Zheng Xiaodong: The way out for marketing technology companies is not "camp" but "sales"

Zheng Xiaodong, CEO of Leo Digital, commented on the capital operation of the marketing industry, optimistic about e-commerce agency operations, mcn, and live broadcast companies, and believed that these types of companies are favored by the capital market. Marketing technology companies, due to the strong competition between bat and headline giants on the "camp" side, lack the competitiveness to cope, so it is suitable to strive to open up the situation on the "sales" side and connect goods and consumers. For entrepreneurs in the marketing industry, it is not only necessary to choose a wide track, but also to build a core advantage over competitors in order to attract investors.

Leo Digital CEO Zheng Xiaodong

Q: From the perspective of capital, what are the characteristics of the operation of the marketing industry?

Zheng Xiaodong: Since 2014, the marketing industry initially focused on mergers and acquisitions, and many companies have been directly listed in the past two years. In particular, many businesses related to ideology and media attributes have been capitalized in accordance with the continuous liberalization of national policies and regulations. There are also many companies with media attributes within the marketing industry, seeking policy support and the possibility of further capitalization.

Q: For entrepreneurs in the marketing industry, are you in the cusp period now?

Zheng Xiaodong: Compared with the previous three years, this year is definitely a good time to start a business, or a good time to capitalize. Among the many companies in the marketing industry, e-commerce agency operating companies, MCN and live broadcasting companies will be particularly popular. In particular, the former has a certain relationship with the epidemic and the heat of the entire consumption field in the first half of this year. As for creative strategy companies, companies like Insai Group and Threesome are listed. The opportunities for marketing technology companies in these two years are not particularly good.

Q: Why aren't the opportunities for marketing technology companies particularly good in these two years?

Zheng Xiaodong: In the past three years, marketing technology companies have not actually had any good target listings, or their performance after listing is not very satisfactory. The reason is that more domestic data and corresponding technical forces are in the hands of giants such as bat and headlines. They provide advertisers and consumers with a variety of technical services. Third-party marketing technology companies do not have the ability to surpass the existence of giants, so there is not so much market space.

Q: What does the future hold for marketing technology companies?

Zheng Xiaodong: This needs to be viewed from the field of "camp" and "pin". From the perspective of "camp", there have been more things to do in recent years, such as marketing cloud, brand advertising, delivery optimization, creative optimization, etc., but these companies will directly face the competition of big manufacturers such as bat and headlines. Headlines have developed rapidly in recent years, because they are aimed at the field of "camp", and there is a lot of data and traffic support behind it. In the face of such giants, independent marketing technology companies do not have an advantage in investment and data capabilities in the "camp", and the market space will be relatively small.

On the contrary, in the field of "sales", there will be some opportunities in the future. For example, companies like Youzan that provide better technology products to merchants on the consumer side, companies that allow consumers and goods to dock, in fact, have a very large space, which is suitable for the development direction of marketing technology companies.

Q: Will there be advertising groups such as wpp and Omnicom in China?

Zheng Xiaodong: It does not necessarily replicate the American model. The global development of advertising groups such as WPP relies on the United States. At that time, the United States was the commanding heights of globalization, and then with the dollar's foreign investment and the process of globalization, it had a radiation effect on the relatively backward developing regions of enterprises. But today is different from then. China's domestic marketing environment is dominated by digital, and the application of all digital media is not the same as the world, and these systems are actually difficult to replicate to the world. It should be said that there are different strengths at home and abroad. Giants such as bat and many large companies, their marketing industry chain will become more and more complete, but in terms of internationalization, it is difficult to re-take the road of wpp.

Similarly, multinational advertising groups are not as developing domestically as before. The advantages of multinational advertising groups are based on global experience, but the experience of the United States is difficult to replicate in China, and this advantage is lost. Secondly, the decision-making chain of advertising groups is relatively long, and it is difficult to make strategic planning and adjustments quickly for some market changes in China. Therefore, to a certain extent, the strategic layout of multinational advertising groups in China and the grasp of customer needs in recent years are lagging behind local marketing companies.

Q: Chengzhi Venture Capital's research found that in 2019, the advertising and marketing industry financing and mergers and acquisitions were sluggish, what do you think is the reason behind it?

Zheng Xiaodong: In 2019, the media sector of China's A-shares was very sluggish. In fact, in the past 10 years, the entire Chinese A-share itself is relatively sluggish, and the media sector is a "bad" sector in the A-share, especially at the end of 2019, the pe of the entire industry sector, relative to the company's market value in the A-share market are at a low level. Due to the unsatisfactory capitalization, mergers and acquisitions and investments will certainly be affected. However, after 2020, there will be obvious changes, due to the rise of MCN companies and live broadcast companies, the entire media sector has a very good performance in the first half of 2020. Then I believe that for M&A investors, the media sector will also have a great incremental performance.

Q: What kind of assets do listed companies in the marketing industry want to acquire?

Zheng Xiaodong: From the general direction, it is definitely hoped that the acquisition represents the future direction of development and has sustained profitability. Why is it said that in the first half of this year, e-commerce agency operations, mcn, and live broadcast companies are relatively hot, mainly because we have found new forms to replace the original forms. For example, the advertising market and market share of short videos have surpassed those of long videos.

Of course, acquiring a company requires addressing issues such as integrating the team, going concern, and cultural identity, which have pros and cons for the acquirer. From the perspective of acquisition, the acquirer can obtain such a layout in the industry in the short term and obtain corresponding profits. However, after the end of the bet, we have to face the problem of the survival of the team, the problem of further development and the problem of cultural integration. If the acquirer can deal with such a problem, I think the acquisition is a good solution.

Q: On how to attract investors, please give advice to entrepreneurs in the marketing industry.

Zheng Xiaodong: First of all, entrepreneurs should be in a track with a relatively high ceiling or a relatively wide range. If there are DSP startups today, I don't recommend that, there are no big companies on this track. The track should let investors see that the future of this field is very broad, there are good market prospects. Secondly, the unique competitive advantage of entrepreneurs, whether it is a technical advantage, an advantage in market judgment, or an advantage in integration ability, or an advantage in content creation, must have a core advantage over competitors, rather than only seeing gaps in the market. Core strengths are equally important as market space. Entrepreneurs choose a good market and have certain advantages, so as to attract investors.