China’s social and mobile companies set to shake the tech world

Received (in revised form): 14th January, 2015

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: [email protected]

Abstract The days of 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 China’s 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, , 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

INTRODUCTION wakes up, he will shake the world’. It has Before he became emperor, Napoleon been over two centuries since those Bonaparte apparently once pointed at a prophetic words were uttered but, today, map of China and stated, ‘here lies a China is more than awakening from her sleeping lion, let him sleep, for when he slumber. China is nowhere near ready to

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challenge the USA for economic as access a multitude of social networking supremacy, but the days of China simply sites and services. Basically, whatever other being a country that copies, pirates and worldwide mobile users are doing, the counterfeits US and European technology Chinese are doing it too. Chinese mobile is quickly coming to an end. The social users are very much on the cutting-edge and mobile platforms are at the forefront of mobile and social media technology of China’s current technological and driving a whole new blogging, revolution. Companies like Alibaba, Baidu, gaming, buying and marketing revolution. WeChat, and Xiaomi might In China, users spend more than 40 per not be household names in the West, but cent of their time online on social media they are in China and most of them are websites, a figure that is expected to traded on US stock exchanges and continue its rapid rise over the next few followed by analysts and users alike almost years.4 ‘This appetite for all things social as much as Amazon and Yahoo are. has spawned a dizzying array of China is the biggest social media market companies, many with tools that are more in the world and whereas Facebook might advanced than those in the West: for be the biggest social network in the world, example, Chinese users were able to its penetration in China is minimal (at embed multimedia content in social media least compared with WeChat) and will more than 18 months before users probably remain so for a long time to could do so in the United States’.4 come, not only because China censors Companies like WeChat are Facebook but also because Facebook’s revolutionising social networks, adding Chinese competitors are actually creating malls as part of their platforms, while some very technologically savvy products. Taobao has teamed up with Weibo to The Global Web Index allow instant commentary and blogging (http://www.globalwebindex.net/), six of on purchased items. yy.com has inverted the ten most widely used social systems the concept of reality television, by taking are Chinese, including (19 per a singing competition and broadcasting it cent), Sina Weibo (18 per cent), Tencent over the internet, while allowing viewers Weibo (16 per cent), (11 per to directly remunerate the contestants. cent), Kaixin (8 per cent) and 51.com (6 per cent). In March 2012, China’s mobile ‘Social media began in China in 1994 with subscriber count topped 1 billion mobile online forums and communities and connections,1 and this number included migrated to instant messaging in 1999. User 356 million mobile internet users.2 It is review sites such as Dianping emerged around 2003. Blogging took off in 2004, almost mind-boggling to think that China followed a year later by social-networking has close to 30 cities with populations 3 sites with chatting capabilities such as greater than 8 million people. Like their RenRen. Sina Weibo launched in 2009, counterparts in other countries, Chinese offering microblogging with multimedia. mobile subscribers do everything from Location-based player Jiepang appeared in making phone calls, sending texts, 2010, offering services similar to e-mailing messages, tweeting and Foursquare’s’.4 blogging. On their mobile devices, they also like to watch videos, listen to music, This explosive growth should continue read and share books, play mobile games, into the foreseeable future, ‘a trend that’s at shop at online stores, connect and check least partially attributable to the fact that in at bricks-and-mortar stores (sometimes it’s harder for the government to censor through geofencing applications), as well social media than other information

2 Journal of Digital & Social Media Marketing Vol. 3, 2 000–000 Henry Stewart Publications 2050-0076 (2015) Pearson 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 Haenlein’s US social media types, there is keep up with China’s 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’. (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 2 highly successful and is growing rapidly cent)’. both in China and throughout the rest of the world, but companies like QQ, Weibo, China’s social media users are a savvy lot, Hexun, Youku, Jiepang, Qieke, Ushi and delighted to trumpet a company’s 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 country’s 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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Table 1: Chinese social media sites

Type Social media site Comparable Chinese site

Collaborative projects Delicious Baidu bookmarks QQ bookmarks Sina viv bookmarks Wikipedia Hudong Soso baike Baidu baike MBAlib Blog Blogger Weibo Instablogs Hexum Livejournal Sina blog Tumblr Blogus Wordpress Bolaa Micro-blogging Twitter Sina Weibo Tencent Weibo Netease Weibo Souhu Weibo Content communities YouTube Youku Ku6 Qiyi Social network Facebook Renren WeChat Qzone Pengyou Foursquare Jiepang Qieke LinkedIn Ushi Wealink Instagram PaPa Meipai Virtual game world Warcraft III League of Legends, Heroes of Newerth, Defense of the Ancients Archeage, Naruto Virtual social world Stageit* YY†

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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political or social freedom to make Whether or not Deng did — as is decisions on their own. They were culturally commonly said — assert that ‘to get rich is conditioned to suppress their own personal glorious’, is immaterial; the statement needs and ambitions and to think and embodies a philosophy he would have behave in terms of the collective responsibility — first for their family, then embraced wholeheartedly. In the decade for their community, next for their clan, and after he came to power, Deng made it ultimately for the nation at large.’6 possible for ordinary Chinese people ‘to utilize their long suppressed ambitions and skills, to begin thinking and acting as Early Chinese society was built upon a individuals, and to help themselves for the strong foundation of Confucian first time in the long history of the philosophy, which was ‘based on the country’.6 Incredibly, less than two decades already old Chinese idea that social after they went into effect, Deng’s policies stability was far more important than ‘freed over one billion people from a kind allowing people to make decisions on of cultural and political enslavement that their own’.6 Over the ensuing centuries, had often treated them more like objects ‘the concept and practice of collective rather than human beings throughout behavior rather than personal actions their existence’.6 There was not one area became so deeply embedded in Chinese or one aspect of Chinese life in the large culture that individualism virtually eastern urban areas of the country that was disappeared’.6 not fundamentally changed by the When Mao Zedong rose to power in economic and social revolution initiated 1949, he systematically attempted to by Deng.6 remould the Chinese into paragons of Once Deng rose to power, many communism, but the effort was a complete restrictions in China that had prevented disaster.6 In 1966, desperate to destroy all people from changing jobs and moving vestiges of traditional Chinese thought and away from their birthplaces were lifted. behaviour, Mao set in motion a violent Virtually everyone in the country, from ‘Cultural Revolution’, the intention of teenagers upwards, tried to figure out how which was to enforce communism in the they could get a piece of the action. country by removing capitalist, traditional Although communist by name, China has and cultural elements from Chinese some of the most capitalistic people society, and to impose Maoist orthodoxy around — hard workers by nature and within the party.6 with an ability to look at things for the Mao died in 1976 and, thankfully, the long term rather than a short-term vision Cultural Revolution died with him. that hampers many other entrepreneurs. However, ‘the damage inflicted upon the Adam Smith’s invisible hand of the market Confucian-oriented culture was profound is alive and well in Shanghai, Beijing, and set the stage for a second but peaceful Shenzhen, Chengdu, Yiwu, and almost and entirely different kind of revolution every other city in China. After Deng’s inaugurated in the early 1970s by his reformation policies took hold, literally for successor, his former but disillusioned the first time in the history of the country, Communist ally Deng Xiaoping’.6 Deng individual Chinese people were free to ushered in a new era that was look out for number one, and millions of euphemistically referred to as ‘socialistic them began doing just that with a capitalism’. Some would almost call that an vengeance. In fact, the remaking of the oxymoron but, in a strange way, the system Chinese mindset required almost no time does seem to be working. at all.6 The intelligence and skills the

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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 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 China’s 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 monk’s 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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A BLOGGING AND E-COMMERCE the source of negative posts and base SYNERGY countermeasures on whether they came Sina’s Weibo is another highly successful from competitors or real consumers’.4 Chinese social media platform and it is a Companies should also be aware of the ‘mashup of Twitter and Facebook that impact of artificial writers when mining makes money selling marketing services to for social media consumer insights and business customers and offering paid analytics. They should compare ‘the memberships to individual VIPs’.9 Users performance of their brands against those post 140-character messages, which in of their competitors. Otherwise, they risk Chinese conveys considerably more drawing the wrong conclusions about information than it does in English.9 consumer behavior and brand Images and video can also be included as preferences’.4 well as comments on post threads. ‘With China’s social media sector is very an educated, urban audience of 368 fragmented and local, with each social million, Sina Weibo has become the top media and e-commerce platform having at platform for breaking news and adding least two major local players; both have editorial commentary.’9 For example, different strengths, areas of focus and, when WalMart-backed retailer often, geographic priorities. For marketers, 360buy.com wanted to publicise a 10 per this fragmentation increases the cent drop in prices on big home complexity of the social media landscape appliances, its CEO first announced it on in China and requires significant resources Weibo, a sign of Weibo’s growing and expertise, including a network of importance to advertisers.9 partners to help guide the way. Tencent is Sina’s biggest competitor. Its In China, Weibo and the e-commerce platform — called QQ — today boasts site Taobao have formed a synergistic 784 million accounts and it ‘helps Tencent partnership in which storeowners on attract users for its other services, such as Taobao create accounts on Weibo and Tencent Weibo, which has some 469 utilise it as a channel to market their million users’.9 Tencent also owns WeChat products and communicate with and offers Qzone, the country’s largest customers. It is reported that Taobao and straight-up Facebook clone, which is Sina Weibo share 75 per cent of ‘especially popular among teens, who post overlapping users among the 500 million photos and videos, keep journal entries, users that they have.10 ‘A linking of each and play games on it’.9 of their accounts will allow Weibo users to In China, the competition for log onto Taobao to make purchase[s] and consumers is incredibly fierce, especially payment[s] and Taobao users to log onto in the social media space. ‘Many Weibo to view news and release products. companies regularly employ “artificial Hundreds of millions of user will be able writers” to seed positive content about to perform the functions of social media, themselves online and attack competitors online shopping and making payment[s] with negative news they hope will go on two platforms without switching viral.’4 ‘In several instances, negative account[s].’9 A comparable situation in the publicity about companies — such as USA would be for users to be able to allegations of product contamination — access and purchase products on eBay has prompted waves of microblog posts from their Twitter account with a PayPal from competitors and disguised users.’4 account that was integrated into their Businesses trying to manage social media Twitter account — all in all some pretty crises in China should ‘carefully identify powerful stuff.

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‘A deep integration of Sina Weibo and WeChat, in particular, has grown by Taobao is about taking advantage of the leaps and bounds. One example from four elements: account, marketing, data WeChat reveals just how interconnected and mobile’, according to Advangent.10 today’s world is: according to the April Since the partnership in April 2013, 2014 article, ‘New York real-estate agent user-centric product recommendations scores $13 million deal on WeChat’,11 Ms have started to appear on Weibo; these Yue Hao, a broker for Douglas Elliman, allow users to see Taobao products that received an unsolicited WeChat message might interest them. Weibo and Taobao from a Chinese entrepreneur who wanted have also considered other measures to to know more about the Baccarat keep their social shopping experience Residences, a 50-storey glass condo tower robust and engaging. On the one hand, under construction across from New they have launched discount promotions York’s Museum of Modern Art. targeting the seller’s Weibo fans through a series of ‘fan festivals’ that happen to ‘Ms Hao left a message with the person on coincide with important events; on the WeChat, telling her she’d inquire. After other hand, Taobao and Weibo are tracking visiting the Baccarat’s sales center, she sent users’ comments very closely — too many the Chinese entrepreneur, whom she declined to name, pictures of what the negative reviews and complaints will get 10 condos would look like and the sellers blacklisted and punished. neighborhood’s amenities. The next day, This is almost a perfect scenario for after speaking with the woman by phone, sellers as it gives them a far-ranging Ms. Hao hammered out the deal: a $10.25 platform not only to sell their wares on million three-bedroom apartment on the but also to gain instant social media 39th floor and a one-bedroom unit on the feedback — it is like word-of-mouth 21st floor for about $3 million.’11 marketing on steroids. Ms Hao then set up a private WeChat group for herself, the buyer and the SOCIAL NETWORKS AND THE attorneys to help everyone navigate the PERVASIVENESS OF COMMERCE tricky US real estate purchasing process.11 Unfortunately, for US companies trying to Although the Baccarat deal is by far the do business in China, they have been biggest WeChat transaction Ms Hao has hampered by strict censorship laws. had, ‘she often posts new listings and Google has left the search space to Baidu pictures from open houses on her timeline and, in the eyes of the Chinese and leaves voice messages for prospective government, Facebook has probably buyers’.11 committed a cardinal sin — helping As shown above, WeChat is more than foment a revolution. ‘Given Facebook’s just an instant messaging communication high-profile role in mobilizing people and platform. It is made up of what it has facilitating protests, such as those that dubbed ‘The four pillars’ — instant helped topple the Egyptian government in messaging, location based services, 2011, it seems unlikely that the Chinese moments and official accounts.12 Similar government would be interested in to WhatsApp’s IM capabilities, WeChat’s granting Facebook a license to operate ‘instant messaging’ section is pretty locally.’9 This has left a social network straightforward and it allows users to hole, a hole that was quickly filled by the message other users via text, which has likes of Kaixin, Qzone, Douban, Penyou become most people’s communication and WeChat, among others. channel of choice these days.12 The

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‘location-based services’ section allows With subscription accounts, brands can users to find information that is relevant in create content and present new products their area. Beyond just finding the nearest and offers to followers. This content can ATM, the radar feature launched in March be linked to an e-commerce store built 2014 allows users to find friends around inside or outside the WeChat them without revealing their cell phone application.13 A subscription account is number. simple to build by using the tools provided In the ‘moments’ section, users can post by WeChat’s www.Fengling.me. The only pictures, make comments and ‘like’ or share catch is the obligation to use a company their pictures or videos with the general registered in China. For companies public or simply share them with a select without a China registered office, there are few. Small business owners can also use this other ways to access the market, but they feature to showcase their products to do not allow for the same control over anyone and everyone in their address book. presentation and process. The ‘official accounts’ section is where As a mobile application with the GPS brands come in. Official accounts allow features of a smartphone, WeChat allows companies to send out either blanket for some promising location-based messages to multiple users or connect with opportunities for brands The app allows an individual in a private conversation. for location-based messaging from retailers ‘This means that WeChat can be used to or casinos or any number of other resolve issues in a private forum, unlike industries who have a one-to-one other platforms such as Twitter.’12 connection with their customers. Brands Companies such as the Galaxy Macau can take advantage of the location-based allow users to sign into their patron abilities of the app by creating a loyalty accounts through a Galaxy Macau WeChat card and/or by encouraging users at a app, giving them access to patron point specific location (a retail shop) to add balances as well as other features. (follow) the brand account. ‘The “Loyalty ‘Brands have taken advantage of Card” account inside of WeChat is WeChat’s “public accounts” to create basically a CRM tool which audiences can awareness and spread messages virally by opt-in for and find locations nearby (of teaming up with influencers, celebrities retail shops), receive discounts, promotions, and key opinion leaders.’13 ‘While points, and rewards.’13 WeChat’s social functions are not as open Retailers, restaurants, casinos, consumer as Weibo’s and the structure makes it staples and a whole host of other harder to create massive followings, industries are using QR codes and other features like “look around” (people can invitations to encourage customers to sign add each other based on proximity), up for WeChat accounts. ‘They typically “Shake” and “Message Bottle” (for random do this on-location, taking customers from connections), and “QR Codes” (a path to offline to online, and thereby collecting the user’s account from wherever they contacts within the CRM accounts of the share the code) have all helped to create brand. Moving from online to offline, more growth in the number of brands are starting to experiment with connections.’13 creating promotions online that drive users There are four e-commerce avenues to a retail location.’13 inside WeChat that brands can exploit as ‘For a restaurant or café this could well: subscription accounts, mean sending out a “flash” alert to online-to-offline sales channels, WeChat followers about a promotion taking place shops and affiliate sales. “in the next hour” for a free trial or a

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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, café, 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, WeChat’s affiliate sales system links Currently, there are ‘a growing number a user’s 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 one’s 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, it’s quickly evolving percent in the early stages of the industry into a catch-all solution for e-commerce, 17 7 gaming, and even consumer banking. in 2003 to a level of 60 to 65 per cent’. 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, they’ve 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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an extensive on-the-ground network of consoles.19 Live gaming competitions draw internet cafés.7 ‘The most common way to huge online audiences that number in the collect individual game fees in China is millions; a late 2013 ‘League of Legends’ still the use of physical game point cards tournament drew over 32 million viewers, that players purchase, although credit card while a 2014 ‘Call of Duty’ competition payments have increased over time. Many had prizes topping US$1m.19 of the largest Chinese online game companies have created their own distribution networks for game point VIRTUAL SOCIAL WORLDS: NOT SO cards, which have increasingly relied on VIRTUAL MONEY MACHINES electronic sales systems at internet cafés On the virtual social world front, China and other distribution points to sell might also be taking the lead. Second Life electronic game point cards at higher used to be a major player in this space, but margins. It has been estimated that the it has now fallen on hard times. While game companies’ distribution costs for Second Life’s Linden dollar valuations physical game point cards are 30 per cent continue to plunge, the harbinger of of revenues, compared with about 12 per capitalism — the US stock market — cent for electronic sales system and 5 per values Chinese virtual social world cent for sales directly to the customer provider yy.com at a price more than through credit card payments.’7 Foreign seven times higher than it was when it companies looking to break into the went public in November 2012. YY has Chinese virtual gaming market might look created a very successful business model by to emulate what smaller Chinese game catering to a niche audience of online companies are doing by partnering with karaoke singers. According to David external game point card distributors in Goldenberg’s article, ‘Virtual roses and the exchange for a share of the revenues.7 rise of yy.com’: Interestingly, the success of these creative endeavours is now having a ‘YY started in 2005 as a place for hardcore spillover effect into China’s physical online gamers to communicate while construction industry. At Hengqin Island, a playing games like World of Warcraft. If a stone’s throw away from Macau, the Hong group of players were planning a raid, its members would all hop on YY to talk Kong based developer Lai Fung Group is strategy. But eventually YY administrators building a 15,000-seat arena specifically found that people were using the chat designed to host e-gaming tournaments, rooms for other reasons. Many sang 19 the first of its kind in the world. Within karaoke. To enter certain chat rooms, you the Middle Kingdom — as China likes to needed access codes, which YY users were call itself (and certainly a name that would selling for cash on Chinese e-commerce not be out-of-place in a Tencent video sites. In 2009, YY decided to keep the sales game — over 500 million people play in-house by creating YY Music.’20 video games, and about 145 million of them play games for more than an hour Today, visitors to YY Music can choose each day.19 e-Gaming is now a growing from thousands of live performances and spectator sport, with live-streamed gaming each performer (and there are, literally, competitions topping content community thousands of them) has his — or, more sites like YouTube and Youku. This is a often, her — own theatre, trend that Microsoft and Sony acknowledged when they built streaming ‘in which fans’ avatars cluster in seats capabilities right into their latest around the main stage. A live video feed of

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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 show’s 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 couple of artists on YY make fifty features on the YY platform such as sending 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 Music’s 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 China’s 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 Napoleon’s 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 China’s widely were once considered untouchable — watched singing talent television show, fellow members of the Politburo Standing Happy Boy Show, to YY’s 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 YY’s 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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surrounded by reform-minded advisers companies can use WeChat as a portal and has given no sign that he will retreat where users can tap into and utilise their from his agenda.’22 Xi has another five customer data. Storefronts can also be set years to implement his reforms, which up to sell directly to customers, who can include ‘key areas like financial reform and use WeChat’s mobile wallet to pay for a host of other issues, such as allowing things. These transactions should be private companies to move into sectors seamless, completed within a closed now dominated by state-owned firms’.22 ecosystem that will ease users’ security Moreover, the reforms needed today are concerns. Retailers wanting to venture considerably more complicated than the into China should not see language as a ones Deng initiated over 35 years ago.22 huge barrier. Sites such as Taobao and Even with this latest crackdown, however, jd.com allow users to upload their items opportunities in China abound. in English. Right now, tomorrow’s social media Unfortunately for Facebook, its time to ideas might be playing out on a mobile make deep inroads and grow in China app in China or Hong Kong or Macau or have probably already come and gone. The half a dozen other Asian countries. local market is dominated by competitors Technology has always moved at the speed with diversified business models that have of light, but today the barriers of culture, helped them achieve deep mobile and language and communication are falling social engagement.9 Robust start-ups are by the wayside. Looking at the social sprouting up in cities across China, from media landscape through Kaplan and Shenzhen to Shanghai to Beijing and Haelein’s six different types of media,5 Chengdu, and many points in between. European and US companies can easily Those aforementioned cities have enter the Chinese market via the Chinese populations of over 10 million people, and social media platforms. their tech workforce are all keyed in and Even though the Chinese government turned on to mobile and social. censored it after the Hong Kong Central Should a social media crisis flare up, demonstrations, Instagram was not the businesses working in China: best platform for marketing in China anyway. European and/or US businesses ‘should carefully identify the source of looking for ways to gain a foothold in negative posts and base countermeasures on China should look to Weibo and WeChat whether they came from competitors or to market to potential consumers. With a real consumers. Companies must also factor in the impact of artificial writers when monthly active user base of 156.5 million, mining for social-media consumer insights Weibo has been the blogging platform of and comparing the performance of their choice for marketers, while WeChat, with brands against that of competitors. 438 million worldwide monthly users, is Otherwise, they risk drawing the wrong 24 the chosen social network. Local apps conclusions about consumer behavior and like PaPa (an Instagram clone that offers brand preferences.’4 photo filters as well as sound effects) and Meipai (an app that turns video clips into In China, cable companies are teaming up videos) can also be used to market quite with the likes of Alibaba and yy.com to effectively. European and US companies distribute content and there is no reason should set up their own public accounts why deals cannot be struck up with on WeChat to tap into the massive pool Europe and US content delivery of potential followers. Like the official companies. New monetisation methods Galaxy Macau WeChat account, include virtual gifts for internet and

14 Journal of Digital & Social Media Marketing Vol. 3, 2 000–000 Henry Stewart Publications 2050-0076 (2015) Pearson television performances, entitlement In America, there is a saying, ‘If you’re not rights, sponsorship advertising and online cheating, you’re not trying’ and sometimes advertising. it seems as though Chinese businessmen When Dove China’s ‘Real Beauty’ are taking this notion to an absurd degree. social media campaign hit the airwaves in Almost every city in China has stores filled China, which attempted to promote with counterfeit goods and many of them beauty among women of all ages and body come with inauthentic ‘authenticity tags’ types, Chinese consumers viewed the ‘real attached to them. Stories of fake eggs, women’ as overweight and unattractive.4 tainted milk and rat meat being passed off Dove moved swiftly, partnering with as lamb are quite common in the press. Imitation might be the highest form of ‘Ugly Wudi, the Chinese adaptation of the flattery, but in China it can also be a quick US television show Ugly Betty, to weave the avenue to success. Xiaomi, China’s largest Real Beauty message into story lines and mobile phone maker, blatantly rips off mount a number of initiatives, including a Apple’s designs, a problem so systemic blog by Wudi and live online chats … The within the company that the CEO of effort generated millions of searches and blog entries, increased uptake of Dove body Xiaomi, Lei Jun, even wears Steve Jobs’ wash by 21 per cent year over year after the clothing of choice — blue jeans and a 25 show’s first season, and increased unaided black mock turtleneck — at company awareness of Dove’s Real Beauty by 44 per press events. Xiaomi’s success in the cent among target consumers.’4 mobile handset market, however, might be a pyrrhic victory, as margins are a paltry 2 Because of strict government industry per cent, far below Samsung’s 18.7 per controls, non-Chinese video game cent and Apple’s 28.7 per cent.26 developers that want to expand into Creativity, it seems, does count for China have limited options, but teaming something. up with a Chinese mobile game Over two centuries ago, Napoleon distributor is key. Many of Google’s made his famous statement about China services, including Google Play, are being a sleeping lion that would one day blocked or highly regulated in China, shake the world. Today, China is roaring making it difficult for non-Chinese and ready to shake up the world, and the mobile game developers to access the colours of this revolution will be in market through normal channels. WeChat’s white and green, Ushi’s dark, Alternative apps stores are flourishing, modern blue, and Weibo’s red, white and however, and non-Chinese mobile app black. developers should target the following stores to sell things through: References 1. Xinhua (2012) ‘China mobile phone users exceed • 1 billion’, xinhuanet.com, 30th March, available at: Biadu App Store http://news.xinhuanet.com/english/bilingual/ • Tencent App Gem 2012-03/30/c_131499096.htm (accessed 24th • Qihoo 360 Mobile Assistant June 2015) • Wandoujia 2. CNNIC (2012) ‘The 29th Report on the Development of Internet in China’, China • 91 Mobile Assistant Internet Network Information Center, Beijing, • HiMarket available at: http://www.cnnic.cn/research/bgxz/ • Taobao Mobile Assistant tjbg/201201/t20120116_23668.html (accessed 4th • June, 2015). Xiaomi App Store 3. See http://en.wikipedia.org/wiki/List_of_cities_ • D.cn Games Center in_China_by_population (accessed 11th January, • AppChina 2015).

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4. Chiu, C. I., Ip, C. and Silverman, A. (2012) attack-company/. ‘Understanding social media in China’, available 15. GPC (2014) ‘China Gaming Industry Report’ [in at: http://www.mckinsey.com/insights/marketing_ Chinese], China Game Publishers Association sales/understanding_social_media_in_china Publications Committee, Beijing (accessed 16th (accessed 2nd June, 2015). May, 2015). 5. Kaplan, A. H. and Haenlein, M. (2010) ‘Users of 16. CNNIC (2014) ‘Statistical Report on Internet the world unite! The challenges and opportunities Development in China’, China Internet Network of social media’, Business Horizons, Vol. 53, No. 1, Information Center, Beijing (accessed 16th May, pp. 59–68 (accessed 24th June 2015) 2015). 6. De Mente, B. L. (2009) ‘The Chinese Mind: 17. iResearch (2008) ‘2004 China online game Understanding Traditional Chinese Beliefs and research report’, iResearch, 25th September, Their Influence on Contemporary Culture’, Tuttle available at: http://www.iresearchchina.com/ Publishing, North Clarendon, VT (accessed 24th reports/3695.html (accessed 16th May, 2015). June, 2015). 18. Wikipedia (n.d.) ‘League of Legends’, available at: 7. Ström, P. and Ernkvist, M. (2014) ‘Product and http://en.wikipedia.org/wiki/League_of_Legends services interaction in the online game industry’, (accessed 11th January, 2015). Technology Innovation Management Review, May, 19. Brustein, J. (2014) ‘Huge video game stadium available at: http://timreview.ca/article/789 coming to Macau’s neighborhood’, (accessed 24th June, 2015). Businessweek.com, 1st May, available at: 8. Doland, A. (2014) ‘Alibaba’s latest e-commerce http://www.businessweek.com/articles/2014-04- bounty: $2bn in sales in first hour’, Advertising Age, 25/hengqin-near-macau-to-host-the-worlds-first- 10th November, available at: video-game-stadium (accessed 16th May, 2015). http://adage.com/article/global-news/alibaba-sells 20. Goldenberg, D. (2013) ‘Virtual roses and the rise of -2-billion-hour-shopping-fest/295795/ (accessed yy.com’, The New Yorker, 5th September, available 10th May, 2015). at: http://www.newyorker.com/online/ 9. Hempel, J. (2012) ‘Facebook’s China Problem’, blogs/currency/2013/09/virtual-roses-and-the-rise Fortune Tech, 10th September, available at: -of-yy-music-china.html (accessed 16th March, http://tech.fortune.cnn.com/2012/09/10/ 2015). facebook-china-problem (accessed 16th May, 21. YY Inc (2013) ‘YY announces exclusive 2015). partnership with Hunan TV and EE Media’, 10. Advangent (2013). ‘In April Weibo and Alibaba available at: http://investors.yy.com/release announced a strategic alliance to cooperate in detail.cfm?ReleaseID=769562 (accessed 11th social shopping’, advangent.com, 13th August, January, 2015). available at: http://www.advangent.com/zh/ 22. Powell, B. (2014) ‘Is this the end of the Chinese 2013/08/13/sina-weibo-taobao-social-commerce- miracle?’, Newsweek, 26th November, available at: 2-0/ (accessed 24th June, 2015). http://www.newsweek.com/2014/12/05/china- 11. Abkowitz, A. (2014) ‘New York real-estate agent after-gold-rush-286757.html (accessed 19th April, scores $13 million deal on WeChat’, Wall Street 2015). Journal, 21st April, available at: 23. Liu, L. (2015) ‘Casino mogul Stanley Ho’s nephew http://blogs.wsj.com/chinarealtime/2014/04/21/ arrested in Macau prostitution sting’, new-york-real-estate-agent-scores-13-million-deal shanghaist.com, 12th January, available at: -on-wechat/ (accessed 31st June, 2015). http://shanghaiist.com/2015/01/12/stanley_hos_ 12. Segev, L. (2014) ‘WeChat is so much more than nephew_suspected_of_pro_1.php (accessed 16th just instant messaging’, Thetechieguy.com, 20th May, 2015). March, available at: http://thetechieguy.com/ 24. Doland, A. (2014) ‘It looks like China’s Instagram 2014/03/20/-is-so-much-more-than-just- blockage is here to stay’, Advertising Age, 8th instant-messaging/ (accessed 16th May, 2015). October, available at: http://adage.com/article/ 13. Baker, C. (2014) ‘4 ways brands can use WeChat digital/instagram-s-blockage-china-a-blow- for sales’, clickz.com, 26th May, available at: marketers/295322/ (accessed 16th May 2015). http://www.clickz.com/clickz/column/2346596/ 25. Bell, K. (2014) ‘7 things copycat Xiaomi blatantly 4-ways-brands-can-use-wechat-for-sales (accessed ripped off from Apple’, available at: 1 May 2015). http://www.cultofandroid.com/66569/xiaomi- 14. Horwitz, J. (2014) ‘Chinese WeChat users sent out dont-copy-apple/ (accessed 11th January, 2015). 20 million cash-filled red envelopes to friends and 26. Jones, L. (2014) ‘Xiaomi’s successful but does not family within two days’, Techinasia, 5th February, make much money’, mobileburn, 15th December, available at: http://www.techinasia.com/ available at: http://www.mobileburn.com/23957/ wechats-money-gifting-scheme-lures-5-million- news/xiaomis-successful-but-does-not-make-much chinese-users-alibabas-jack-ma-calls-pearl-harbor- -money (accessed 16th May, 2015).

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