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Andrew W. Pearson
is the Managing Director of Qualex Asia Limited, a leading software big data, fast data, mobile and
social media implementer for the gaming, finance, healthcare, energy, hospitality and retail industries. He
has written books on casino marketing, predictive analytics and mobile and social media. A frequent
speaker on such topics as big data, predictive analytics, customer relationship management (CRM) and
social CRM, as well as mobile and social media, Mr Pearson is fascinated by the rapidly changing
business world, especially in Asia.
Qualex Asia, 1 Central Residences, Lot B, Zone B, Tower 7, 24A, NAPE, Macau
Tel: +853 6265 5885; E-mail: andrew.pearson@qlx.com
Abstract The days of China simply being a country that copies, pirates and counterfeits
US and European technology is coming to end. Platforms like social and mobile are at the
forefront of Chinas current technological revolution. We are truly living in an
interconnected world and this interconnectedness is creating a whole host of ways to
market a product and/or a service. Chinese blogs, micro-blogs, content communities,
social networking sites, virtual game worlds and virtual social worlds are leading this new
technological revolution. Companies like WeChat, QQ, Weibo, Hexun, Youku, Jiepang,
Qieke, Ushi, Taobao and Ku6 are all experiencing exponential growth. In China, the
competition for consumers is incredibly fierce, especially in the social media space. This
competition, however, does have a dark side: many companies regularly employ artificial
writers to seed positive content about themselves online and attack competitors with
negative news they hope will go viral. On the e-commerce front, Taobao has formed a
synergistic partnership in which store owners on Taobao create accounts on Weibo and
utilise it as a channel to market their products and communicate with customers. On the
virtual social world front, China might also be leading the world with sites like yy.com,
which have figured out a way to monetise karaoke. Technology has always moved at the
speed of light, but today the barriers of culture, language and communication are falling
by the wayside and China is finding itself at the forefront of this new technological
revolution.
KEYWORDS: Chinese social media, social shopping, WeChat, instant messaging, location
based services, e-commerce, mobile affiliate sales, WeChat, Taobao, virtual social worlds,
Singles Day
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channels.4 The Chinese government puts virtual game worlds; and virtual social
the onus of censorship on the internet worlds. For every one of Kaplan and
providers, but it is very hard for them to Haenleins US social media types, there is
keep up with Chinas technologically a corresponding Chinese social media type
savvy users, who are constantly on the that includes sites that either mimic or
lookout for the latest technology and supersede the capabilities of their US
newest internet access work-arounds. counterpart: for every Facebook in the
Mobile apps pop up on a daily basis and USA, there is a RenRen in China; for
remote access software allows Chinese every US microblogging site such as
users to easily evade what has been Twitter there is an equivalent such as
dubbed the great firewall of China. Tencent Weibo (see Table 1).
One of the most important elements of China has almost half a billion social
mobile and social media is its media users engaging with each other on
interconnectedness. An upload to YouTube mobile.2 Mobile instant messaging is the
can go viral through Twitter, Facebook, most popular activity,
LinkedIn, WeChat, Weibo, WhatsApp,
Youku and a whole host of other social accounting for 83.1 per cent of the total
media and mobile media platforms. Within population of mobile users, followed by
seconds, something uploaded onto social mobile search (62.1 per cent), mobile news
media in the USA can end up on a (60.9 per cent), mobile music (45.7 per
cent), mobile literature (44.2 per cent),
mobile application in China or Japan or
mobile social networking sites (42.3 per
Korea or almost anywhere else in the cent), mobile microblogs (38.5 per cent),
world that has mobile and/or internet mobile games (30.2 per cent), mobile posts
access. We are truly living in an and reposts (29.7 per cent), mobile e-mails
interconnected world and this (24.1 per cent), mobile videos (22.5 per
interconnectedness is creating a whole cent), mobile payment (8.6 per cent),
host of ways to market a product and/or a mobile banking (8.2 per cent), mobile
service. shopping (6.6 per cent), travel booking (4
WeChat, in particular, has proven to be per cent), and mobile daily deals (2.9 per
highly successful and is growing rapidly cent).2
both in China and throughout the rest of
the world, but companies like QQ, Weibo, Chinas social media users are a savvy lot,
Hexun, Youku, Jiepang, Qieke, Ushi and delighted to trumpet a companys products
Ku6 are all experiencing exponential when they like it or just as happy to tear
growth. With a base of 1.3 billion people, one down when they do not. To
it is not too hard for services that catch on understand the popularity and the
in China to rapidly get to tens of millions potential that social media holds for
of users within a year or even sooner. The China, it would be illustrative to look back
sheer number of users also means that at the countrys long and tumultuous
there is a lot of room for failure as well. history.
In their influential article Users of the
world, unite! The challenge and
opportunities of Social Media,5 Kaplan THE AWAKENING OF THE CHINESE
and Haenlein show how all social media MIND
websites can be broken down into one of Today, a visit to Eastern Chinese cities like
six different categories: collaborative Shenzhen, Guanghzou, Dongguan and
projects; blogs and micro-blogs; content Zhuhai is an eye-opening experience. The
communities; social networking sites; typical London taxicabs (painted a dull
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Chinas social and mobile companies set to shake the tech world
Source: Intelligentsia.media.
Notes: *Stageit is a web-based platform headquartered in Hollywood, CA. The service allows musical artists to
sell their live performances via webcam. Artists choose when they want to perform, for how long and how much
they want to charge (see http://www.stageit.com).
YY is a revolutionary rich communication social platform that engages users in real-time online group activities
through voice, text and video. With the capacity to support over one million participants concurrently, our
platform allows users to create and organize groups of varying sizes to discover and participate in a wide range
of online group activities, such as karaoke, online games, music concert, e-learning covering language, finance,
software, and other subjects, live shows and conference calls (see http://www.yy.com/).
blue rather than the standard London still contain communist propaganda murals
shiny black) are not quite as ubiquitous on that are rich in bold reds and deep blacks
the streets of Shenzhen as they are in and contain the smiling faces of the
London but, because of their uniqueness long-forgotten patriots of the Cultural
and seemingly out-of-place oddity, they Revolution.
certainly stand out as much. China is in As Boye Lafayette de Mente explains in
the midst of a building boom and Frank his book, The Chinese Mind:
Gehry-esque skyscrapers pierce the Understanding Traditional Chinese Beliefs
smoggy skylines of cities like Shenzhen, and Their Influence on Contemporary
Shanghai, Chengdu and Guangzhou. Culture:
These architectural splendours rise up
amid the dirty and crumbling facades of For over three thousand years the vast
Mao-era derelicts, which, in many cases, majority of Chinese did not have the
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Chinas social and mobile companies set to shake the tech world
Chinese needed to start remaking their China evolving, but also of the developers
country had always been there. It had just and producers of these games getting up
been locked down at the point of a gun, to speed, with not just a little helping
literally. hand from the government. Since the mid
The appearance of computers and the 2000s, there has been a global shift in the
internet in China had an equally pervasive geography of production in the creative
influence on the thinking and behaviour industry. While established centers of
of the Chinese further weaning them creative industry production in the United
away from the traditional culture as well as States, Japan, and Europe remain strong in
the communist culture of the Mao era.6 creative industries, new regions have
One of the key elements in the cultural focused on the opportunities in newly
changes brought on by computers was the emerging creative sectors,7 China, in
fact that the computer itself is culturally particular, has become a dominant player
neutral; that is, unlike human beings it in this market, with the online game
does not come with any culture hardwired industry leading the way:
into it. Like Americans, Japanese, Koreans,
and other computer users before them, With the growth of the knowledge
large numbers of Chinese were freed for economy and related services, the creative
the first time in the history of the country and cultural industry is seen as a sector of
to think like and act like individuals, potential growth both in terms of
without any thought of their social status, employment and economic contribution,
gender or relationships with others, and it is seen as a way for China to
including with the government.6 transform its material productivity, mainly
Digital video games have also had a from manufacturing into innovative
profound effect on the attitudes and productivity in knowledge-intensive
sectors.7
behaviours of the young Chinese mind.
Millions of children in families whose
income had risen above subsistence levels Today, companies like Alibaba, Taobao,
began spending countless hours playing Tencent, Weibo, WeChat, yy.com and a
video games that had both an obvious and plethora of others are taking the tech
subtle influence on their ways of thinking world by storm. Because these companies
and acting.6 The role models of these have such a massive home-grown
games were not the selfless, self-sacrificing, audience, the numbers they attain in terms
well-mannered heroes of Confucian of revenue and sales far outweigh any
China. They were the individualistic, comparable US sites. For example, in
independent, self-serving, 2013, Alibaba celebrated what it has
fashion-oriented, sensual-minded dubbed Singles Day or the Double
characters embellished by the imagination Eleven (named after the date, 11/11) a
and creativity of Japanese anime and manga 24-hour discount festival dreamed up to
(comic) masters.6 Today, League of Legends encourage spending at a dead time in
a multiplayer online battle arena game Chinas retail sales calendar.8 Alibaba
distributed by Tencent in China logged US$5.8bn in sales in 24 hours,
contains characters who would be more which made it way bigger than Black
comfortable in a Machiavellian drawing Friday and Cyber Monday combined (just
room plotting the untimely and painful under US$3bn in online sales, according
death of an enemy rather than taking to comScore). In 2014, the Singles Day
solace at a monks temple. Festival did more than US$2bn in its first
It is not just a case of the players in hour of business.8
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discount. For a fashion company it could challenges either, especially with the
allow them to activate a pop-up shop former. To get worthwhile visibility in
within a short timeframe for a launch or these channels, brands often have to pay
product demo/trial.13 Once a user is in a hefty fees to the malls to get priority
restaurant, caf, pop-up shop or on a listings. Ultimately, the malls control
casino floor, he or she can pay on which products get sold and so there is a
location, provided the payments function real loss of control for brand owners.13
has been set up on their WeChat account. The final e-commerce option inside
This makes the retail process much more WeChat is their affiliate sales network.13
flexible as brands can take pre-payments or Similar to Amway and other direct sales
set up small sales without cash registers at models, NuSkin and other pyramid sales
WeChat shops. systems, WeChats affiliate sales system links
Currently, there are a growing number a users social connections together in
of shops, malls, group-buy (TuanGou), and order to create sales by word of mouth.
flash-sales (MianGou) channels being built There are a growing number of affiliate
into WeChat.13 Brands such as Xiaomi, sales channels, including Weidian and
ONLY, and Sephora have created branded OKWei, where links (pictures and basic
stores (as Service Accounts) where they details) are shared through user networks,
sell products directly.13 WeChat only and proceeds of sales are split between
allows access to this channel to brands that people who shared through to the final
have a plan for building awareness (traffic purchaser.13
to their store) and to have a The products OKWei currently offers
logistics/fulfillment capability.13 Most are not great and the process has the
products sold on WeChat are moving potential to become very complicated,
through malls of one type or another very quickly, but the affiliate sales
many of which are controlled by networks are resilient; the invisible hand of
Tencent.13 Tencent has done a good job profit is just too seductive a motivator to
of implementing its most important bet against. Despite these hurdles, affiliate
companies, applications, and investments networks built inside/around WeChat
into WeChat. Grouped together inside the hold a lot of potential. It is this type of
payments section, key WeChat/Tencent link between social and e-commerce
owned/invested channels are highlighted, which makes WeChat very powerful for
including; Specials (linked to its brands.13
ecommerce mall yixun.com), Weituangou The mobile wallet has become an
(linked to its group buy site gaopeng.cn) important tool that most of the large tech
and Dianping for restaurants.13 companies are trying to develop. The one
Tencent also has accounts for other who creates an all-encompassing mobile
invested companies, including eLong, wallet payment system should be enriched
JD.com, OKBuy, Tongcheng, and accordingly, but any companies developing
Sougou.13 There are also malls for a solution would be wise to keep an eye
Dangdang, Amazon, VIP.com, Lefeng, on things out East. For example, during
Mougujie, Meilishou, Suning, Guomei, the 2014 Chinese New Year, WeChat
No1Shop, and Qunar, to name just a few. launched a feature that let users based in
The biggest challenge in selling through China send money to friends and family
these channels is first to gain enough via a virtual red pocket, which is a
visibility in a very crowded channel and, traditional gift of money shared during
secondly, to manage the presentation of this important Chinese holiday. The
the brand. These are not insignificant feature went viral and on 4th February,
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2014, WeChat reported that during the RMB in 2013 (US$13.4bn). Online games
first two days of the Spring Festival, over 5 dominated the market, with the largest
million users participated in the offering, segment being PC online games (53.66bn
exchanging over 20 million envelopes.14 RMB), followed by browser-based games
This is how it worked: after connecting (12.77bn RMB), mobile phone games
ones bank card to the app, users were able (11.29bn RMB), social network games
to send cash-filled virtual red envelopes in (5.41bn RMB), and single player games
one of two ways, either directly to an (0.9bn RMB).15 In total, an estimated 338
individual or, if he or she wanted to spice million users were accessing online games
things up, senders could put up a set sum though personal computers and 225
of cash that would then be distributed million users were accessing online games
randomly among a specified group of though mobile phones.16
friends.14 Initially, Chinese gaming companies
The brilliance behind the Red Pocket were simply service operators for
plan was that WeChat got users to bind foreign-produced online games.7 Today,
their bank cards to WeChat: however, the revenue share of
Chinese-developed games in the domestic
While the app originated as a messaging market has increased, from around 15
app and social network, its quickly evolving
percent in the early stages of the industry
into a catch-all solution for e-commerce,
gaming, and even consumer banking.
in 200317 to a level of 60 to 65 per cent.7
WeChat might have hundreds of millions of This is an important ingredient for
users texting friends every day, but once long-term success, as game development is
those users clip their bank account to the usually a complex and time-consuming
app, theyve opened their pocketbook to process that results in success for a small
Tencent.14 few.7 The life cycle of a successful game
can play out over several years and
revenues are typically derived from
VIRTUAL GAME WORLDS: 500 business models that are based on time or
MILLION TURNED-ON AND ENGAGED virtual items.7
BUYERS
There are two different types of online With time-based business models, revenues
games: (i) massively multiplayer online are either derived through monthly, flat-fee
games (MMOG), like League of Legends subscriptions or through fees based on the
and Warcraft III; and (ii) casual online amount of time users spend playing the
game. With business models based on virtual
games, like Candy Crush and Temple
items, the basic functions of the game are
Runner. In MMOG, which initially free for the players, but revenues are derived
dominated the market, thousands of from the sales of virtual items and services
people can play a game simultaneously in within the game.7
virtual worlds on computer servers, often
over the course of many months. Usually, For a game like League of Legends,
casual online games are less complex than players can purchase additional game
MMOG and are played on social options through riot points (RP) and
networks, browsers, and mobile phones.7 influence points (IP). RP must be bought
In the online gaming space, upstart using real money, while IP are earned by
players from Korea and China are now playing the game.18
eclipsing the Japanese stalwart gaming Breaking into the virtual gaming
companies.7 The size of the Chinese market in China is not easy, however, as
gaming market increased to 83.17bn any revenue generated by a game requires
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the performer rises from the middle mobile platforms. Once contestants
Users can chat with the performer and buy complete their preliminary selection rounds
all sorts of virtual gifts for her; their avatars and generate a large fan-base, YY will
hurl the favors onto the stage. (The broadcast the contestants training and
performer gets pretty much the same view, rehearsal sessions live across PC and mobile
along with some administrative controls.) platforms beginning in late June. In July,
The performances can seem something like during the final rounds of the competition,
a combination of a pop concert and a peep YY will establish a designated channel on
show.20 YY Music for each finalist, documenting
their real-life stories and offering live,
There is a revenue split between yy.com behind-the-scenes viewer interaction.
and the artists: For every sixteen-dollar Moreover, the shows unique interactive
bouquet of virtual roses that a fan throws functionality will allow YY users to show
on stage, the performer keeps about five their support for their favorite performers
dollars; YY gets almost all of the rest.20 A through a variety of both paid and free
features on the YY platform such as sending
couple of artists on YY make fifty
virtual gifts and casting votes, thereby
thousand dollars a month from the
enhancing the appeal and intimacy of the
platform, according to Hany Nada, a show with its audience members and raising
partner at GGV Capital, which invested in YY user participation levels.21
YY before its IPO.20 Unsurprisingly, it has
to do with how pretty the artists are, and In addition, David Xueling Li, chief
how much their fan bases want to impress executive officer of YY, added, this
them, said Nada.20 partnership represents one of our most
Some of YY Musics paying users are innovative forays into creating new
members of the diaosi a once-insulting monetization methods such as virtual gifts
term meaning, roughly, losers.20 It is a for television performances, paid votes,
term that Chinas underclass has embraced. entitlement rights, sponsorship advertising
Rachel Lu, the cofounder of Tea Leaf and online advertising.21
Nation, a company that analyses Chinese
social media, believes these users are too
poor to go to real concerts so they go to CONCLUSIONS
virtual ones on YY, where they bestow Treading carefully in China is probably the
virtual gifts to real singers who appreciate best way to approach Napoleons
their offerings.20 Paying users are about 1 awakening lion right now. Its new
per cent of the total and each user spends president, Xi Jinping, whose father was a
an average of US$200 on the site contemporary of Mao, has been
annually.20 consolidating his power by launching
In June 2013, yy.com announced an crackdowns on corruption that have
exclusive partnership with Hunan TV and imprisoned everyone from those who
EE Media to bring Chinas widely were once considered untouchable
watched singing talent television show, fellow members of the Politburo Standing
Happy Boy Show, to YYs interactive Committee22 to a relation of the
internet platform.21 As per the yy.com retired King of Gambling, Stanley Ho, in
press release: neighbouring Macau.23
James McGregor, China chairman for
The 2013 Happy Boy Show will leverage consulting firm APCO and a former head
YYs unique platform to debut a live TV of the US Chamber of Commerce in
talent show in an unprecedented interactive Beijing, says Xi is using the tactics of
format simultaneously across TV, online and Mao to be Deng 2.0. He is still largely
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