The China Vortex

Chang-Won Kim, who publishes the Web 2.0 Asia blog, recently commented on my article about China’s BBSes, and questioned whether the BBS would indeed become the future of social media in China.

Here is what Mr. Kim says:

In short, the article said:
Much of Chinese internet = BBS
Often the Chinese “group thoughts/activities”, such as the recent (rather unfortunate) “Angry Chinese” incidents, get organized on these BBSes
Chinese’ love of BBS might have come from distrust of traditional media
Outsiders have not figured this out
But the very last part of the article kind of made me scratch my head:
So, BBSes are the real social media marketing tool, and as usual, the Chinese are ahead of everyone else, but just haven’t figured out that part themselves. While the west talks about social media and Web 2.0, China has had a version of it for the past ten years. It may not be pretty, but it works.

Does the fact that BBS is so popular in China today mean a) BBS is the right platform for social media and b) BBS will remain as popular in China for the coming years? I’m not very sure about that, at least using the Korean market as a “canary in coal mine” example.

a) Is BBS the right platform for social media?

If we define “social media” as the collection of unique, diversified individual voices, I don’t think BBS is the optimal platform for social media activities - on the contrary, BBSes can often lead to group thoughts and monoculture, where the agenda is largely driven by big voices.

b) Will BBS remain popular in China for the coming years?

In Korea, we have a popular BBS/forum service in “Daum Cafe”. Three or four years ago, Daum cafe was arguably THE most popular service for Korean netizens. Today, Daum Cafes are still doing pretty okay I guess, but are definitely not the most popular daily web destination as they once used to be. Over the last several years, Daum Cafe has given much way first to minihompies, and later to blogs.

The problem of Daum Cafe as a BBS-type service was that it wasn’t as much focusing on individuals. On BBSes and forums, usually it’s difficult to keep track of the messages users left on different spaces and the subsequent comments left by other users. It’s also difficult to put one’s personal identity to the page that collects all his postings (”My page”), just like a contributor’s personal page on Wikipedia is rarely visited (many people don’t even know such pages exist). People like group activities too, but basically people are individualistic. Users want to have “their own site” where they have all their content under a specific URL which they can use as personal brands.

I would like to stress that I don’t think of the BBS as the future of social media, I can’t see that far ahead. But along with IM clients like QQ and MSN, it certainly does bring in the highest amount of traffic volume on the Internet in China. And regrettably, it is, for the most part, neglected by marketers and journalists for gathering information on what Chinese are thinking and talking about.

Mr. Kim freely admits to using the Korean market as a reference point for his conjecture about how the Chinese market may develop, talking first about how Daum was very popular as a BBS in Korea several years ago, but has now fallen off in popularity. He seems to suggest that the popularity of BBSes will eventually fall off in China; it’s just that no one quite knows what will replace it. He also suggests that BBSes are subject to “groupthink” much more than blogs, which are more about individual expression. As Chinese society becomes more open and individualistic, he suggests, then the need for BBSes will gradually fade.

I would beg to differ.

I think of BBSes as the electronic equivalent of the town square. The town square is always the place where people would go to gossip, share information, and shop. This is what most Chinese do when they go to the BBS. Sometimes they are looking for specific information about buying a home or a car, there are BBSes for this. Other times they are looking to complain about something unfair happening to them, there are BBSes for this. And so forth and so on.

Then sometimes, the BBS is the place where they turn to when they are unhappy with something, such as the recent issues with the Olympic torch relay and Tibet demonstrations in the west. When this happens, the BBS is where they turn to in order to vent their personal feelings because, for the most part, there is less Chinese government influence in the private BBSes and they can speak and organize more freely. When this happens the BBSes become the digital Tiananmen Square, places where the Chinese gathered to show their displeasure on two occasions in the 70s and 80s.

Now, instead of going to Tiananmen Square, they go to their BBSes.

China now has the largest number of blogs in the world, and blogs are the venue for personal expression. With more than 25M Chinese blogs, they are not short of opportunities for personal expression. I tend to think of social networks like Facebook and Xiaonei as social networks for people who want to meet others, but don’t have enough to say to maintain a blog. Instead, they provide a wealth of information about themselves, hoping to link up with others who may find them interesting and appealing, and to find others with shared interests.

Mr. Kim seems to suggest that since South Korea is more developed and more open as a society than China, the Chinese Internet will eventually follow developments in South Korea. While China has closely followed some South Korean trends such as online gaming and in mobile devices, there are some areas where it is still very different.

For one thing, South Koreans seem much more willing to reveal their true names and identities online than Chinese. Cyworld, a fantasy world where virtual tools can be made and sold, was a huge success in South Korea, but it failed miserably in China.

In every case, the Internet closely mirrors the values of a society, and the choices it makes. The choices made by Chinese are still very different from South Koreans. It remains to be seen whether they will more closely resemble each other, or grow further apart. I suspect that they will grow further apart as their societies develop differently.

Technorati Tags: BBS, blogs, China, Cyworld, Daum, groupthink, im, internet, Korea, msn, qq, web2asia

When the western media and some outside observers talk about “Angry China”, they really miss out on the real story, and even the real questions which need to be asked. For instance, how do very large groups of people, who at least on the surface, have nothing to do with each other, organize in large numbers so quickly in a society which many westerners see as authoritarian? Are they government-led or influenced, or do they do it themselves? How do they come to believe some of the wild rumors which come up, such as for instance, the belief that Carrefour sends a portion of its earnings to support the Dalai Lama and Tibet independence, and are seemingly oblivious to the fact that any large company would like to keep as much of its earnings for itself?

There is a very simple answer to all this: a large part of the organization is done on the Internet in China, specifically on BBSes. While the BBS (bulletin board system) is something outdated and antiquated in the US Internet, it has been a very important part of the Chinese Internet, and I would argue, it is growing and becoming more influential. For the Chinese government, it is a headache because in spite of Chinese government regulations, it is largely unregulated. For western corporations it is a good place to gather information but is useless for advertising, but for many Chinese it is the most important part of the Internet (along with online gaming and their IM client, which is most likely to be QQ or MSN Instant Messenger depending on their age and demographics).

Don’t believe me? Go to your nearest Chinese Internet cafe and watch what people are doing.

Most westerners who come into the China Internet market have no idea of its power and influence, and instead think that the Chinese Internet is largely the same as the US market, but it isn’t. The Chinese government doesn’t really like BBSes because it really is free (as in free speech), and is the breeding ground for all kinds of weird stuff. And while it is important for gathering buzz on products (as CIC, based in Shanghai, does) for corporations, nobody has really been able to monetize it. And, western journalists fail to monitor it, which is why they miss on so many big stories, and end up giving credit to some sinister Chinese government policies. ( I guess it’s kind of flattering for the Chinese government to be given credit for something when most Chinese know that it isn’t that powerful.)

Isn’t it amazing that such a huge and important part of free speech in China has been entirely missed? Fortunately, Tom Melcher’s new blog Live from Beijing! has a very good introductory article to BBSes (h/t to Andrew Lih). I got something of an introduction to the BBS in 1998, shortly after Sina was formed from the merger of SRS and Sinanet. One of the first web applications created by Wang Zhidong was a simple BBS which he demoed to me in the summer of that year. It really took off in popularity with the US’s accidental bombing of the Chinese embassy in Belgrade in April 1999 when millions of angry Chinese hit the Sina news forum. Please don’t think of the Strong Nation forum on the People’s Daily site as being at all representative of Chinese BBSes; it is official and closely monitored for content. The interesting BBSes are all unofficial or semi-official.

Most of the angry Chinese in China, or fenqing, are organized on the BBSes, where they gather and shoot the breeze. These people have time on their hands, and play games, spend time in QQ, and gossip on the BBSes of their choice at the moment. They spend almost no time on what we would call the official Internet, except going to get news on Sina, Sohu and Netease. It is very hard to reach them with advertising.

Now, let’s talk about their persona. For the most part, they:

• They distrust the official media and do not buy magazines, and get as much information as they can from unofficial sources, such as BBSes. They only go to the official media for some sports information and major news information.
• They trust unofficial news more than news which comes from official sources.
• They are the perfect audience for spreading rumors, because they can be quickly organized by anonymous leaders, or “honeybees” as Tom Melcher calls them in his article.
• When organized, they can be huge, in the millions, and they can move like a swarm.

In simple terms, the characteristics of this unofficial crowd are:

• Chinese official government influence is very limited
• They are mostly self-organized
• The numbers are in the millions
• They move extremely fast
• They disappear just as fast as they appeared
• They are almost always anonymous and do not use their real names, preferring instead to use their own handles

In simple terms, they are an issue-focused flash mob. For corporations, they are:

• Not susceptible to traditional PR methods since you are dealing with an anonymous group
• Very tightly focused around one issue
• Move much faster than corporations and their decision-making apparatus is diversified,
• Do not trust/ believe in information from any government, including Chinese

My estimate is that more than 60% of non-IM traffic in China is to these unofficial BBSes, and that number is growing.

When it comes to advertising, most adspend hits that remaining 40% of the official and semi-official Internet, without reaching where many people are. CIC acts as the eyes and ears of corporations, but corporations have not been able to do anything yet with that information and are still reliant on mainstream advertising approaches for both online and offline which are largely out of date. This is the background for my article on why agencies need a new approach to online marketing in China.

So, BBSes are the real social media marketing tool, and as usual, the Chinese are ahead of everyone else, but just haven’t figured out that part themselves. While the west talks about social media and Web 2.0, China has had a version of it for the past ten years. It may not be pretty, but it works.

It’s just that vast majority of outsiders haven’t figured it out yet.

Technorati Tags: angrychina, BBS, carrefour, China, cic, fenqing, gaming, im, marketing, media, online, qq, sina, social, Tibet, US, web2

Unless you have been living under a rock for the past six months, you have probably heard of Twitter. Developed with Ruby on Rails, it has now hit the big time, with many companies offering client versions of Twitter, so that you don’t have to keep the Twitter web page open to record your deepest thoughts, which you can share with your community/ies.

Technically speaking, there is not a whole lot of difference between Twitter and many other IM clients, including Tencent’s QQ, the immensely popular Chinese IM client. If there is any difference, it is that Twitter makes it possible for dispersed communities to keep track of each others’ activities. In contrast, the IM clients are mainly Web 1.0 tools which enable people to find and contact each other to meet offline. QQ, for instance, is a great enabler for that popular activity which we shall call “dating” in China.

The difference between Twitter and the Web 1.0 IM clients is not so much in the technology, as in the way people handle relationships. Put simply, the lines between offline and online relationships are blurring, and in many cases, more people spend more time online than they do offline. For this reason, their online communities are gaining value, and in a few cases, are assuming primary value, while their offline relationships become secondary.

This was not the case for most of the Web 1.0 IM clients.

From the business perspective, this means that businesses will have to pay even more attention to what is going on online, as I have mentioned in my previous post.

In China, many people do not have email addresses, instead they rely on QQ ID numbers to identify each other. Walk into any Chinese working area (including Starbucks and any other area which provides free Wifi) and chances are you will see that almost every screen has a QQ or Windows IM client window open.

And they are using it for business, not just personal gossip.

So, the ultimate test of whether Twitter becomes the American QQ is whether American’s use it for business, not just social chatting.

If that happens, the American Internet will suddenly look a lot more like the Chinese Internet.

Technorati Tags: American, business, China, client, community, dating, email, im, internet, marketing, qq, relationships, rubyonrails, Starbucks, tencent, twitter, US, wifi, windows

One of the things which I frequently hear from first-time visitors to China is that “It is so big!” Sometimes, I hear this even from Texans, an American state which takes pride in being bigger than almost any other state, with the exception of Alaska.

Westerners are not the only ones to fall victim to this thinking; Chinese also are enamored with these numbers. When I hear presentations, the most frequently heard numbers show 420 million mobile phone subscribers, 250 million IM subscribers, at which point the China virgins go gaga and start counting the yuan they are going to make (in their dreams) and planning their retirements (also in their dreams).

By now, I’m sure that you’ve figured out that I don’t buy into this view. Yes, China is big, but so what?

Instead, when you start looking at real revenue and earnings numbers, China is still way down there. And for many companies, both Chinese and western, it’s a difficult nut to crack.

But I don’t think that it needs to be. First of all, let’s get past the population and subscriber numbers. Yes, they are very big, and the only country which can even come close is India. All the thoughts, fantasies and conversation about projections should end there, and marketers should dig deeper to look at revenue and earnings projections, since they are the only real numbers which count.

Marketing 101 says that it isn’t the size of your market and number of units sold, it’s really all about your margins and accessories you can continue to cross-sell or up-sell to your customers after the initial sale. There is the often quoted example of “give away the razor, and sell the razor blades (where you really make the money).”

Since my field is the Internet, I frequently come across all kinds of interesting ideas where Chinese entrepreneurs are seeking funding. Let’s say that I’ve seen a lot of ideas in my lifetime, and I’m picky about what strikes my fancy. When I talk to people, I’m often looking for a “je ne sais quoi” which is different about them, or their products and services, and their ability to execute. China subscriber and user numbers don’t impress me, and make my eyes glaze over very quickly.

I’m much more impressed when people talk about revenue and earnings projections. I’m even more impressed when I find out that these numbers are not pulled out of thin air, and can relate to something the presenter/entrepreneur has worked on and delivered in the past. At this point, we cross the line from fantasy to a doable reality.

The trouble with many Chinese startups is that the founder is so focused on raising money that he forgets to even spin a good story about what he’s going to do with the money! And yet, China is such a hot place to be now that there are people with money who are willing to part with significant amounts of money without even asking for a good story about how they are going to execute!

Part of the reason so many poor ideas get funded is because the burn rate is so low in China that even if the startup fails in the initial stage, the burn can be kept so low that if/when the startup founder has to do a reboot (usually by coming up with a sensible idea), that there is still money left in the till for a repositioning and second chance. In reality though, I think that this is a bad strategy for investors. After all, if the founder/s did not come up with a good idea the first time, and it got funded, what is the incentive for him to come up with a good idea the second time around?

This is why countries like the US and Sweden and other countries continue to be competitive in the Internet startup field even though their initial startup costs and burn rate are much higher than in China. Being cheap and being good are too entirely different things, and often being cheap actually prevents you from being good because it allows, and even encourages, sloppy thinking and poor execution skills.

This is not healthy for the western investors and for the Chinese. This is a sign of a bubble, and is oddly reminiscent of that situation in the US just a few short years ago when many people thought that they could buy a house without a down payment and a job. Fortunately for China, the Internet sector is still a relatively small part of the economy, and while US and western funds may eventually come up $50 billion or so shorter in a few years, it won’t be significant enough to put a crimp in any venture capitalist’s or private equity fund manager’s retirement plans.

What is needed now, at least in the Internet startup area, are entrepreneurs who have actually had experience selling something, and actually understand the purchasing habits of Chinese consumers, and know how to provide a useful service to earn that money and are willing to put revenue projections into their pitches.

There are plenty of opportunities and China is still a big market. I can think of several things right off the bat.

But let’s stop talking population and subscribers, and start talking revenue and earnings, shall we?

Technorati Tags: alaska, burnrate, China, Chinese, earnings, economy, entrepreneurs, founders, funding, im, marketing, mobilephone, privateequity, projections, revenue, startups, sweden, texas, US, venturecapital

As China becomes more developed and sophisticated, more westerners are coming to China to understand the reasons for its success. I don’t believe that the Chinese success can be fully ascribed to China’s rising wealth and development; a good deal also has to deal with how western countries have screwed up in their politics and policies.

In the kingdom of the blind, the one-eyed man is king. Right now, China is the one-eyed man.

Setting this aside, there are areas where China’s growth is remarkable.

In a recent blog posting, Henry Jenkins of MIT shows how much more willing Chinese youth are to live their lives out and share their behavior with complete strangers in a manner American youth are not yet willing to. Here are some of the statistics (mostly in percentages) of what he has observed:

# Almost five times as many Chinese as American respondents said they have a parallel life online (61 percent vs. 13 percent).

# More than twice as many Chinese respondents agreed that “I have experimented with how I present myself online” (69 percent vs. 28 percent of Americans).

# More than half the Chinese sample (51 percent) said they have adopted a completely different persona in some of their online interactions, compared with only 17 percent of Americans.

# Fewer than a third of Americans (30 percent) said the Internet helps their social life, but more than three-quarters of Chinese respondents (77 percent) agreed that “The Internet helps me make friends.”

# Chinese respondents were also more likely than Americans to say they have expressed personal opinions or written about themselves online (72 percent vs. 56 percent). And they have expressed themselves more strongly online than they generally do in person (52 percent vs. 43 percent of Americans).

# Chinese respondents were almost twice as likely as Americans to agree that it’s good to be able to express honest opinions anonymously online (79 percent vs. 42 percent) and to agree that online they are free to do and say things they would not do or say offline (73 percent vs. 32 percent).

Some of the differences can be accounted for because, until recently, Chinese played relatively few games using game consoles, an area American youth have long had free access and exposure to. Instead, they play games in the Internet cafe, which offers an online and offline social experience which has not existed until very recently on the Microsoft and Sony platforms, and which has been addressed very well with Nintendo’s Wii.

These statistics do not tell us much about China on their own; I frequently insist that if one is to really understand what makes China’s Internet different it is necessary to dig deeper and look at its development at least from the application level. If one were to make even the most cursory look at users in any Internet cafe in China, one would find that most if not all, would have an instant messaging (IM) window open and are chatting with their friends while they are playing an online game. Lately I have noticed that in the Starbucks I frequent near Guomao in Beijing (Starbucks in China often offers free WiFi, compared with the US which charges users a daily subscription through its partnership with T-Mobile; go figure), many office types often have an IM window open even when they are busily working through their Excel spreadsheets.

For this reason, I particularly welcome the recent report by Plus8Star on Tencent’s QQ which started as a simple IM client and has now metamorphosized into China’s largest online company, and which has more than than 270M users in China. Basically, it has become what AOL would have become if it had been able to pull everything off with its acquisition of ICQ in 1998. In fact, the first version of QQ was called OICQ, standing for “open ICQ”; in its early days the company approached AOL seeking to become its China partner; it was brushed off. Now the company is listed on the Hong Kong stock exchange and has a market cap of US$11.4B.

The report is available in a free downloadable PDF version; the full version costs US$3,000. The greatest value of this report for those coming into China is that it provides valuable context and answers the “how” and “why” China’s Internet has developed the way it has.

Too much of the time, western observers claim that China’s Internet has changed the way it has because of Chinese government control and policy; not enough is mentioned about the business reasons why local competitors have succeeded why western companies have failed. This reports does a good job of plugging that hole in most peoples’ knowledge.

The title of the report sums it up: “Inside QQ: Learning from China’s leading online community”. An especially helpful page is page 23 of the report “Why do global giants fail in China?”. There have been billions of dollars which have been expended, and mistakes have been repeated over and over again in their quest for western dominance of the Chinese consumer market. I’m amazed that it continues to this day. This page alone is worth the price of the whole report; just read it.

If you are a business person anxious to break into the Chinese consmer market, or are just interested in learning more about the Chinese Internet, this report is a must-read.

Technorati Tags: AOL, Beijing, cafe, China, gaming, guomao, ICQ, im, instantmessaging, internet, microsoft, nintendo, qq, sony, Starbucks, tencent, wifi