There Is No China Market

September 1st, 2008

One of my biggest complaints about western observers of China is the overly used term “China market”. In fact, there is no China market, just as there is no European market. While there is a European Union, which many Europeans complain about as some kind of bloated legislative bureaucratic monster, it would be silly for any marketer to think that there is anything like a European market on the ground. After all, what are you talking about? Are you talking about the UK, Germany, Belgium, Spain or Italy? Even within these national markets, there are vast social and cultural differences within the same country.

While China is ruled as a single nation from Beijing, the political, regional, social and cultural differences within China are just as big as in Europe. While many western observers see Beijing as authoritarian, the truth is that Beijing has to play a huge juggling act among its own provinces. Every time the center asks for something from the provinces, it has to offer the provinces something in return. In this respect, China is just like the US, Russia and other big countries. There is endless bargaining, trading and swapping of favors, most of which does not occur publicly and is not common knowledge.

These local differences even extend to Internet businesses. The two biggest and most successful companies which dominate in CPC advertising and micropayments are both based in Shenzhen, and are not in Beijing and Shanghai. They are Tencent and Xunlei. Tencent is the leader in charging for micropayment-based subscription services and is the leader with its popular instant messaging client, QQ. Tencent is publicly listed in Hong Kong, and analysts love the company’s business model. Xunlei is a leader in P2P distribution of video, and inserts ads into video content before sending them on their way through its network. Although it is still private, it is already profitable, and Google has invested in the company.

If you go to Beijing, the media landscape is dominated by Sina, Sohu and Netease, China’s leading portals. I think of these companies as being like Web 1.0 national newspapers; they are like the Wall Street Journal and New York Times in China for the Internet generation. Because media content is a politically sensitive area in China, they need to be close to the government, which is why they are in Beijing.

And Shanghai is where most of the gaming companies are. While Beijing is home to serious media and sports, Shanghai is much more entertainment oriented. In the twenties and thirties, Shanghai was the home for China’s film industry; and the talent for entertainment had strong roots in Shanghai. After 1949, many of the producers, directors and actors moved to Hong Kong, but with China’s opening up, many have returned to their old base in Shanghai.

Think about it. Why is it the case that two of the leading micropayments companies in China are based in Shenzhen? I believe that being in Shenzhen forced these two companies to be much more consumer-oriented since fewer VCs ventured there. The paucity of easy access to capital forced them to be creative. In their early days, they were able to get favorable rents, cheaper employees and lower their other costs because of favorable terms from the Shenzhen municipal government. Micropayments really started in desperation as a payment system for poor people who had no credit in a nation without a national credit-ranking system who did not have credit cards. Without money from VCs, these companies were forced to innovate, and had to come up with a solution which got money from consumers.

Getting paid by your users; what a neat idea!

In China, many smart entrepreneurs go to second- and even third-tier cities so that they can get a local municipal government to support them. This is called finding a 靠山 or literally “a mountain to lean on”. After all, every city official wants to be able to say someday: “I helped set up Tencent (or Xunlei, or whatever.)” That would look good on their resume.

I’m always mystified that western-funded companies like to set up in Beijing and Shanghai; why don’t they strike out into other Chinese cities? Most of the time, I think it’s because their management are able to enjoy a level of living which is closer to what they would enjoy in the west. The problem is that because they are more like western cities than most Chinese cities, they give a skewed and sanitized view of what China is really like.

As a result, they unwittingly hand over the advantage to smart local Chinese companies. With the huge number of Internet companies in those two cities of Shanghai and Beijing, it’s almost impossible to find any Chinese government officials who can serve the role of mountains to lean on. And when you can find them, the cost of the mountains are much higher.

Google China Launches Earthquake Disaster People Search

May 17th, 2008

Google China announced their launch of Google China People Search in the Google China blog to help victims and their relatives get in touch with each other. I have chosen to translate the announcement in full, and have included the original hyperlinks in the story.

Aside from the human tragedy, this is an excellent study in how Chinese Internet users turn to the BBS (all of the links except for the disaster area search platform below are to BBSes) during times of emergency.

As of this morning (May 16), there are 19,579 casualties, and total fatalities are estimated to total more than 50,000. Many families are continuously looking for their loved ones, in the hope that they will be able to find them safe.

Google China’s engineers, after working more than 24 hours, have created the disaster area search platform. We have attempted to gather information from across the Internet to make it easier for users to get information. Our objective is to create a platform where bravery and hope can meet.

We hope that your loved ones are not among the long list of fatalities. Maybe they are searching for victims in ruined buildings, maybe they are caring for the injured in a hospital, maybe they are feeding a child somewhere. Maybe they will hear our call and know that they are not alone in this disaster.

If you have any information about people you know who are involved in this disaster, please post their information to Tianya Laiba, Baidu Tieba, Soso Search, Sina, and Netease. You can also send email to us. Our engineers are at work 24 hours and we will regularly update our information.

Google’s influence in China is small, so we have made this code available to everyone. Any blog and website can include this code in their website so that more people and websites can join in this search.

This is a long recovery process and there is much more work to be done. May heaven protect China, and we hope that your loved ones will be safe.

寻找灾区的亲人

Links for Sichuan Wenchuan Earthquake News and Donation Information

May 15th, 2008

I have put together a few links for those interested in news about and/or are interested in donating to help the victims of the Sichuan Wenchuan earthquake of May 12 tragedy.

What Tibet and Carrefour Can Teach Us About the Chinese Internet

May 9th, 2008

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.

Visualizing the Internet and Online User Behavior

August 7th, 2007

One the things which has been interesting to me are visual maps of the Internet, which show the main websites, and usually, how much traffic they attract. One of the leaders in measuring Internet usage all over the world, and in Asia-Pacific, is Comscore, which recently prepared a report on Asia-Pacific Internet usage.

Today, we are swamped with data and different sets of variables, so much so that most executives prefer to have their data presented in some graphic form. One great pioneer in this field is Edward R. Tufte, whose book The Visual Display of Quantitative Information is considered a classic for all communicators who need to provide snapshots of large data sets in a simple and clear fashion so that business decisions can be made quickly and efficiently.

iA Japan has recently released a map of the Internet presented as a variation of the Tokyo subway map. Broadly speaking, larger sites are larger, while sites with less traffic are smaller.

Internet Web Trend Map

Now, I find myself spending more time thinking about how to visualize human behavior. Advertising and marketing have everything to do with understanding group behavior and psychology. While there have been books written about it, there has been almost no research done about how to visualize it. I find myself most interested in how groups of people move from one interest and website/s to another.

In the map, for example, I can see that among Chinese sites, Sina, Sohu, Netease and QQ are big, but I don’t know how people move to and from these sites, and to other sites. Static maps are about nouns; I’m also interested in the verbs and the adverbs. And not on a static basis as a snapshot, but in a live, ongoing, continuously evolving and changing basis in real-time.

How would online user behavior be visualized? One thing for sure: no static image would capture it; it would have to be like a video, constantly updated in real-time. And what insights would it give to marketers, advertisers, psychologists, anthropologists and linguists? My guess is that it would show that online user group behavior really has a lot in common with members of the animal kingdom which travel together in large groups, such as fish and starlings.

How about you? How do you think this data should be represented?

Since Google just announced a new university search API for research, maybe this could be a project it could be applied to.

Flock of starlings