The China Vortex

In a previous article, I talked at some length about Jeremiah Owyang’s review of the current Internet situation in China, and what many Internet cafes are really like, and what is wrong with the current data about Internet usage in China.

In the article, I questioned the wisdom of Jeremiah’s visit only to Hong Kong and not to China. Specifically, I said:

I questioned the wisdom of going to Hong Kong to cover the Chinese Internet; to me it seemed like visiting Toronto to understand the UK market.

This has seemed to cause some consternation on Jeremiah’s part, who responded in on his blog:

I really enjoyed Paul’s additional commentary, although he questions why I would visit HK to cover mainland. Most of the people I talked to were from mainland, served mainland, or had their users in mainland, it was all tied.

A little clarification on my part: meeting with CEOs, analysts, entrepreneurs, investors, etc in HK is fine methodology for a 30K foot view, but it doesn’t work for me. Maybe I’m revealing my product management background here, but I actually like to see how users use a product, and extrapolate information and insights from that. That can only be done in on the ground in China.

CEOs, analysts, entrepreneurs and investors are all very bright and intelligent people full of strong opinions about what works and doesn’t work in China. Most of the time, they also have agendas, products and services to sell. This does not mean they are not telling the truth; they just want to present their companies in the best possible light. That is part of their job description.

It’s just that I think that it is my duty to tell my readers that there is more to China than meets the eye, and provide my view, not necessarily someone else’s spin. Sometimes it takes me time to digest the information and form my own conclusions; that is why blog only once or twice a week. Quality over quantity is what I strive for.

And that is why I went to some length to explain what the Chinese Internet cafes I have seen are really like. You see, I actually believe that it is important to walk into these Internet cafes and see what people are doing. To me, this is crucially important; this is what it’s all about. This is real spin-free information, which is usually hard to come by.

It gives me a feel for the environment in which people are living and operating with on the Internet in China.

I feel that this is what is missing from Jeremiah’s analysis by not visiting China, and that is what I tried to address in my posting. Hong Kong was ruled as a British crown colony from 1842 to 1997; Internet usage patterns there are vastly different from in China. Even within China there are vast differences based on geography and income.

I really thirst for that kind of boots on the ground analysis, which is why I have taken upon it to do it myself to present my readers with this kind of information. Economics is based on supply and demand, and if more people demand this kind of deeper analysis and are willing to pay for it, maybe, just maybe, the analysts, reporters, CEOs and ad agencies will provide it.

And to Jeremiah I would say: “Next time you come to China, let me know, and I’ll take you to visit some Internet cafes and we can talk about what people are really doing on the Internet. Then you can draw your own conclusions for your readers.”

UPDATE:
In this new posting from Ogilvy China Digital Watch, Kaiser Kuo quotes:

He also laments that marketing people never really interface with the people who understand the customers best: The employees, the recommenders, the distributors, the distributors, the influencers, tech support people, bloggers and the like. “We outsource our tech support to India.

I would say that this is the same problem with analysis of the Internet, especially the Chinese Internet. Sure you can get great sound bites, neat spreadsheets and all, but if it’s too far removed from the users, it is ultimately useless information. And unless it is grounded by checking with users, there is the very real danger that it will become dangerously wrong and irrelevant.

This is what is wrong with so much information about the China market, a subject I talked about in this article.

Do you feel the same way? Please feel free to comment below.

ANOTHER UPDATE:

The best stats and most useful quantitative and qualitative information come from people who have lived in China for some time. Kaiser Kuo and William Bao Bean are doing such an excellent job that I’m just going to link to them and their coverage of Adtech Beijing.

Kaiser has also added some useful commentary and perspective on my read of China’s Internet cafes.

TIP:If you have a serious interest in Chinese online media, you should subscribe to Ogilvy China Digital Watch.

Technorati Tags: analysis, cafes, China, internet, jeremiah-owyang, usage

Jeremiah Owyang has published a good report for beginners who know nothing about China’s internet market. I questioned the wisdom of going to Hong Kong to cover the Chinese Internet; to me it seemed like visiting Toronto to understand the UK market. However, he does have some good takeaways for people just starting out in China and who do not read,write or speak Chinese.

I am going to dig a little deeper. Christine Lu of the China Business Network has mentioned to me that her audience is mainly for new people just starting out with China; I’m going to dig deeper and point out some real issues behind the current numbers tossed about re China. Tangos Chen has an excellent follow-up posting which is well worth a read.

All the reports which have so far covered China have been based on impressing non-Chinese with the huge numbers of China’s online population. This provides a very incomplete picture of China’s Internet users, especially those who go to Internet cafes. Most of these people go to play games and communicate with each other using QQ.

An awful lot is posted about China’s large online gaming population accessing the games from China’s Internet cafes. I suspect that a lot of the people who write these articles have never even been inside one in China. I would like to tell you about my first-hand experiences.

I am now in Beijing, and I have been to several Internet cafes here. Several months ago I also went to several in Shanghai.

Let me tell you something about these Internet cafes and their users. For the most part, these Internet cafes are shitholes and firetraps. And the people who go there are young, single, low-income males. They do not bring their dates there. The places are smoky, dingy and poorly lit. They sell some basic food and beverages in the front, and also charge people a fee to sleep overnight on the dirty, bug-infested, stained futons which pass for couches. If you want a truly terrible experience, visit their bathrooms.

These are dirty decrepit places in every way; they are just filthy. If fire safety laws were actually enforced, they would be shut down. And the people who spend their day playing games are, in my opinion, China’s new urban permanent underclass. Why do they go to Internet cafes? Because most of them are from outside Beijing and Shanghai, and the Internet cafe is the cheapest place to go to. They can get by spending 20-30 yuan (US$5-6) a day, including food, drink, games and a place to sleep.

The characters are sad characters; if they were living in England 150 years ago, Charles Dickens would be writing about them. From the Chinese perspective, although games and the Internet are highly addictive, Internet cafes serve a useful purpose. Otherwise these people would be on the street, unemployed. The Internet cafe today in China is what gin and beer was to England’s working class in the mid-19th century when Karl Marx was writing Das Kapital about the evils of class exploitation.

Now, if you were an advertiser, would you want to reach this audience? It all depends.

If these people were working their way up the social ladder, got better jobs, made more money and spent less time playing games and socializing at the Internet cafes, then yes, there would be some value in reaching this audience. On the other hand, if these people are a permanent underclass who have very little money to spend, then the answer would have to be no.

I have made an interesting observation from a personal experience. Earlier this year I visited Chongqing for the first time, and went to an Internet cafe downtown. It was on the ground floor of a an office building (unlike in Beijing and Shanghai, which are in upper floors or basements). It had windows you could actually see in and out of. It was clean, had fresh air, and carried fresh food and drinks. Unlike Beijing and Shanghai, it was divided into smoking and non-smoking areas. The highest fee for a booth was 4 yuan an hour, and there were several people paying that amount at 11AM in the morning, when I visited. I could tell that it was cleaned and maintained on a daily basis. I would not have been ashamed of going into this Internet cafe, unlike in Beijing or Shanghai.

For this reason, I am much more impressed with Internet cafe users in Chongqing than I am with Internet cafe users in Beijing and Shanghai, which are basically awful.

The trouble with the reports about China’s market is that they don’t go deep enough; they just present very basic number information, enough to make the marketing and bizdev types get excited about China, but not enough to ask hard questions which provide insights into user behavior, so that advertisers can really take a deeper look at Chinese audiences, because there is not one; there are many.

Here are some questions I would ask and like to see answered in a report, and advertisers contemplating targeting China’s Internet cafe users should also ask:

• Please explain your methodology for data gathering.
• What cities and provinces do you gather data from?
• How do you scrub your data to make sure that it is as close to factually correct as possible?
• What is their average income divided by city/region/provinces?
• What kind of jobs do they have divided by city/region/provinces?
• How many hours do they spend online per day divided by city/region/provinces?
• Can you show me the amount of churn of Internet users over time? (This is one of those rare situations where high churn is a good thing; you want these people to make their way up the social ladder.)
• What games and activities do they spend their time on?
• Define the difference between hardcore and casual gamers over time.
• How much money do they spend every month divided by city/region/province?
• What do they spend their money on, divided by city/region/province?

I always find this kind of information much more useful than the “Wow, China has a lot of people!” level of coverage; I find this information, for example, very helpful in understanding the Chinese mobile market and its users better.

I’d like it if the publishers of Ogilvy China Digital Watch
or CiC or some other agency could commission a report like this, and make it widely available on the Internet.

I suspect that the hard-core gamers are basically a bunch of losers, but the casual gaming market has good potential for advertisers.

It is time for advertising departments to start slicing and dicing the Chinese audience on demographic and psychographic profiles, and finding out the education/economic profiles of different audiences. Forget the big numbers about China; let’s get our hands dirty and start looking for insightful information which will really help advertisers, consultants and everyone else.

Enough China hype already; it’s time to dig deeper and get down to business and start making money for our clients.

Technorati Tags: advertising, Beijing, bizdev, cafes, China, demographic, gaming, internet, jeremiah-owyang, marketing, mobile, profiles, psychographics, qq, shanghai