Any predictions you would add (or change)?

(1) eCommerce to see wider adoption, driven by convenience, lower-price alternatives to traditional retail, and improved trust & safety. Gross merchandise volume (GMV) is expected to reach Rmb723B in 2011, or less than 4% of retail sales.

(2) Social commerce. Expect social sites to be an emerging and important traffic generator for eCommerce companies. Synergistic relationship between social networks and commerce merchants will fuel growth for both segments.

(3) Gaming segment likely to see re-rating with good game titles launch. Highly anticipated games in 2011 include Duke of Mountain Deer, World of Warcraft Cataclysm, etc., which could generate greater player interest and, as such, sector rerating.

(4) Video advertising to prompt ad dollar shift from TV to internet. With the recent IPO of Youku, a broader range of online video content, growing online video user base, and a familiar ad format, TV advertisers are likely to accelerate the ad budget shift from offline to online.

(5) Mobile Internet to see increased competition. We expect Internet leaders like Baidu and Tencent to formally launch middle-ware products that could include third party application distribution platforms; compete with existing players UCWeb other mobile game platforms.

(6) Search continues to see solid growth, with wider market adoption. Baidu still maintains dominance, other players such as Soso and Sogou still unlikely to gain meaningful market share.

(7) Solid consumer spending trend supports good advertising segment growth. Expect continued good macro environment to support consumer spending. We believe the sector growth story remains intact: Internet usage growth, particularly in lower-tier cities, to drive ad budgets online.

(8) Expect transition from time-base pricing to CPM-base pricing to accelerate in 2011, but remain gradual, driven by user-segregation and better online adserving/tracking technology. Yet, leading portals will still benefit from their own brand influence.

(9) 2011 Rmb appreciation to improve sector profitability. Expect sector margins to have very slight improvements from Rmb appreciation, as only a small portion of costs are in US dollars (game licensing fee, overseas video/sports content fee, and some servers, etc.). Benefits to come from translation gains from Rmb-denominated EPS to US$-denominated EPS.

(10) More IPOs likely in 2011. We expect investors will likely continue to look for growth investment opportunities in 2011. We think China’s internet segment offers good secular growth, as well as a number of sizable private companies. We believe more new listings are likely.

Since then, new social media platforms have become relevant – on both sides of the Great Firewall – and so the team reworked the infographic. They have also widened the scope to include more platforms within some of the categories.

Major changes include:

Three new categories: professional social networks, which may become more important with LinkedIn’s China future still uncertain, mobile chat, and online music.

GroupOn’s Chinese platform: Although just launched, if their planned investment is anything to go by and they get over some of their initial obstacles, GroupOn China is likely to become a major player in the next few months.

Quora: Although different to Yahoo Answers, which it replaced, Quora is now the Q&A platform everybody is talking about. On the China side we have included its direct equivalent, Zhihu, as well as Baidu Zhidao and Tianya Wenda, which are more like Yahoo Answers.

More Tencent: This Chinese internet giant has been given a lot more face than last time, with the addition of their microblog and the highly populated but relatively inactive Qzone.

Making graphics like this is, of course, far from an exact science. Many of the changes are debatable and the Chinese equivalents also have very different features from their equivalents. Inevitably, there is also the difficulty relating to category crossovers.

Suggestions welcomed in the comments!

By Andrea Fenn

When in the mid-2000s automobile brands like Volkswagen or Honda started leveraging Chinese online forums to talk about their nameplates, the world of Chinese social media was muddy ground for doing business. Rules were unclear, governmental control was tight and the Chinese Internet audience seemed more interested in online games than in brand and product information.

Five years later, social media have become a core platform for brands to spread messages to their audience and to build supporters’ communities. This is because of the unrestrained growth of Internet usage in China, and because Chinese Netizens have evolved to a more mature, informed and consumption-prone audience.

China’s Netizens: Many and Active
According to the China Internet Network Information Center, the official voice about Internet usage in China, the Chinese Internet population has today reached around 404 million. With a 5.2% growth from 2009, China’s Internet population is the world’s biggest, bigger than the entire population of the Middle East.
But what is even more pronounced is the level of participation of Chinese Internet users in social media. The latest China Social Network Report indicates that roughly 54.7% of Netizens in China users today own or visit blogs, and 47.3% have a page on one or more social networking site (SNS). More than 25% write 10 or more posts on forums, blogs or SNS every day, and 92.3% of Netizens visit social media pages at least three times a week, while 27.1% have pages on five or even more different social networks.
Social media is progressively becoming a crucial element in the lives of Chinese people, as it allows them to gain entry to social circles and information that would not be otherwise accessible because of distance, governmental control or other constrictions.

Farflung Relations, Dull Media
Firstly, the sheer size of the Chinese territory is a limit to keeping long-distance relationships, getting in touch with old friends and meeting new people outside one’s work nucleus. Thanks to social media, Netizens can keep the threads of their lives together and expand them without resorting to overnight train journeys or expensive long-distance calls. As a consequence, China is the only country in the world where people say they have more friends online than offline, stated an MTV Research in late 2008.

Secondly, because of the restricted availability of information on traditional media, social media have become an invaluable resource for Chinese to access the “other side of the story”, and information they would not be able to find anywhere else.

This is true for political discussion and social issues, but it is also true for brands. As many foreign products are often unavailable outside tier-one cities and official information about them is often limited or only available in foreign languages, social networks have become the privileged forum for Chinese consumers to find news about brands and products and share experiences about their shopping habits.

Trust “Strangers With Experience”
According to the 2010 TNS Digital Life Report, China is the first country in the world for number of Netizens who join social networks to find information about brands. And the Internet is a trusted source, as 2010 Global Web Index indicates that Netizens trust reviews and insights on social media three times more than a recommendation from an acquaintance in a bar.

International Brands Join the Conversation
Facing the thirst for information and consumption of Chinese Netizens, international brands are entering full force the Chinese social media space. Not long ago it was not unusual for even internationally reputed brands not to have a Chinese-language version of their website. Today, most brands have a branded page in SNS like Kaixin or Renren, from which they broadcast tailored messages for their Chinese audiences.

This is true for multinational corporations with a huge retail footprint in China like KFC or Coca-Cola, which have been active on social media since early times and now have communities of hundreds of thousand fans on Chinese SNS.
However, it is also true for brands that have been slow in penetrating the Chinese market or that have lagged behind in terms of brand definition in China. Sportswear brand Reebok has suffered from unclear brand positioning and poor sales in the past few years, and is now straightening its status in the Chinese market by aggressively building communities and buzz on social media.

Chinese Brands: Slow Start, But Now Innovating
While Chinese brands have been somewhat slow in understanding the potential of social networks, now they have developed their own approach to social media, and are quickly moving to leading the way in the field.
The reason is mostly cultural: as western social networks like Facebook and Twitter are blocked in China, the Chinese counterparts developed in China are not just replicas, but rather new original creations that incorporate elements of the local culture and Internet customs.
The Sina Microblog, the Chinese alternative to Twitter, try to appeal to multimedia-loving Chinese Netizens and thus has extremely well developed video and photo sharing functions, better even than Twitter itself. At the same time, because 140 Chinese characters can say much more than 140 alphabetical characters, Sina Microblog is being used for more complete communications than mere short messages, which made it more suitable for a wider range of audiences and purposes.

Local brands have been better interpreting the peculiarities of “Made in China” social media, and in the past few months they have crafted extremely successful digital campaigns that will set the tone of advertising trends in China for the years to come.

Strong Case Study: Vancl
Most notable is the case of ready-to-wear brand Vancl: in April 2010, Vancl created parody versions of its own commercial, substituting official sponsor celebrity writer Han Han with new figures and modifying the slogan, and distributed it online without disclosing the official provenience.
The strategy aimed at leveraging the growing popularity of “online mockery”: the tendency of Chinese Netizens of ridicule, distort and customize online content as a means to express themselves.

The mocking campaign generated immediate reactions online: Netizens posted thousands of user-generated mock-versions of the Vancl commercial, and the phenomenon of online mockery became subject of wide attention in the Chinese public opinion. Few months later, the term fan ke ti (Vancl-ization) has already become a new popular idiom in the Chinese Internet vocabulary.

While it is hard to predict what changes will take place on Chinese social networks in the close future, lessons such as Vancl’s suggest that the social media space is bound to become more crowded with local companies.
“Made in China” campaigns are soon bound to become trendsetters for the direction of online marketing in China. To be successful, online marketing efforts of western brands will have to pay more and more attention to the peculiarities of the Chinese Internet culture and structure.

Andrea Fenn is Regional Digital Strategist at Ogilvy 360 Digital Influence Shanghai, the social media strategy team of Ogilvy. Andrea helps foreign brands or organizations understand and plan communication strategies on Chinese social media. He also writes on Chinese and foreign media about communication, social issues and lifestyle in China.

Before attacking the messenger, Social Bake is a highly credible source of statistics on Facebook, which is why I did not dismiss this as an error not worth noting.

According to Social Bake, there are now 659,060 Facebook Users, ranking China as the 82nd largest nation on Facebook and a penetration 0.16% of the online population and 0.05% of the general population. To get an idea of scale, there are roughly 420mn netizens in China and 160mn users registered on Renren, the China-based social network aiming to IPO later this year.

Nations Social Bake places at a similar speed of growth are a catalog of African nations with troubled histories, such as Somalia, Sierra Leone and the Central African Republic.

Social Bakers is not very clear about how they gather statistics for nation. I presume these are people who self-declare their location as China. To log onto Facebook from within China, users need to use a proxy service, which would show an IP location outside of China.

It would be interesting to know what has driven registration in recent months. Was it the film “The Social Network”? Are the new users students who return to China from overseas studies? (There were more than 130,000 Chinese students studying in the US in 2009)

Below are the demographics Social Bake provides for China’s Facebook population insight.

Facebook holds sway as the default social network in many parts of the world across all Internet demographics. In China, where Facebook is blocked, a handful of homegrown social networks attract segmented audiences, ranging from upmarket urban youth to university students and migrant workers.

While the world’s big focus these days is on Renren preparing to go public, these other networks deserve a look:

- Douban – a more specialized social networking site, attracts art students and those passionate about books, cinema, culture, and music. Users connect according to their interests and often hold offline activities, such as trips to local art exhibitions.

- Kaixin001 – a platform designed for a more mature audience of young professionals, has a membership that is heavily dominated by white collar workers in Beijing; Guangzhou, Guangdong; Shanghai; and second-tier cities. Users do not upload personal content but rather share information they find elsewhere, often relating to health, relationships, and professional advancement.

- QZone – the first and largest social networking site in China, attracts youth from teens through age 25, often from second- and third-tier cities. A sizable portion of migrant workers, many of whom share personal diaries in a blog-like format, use QZone.

- RenRen – the platform in China most similar to Facebook, attracts university students who use the platform to connect and interact with classmates. The site is organized around users’ school and graduation class. Many users upload videos and photos of their activities.

Quick summary:
Kaixin = Cool girls
Facebook = Expat foreigners
Douban = Hipsters
Renren = College students
Qzone = Teens in second and third tier cities

The Ogilvy Beijing social media team created the below archetypes to bring these personalities to life. Another posting that has generated a good deal of interest is the Beijing team’s infographic of China’s social media equivalents. The equivalents graphic will soon be updated, so suggestions welcome!

Beyond censorship, these actions now may have financial impact on China’s most prominent Internet properties. Deutsche Bank last night downgraded their outlook for Sina, based on potential government action against Sina Weibo.

Although filtered, Sina Weibo has evolved into one of the most open media platforms in China. There have been many open critiques of the government on Weibo. These have included questioning official statistics, condemning corrupt officials and arguing against policies like the recent measures requiring a Beijing ID card to  buy property in the capital.

Pressure via Weibo has brought change, since many of those using the service are high profile, including nearly 300 local and national delegates to the CPPCC, according to the People’s Daily. The People’s Daily cited Li Dongsheng, a delegate and board chairman of electronic device manufacturer, TCL gained 130,000 new Weibo followers last week after posting that he would listen to netizens’ ideas for inclusion in his motions. He now has 490,000 followers on Weibo. One example of legislation is a law protecting children that has been proposed in the wake of a Weibo-led campaign to save children from begging on the street.

Such high level users will do something to protect Sina Weibo, but the service may face constraints beyond censorship if the unrest carries on in the Arab world. Additional limits could include the slowing of speed to post (for government inspection) or limits to the number of re-tweets.

Deutsche Bank acknowledges Sina’s dominance, innovation and leadership, but expressed concerns big enough to warrant an investment downgrade.

As Deutsche Bank put it (emphasis is theirs):

Run-up on weibo enthusiasm may reverse
While we continue to recognize Sina’s dominance, innovation and leadership in the portal space, and view its weibo microblog service as a breakthrough in internet-based communications, we do believe that the risks of tightening government regulation around its “Twitter-like” service continue to mount. We believe the occurrence of (admittedly sparse and lightly attended) demonstrations across China over the weekend may move the authorities to disable aspects of microblog services that they view as destabilizing.  Further Mideast unrest could also lead to tightening.

Downgrade on valuation.
We downgrade to Sell (from Hold) as Sina now stands at USD85.52, well above our PT of USD58. Our valuation methodology is based on 1.1X PEG using a 3-yr CAGR. PT implies 27x 2011E PE. Upside risks include lenient government regulations and strong weibo monetization. We aim to re-evaluate our assumptions going forward.

I wrote the below article for China Business Review, the magazine of the US-China Business Council. I’d be interested in feedback from the readers of this blog! Tom

As Chinese consumers spend more time online, foreign companies should deepen their knowledge of domestic social media platforms.

by Thomas Crampton

Much has been written of late about the PRC government’s efforts to control and censor the Internet. The government’s censorship of websites is an important issue, but it is not the top priority of the country’s 420 million Internet users (netizens). Their top priority? Connecting with other Chinese online. The Internet has opened access to information for ordinary Chinese citizens in ways that were unimaginable just a few years ago. Coming from a world where information was pre-filtered by editors at state-run media, China’s Internet is freewheeling by comparison.

Quick Overview
Chinese Internet users are actively engaging in social media—especially home-grown social media platforms. Domestic social media platforms differ in various ways from Western platforms.

Companies should learn how Chinese consumers use social media and take advantage of the platforms to conduct consumer research, launch products, manage public relations crises, and more.

Rather than eliminate social media, restrictions on foreign websites and social media have resulted in a flourishing home-grown, state-approved ecosystem in which Chinese-owned properties thrive. YouTube, Facebook, and Twitter are blocked in China, but their Chinese equivalents are expanding. By some measures, usage of Chinese social media is some of the most intense in the world. A Boston Consulting Group study found that Chinese Internet users are online for an average of 2.7 hours per day, considerably more than other developing countries and more on par with usage patterns in Japan and the United States (see Understand and Tap Into China’s Digital Generations).

Numerous factors help drive Chinese, more than other populations, to engage in social media. These include rural-to-urban migration that has separated families, the loneliness of the one-child generation, and a distrust of information from government-controlled media.

A 2008 MTV Music Matters survey found that young people across Asia have made a similar number of friends online and offline. Only in China, however, did young people actually have more friends online than offline. This points to a convergence of the offline and online worlds, where it is less important to distinguish between what happens online from the “real world.” In China, more than in many countries, social media has become deeply integrated into people’s lives.

Chinese netizens actively engage in discussions that could directly affect companies. A recent study by OgilvyOne in China found that 55 percent of China’s netizens had initiated or participated in online discussions about companies. Understanding social media is no longer a luxury for companies operating in China—it is an imperative. Formerly, a lack of engagement with netizens could be considered a lost opportunity. Now, the penetration and impact of social media is such that failing to understand what consumers are saying about a company online has become a business risk.

Comparing social media platforms
To explain the development of social media in Asia, Ogilvy’s 360 Digital Influence team has developed a series of social media “bulls-eyes” that place international platforms on the outside ring and their local equivalents on an inner ring (see Figure).

With China, as with other countries, this bulls-eye system has strengths and weaknesses. For example, the bulls-eye shows that the equivalent of Twitter in China is Sina Weibo (www.sina.com.cn), and the two equivalents of YouTube are Tudou and Youku (www.tudou.com and www.youku.com, respectively).

This comparison is helpful, but it can also be misleading. China’s social media platforms and online behaviors vary in important ways from those that may be considered their international equivalents. This variation is not all due to censorship. In China, as elsewhere in Asia, local variations of Internet usage are driven by language, culture, levels of economic development, and the underlying digital ecosystem. Digital ecosystems—the platforms around which populations focus online communications—can vary wildly between countries and within a single country. Substantial differences can exist even in countries at similar levels of economic development. Even without government blocks, Internet users in Japan and South Korea, for example, flock to domestically developed social media platforms such as GREE (www.gree.jp) and Cyworld (www.cyworld.co.kr), respectively, rather than internationally known sites.

YouTube vs. Youku and Tudou
Different social media usage patterns tell a great deal about the Internet and the country involved. For example, Chinese netizens use online video platforms quite differently from how Americans use YouTube. Rather than short videos of cute animals or silly domestic mishaps that may be popular among YouTube watchers, Youku and Tudou are filled with longer form content, up to 70 percent of which is professionally produced. Users in China spend up to an hour per day on the sites, compared with less than 15 minutes spent by Americans on YouTube. In the way they present programs, the Chinese sites seem more like online television stations or a replacement for digital video recorders. Though individuals in China produce and post videos, a large portion of online video content is longer-format professional videos. Much of this content consists of foreign programs pirated, subtitled, and uploaded hours after broadcast in the United States. An odd consequence is that the stars of programs such as Prison Break have a huge fan base in China, despite the series never having been broadcast on Chinese television.

In addition to the pirated programs, demand for original content on Youku and Tudou has resulted in a boom of companies that focus purely on online video. In some ways, the sites resemble a variation on US-based television service Hulu more than YouTube.

The television-like feel of Youku and Tudou reflects the usage pattern of young Chinese. University students in China often express skepticism when told that their country has one of the highest levels of social media engagement in the world, because they expect that the United States would rank first.

In my favorite demonstration, I ask students in a classroom to raise their hands if they have watched China Central Television (CCTV) in the last week. Generally, no one raises their hand. When I ask who has watched a video on Youku or Tudou in the last 24 hours, every hand in the room goes up, accompanied by amused laughter.

This switchover to social media does more than demonstrate the popularity of new media—it affects the whole advertising industry. In China’s case, certain demographics can no longer be reached effectively via traditional media channels. As the anecdote above shows, a well-crafted television advertisement on CCTV could miss university students entirely.

Twitter vs. Sina Weibo
Some differences between Chinese and foreign social media are rooted in culture and language. At first glance, Sina Weibo is a latecomer to the microblog phenomenon. But launched in 2009, just about three years after Twitter, Sina Weibo is by far the most popular microblogging platform in China. (The PRC government has blocked Twitter, though a small number of Chinese and resident expatriates hack their way around the blockage.)

Similar to Twitter, Sina Weibo allows users to post 140-character messages, and users can follow friends and find interesting comments posted by others. Small but important differences in the platform have made some say it is a Twitter clone, but better. For example, unlike Twitter, Sina Weibo allows users to post videos and photos, comment on other people’s updates, and easily add comments when re-posting a friend’s message.

Though mobile phones are used to send less than 20 percent of Twitter updates in the United States, nearly half of Sina Weibo’s updates are sent via mobile phone. This phenomenon points to the growth of China’s mobile Internet, one of the biggest trends in China and Asia.

Perhaps the most striking difference between Chinese and foreign social media, however, is the length of communications expressed via microblogs in Chinese versus English. One measure is to look at what Dell Inc., a company skilled at social media, can communicate on microblogs in Chinese compared to English. Twitter holds messages to 140 characters, which is quite short in English, especially if users want to include a URL. Dell often uses its Twitter feed, @delloutlet, to promote special offers, such as this posting: “Today’s Deal: Get FREE Eco-Lite Sleeve with the purchase of any Dell Outlet Insprion Mini 10 or 10v Netbook! http://bit.ly/77fUFG.” This message came in at 136 characters, almost the maximum length.

Since each character in Chinese is a word, @delldirect, Dell’s Chinese-language feed, can write much more using the Chinese-language Zuosa microblogging platform (http://zuosa.com). As translated by Ogilvy’s Beijing team, a similar message reads:

Dell’s National Day Sale runs from Sept. 11 to Oct. 8. To celebrate the 60th anniversary with the motherland, Dell Home Computers is offering 6 cool gifts and deals on 10 computer models. These exciting offers will run non-stop for 4 weeks. Also, get a free upgrade to color casing and a 512MB independent graphics card, as well as other service upgrades. All offers are on a first-come, first-served basis. What are you waiting for? Act now!
Even with a message this length—114 characters in Chinese—there is still enough space to put in a webpage link. In other words, 114 characters in Chinese translates into 434 characters in English, well beyond the text limit of a “tweet” in English. This language efficiency turns microblogging in China into a more blog-like platform.

Like Facebook, but different
Throughout much of the West, particularly the United States, Facebook holds sway as the default social network, gathering all demographics. The same does not hold true in China, where a handful of social networks attract segmented audiences, ranging from upmarket urban youth to university students and migrant workers.

Douban (www.douban.com), a more specialized social networking site, attracts art students and those passionate about books, cinema, culture, and music. Users connect according to their interests and often hold offline activities, such as trips to local art exhibitions.

- Kaixin001 (www.kaixin001.com), a platform designed for a more mature audience of young professionals, has a membership that is heavily dominated by white collar workers in Beijing; Guangzhou, Guangdong; Shanghai; and second-tier cities. Users do not upload personal content but rather share information they find elsewhere, often relating to health, relationships, and professional advancement.

- QZone (http://qzone.qq.com), the first and largest social networking site in China, attracts youth from teens through age 25, often from second- and third-tier cities. A sizable portion of migrant workers, many of whom share personal diaries in a blog-like format, use QZone.

- RenRen (www.renren.com), the platform in China most similar to Facebook, attracts university students who use the platform to connect and interact with classmates. The site is organized around users’ school and graduation class. Many users upload videos and photos of their activities.

Bulletin board systems
Beyond these sites that have more modern Internet functionality, some original forms of social media still flourish in China. Bulletin board systems (BBS), which were a primal form of the early Internet, allow people to post basic messages online (see the CBR, January-February 2009, Blogs, Bulletin Boards, and Business). In contrast to many countries, a wide range of BBS still flourish in China today, with users relying on them for critical consumer comments about products and services from clothes and cosmetics to restaurants and cars. Postings are anonymous, which encourages users to give unvarnished views. Writing under pseudonyms, many users that frequently post on BBS build reputations and sizable followings. Anonymity does, of course, also open the system to abuse by competitors writing negative comments.

The Internet as social media
A broader impact of China’s deep involvement in social media is that some netizens only experience the Internet through social media platforms. This is partly because of the large population of new netizens coming online at any given time. According to the China Internet Network Information Center, China had 420 million netizens by the first half of 2010, up 36 million Internet users over year-end 2009. When new users join the Internet, a friend will often introduce them to one particularly relevant service, such as how to communicate with friends for free via Sina Weibo or buy goods via China’s e-Bay equivalent—Taobao (www.taobao.com), so that service becomes their concept of the Internet. These examples show how many Chinese netizens would not distinguish between social media and the Internet itself. To them, the Internet is social media and vice versa.

Case studies in China’s social media
For companies operating in China, the rise of social media opens opportunities to engage with consumers and, at times, avert serious problems. By ignoring social media, companies may not see a consumer-led crisis coming.

Companies can use social media in China to conduct consumer research, shift brand preference, launch products, and manage crises. Even monitoring online conversations can yield striking results. For example, while conducting daily online monitoring for a client, Ogilvy found a brewing consumer protest over the client’s shop in Guangzhou. Early in the week, a disgruntled customer had posted complaints about customer service and announced his intention to visit the store that coming Saturday to express his dissatisfaction. Other netizens said they would join, exchanged mobile phone numbers, and discussed where to meet. By Wednesday, a group of 30 disgruntled customers had plans to meet at the store on Saturday. Because the original complainer had posted full details of his experience, the company was able to contact the customer and rectify the situation. In response, the customer announced online that he would cancel his visit to the shop. He was impressed with the direct outreach and the fact that the company listened.

An example involving a nationwide consumer recall shows how companies should use social media and speak the language of consumers. In this case, consumers had different concerns from what the company expressed in public statements about its recall. The company also posted general information about the recall, but consumers online wanted more detailed and practical information. By actively listening to consumers on BBS and other social media sites during the recall, the company adjusted its online messaging to answer consumer questions. As the recall went into full swing, the number of people visiting recall-related forums remained high, but fewer people left comments or asked questions because their questions were being answered sufficiently.

Oddly ignored
As China’s population moves online, consumer behavior shifts. Oddly, many companies have failed to acknowledge the shifts in their marketing strategies. Social media has grown to become the shared commons where Chinese consumers offer opinions, ask for advice, and discuss brands. Ignoring the Internet could be considered a lost opportunity in the past, but in China today, ignoring social media is a business risk.

The future will rely highly on mobile and tablet devices, Gary said (see video below for more details), while adding that Tudou is currently working to make the entire video library accessible on these devices.

With Android, mobile devices in China are increasingly replacing laptops as the primary device and quite often as the only device. Chinese people think that mobile technology is smarter and more user friendly. Mobile devices are also much cheaper than laptops.

China is known for a more aggressive monetization policy than in the West and this is likely to continue. Mobile devices make micropayments a lot easier so we will see a strong increase on that front in China, Gary added.

A few minutes on the streets of Beijing or Shanghai confirms the affection Chinese consumers have for the latest mobile phone, but it is interesting to see research supporting the observation. This is from a recent Chinese consumers report by Roland Berger Strategy Consultants.

The second graph, also from DCCI, shows that from June the majority of content online in China was user-generated. This shows that “Made in China” is not just cheap plastic goods, but also Internet content.

Their conclusion, that Chinese are more negative than anyone else in Asia, will not surprise anyone familiar with Chinese social media. Comments written by Chinese online (mainly in bulletin boards) often take a negative tone, especially when companies have not joined the conversation in a productive way.

China was the only country in Asia for which the majority of respondents said they tended to post negative reviews rather than positive ones. Koreans, on the other hand, were found to be the most forgiving, with almost 75% of those posting online reviews writing positive ones.

Nielsen statistics are based on their Global Online Survey done in April 2010 respondents, n=7,063.

Although often described as “YouTube copycats in China”, both Wang and Koo dismiss that description. (Wang actually founded Tudou one month before YouTube began, so dismisses the description on a historical basis.)

For Victor, the copycat status really misses the point about the role of online video for China’s netizens.

“Our sites best described as Internet TV, not online video,” Koo said. “The relationship that our users have to the platform is very different from YouTube.”

A key difference highlighted is that both platforms are heavily dependent on high quality and longer-form video. In the case of YouKu, up to 70 percent of the video is professionally produced video, while much of the remaining video was professionally produced for the Internet, Koo said.

The form of content changes the way that people interact with the video in a number of ways, including a stronger focus on the screen itself.

This format difference opens the way for a tolerance to advertisements running in a way that would not be possible with YouTube. Popular formats for advertiser engagement include:

- Pause ads when the video is loading (pre-roll and during the program). This is particularly important in low bandwidth parts of China. Tolerance for these ads is such that some run up to 30-seconds. Something almost unheard of in YouTube, for example.
- Product placements
- Sponsored productions

There are differences between the platforms, however, with Youku being more popular among older males in northern China and Tuodou being more popular among women.

Among the challenges raised in the discussions it that state-run media are now investing serious funds into creating online video content.

One person I spoke with had calculated that government agencies had set aside 120 billion RMB to develop online content. This could prove a challenge to these sites if traditional media begins investing real
money into online video.

In the discussions about television, it became clear how wildly fragmented the TV market is in China, part of the reason for the web platforms’ success. Although CCTV is the most famed national broadcaster, every province has its own TV channels. There is such competitiveness, in fact, that CCTV has only a 15 to 20 percent market share nationally, one person said.

In one discussion, when Wang and Koo were challenged to show how their business model would work, they raised a very interesting point. In some demographics it is no longer a case of arguing that online
video is more effective at reaching some demographics more effectively than TV. In some cases online video will be the only way to reach those demographics.

China is, of course, the world’s largest mobile phone market, meaning that a gender shift this swift will likely spawn a new kinds of female-focused phones.

David Liu runs one of the China-based, Twitter-like platforms, WoZai, so I asked him how he will break out from the pack of clones to set himself apart in the world’s largest Internet market.

David emphasized that he is taking a different route to getting early adopters. Instead of focusing on general users, WoZai’s strategy is to help celebrities and businesses set up communities and followings. Celebrities and businesses in China, Taiwan and Hong Kong will build virtual mailing lists to increase awareness and engagement.

Similar to Twitter, WoZai’s homepage will be available in traditional and simplified Chinese to attract the largest audience. For all his ambition, however, David does not expect WoZai to become a central platform for users, so has built in functionality for cross-posting from Twitter and other third party applications.

As with Twitter, WoZai has a 140 character limit, but because Chinese characters represent single words, much more can be expressed in 140 characters. WoZai is pushing for a mobile audience as well and is being designed to integrate with current Twitter mobile apps on Blackberry, iPhone and other platforms.

In targeting the mainland, WoZai is making the service as “China Friendly” as possible and clean enough for Beijing authorities.

The result is that people visiting with a non-China phone, such as me, can easily become mayor of many locations. That said, there are locally created options for people in China who are eager to Check In.

Among the current Foursquare clones in China are: Wan Zhan, Si Wang, Zai Nar, Bedo, Jie Pang, Da Zhong Dian Ping. In addition, similar services are coming online from: China Mobile, Tencent, Sina.com, Baidu.com. Renren.com, Kaixin001.com and Kong.net

A few days ago Jie Pang sent over some slides about their service and Jeremy Webb, a colleague at Ogilvy, did an interview with Jie Pang’s founder, David Liu (All below)

h/t to Tim Ho for creating the Foursquare China badge.

 
My colleagues in OgilvyOne China recently released OgilvyOne Connected, a report that may surprise those not aware of the incredible levels of engagement within China’s Social Media.

The intention was to look at how Chinese consumers use Social Media to interact, both with each other and with brands.

The report assigns percentages to the different ways in which consumers in China interact online.

OgilvyOne’s research found a large number of Chinese social media users are Initiators, with 26% of all Chinese social media users regularly starting conversations, creating content and publishing their opinions online. These users are also a common starting point for new ideas, services and products.

A further 29% of Chinese social media users are “Commenters” — people who may not initiate, but who do react and comment on other people’s views. They are also the “accelerators” of new ideas, giving them momentum and wider acceptance.

The largest group, comprising 45% of social media users, are “Gawkers” — those who quietly browse, observe and look for entertaining ideas and brands that are already popular.

These findings of high engagement in China mirror Forrester Research’s Social Media Technographics from several years ago that found 13% Creators and 19% Critics within Social Media in the US, compared with 40% Creators and 44% Critics in China. (Forrester’s Creators and Critics map roughly to OgilvyOne’s Initiators and Commenters).

OgilvyOne’s Research methodology: From February to April 2010, China Polling administered online, self-completed questionnaires to Chinese social media website across 71 sites in different categories. Over 5,000 people completed the survey, of which, 1,519 were qualified samples (anyone who used social media sites the day before and those who completed the questionnaire in its entirety). Panelists were also drawn from random samplings on 12 major social media websites such as Kaixin, RenRen and others via advertising and from China Polling‟s national panel of 400,000+ participants.

h/t to my colleague at Ogilvy, Jeremy Webb who wrote about this first on our Ogilvy team blog, Asia Digital Map.

OgilvyOne Connected (Original Report)

The China International Public Relations Association produced a set of rules and recommendations that has been trickling through China’s media and Internet in various reports. We decided to do a full translation of the guidelines (Below).

Some highlights relating to what they call “Digital PR”:

• Digital PR is the fastest growing business model within the PR industry
• Accounted for 6.3% of PR in China, with a total turnover of 880 million RMB in 2008.
• Companies “should not provide any form of attack or defamation towards a competitor” 

The point about attacking competitors is an interesting one and an ongoing problem in China, as this article in the China Daily points out:

An underground business, that charges companies high fees to delete negative news or posts against them, has been flourishing in the run-up to World Consumer Rights Day today, normally regarded as the most important day to highlight a company’s good reputation.

An operator surnamed Wu with Han De Kai Si Crisis Dealing Experts Company, told METRO on Sunday they normally charge 600 to 800 yuan per post deleted. He revealed there were usually two ways to deal with such business crises, including paying insiders within websites to delete online information and hiring people to release positive posts with the same titles as negative posts.

The association itself is run by a former China ambassador to the US and has the stated objective “to let the world know China and to let China orient itself to the world”

Anyone have thoughts/comments on these recommendations?

Guidelines for the Online PR business in China
Preface
Following the rise and expansion of the Internet and of social media like forums and blogs, traditional media and communication patterns have undergone a profound transformation. At the same time, marketing and public relation disciplines have also undergone a radical transformation. Digital PR has already become an extension of traditional PR that cannot be ignored, and it is the fastest growing business model within the PR industry. As shown in a survey of the CIPRA, in 2008 the PR market in China has exceeded 14 billion RMB, with a growing rate of 29.6%. Digital PR accounts for 6.3% of this market, with a total turnover of 880 million RMB.

The use of online news, forum conversations, online activities, word-of-mouth marketing, group marketing, sentiment marketing and online crisis management has become the main services provided in the PR market, and fast consumption, automobile, IT, Internet and communication companies have become the main clients of PR. Following the normalization and the expansion of e-commerce and online sales, companies have raised higher and higher voices calling for the standardization and regulation of online public relations. At the same time, given the continuous innovation of means of communication and of communication technologies, the concept of online public relation is also in continuous evolution.
The expansion of the market calls for regulation, and in the case of online public relation, this is even more important. We believe we should take example from the Regulations for public relation services, in order to control and regulate this market, continuously raise the standards of technology and the level of qualification of the people working in the field, in order to ensure the sustainability and the growth of the market. For this reason, as a result of thorough research and thought from the CIPRA, we have developed this document that attests the standards of services in online public relations.
The specific content is as follows:

Chapter 1 Definition of digital public relations
1.1 Digital public relations aims at making use of the practice of traditional public relations to communicate, build relations and manage brands on online platforms like social media and online media. Compared with traditional public relations, online PR has the advantages of being faster, more interactive, more precise, more long-term and having a bigger scope.
1.2 Differently from other online marketing techniques, online PR does not only have the objective of increasing sales, or influencing the purchasing behavior of single individuals or groups. Digital PR aims at delivering strategic and long-term messages to the online public, and therefore serves the creation and the management of the brand. For the client, the practical value of digital PR is: increase the image of a brand; affect the opinion of consumers towards the brand and their purchasing behavior; protect the companys reputation and image.
1.3 Digital PR agencies and any company providing online PR service should satisfy their clients online PR needs. The ten main services provided in online PR are: customer service; online news; online activities; brand promotion; interactive marketing; public opinion monitoring; crisis management; online media management; specialized training.
1.4 Online PR services can be divided in two main groups: concept products and channel products. Concept products are consultancy and announcement products like online news, online customer services; experience/activity products like online activities, word-of-mouth marketing, community marketing; monitoring/alert products like public opinion monitoring, crisis management, criticism protection; and protection/optimization products like website optimization, SEO, traffic optimization. Channel products are news distribution, forum and blog seeding, SNS seeding, IM seeding, video distribution.

Chapter 2 Technology utilization and media attitude of digital PR agencies
2.1 Online PR agencies mainly utilize Internet technologies for their work. Internet media tools have qualities that traditional media do not have such as immediateness, personal approach, interactivity, openness. They can be one-to-many, many-to-many or many-to-one. Online media have overturned the elitism of traditional media, slightly moving the right to express opinions from the elites to the grassroots.
2.2 According to the main means of communication of online public relations, it is possible to divide the online PR media in five kinds: general portal websites, vertical portal websites, forums, blogs, streaming websites. The most used channels of communication are news, forum threads, blog posts, streaming videos.
2.3 The technology support systems of online PR can be divided into five main platforms according to the different functions: news publishing platforms, sentiment monitoring platforms, media resource platforms, media communication platforms and control platforms.

Chapter 3 The workflow of digital PR agencies
3.1 Digital public relations are a consultancy service, and the effectiveness of this service is attested through regulated and organized procedures, and developed through stages such as project discussion, project research, project planning, project confirmation, project execution and project evaluation.
3.2 The core aim of digital PR is to solve the online reputation issues of a client, and digital PR agencies should carry out research on the online brand of the client, evaluation of the online PR strategies already carried out by the client, analysis of the competition, definition of the challenges faced by the client, and the opportunities ahead, and finally define an online strategy for the client.
3.3 Because it makes use of advanced technologies, the effectiveness of online PR is more easily assessable. Nowadays, there are three main assessment systems: qualitative assessment of the project (online traffic changes, attention from traditional media, level of satisfaction of users, level of reputation of the brand); quantitative assessment of the project (number of posts, number of views, number of participations and recommendations); ROI.
3.4 The assessment reports of digital PR projects must include a project summary, project research, project strategy, project implementation, project assessment.

Chapter 4 The payment procedures for digital PR
4.1 Digital PR is a personalized service, that should be rewarded in the form of service fee, and the amount of this fee is established in light of the level and the expertise of those providing the service. The service fee is normally established in light of the number of people participating in the project and the time spent on the project.
4.2 Payment should follow these international procedures:
Payment item: project operative cost; consultancy service fee; project management fee, management taxes.
Payment procedure: project service fee; consultancy fee; project management fee.
4.3 Nowadays there are four main payment procedures: payment at the moment of the completion of the project; payment according to the quantity of work in the project; payment according to the time spent on the project; payment according to the results of the project.

Chapter 5 The service management of digital PR agencies
5.1 Digital PR agencies must all comply with the rules and the regulations of the national corporate law. These include: companies should register before operating; they should organize and define the higher organs of management (such as the shareholder, the board of administration, etc.) and their responsibilities; keep the accountancy books; settle taxes; mismanagements or failure to comply with these regulation can result in criminal act.
5.2 Digital PR agencies should respect the following conditions: have a solid initial capital (not less than 100k RMB); have a fixed company address; have good office and communication conditions; feature two PR consultants with at least five years of experience in PR; a definite number of clients or potential clients.
5.3 Digital PR agencies must set up their organizational structure according to the management objectives, and should be divided into: market department; client service department; creative department; media management department; activity management department and administration department. Alternatively, they can be divided according to industries into: IT client department; financial client department; consumption goods department; public affairs department. Finally, it could be divided into regions of activity into: international affairs department and local affairs department.

Chapter 6 The development of the profession of online PR
6.1 Online public relations practitioners should have a variety of professional skills, expertise and professional experience. Strategic thinking, innovation, organizational sense, interpersonal skills, analytic spirit and problem solving skills should be the common features of successful online PR professionals.
6.2 Business operations of online public relations generally involve seven main teams: management team; project management and customer service teams; strategic planning team; media relations and media executive team; creative design and art production team; R & D and technology team and administrative support team.
6.3 Generally speaking, the online public relations professional ladder is mainly composed of the following levels: junior positions (Customer Assistant, Account Executive); intermediate positions (Account Manager, Senior Account Manager); senior positions (Assistant Account Director, Account Director, Senior Account Director, Vice President, Senior Vice President). In order to be promoted from the junior level to senior positions most of the professionals need 8-10 years of experience in the field.
6.4 Training programs should be organized for every level of professionals working in online PR. Content of training should include: online communication means, online interaction strategy, public relations, introduction to research methods, project proposal writing, proposal and bidding, event planning and management, online media analysis and research, online media relations program, marketing, brand management, crisis management, case studies and analysis, project management, customer management, impact assessment and strategic consulting. Junior professionals should be given 100 hours of training each year; mid-level professionals should be given 60 hours of training each year; senior professionals should be given 30 hours of training each year.

Chapter 7 Professional ethics of the online public relations practitioners
7.1 Public relations businesses should abide by the Internet Self-discipline Convention. In specific: they should ensure that the content and means of dissemination of information are consistent with the relevant provisions of the national law; they should ensure content integrity, authenticity and accuracy, and that content disseminated on the Internet is not inconsistent with objective reality; they should ensure that the content of information does not involve politically sensitive topics or state-sensitive issues; they should not conceal the truth or deceive the public; they should not engage in any immoral or dishonest activity, or damage the dignity or the reputation of others; they should not provide any form of attack or defamation towards a competitor; they should not use any copyrighted material without lawfully clearing the rights.