How much does it cost to do digital marketing in China?
After the fierce winter of capital, Chinese entrepreneurs are facing a bigger challenge: traffic flows are so much expensive.
Every once in a while, the traffic flow pricing up a little bit, but it has to be in a reasonable range. No matter it is search ads, other display or banner ads, no matter who are they paying, ad servers or ad networks, no matter it is BAT, or the service provider who connects to them, it is pricy.
According to haiwan.com, a start-up in oversea travel, down below is its cost to acquire a new user in these years.
This is just the average cost across the industry. For some segment like oversea travel and P2P, which only get 1% frequent user from the pot, the cost will be up to $500–1500. In extreme condition, let’s just do a simple calculation. If a start-up got its round A for 2,000,000, which is at the average chunk of money on A round. If this company spends all of his money from this round on digital marketing, it only got 4,000 users.
A DSP platform provider found out that 80% of the marketing budget of their clients goes to digital marketing, and it also 8% of the total budgeting of the company, which is 4–5% is the normal marketing expense.
At the sell-side, companies like BAT owns the traffic and just sit in their office and wait for start-ups to beg for these spaces. 2015, the advertisement revenue of Baidu is 10 billion US dollars, which is triple to the 2012.
What if we turn into the offline market?
If we want to buy traffic flow offline, then we have to compete with traditional CPG companies like P&G, and also buying customers offline needs more tangible asserts, like the stands, booth, and others like labor, it is also huge investment without backup.
Is it worth the money?
For example, Baidu listing plays a trick with the start-ups. Doing a SEO at Baidu needs to continuously spending in Baidu listing for a period to get up in the list. It is not a onetime investment!!!! And, if you are paying app store for the listing, then every download will be charged by the App store, the estimate price will 40yuan, around $8 per customer. If 80% will be a one-time user or never user, then the company will lose $60 for every 10 downloads. If you want to have a DSP or real time advertisement buying, then there is another cost tiding to it, and the outcome won’t be fancy.
Ways to get the free traffic?
One of the biggest online fresh fruit E-commerce, yiguo.com, choose to accept investment from Alibaba, it will make the traffic flow easier to seize. However, BAT have been strategically invested in lots of start-up and couldn’t lean on one of them before the market gets clear. More, importantly, when shareholder gets more, the team will be less control over the company, then the issue will be way bigger than getting a new customer.
Try something creative
If you travel to any big cities in China now, there are people in the metro holding their little advertisement asking you to scan their QR code, this is a jerry-rig way to do the 020 marketing. And the time of a start-up is limited, if they all spend time on running to the subway to get new customer, what is the time for managing and other things.
Being creative as an entrepreneur comes in different aspects of the business, it also is what the Chinese start-ups to learn.