Digital Advertising and Enterprise SaaS Present Tremendous Opportunities as Online Marketing Soars in China

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Mar 31, 2020, 08:30 ET

NEW YORK, March 31, 2020 /PRNewswire/ -- With China's population now numbering 1.4 billion and internet use increasing at a tremendous rate, the future of SaaS Enterprise Solutions and online marketing has never looked brighter.

Despite causing a global economic turmoil and negatively affecting some sectors, such as hospitality and travel, the COVID-19 pandemic has led to a sharp increase in demand for certain industries, like online gaming and ecommerce. Quarantines and lockdowns are driving huge spikes in online traffic in China, and digital marketing — already on the rise — 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. One of the biggest players in online marketing in the region is Tencent Holdings Ltd. (OTC: TCEHY) whose multipurpose messaging, social media and payments application, WeChat, has reached a monthly active user base of over 1.1 billion. iClick has been a Platinum Service Partner of Tencent Social Ads, and has effectively captured the high growth of WeChat. Signifying tremendous market growth and opportunity, foreign companies have recently been targeting the East Asian market as well. American-based The Trade Desk Inc. (NASDAQ: TTD) is moving digital-marketing services into east Asia, starting with a partnership in Indonesia. Cloud-based software company Salesforce.com Inc. (NYSE: CRM) recently improved the partnership program it uses to provide marketing and other digital tools, and HubSpot Inc. (NYSE:HUBS) has been recognized as a leader in marketing automation, thanks to its suite of online services.

Chinese online users have tripled over the past 11 years, leading to explosive growth for companies in the SaaS Enterprise Solutions, online marketing space.
Using big data and AI, savvy organizations can target advertising with increasing effectiveness.
Cross-company partnerships are driving these developments across Chinese parts of the internet.

To view an infographic of this editorial, click here.

SaaS on the Rise as Chinese Economy Booms

China has a burgeoning middle and upper-middle class, driven by its robust economic growth over the past few decades. The fast-growing Chinese wealth has led to tremendous consumer opportunities for both domestic and foreign companies to expand their businesses to.

Software adoption has been rising rapidly, especially in the advertising and marketing spaces, as both Chinese and foreign companies seek to effectively target and market towards Chinese customers, especially digitally where the captive Chinese consumers spend most of their time. With hundreds of millions of potential online customers and the growing wealth of businesses wanting to target them, huge potential exists in the Chinese digital advertising industry.

Marketing and 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 tsunami of internet usage in China, as the general population steadily increases its standard of living and China surpasses 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 tripled in just over a decade. And that growth is expected to continue.

It's a sign of the power of this market — and iClick's ability to leverage that power — that iClick has seen more than 30% year-on-year growth. The company is not only expanding into an existing market but reaching into previously nonexistent 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 U.S. is dominated by the big three — Amazon, Google and Facebook — in China, the market is very fragmented. This represents ample opportunity for innovative companies to grow and benefit from economies of scale and the fragmented nature of the market,

This market also creates an opportunity for brands and retailers, which is where iClick's enterprise SaaS solutions enter the picture. By providing full online-to-offline data integration and analysis, enterprise SaaS solutions may help brands increase repurchase rates and customer loyalty 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 alone had a target of $10 million for enterprise SaaS solutions in 2019 and estimates the revenues to double to more than $20 million in 2020.

Big Data and Intelligent Analysis

With more than 1.4 billion people living in China, and a growing number of those people becoming avid online users, marketers in the country could benefit enormously from big data and smart analytics. If those marketers can tap into the data these internet users are providing and find ways to turn that information into actionable insights or targeted marketing, they can reach remarkable levels of consumer engagement.

iClick has a substantial advantage in this arena. The company already has data sets on more than 820 million Chinese consumers' dataset, providing a solid basis for comprehensive data analysis. But data is only as useful as the analysis that can be drawn from it. For this, companies are increasingly turning to implementing AI-driven tech to facilitate the emergence of actionable insights. Manual approaches and old-fashioned software simply can't handle the volumes of data now being gathered, nor can these older processes produce the level of nuanced insight companies seek in order to target advertising.

iClick stands at the forefront of the market with its proprietary AI-driven, end-to-end marketing solutions. These solutions do not only accurately identify and engage potential customers, but 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 of refinement that most businesses can't afford to do in-house. It's also an approach that has won the company accolades, with CEO and co-founder Sammy Hsieh winning an EY Entrepreneur of the Year China 2019 Award in Technology.

Partnering for Profit

For a company to succeed in this space, it has to develop a strong portfolio of customers and partners that provide not only revenue but also create valuable data. Work carried out for customers feeds into the analytical engines. It's 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 powerful roster of customers and partners. The company serves over 2,500 top-tier clients such as 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 profitable for iClick. The company has developed a healthy cash position along with the opportunity to seek fund support from HSBC for accelerating businesses growth. As both its partnerships and the pool of online users expand, the company plans to continue expanding the reach of its SaaS work.

The value of these Chinese-focused companies remains underappreciated in many quarters. iClick is trading at a fraction of comparable prices of many of its SaaS competitors. Recognition of inherent value will come with the realization that the population of China has moved online and marketing to this group can produce exceptional returns. With marketing automation in the country currently only at 10–15%, compared with more than 50% in the United States, a tremendous opportunity exists to increase data-driven smart marketing — an opportunity that iClick appears ready to monetize.

Selling to the Online Market

Outside of China, online marketing and ad placement is already well developed. Among the companies leading the market is The Trade Desk Inc. (NASDAQ: TTD), the largest independent, demand-side platform providing real-time ad pricing and placement. The company recently formed a partnership with Gojek, Southeast Asia's leading technology platform, to provide advertisers with unprecedented insights into how their online marketing affects offline sales. Launching in Indonesia, this partnership will use in-store transactions instead of cookie data to connect actual purchases to ad use, and so drive more effective advertising.

Chinese multinational Tencent Holdings Ltd. (OTC: TCEHY) is one of the largest providers of internet services in the region. WeChat, the company's multi-purpose messaging, social media and mobile-payment app was released in 2011, and by 2018 was one of the world's largest standalone mobile apps, with more than a billion users worldwide. Most recently the company announced plans to expand the scope of its international investments, with a focus on smart retail, Working in cloud and smart industries, the company has naturally gravitated to big data and AI, the same tools that iClick uses to target advertising. Tencent provides its own social advertising, and iClick has closely integrated its technology with the Tencent advertising system.

Cloud-based software company Salesforce.com Inc. (NYSE: CRM) includes marketing tools among the many software services it provides. The company works closely with companies using its services and has recently revamped its partner program to make these relationships work even better. Salesforce's reach extends into China, most recently providing a platform for the City University of Hong Kong to unify its campus systems.

HubSpot Inc. (NYSE: HUBS) provides software for marketing, sales and customer service, built on the basis of making the bottom line grow in line with what's good for the customer. The company's marketing hub makes it easier for businesses to generate traffic, turn visitors into leads and track the activity of customers. The company was recently recognized as a leader in marketing automation by G2, with its services standing out for ease of use and powerful features.

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. Meanwhile, as China's middle class continues to grow and spend, both domestic and foreign companies will continue to market to the world's largest spending demographic, which will continue drive the growth of China's digital advertising industry. iClick is well positioned to capitalize on the growth and scale of these market opportunities.

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

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