith, ChuKong, Laneige, Lay’s and J’code. In addition, AdMaster, Miaozhen, Adbug, RTBAsia are its partners for third-party verification.

"Our mission is to make brand advertising as simple and as answerable as possible, and we do that by not taking positions on the sell side," said TubeMogul's global chief client officer Daniel Schotland. "The way we have activated new markets across the globe is similar, and our differentiator is complete transparency".

Schotland promises that the company's goal is to manage expectations through a test-and-learn method. "We don't expect you to trust us off the bat just because we tell you to trust us".

TubeMogul's mainland product offerings so far, are: programmatic direct buying (PDB), real-time bidding (RTB), and a research-oriented service it calls 'Brandsights'.

While its 'non-human traffic credit program' refunds fraudulent botnet impressions automatically, take note the refunds are only available to clients who sign a long-term master service agreement (MSA).

China's programmatic ecosystem has four unique characteristics, Schotland noticed.

"PDB is growing; there is low adoption for VPAID (video player ad-serving interface definition) and VAST (video ad serving template), both of which are video viewability standards common in the West; independent data-management platforms (DMPs) are not very developed; audience verification is nascent," he said.

Alongside these, there is huge potential in video programmatic in China, said Zheng, who would like to establish this as a niche advantage for the business.

Local play

"We acknowledge that China is a publisher-dominant, sell-side market," said Schotland, adding that TubeMogul offers a unique selling proposition for domestic publishers in how it is bringing in global clients who want to run campaigns in China using domestic inventory.

"Once they co-work with us, we will share our technology and a whole set of heuristics for verification and fraud mitigation developed at our back end. The temptation to work with us is strong," he stated.

That aside, one bone to pick about foreign DSP companies operating in China is how they may not be as grounded, localised, speedy or invested compared to local players.

TubeMogul's VP of engineering Peter Wang pointed out that the Chengdu R&D office, the company’s second largest development hub after its Emeryville headquarters, is a commitment to localising the technology for client needs in China, as well as a heavy financial investment.

The company took a lesson from Uber, whose product development is mainly in its San Francisco headquarters with little local integration—one of the reasons it failed in China, Wang said.

Over the course of the next 12-18 months, TubeMogul plans to double the R&D staff size in Chengdu to 100, and to open more offices in Beijing, Guangzhou and Taipei in a continued go-to-market strategy. The company is also planning more educational events as well as certification programmes for Chinese advertising partners.

"I don't know where this result came from"

Zheng wants to make the above statement, which stems from 'black-box operations' with fake inventory, a thing of the past.

"When advertisers or agencies realise that the actual click-through rate (CTR) is 0.1 for example, they get upset that the rate seems so low even though it's real, so people pump them up," explained Prince Zhang (章健), chief digital officer at IPG Mediabrands China at a discussion panel at the TubeMogul's official launch event this week in Shanghai.

"So we need to educate clients in China to be more rational and reasonable," Zhang said, so as to avoid exerting indirect pressure on agency trading desks or DSPs to cheat.

"Actually the interests of DSPs and trading desks are intertwined. Both serve the marketer. We should be solving marketing issues rather than merely providing some numbers. But it's difficult as you need to understand bigger business challenges," he said.

In China, many clients treat a DSP as a performance marketing tool, especially gaming advertisers, said TubeMogul's Zheng. "We communicate with them and educate them not to just accept results like cost-per-install (CPI) or cost-per-click (CPC), but should look at the whole chain of key performance indicators (KPIs) focusing less on cost, but more on quality outcomes.

In such a price-driven market as China, the problem arises from focusing too much on the cheapest options, so the firm is trying to get brands and agencies to lean in to the idea of mid-process media quality audits.

"They may be surprised that it costs this much for this kind of performance. If they make decisions based purely on cost, they run a risk of buying significant volumes of fraudulent traffic," said Schotland. True cost needs to encompass viewability, brand safety and numerous other metrics, he noted.

"It’s not that we will be more expensive; you truly get what you pay for as there is no free lunch. If you are only paying the lowest price, the chances are the eyeballs you’re buying do not exist," concluded Zheng (pictured below).