Digital Media in China

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Our team of MBA consultants, "Dragon Consulting Partners", developed this key learnings report after completing fieldwork, interviews and desktop research on trends in digital media in China. …

Our team of MBA consultants, "Dragon Consulting Partners", developed this key learnings report after completing fieldwork, interviews and desktop research on trends in digital media in China.

Together with our MBA cohort, we flew to China for a study tour where we experienced first hand the cultural differences in China.

This report condenses the key learnings and take aways that we had from the experience. Drawing upon a number of case studies, we analyse managerial implications for businesses looking to succeed with digital media in China

"Dragon Consulting Partners" are: Georges Shayeb, Izam Ryan, Lisa Amin, Mike Yu Tian, Ram Chandramohan (who wasn't able to join us in China for the fieldwork, sadly) and Rizwan Habib.

Submitted in partial fulfilment of the requirements of the Imperial MBA degree and the Diploma of Imperial College London, our team was awarded a Distinction for the quality of our work.

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  • 1. 1 Digital Media in China BS5011 – Global Exposure Week Dragon Consulting Partners 龍高手
  • 2. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Executive Summary Discussion of B2C cases of companies using digital media Discourse: Vancl and selfies • Vancl leverages on the viral effect of word-of-mouth recommendations through digital media with its advertising portal, allowaing consumers to upload “selfies” wearing Vancl clothing and earning a 10% commission on sales. Access to information: Nike, Adidas, price premium and differentiation • Nike and Adidas, are perceived to be more expensive than their competition. However, by openly through sharing more information on customer ratings, these international have differentiated themselves against their peers and reinforced their branding as quality manufacturers. Network effects: Meters/bonwe, star power and omni-channel • Meters/bonwe weaved a strategy of engaging consumers across an omni- channel experience through both online and offline offerings. Engaged consumers are also loyal customers who reinforce the network effect. Discussion of B2B & C2C cases of companies using digital media TaoBao: societal discourse and network effects • TaoBao, famously dealt with the threat of new entrants (eBay China) through amassing grassroots support and digital community marketing. Alibaba: massively increasing access to information • Alibaba is seen to be empowering businesses across China, particularly because of its unique third party business model whereby new vendors offer enhanced new services on top of Alibaba’s own ecosystem. Conclusion • Success in China will not come exclusively from mastering digital media. The message is more important than the medium, and therefore businesses looking for success must first develop their message to their stakeholders and cultivate trust and a strong reputation. 2 In order to compete effectively in China, companies need to consider digital as a core component of their wider business strategy. But success will not come from digital mastery alone. It will be in the crafting of a wider strategy that incorporates digital as a key pillar. China is laying the foundations for a knowledge based economy Implication of digital • The global economy is emerging in an “Information age” where it is knowledge based activities that are the primary driver of economic progress. • China, with the world’s biggest Internet user base, is well placed to accelerate economic growth as the pace of digitisation also increases. Three key factors that explain the rise of Digital’s popularity Societal discourse • Digital media has created a forum for Chinese citizens to participate in the national dialogue. Society is now much more comfortable with the idea of sharing and posting information online. Massive increase in access to information • The economics of information has shifted and has created the opportunity for very rich communications to a very broad audience. There is now a critical mass of users online that creates a multiplier effect • As a result of these two, Chinese consumers have adopted digital platforms very quickly and there is now a critical mass of users online. Advantages and disadvantages of digital media Easy to reach a broad audience and ROI is high • The incremental cost of reaching one additional user through SNS is virtually zero. But astroturfing PR crisis can get out of hand very quickly • However, that same virality can work against the same companies and cause brand damage, especially when there are PR crisis that break out on microblogs. We have used these three key factors as an overarching framework to analyse specific case studies of B2C, B2B and C2C interactions
  • 3. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Key terms used Case studies • Company visit to Touch Media, 10 April 2014. 3 Throughout this report we refer to the acronyms, key technologies and corporate case studies below. Acronyms • BBS – Bulletin Board Service • GNI – Gross National Income, the total domestic and foreign output claimed by residents. • KOL – Key Opinion Leader • P2P – Peer to Peer • ROI – Return on Investment • SNS – Social networking service. These include services like Facebook and Twitter. • UGC – User Generated Content • USP – Unique Selling Proposition Terminology • Astroturfing – posting fake online posts with the hope of orchestrating what appears to be positive PR and popular support • Selfie – A photo taken by the subject, of the subject. Usually with a smartphone and usually uploaded to an SNS. • Weibo – the Chinese term for “micro-blog”. Typically the industry refers to Sina Weibo here, which is largely considered to be the Chinese equivalent of Twitter. • Wikis – user edited online knowledge stores
  • 4. 4 Deloitte PowerPoint timesaver The impact of Digital media in the Chinese business context
  • 5. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners “Digital media” defined We define digital media as being “machine readable” We are living in an Information Age • As economies progress through the different phases of development, the main driver of economic progress shifts from resource extraction through to labour productivity through to capital accumulation. • At the moment, the global economy is in an “Information age” where it is knowledge based activities that are the primary driver of economic progress. • In the past, economic success was won by economies with access to major reserves of natural resources, or large workforces, or decades of capital accumulation. However, this isn’t the case anymore in the Information Age. Now it is economies who harness knowledge flows that will lead progress. • PCs and smartphones put the ability to access, modify, share and store digital media in the hands of billions of people. Countries that have high penetration rates of technology will incubate a new generation of tech-savvy leaders. China is well placed to harness this shift to the Information Age • Not only does China have the world’s biggest Internet user base, (513m users versus 245m users in the US), but it also has the most active environment for social media. This includes blogs, microblogs, social- networking sites and other online communities. • Referring to Figure 1 – we can see that while TV penetration has stayed at roughly 1.5m households (roughly 96% - 99% of total) during the period from 2005 to 2010, PC penetration has doubled from 0.5m households to 0.9m households (doubling from 30% to 60% of the total). • In recent years, China’s growth engine has relied mostly on the employment growth and rapid capital accumulation. This wave of digitisation will lead to an acceleration of China’s fast growth as the infrastructure of a knowledge based economy is being built. 5 Digital media Outdoors Digital TV / Radio The Web Social Mobile We have defined “digital media” as: machine readable forms of mass communication. In China, there is a trend of increasing PC adoption and we see this mega-trend as laying the infrastructure for future growth as China transitions to a knowledge based economy. Reference: Chiu, C et al (2012), Miles, D et al (2005) Chapter 4.Source: Yong, H., et al (2012). Please see Appendix 2 for details. 1,463,460 1,524,886 462,226 921,381 - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2005 2006 2007 2008 2009 2010 Figure 1 - Households owning equipment, 2005-2010 TV sets Radio receivers PCs
  • 6. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners “Digital media” defined Digital technology has changed the way people communicate Richness vs Reach • In the past, businesses used to focus on one, mutually exclusive strategy: – A “rich” strategy: developing content that targets a niche audience; or – A “reach” strategy: appealing to the widest audience and capturing a large addressable market, thereby sacrificing richness for broad appeal. • Today we don’t need to choose between the two. Technology has disrupted this trade-off and we can now achieve highly rich communication (tailored, targeted messages) that can reach the broadest audience (online users). P2P and cheap • Furthermore, the design of the internet and the rise of SNS has meant that users could communicate peer to peer in a very cheap fashion, without the need for expensive broadcast infrastructure. • In the past, getting a message out required printing presses or TV stations, today anyone with a PC or a mobile can reach out to small and large audiences, cheaply and quickly. In recent years, UGC has rapidly gained popularity in China • User-generated content, also known as ‘citizen journalism’ or ‘social media’, has recently mushroomed in China. This includes all forms of user-generated content from social networks, blogs, microblogs, forums or BBSes, video sharing and Wikis. Figure 2 shows an analysis of some of the most popular UGC sites in China. China’s online users spend more than 40% of their time online on social media, and we expect the visitors per day to continue to trend up. • One unique feature of digital media in China is the role of the KOL. Now that it is cheap and easy to reach a wide audience, these KOL’s are individuals who have a large online following in SNS and are known to exert significant social influence. 6 Rich vs Reach • Digital technology disrupts the economics of information P2P • An equitable system – all users are equally exposed to information flows Cheap • Easy to reach a massive user base and build critical mass Digital media has disrupted traditional media and changed the way people communicate. It is now possible to reach specific audiences with very precise, targeted and tailored messages and in recent years, UGC has rapidly gained popularity in China. Source: Yong, H., et al (2012) Reference: Evans, P. (2000), Ogilvy PR, et al (2012), Touch Media case. - 10 20 30 40 50 60 70 80 90 Sina.com.cn Baidu Tieba QQ.com Qzone.qq.com blog.sohu.com blog.163.com Tianya.cn Renren.com Baidu.com Sohu.com Youku.com blog.sina.com 163.com tudou.com Figure 2 - Visitors per day of popular UGC sites in China
  • 7. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Major overarching theme Based on our observations of Weibo, our own research and case studies we generalised a model to understand adoption of digital media in China Weibo represents a large critical mass of Chinese speaking users • Although Weibo’s monthly active users is estimated at 113m (about half that of Twitter’s 213m), KOL on Weibo tend to have a larger following than their Western peers. • Weibo also ranks the “influence” of KOL’s, further driving their popularity., Kai Fu Lee in one instance, blogged about a frozen desert that he tried, which resulted in more than 100,000 re-shares and a surge in sales for the dessert maker. In trying to explain this phenomenon, we developing the following model • We generalised three factors to explain the rise of digital media following our: – research in to how Chinese companies manage PR crises and Ogilvy PR’s suggestions into how these risks can be addressed – company visit to Touchmedia where we discussed the place that digital media has in Chinese society. 7 Kai Fu Lee Former Google China president. 51m followers Xie Na Chinese TV host, singer and actress. 49m followers Eric Schmidt Executive Chairman of Google and Former CEO. 808k followers Lady Gaga International Musician. 41m followers. There are many more Chinese speakers than English speakers (1.1bn vs 760m English- speakers) and Weibo celebrities tend to have more followers than their Western peers. As a result, they have more clout and influence, resulting in the emergence of KOLs. increased dialogue Access to Information Network multiplier effect Profile photos: Kai Fu Lee, Xie Na, @ericschmidt, @ladygaga Reference: Cheung (2013). Guco, C. (2013), Koh, Y., et. al. (2014), Touch Media case, Ogilvy PR, et al (2012).
  • 8. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Major overarching theme • Chinese consumers are now able to define and interact with the national conversation Societal discourse • Digital media has changed the economics of information by disrupting the Richness vs Reach trade off Massive increase in access to information • As a result of these two factors, SNS now have a huge critical mass of users Resultant network multiplier effect 8 Three factors Moving the societal discourse online has changed people’s perceptions • In the past, all forms of mass media were exclusively controlled by China’s Communist Party. This stifling control and censorship limited the direction of the social discourse and national dialogue. • Digital media has created a forum for conversation amongst Chinese citizens and has created an outlet for creative expression that never existed in the past through sharing and posting information online. • Netizens now participate in the multi-way national dialogue, and China’s society and political administration have begun to embrace this new normal. Massive increase in access to information • The shift in the economics of information has made it incredibly cheap and easy for a broad segment of the population to access information. Whereas in the past, there was a tradeoff in richness vs reach, digital media has created a new opportunity for very rich communications to a very broad audience. Resultant network multiplier effect • These two factors above have driven Chinese consumers en masse to digital platforms where there is now a critical mass of users. • Network economics tells us that the value of a network is proportional to the square of the number of connected users of the system (n²). • Therefore: – as society sees it as more “acceptable” to be on digital media, and – as there has been an explosion in the massive increase in acccess to information, – there has therefore been a resultant acceleration of user base growth to the level that there is now a critical mass of Chinese digital media users.. We have identified three key factors that resulted in the massive rise of Digital’s popularity. They are: the societal discourse, the massive increase in access to information and the resultant network multiplier effect. Reference: Ogilvy PR, et al (2012), Touch Media case, Varian, H. R., et. al. (1999)
  • 9. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Pros and Cons of digital media 9 Digital media has the potential to reach a very broad audience, very quickly. However, because of this viral feature, there is also a corporate reputational risk if digital media is misused by astroturfing or through a badly managed PR crisis. Advantages • Easy to reach a broad audience • The ROI on social media campaigns can be very high Disadvantages • Astroturfing • PR crisis Reference: Ogilvy PR, et al (2012), Touch Media case. Advantages Easy to reach a broad audience • Unlike traditional media, the incremental cost of reaching one additional customer through SNS is virtually zero. • Once a critical mass has been achieved, users begin to recruit other users to the cause and marketing becomes more word-of-mouth. And given the level of distrust that the Chinese consumer has for brands, this actually works out as a double advantage for companies reaching out through digital media. The ROI on a social media campaign can be very high • In Touch Media’s case there is the example of Nancy Pon’s videos that were very cheap to produce. These spread virally over SNS and drove the societal discourse over several weeks – a feat not easily achieved by traditional media. Disadvantages Astoturfing can actually damage brands • Consumer’s don’t trust brands as much as they do in Western economies and peer recommendations have a far greater influence on buying patterns in China than in the US. On average, 60% of Chinese consumers say they rely on comments from colleagues on SNS before making buying decisions, compared with only 38% in the US. • However, this trend may be changing due to the increased level of astroturfing and number of “zombie” accounts and fake PR spam on Weibo. PR crisis can get out of hand very quickly, especially on microblogs • Ogilvy PR give several examples where national and international brands damaged their online reputations through mismanagement such as the Jiugui liquor scandal with plasticizers, compared with how McDonalds reacted very quickly to customer satisfaction on food safety.
  • 10. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners B2C Opportunity = “Urgent meeting” Increased engagement  leads to increased loyalty and margins • China currently ranks as the lowest online spend per capita amongst other highly developed nations (see Figure 3). • Online spend accounts for roughly 1.5% of GNI. If we assume that as the Chinese market matures, that this rises to say 3% (an average of what the UK and US currently spend online, as a % of GNI), then we can expect online spend per capita to at least double to £102 per capita. • Therefore there is a potential for the online market to double in size if China catches up to the same level of sophistication and maturity as that in the West. Threat of cannibalisation • On the other hand, this trend of increased online sales will take market share away from existing channels and retail outlets. • The “showrooming” trend is particularly bad in China, where 26% of consumers surveyed admitted to showrooming, as compared to 7% in the US. This is the practice of looking at goods in an online retail outlet, but then shopping online for the cheapest price. • This trend is also illustrated in the steady decline of LFL sales in Chinese retail channels. As more consumers go online, retail stores face difficulties with increased operating expenses but declining revenues. • This double-edged nature of competing in the B2C segment can be summed up in the following translation. “Jīhuì” • The Chinese translation for “opportunity” literally translates as “urgent meeting”. 10 The rising prominence of digital media is a double-edged knife for the B2C segment. On the one hand it represents a significant opportunity for increased loyalty and margins but at the same time it represents a threat of cannibalisation. 50 330 400 420 450 500 750 880 - 100 200 300 400 500 600 700 800 900 1,000 China Japan Germany Canada France Australia US UK Figure 3 - Online spend per capita, 2013 (£s) Source: OC&C (2014), OC&C (2012A). Please see Appendix 3 for details. Reference: OC&C (2014), OC&C (2012A), IBM (2013) Touch Media case. R² = 0.8787 (15.0)% (10.0)% (5.0)% 0.0% 5.0% 10.0% 15.0% 20.0% 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 Figure 4 - LFL sales in offline retail channels
  • 11. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Case examples of companies that leveraged digital media, and how they mapped to our three factors identified: B2C We analysed B2C success stories with our model Trust is critical and is the key driver of consumer brand perception • As consumers tend to trust their friends and KOLs more than they do brands, we have seen how the increased acceptance of using digital media to communicate (and thus, how societal discourse has moved to SNS) has increased the importance of Trust in a retail setting. • Vancl is a clear favourite of consumers in the fashion space, with annual sales ~5bn RMB. They have curated an online following that leverages on Chinese consumer’s need to trust their peers and capitalises on the social trend of sharing selfies. Differentiation • With unfettered and cheap access to information, businesses have found it more difficult to stand out and communicate their USP. Market research has show that this type of investment still resonates with Chinese consumers and can “drive positive brand perception”. • The need to differentiate has thus been driven by this massive increase in access to information. Nike and Adidas are an excellent example of this as they have differentiated themselves versus their competition by building a superior brand reputation, and yet still have the perception of higher prices. Sustaining a critical mass of users across an omni channel experience • Companies should aim to allow consumers to access their product when they want, how they want and where they want. Similarly then, the value of a brand’s online presence is driven by how content is shared virally and how broadly its user base is engaged across different customer experiences. • Meters/bonwe weaved a strategy of using celebs, stores and its online platform to create an omni channel experience. This resulted in a very high brand appeal score amongst surveyed consumers, and highly appealing brands tend to be more widely shared thereby reinforcing the network effect. 11 Some successful B2C use cases of digital media have: (1) Built trust as a key part of their value proposition, (2) Differentiated themselves through providing easy access to information, and (3) Crafted unique omni channel experiences. Reference: OC&C (2012B), Touch Media case. (10) 13 (15) (10) (5) - 5 10 15 Low prices Fashionability Wide choice Service Value for Money Store look & feel Suited for me Trust Quality Figure 5 - Nike and Adidas vs other brands Source: OC&C (2012B) Societal discourse •Vancl engages consumers through digital media with an advertising portal, allowing consumers to upload “selfies” wearing Vancl clothing and earning a 10% commission on sales. Increase of access to information •Nike and Adidas, even though they are perceived to be more expensive (see Figure 5), through sharing more information on customer ratings have differentiated themselves against their peers. Network effects •Meters/bonwe is famous for engaging Chinese model Lin Chi-Ling in both online and offline consumer engagement.
  • 12. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners How our overarching themes align with selected B2B and C2C success stories B2B & C2C Digital media is an enabling technology Grass roots advertising and engaging the C2C user community • TaoBao is roughly the Chinese equivalent of the eBay online C2C marketplace. When TaoBao was first dealing with the threat of new entrants with eBay entering the China marketplace, eBay had originally signed exclusive contracts with most of the major Chinese online media outlets. • In response, TaoBao used a grass roots approach and posted messages on BBSs, reaching out to TaoBao’s customers (in a B2B way, as the vendors selling products on the TaoBao platform were TaoBao’s business customers) to engage them and encourage them to use TaoBao instead of eBay. This worked so well that even after eBay’s exclusive contracts expired, TaoBao still uses this method of engaging with TaoBao’s customers. • From a C2C angle, TaoBao enabled the development of a peer to peer community through integrating instant messaging into their ecommerce platform. Increase in access to information and Network effects – Alibaba’s Third- party business model and TaoBao’s no-fee model • Alibaba is roughly the Chinese equivalent of the Amazon Reseller Marketplace online marketplace, for businesses to sell B2B. • Alibaba places great focus on the success of its ecosystem. That ecosystem drives the livelihood of sellers and third-party service providers, aligning the interests of participants with Alibaba’s own interests. As more users adopt the Alibaba ecosystem, the more valuable it becomes for all users, and this is again enhanced by new services offered by third party participants. • The two systems – Alibaba (B2B) and TaoBao (C2C) are seen as platforms that empower entrepreneurial businesses across China. In the same way the TaiBao no-fee model creates a strong incentive for consumers to join the platform and stay on the platform – further perpetuating the critical mass of users. 12 Source: Shih, G. , et. al. (2014) Alibaba, powers ~ 80% of all online commerce conducted in China. The three overarching themes we identified can be seen in our unique case studies of TaoBao (C2C) and Alibaba (B2B). Societal discourse • TaoBao with advertised its services on BBSes in a grassroots fashion, gaining grassroots support. • TaoBao integrated an instant messaging service into their platform, creating a sense of peer to peer community amongst the C2C sellers. Increase of access to information • Alibaba and TaoBao are seen as being a platform that empowered businesses across China, even the most remote entrepreneurs in rural areas. Network effects • Alibaba’s portal drives traffic growth through its third party platform business model. • TaoBao was very successful with its no-fee model that massively increased its user base. Source: Alibaba (2014)
  • 13. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners The message > medium Success in China Distinctive capabilities Unique selling proposition Communication Strategy Branding Trust and Reputation Outsized returns 13 Developing a strategy from capabilities, brands and culture These are inimitable and unique characteristics • In order to differentiate and successfully compete, businesses must develop relationships with internal and external stakeholders that give businesses the power to charge higher prices or get access to cheaper unit costs. • In the context of China – this is particularly important because in such a broad and diverse market, there is a great deal of competitive pressure from the large number of businesses competing in the market and the continued threat of new entrants as capital flows into profitable markets. Defining the USP and communicating this to the market through brands • Only once that USP has been developed, a communication strategy can be crafted around it. Since the Chinese consumer is very savvy, businesses must be mindful of the importance of crafting an omni-channel strategy. • In this way, digital media only plays a smaller part in the wider picture. Brands represent a shorthand by which businesses communicate their USP to consumers. The strength of these brands are reinforced through the company’s actions and interactions with stakeholders. Cultivating trust and reputation through maintaining a corporate culture • The main tool that managers have for orchestrating organisational behaviour is through managing corporate culture. A system of espoused values, ethics and shared meanings can help an organisation consistently manage its interactions with outside stakeholders. • This is emphasised in this definition of “trustworthiness”. When an organisation reliably lives up to its espoused values, it can cultivate the trust of its stakeholders. • Success comes from an integrated strategy that is integrated with a supporting corporate culture and reinforced through consistency in stakeholder relations. Success in China will not come exclusively from mastering digital media. The message is more important than the medium, and therefore businesses looking for success must first develop their message to their stakeholders and cultivate trust and a strong reputation. Reference: Kay, J. (1993). Porter (1980), Schein, E. H. (2006). Ogilvy PR, et al (2012). 𝑻𝒓𝒖𝒔𝒕𝒘𝒐𝒓𝒕𝒊𝒏𝒆𝒔𝒔 = 𝑪𝒓𝒆𝒅𝒊𝒃𝒊𝒍𝒊𝒕𝒚 + 𝑹𝒆𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒚 + 𝑰𝒏𝒕𝒊𝒎𝒂𝒄𝒚 𝑺𝒆𝒍𝒇 − 𝒐𝒓𝒊𝒆𝒏𝒕𝒂𝒕𝒊𝒐𝒏 Source: Maister, D. H. et al (2000).
  • 14. 14 Deloitte PowerPoint timesaver Appendices
  • 15. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Appendix 1 – Bibliography Bibliography • Alibaba (2014). SEC F-1 Filing: http://www.sec.gov/Archives/edgar/data/1577552/000119312514184994/d70 9111df1.htm • Cheung, H. (2013). Who are China’s weibo super stars? BBC News: http://www.bbc.co.uk/news/world-asia-china-23925364 • Chiu, C., Ip, C., & Silverman, A. (2012). Understanding social media in China. McKinsey Quarterly, 2(2012), 78-81. • Evans, P. (2000). Blown to bits: How the new economics of information transforms strategy. Harvard Business Press. • Shih, G. , Oreskovic, A., McBride, S., Seetharaman, D. and Leske, N. (2014). China's Alibaba embarks on U.S. IPO journey. Reuters. http://www.reuters.com/assets/print?aid=USBREA450VV20140506 • Guo, C. (2013). Social Networks in China: 10 Marketing Tips How to Win on Sina Weibo. Search Decoder: http://www.searchdecoder.com/social- networks-in-china-sina-weibo/ • IBM (2013). IBM Survey: Shoppers Poised to Dramatically Expand Purchasing Power Beyond the Store http://www- 03.ibm.com/press/us/en/pressrelease/40138.wss • Kay, J. (1993). Foundations of corporate success: how business strategies add value. Oxford University Press. • Koh, Y., Winkler, R. (2014). Sizing Up Weibo and Twitter. WSJ.com: http://blogs.wsj.com/digits/2014/03/14/sizing-up-weibo-and-twitter/ • Maister, D. H., Green, C. H., & Galford, R. M. (2000). The trusted advisor. Simon and Schuster. • Miles, D., & Scott, A. (2005). Macroeconomics: understanding the wealth of nations. John Wiley & Sons. • OC&C (2014). Retail Nation. Retail Week: http://www.occstrategy.com/sites/default/files/retail_nation.pdf • OC&C (2012A). Fashion Redesigned. http://www.occstrategy.co.uk/sites/default/files/fashion_re- designed_fa_online.pdf • OC&C (2012B). The Dawn of the E-Tailers. http://www.occstrategy.co.uk/sites/default/files/the_dawn_of_the_e-tailers.pdf • Ogilvy PR, CIC (2012). Crisis Management in the Microblog Era. • Porter, M.E. (1980). Competitive Strategy, Free Press, New York. • Schein, E. H. (2006). Organizational culture and leadership (Vol. 356). John Wiley & Sons. • Stanford GSB (2010). Taobao vs Ebay China case IB-88. https://gsbapps.stanford.edu/cases/documents/ib88.pdf • Varian, H. R., & Shapiro, C. (1999). Information rules: a strategic guide to the network economy. Harvard Business School Press, Cambridge. • Yong, H., Kun, F., Yang, L., Ha, I., Yuping, Z., Mengyao, W., Nute, K. (2012) Mapping digital media: China. Open Society Foundations. 15
  • 16. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Appendix 2 – Households owning equipment 16 Statistics on internet penetration and popularity of UGC in China Table 1 - Households owning equipment, 2005-2010 ('000) of households 2005 2006 2007 2008 2009 2010 TV sets 1,463,460 1,457,318 1,477,281 1,495,709 1,520,279 1,524,886 Radio receivers 546,686 546,686 537,472 981,271 1,372,858 nav PCs 462,226 502,153 752,461 813,887 844,599 921,381 As a % of total TV sets 95.3% 94.9% 96.2% 97.4% 99.0% 99.3% Radio receivers 35.6% 35.6% 35.0% 63.9% 89.4% nav PCs 30.1% 32.7% 49.0% 53.0% 55.0% 60.0% Sources: Yong, H., et al (2012) China TV Rating Yearbooks 2006 to 2010, Communication University of China Press, Beijing; China Radio Yearbooks 2006 to 2009; Household Ownership of TV Sets in National Sample of 154 Cities and Countries, CSM M edia Research 2005-2007 surveys. Notes: (1) The actual number of households was calculated by M apping Digital M edia editors based on data on households from the International Telecommunication Union (ITU) Table 2 - The most popular types of UGC and UGC sites 2011 Site Category Reach %share %from parent visitors per day Baidu.com Search engine 957 96.9% 51 Baidu Tieba Online community 221 14.5% 12 QQ.com Portal 115 97.1% 12 Qzone.qq.com SNS, w eblog 212 21.1% 22 Sina.com.cn Portal 116 95.7% 11 blog.sina.com Weblog 855 15.9% 84 163.com Portal 541 96.8% 85 blog.163.com Weblog 201 13.4% 31 Sohu.com Portal 487 96.5% 65 blog.sohu.com Weblog 206 7.3% 27 Youku.com Video sharing 358 95.3% 68 tudou.com Video sharing 570 97.3% 85 Renren.com SNS, w eblog 53 93.6% 49 Tianya.cn BBS 2 96.5% 38 4,894 640 Notes: (1) Reach = global reach, millions of pageviews (2) %share = %of incoming traffic that is domestic (China) (3) %from parent = %visitors to this site that are referred from the broader parent site, which this UGC site is a subsidiary (4) Visitors per day = daily unique visitors (million)Source: http://www.alexa.com/topsites/countries/CN, Yong, H., et al (2012) Source: Yong, H., et al (2012) Source: Yong, H., et al (2012)
  • 17. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Appendix 3 – Chinese Consumer spending patterns 17 Online spend per capita and LFL sales in offline retail channels Table 3 - Online spend per capita, 2013 £ per head Income Spend %share UK 22,947 880 3.8% US 31,058 750 2.4% Australia 35,224 500 1.4% France 24,774 450 1.8% Canada 30,245 420 1.4% Germany 26,264 400 1.5% Japan 28,412 330 1.2% China 3,394 50 1.5% Average 25,290 473 1.9% Source: Source: Conlumino, M intel, OC&C analysis, Wolfram Alpha, Dragon Consulting Partners analysis Notes: (1) Income = GNI per capita Source: OC&C (2014) Table 4 - LFL sales in offline retail channels % 2011-Q1 17.5% 2011-Q2 7.0% 2011-Q3 0.0% 2011-Q4 (3.0)% 2012-Q1 (9.0)% 2012-Q2 (6.0)% 2012-Q3 (9.0)% 2012-Q4 (4.0)% Average (0.8)% Source: Corporate Annual Reports, Analyst Reports, OC&C analysis Source: OC&C (2012A).
  • 18. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Appendix 4 – Social marketing core platforms 18 China Social Media Landscape 2014 Note: image is © CIC. http://www.ciccorporate.com/index.php?option=com_content&view=articl e&id=1204&catid=99&Itemid=208&lang=en This image shows that for every one category-leader in Western social media networks, that there are normally more than one Chinese equivalents.
  • 19. BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners Copyright info This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/4.0/ or send a letter to Creative Commons, 444 Castro Street, Suite 900, Mountain View, California, 94041, USA. Dragon Consulting Partners are: Georges Shayeb Izam Ryan Lisa Amin Mike Tian (Ram Chandramohan is a Partner, but was unable to participate in the China fieldwork portion of this research piece) Rizwan Habib 19
  • 20. 20 THANK YOU!