An Introduction to China's Online Video Landscape: Part One

This blog marks the start of a new content-series by the Coull Team. Over the next few months we’ll take a look at video markets across the world and highlight how device adoption, market maturity, technological landscape and consumer behavior have contributed to the evolution of intriguingly different online video markets across the world.

It’s easy for us, both as a company and an industry, to focus our attention on the European and North American markets. After all, it’s where programmatic video is most mature. However, as the old adage goes - ‘advertisers follow audiences’ - and when you take a look at regions such as South America, with its smartphone obsession, amazingly-populous countries such as India with an emerging middle-class, and China with its well-established online video platforms, the opportunity for the next evolution of programmatic video advertising might be further afield.

First up is China, and in this installment we're specifically looking at the country’s online video audience. How big is it? What channels do Chinese consumers use to view content? How prevalent is mobile viewing and what are viewer attitudes to advertising?

The Chinese Video Consumer

An engaged video audience

China is an enormous country with the largest population in the world. It has 618 million internet users and while that isn’t even 50% of the country’s population, it is still an astonishing number of digitally-connected users and it’s growing all the time.

China's engaged video audience

(Source: ChinaDailyAsia, January 2014)

As you can see, a large proportion of this connected audience watch video content, and more than half of those video viewers are accessing that content via smartphones, with usage of such devices growing rapidly year by year. Given this growth it appears as if mobile will soon become the dominant channel for online video in the country, and as such will form a large part of the following discussion.

There are a number of factors contributing to this growth, from an increase of popularity of ‘phablets’ and low entry-level costs, to the suitability of such devices for the lifestyles of China’s workforce. Many commute, and smartphones or phablets provide entertainment and connectivity on journeys, while some manufacturers are even competing with each other to attract workers by offering free WiFi, as “mobile devices serve as their entertainment centers and with WiFi they can watch shows without having to spend too much money on data plans.”

Smartphone adoption and video consumption are clearly closely linked, according to Liu Bing, Deputy Director of (CINNC) China Internet Network Information Center, with rapid growth in smartphone owners and increased coverage of LTE or 4G networks driving increased usage of data-driven apps and content such as video. As you can see below, watching video content on mobile devices is far more popular with Chinese consumers.

Frequency of video viewing in six markets

(Source: Strategy Analytics Mobile Video Report)

In summary there are a huge number of Chinese video viewers, they like to watch video frequently and they are increasingly consuming it on mobile devices.

Which video platforms are available to Chinese consumers?

Chinese consumers are accessing online video content on their downtime from work, or on their commute to and from their jobs. But where do Chinese video enthusiasts go to watch their content? What does the market look like in terms of online video platforms?

That’s an area of exploration worthy of its own blog, and will be the focus of the second part of this series. However, it is worth highlighting here as it’s important to note the variety of channels available to Chinese consumers.

Monthly users of China's online video platforms

 

Consumer attitudes to advertising

A digital content economy doesn’t fund itself, it’s paid for by consumers one way or the other. Sometimes that takes the form of subscription models a la Netflix, and an advertising-free user experience. More often though the content we access is supported by revenue from advertising. This is as true in China as it is in western markets such as Europe and North America.

We will discuss the advertising models and the programmatic video landscape specifically in more detail later in this series, but given the the size of China’s video audience and the opportunity it represents, it’s essential to understand consumer attitudes to advertising.

Given the growing popularity of mobile as a viewing device, which is predicted to continue unabated in the coming few years, what preference do Chinese consumers have when it comes to mobile advertising?

Preferred formats for mobile advertising

(Source: Mobile Advertising in China, PWC, May 2014)

There are two clear preferences here. Chinese consumers mirror their enthusiasm for online video content with their preference for video as a format for mobile advertising. Close behind come coupons. China is a hugely competitive retail market and consumers are savvy, typically shopping around for the best prices on the best quality products.

In summary

China’s video audience is enormous and it is clearly highly-engaged. Multiple video platforms offer a rich array of content and rapid smartphone adoption, combined with increased 4G/LTE and WiFi connectivity, enables consumers to access it during their commute to and from work or in their downtime.

Combine this huge audience with its preference for video as an advertising format on devices as personal as smartphones and you have a market that has huge potential for brands to connect with consumers, and for digital media companies to drive revenue from their video assets.

In the next installment of this series we’ll explore what China’s competitive landscape looks like in terms of online video platforms. We’ll look the revenue models, audience sizes, content mix and affiliated channels that characterise this intriguing market.