China's Strong Internet Use Spurs New Opportunities in Enterprise SaaS, Digital Advertising

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Apr 02, 2020, 08:30 ET

NEW YORK, April 2, 2020 /PRNewswire/ -- As China's population nears 1.5 billion and internet use is rising at an explosive rate, the prospects for SaaS Enterprise Solutions and online marketing look brighter than ever.

With a record number of people in China spending time online reading new, playing games, shopping and participating in social media, Software as a Service (SaaS) and digital marketing may be more effective than ever. iClick Interactive Asia Group (NASDAQ:ICLK) (ICLK Profile) is among the leading providers of independent online marketing and enterprise SaaS solutions in China, supplying integrated tools for analyzing and improving advertising and marketing performance. Shopify Inc. (NYSE:SHOP) powers over 1 million businesses worldwide through its all-in-one commerce platform that helps its partners start, run and grow a business. Adobe Inc. (NASDAQ:ADBE) is online platform that integrates eight marketing solutions and includes professional services and support. A pioneer in offering online services, DocuSign Inc. (NASDAQ:DOCU) has created the world's first "Agreement Cloud." Zuora Inc. (NYSE:ZUO) is the world's premier SaaS billing platform optimized for subscription businesses.

Chinese online users have tripled over the past 11 years, creating impressive growth for an array of companies operating in the SaaS space.
Smart organizations are using big data, AI to effectively reach target audiences.
Strong portfolio of customers, partners driving these developments across Chinese parts of the internet.

To view an infographic of this editorial, click here.

Robust Economic Growth Creating Opportunities

China has a flourishing middle and upper-middle class, fueled by its healthy economic growth over the past few decades. The fast-growing Chinese wealth has created significant consumer opportunities for both domestic and foreign companies to expand their businesses to.

Along with that, software adoption has been increasing as well, especially in the advertising and marketing sectors, as companies around the world seek to effectively target and market to Chinese customers, especially digitally where the Chinese consumers spend much of their time. With untold potential online customers and the growing wealth of businesses wanting to target them, tremendous potential exists in the Chinese digital advertising industry.

Flourishing Marketing, Enterprise Software Solutions

In this context, companies providing marketing and enterprise SaaS solutions are flourishing. One of the rising stars of the sector is iClick Interactive Asia Group (NASDAQ:ICLK).

iClick is a proprietary, marketing-technology platform targeting Chinese consumers. The company's data-driven analytical approach provides targeted advertising in a market that has historically been underserved but is increasingly online and accessible to such marketing.

iClick is riding a rising wave of internet usage in China, as the general population steadily increases its standard of living and China exceeds the West in internet usage. In 2008, internet users in the country numbered 298 million; by the first half of 2019, that number had reached 854 million — nearly triple in only a decade. And that trajectory is expected to continue.

It's a sign of the power of this market — and iClick's ability to take advantage of that power — that iClick has experienced more than 30% year-on-year growth. The company is not only expanding into a current market but exploring previously unknown online market segments. Different companies approach this opportunity in different ways. For iClick, success has come from a growth strategy founded on two pillars: marketing solutions and enterprise SaaS solutions.

iClick's core business – marketing solutions – operates in a different environment in China than in the United States. With predicted CAGR of 23%, China's digital advertising industry significantly outpaces the 13% CAGR of its America peer. Furthermore, digital marketing in the United States is largely controlled by the big three — Amazon, Google and Facebook — while in China, the market is fragmented. This situation presents abundant opportunities for innovative companies to grow and benefit from economies of scale and the fragmented nature of the market.

This market also creates impressive opportunities for brands and retailers, which is where iClick's enterprise SaaS solutions may become relevant. By providing full online-to-offline data integration and analysis, enterprise SaaS solutions may help brands increase repurchase rates and customer allegiance through building a 360-degree detailed consumer profile. This leads to high gross margins for companies providing SaaS solutions in this area, with stable recurring revenues; iClick, for example, had a target of $10 million for enterprise SaaS solutions in 2019 and estimates its revenues may double to more than $20 million in 2020.

Benefits of Big Data, Intelligent Analysis

With almost 1.5 billion people living in China — and many of them becoming avid online users — marketers in the country stand to benefit significantly from the deliberate use of big data and smart analytics. If marketers can tap into the data these online users are providing and discover ways to transform that information into actionable insights or targeted marketing, they could see impressive levels of consumer engagement.

iClick has a substantial advantage in this space. The company currently has more than 820 million Chinese consumers' datasets, providing a solid basis for comprehensive data analysis. But data is only as useful as the analysis that can be drawn from it. To achieve this, companies are implementing AI-driven tech to identify actionable insights. Manual approaches and old-fashioned software can't handle the sheer volume of data being gathered, nor can these more traditional processes produce the level of insight companies seek in order to target advertising.

With its proprietary AI-driven, end-to-end marketing solutions, iClick stands at the front of the market. These unique solutions not only accurately identify and engage potential customers, they also provide actionable business decisions based on the analyzed consumers' behavioral information. This is the sort of effort that provides the backbone of SaaS — a specialist company providing services on a scale and level that most businesses are unable to do in-house. Its exclusive approach has won the company accolades, with CEO and co-founder Sammy Hsieh winning an EY Entrepreneur of the Year China 2019 Award in Technology.

A Strong Portfolio

Companies grow best in this space when they build a strong portfolio of customers and partners that produce not only revenue but also valuable data. Work completed for customers feeds into the analytical engines, creating a situation where strong relationships become self-fulfilling prophecies as key partners provide a company with the influence and credibility it needs to attract new business and build more relationships.

This powerful process is evidenced in iClick's strong roster of customers and partners. The company serves more than 2,500 top-tier clients, including Nike and eBay. In addition, iClick is a platinum partner of Tencent and the largest overseas partner of Baidu.

Not surprisingly, these partnerships have proved beneficial for iClick. The company has developed an admirable cash position along with the chance to pursue fund support from HSBC for increasing business growth. As both its partnerships and the pool of online users expand, iClick eyes continued expansion of its SaaS work.

The value of these Chinese-focused companies appear underappreciated in the eyes of many. iClick is trading at a fraction of comparable prices of many of its SaaS competitors. Realization of innate value will come with the recognition that the population of China has moved online and marketing to this group can produce outstanding returns. With marketing automation in the massive country presently only at 10–15%, compared with to more than 50% in the United States, a remarkable opportunity exists to increase data-driven smart marketing — an opportunity that iClick appears ready to monetize.

Selling to the Online Market

Offering online services is clearly a burgeoning market, with many savvy companies entering the space.

A SaaS pioneer and now a leading global commerce company, Shopify Inc. (NYSE:SHOP) has seen significant growth, recently reporting total revenue for FY 2019 of $1.578 billion. "2019 was a milestone year for us," said Shopify CEO Tobi Lütke. "We've earned the trust of more than one million merchants, and we are motivated more than ever to keep lowering the learning curve so anyone, anywhere can become an entrepreneur." Shopify provides tools for its one-million-plus merchants in more than 175 countries to start, grow, market and manage a retail business of any size. Shopify's platform and services are designed to deliver a better shopping experience for consumers around the world.

Recognized as a leading digital marketing suite, Adobe Inc. (NASDAQ:ADBE) offers an online platform that provides its customers with everything from support and community to partners and consulting. Through its support services, Adobe delivers tutorials, manuals and troubleshooting. The Adobe Marketing Cloud community allows customers to talk with each other and find help from Adobe experts. The platform includes interactive agencies and consulting firms as well as a network of consulting partners that provide expertise and best practices tailored to a customer's specific needs.

With 500 customers and hundreds of millions of signers around the world, DocuSign Inc.'s (NASDAQ:DOCU) Agreement Cloud automates and digitalizes the entire agreement process. A pioneer in electronic signatures, the company offers a suite of applications allowing companies to send and sign with eSignature, automate agreement workflows and management, streamline agreement generation and approval, and even use AI to search and analyze documents by legal concepts.

Zuora Inc. (NYSE:ZUO) has recognized that the subscription economy is forcing companies to adopt new core enterprise systems to support SaaS billing models. Traditional ERP solutions aren't equipped for these new billing models. Zuora Billing is the world's premier cloud-based billing platform optimized for subscription businesses regardless of the size or industry. ZUO is capable of supporting a range of needs, from a single company with one monthly subscription service to an enterprise with a large product portfolio and complex usage-based pricing.

SaaS plays a powerful role in online marketing, and as Chinese internet use grows, so will the role of SaaS — and companies operating in that space. iClick appears to be well positioned to take advantage of the growth and scale of these industry opportunities.

For more information about iClick Interactive Asia Group, please visit iClick Interactive Asia Group (NASDAQ:ICLK).

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