Impact of Social Media in China

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In a fast-changing and dynamic market like China, having a strategy to build capabilities around social media has become an imperative for businesses - whether multinationals or locals. Unlike in traditional media, where there is a complex process of collection and processing before information is delivered to the public, social media is intrinsically flat and interconnected. This requires corporate managers to think carefully about how to adapt their companies’ PR capabilities and brand building to social media platforms. Learn more: http://www.booz.com/global/home/what_we_think/reports_and_white_papers/ic-display/50901198

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Impact of Social Media in China

  1. 1. Perspective Edward Tse Adam Xu Andrew CaineyImpact of Social Mediain China
  2. 2. Contact InformationBeijing / Hong KongEdward TseSenior partner+86-10-6563-8300+852-3650-6100edward.tse@booz.comShanghaiAndrew CaineyPartner+86-21-2327-9800andrew.cainey@booz.comAdam XuPrincipal+86-21-2327-9800adam.xu@booz.com Booz & Company
  3. 3. EXECUTIVE Opinions may differ as to what have been the hottest topics of the last year, but there is no longer any doubt as to whereSUMMARY the largest number of hot topics is generated. In China, the answer is obvious—it is Sina Weibo. Sina Weibo, a Twitter ‘clone,’ was launched in August 2009. Prior to its birth, six or seven microblogging websites had already emerged in China. However, the latecomer became the biggest winner. Leveraging Sina’s premium reputation as a news portal and the earlier success of Sina’s blogging platform, Sina Weibo successfully attracted 1 million registered users within 3 months of its launch. Its growth was then explosive: its users reached 10 million in April 2010, exceeded 100 million in March 2011, rose to 200 million in August 2011, and had reached 300 million by the first quarter of 2012, well over half of the total netizen pool of 500 million (as at the end of 2011, according to the China Internet Network Information Center). Sina Weibo’s reach is already starting to spread beyond the mainland, with 8 million of its registered users now being overseas, 3 million of those from Taiwan and 2 million from Hong Kong. Sina Weibo has thus become the largest media platform connecting Chinese mainland, Hong Kong and Taiwan.Booz & Company 1
  4. 4. Initially emulating the successful 31% on Twitter. Depolarization and around a young woman calledAmerican microblog Twitter, Sina flattening is one of the major features Guo Meimei, who boasted of herWeibo has quickly evolved into of social media, leading to a mass extravagant lifestyle while workinga completely different product in spread of trivial information closely for a charity group; it was widelyChina’s unique cultural and business related to daily life. As Thoreau presumed that her extravagancecontext. Many people underestimated wrote in regard to an earlier advance could only have been supported bythe importance of Sina Weibo, in communications technology, “We embezzling charity funds, and thebelieving that it focused more on are eager to tunnel under the Atlantic story had severely negative impactsentertainment than originality and and bring the Old World some weeks on charitable donations, and ininnovation. They are now realizing nearer to the New; but perchance particular on the image of the Redthat the potential impact of the the first news that will leak through Cross, with which Guo Meimei hadhundreds of millions of original posts into the broad, flapping American ear been associated. The impact of theand reposts created on this platform will be that the Princess Adelaide has free dissemination of information,is enormous. the whooping cough.” However, in even if it is of a trivial nature, breaks China’s media climate, which is still the blockade of public opinionA comparative study done by HP relatively closed and dominated by control so long exercised by theLabs at the end of 2011 found that the state media, even the exchange of Chinese authorities and contributes toWeibo users mainly share jokes, fairly trivial information can achieve the progress of public dialogue.pictures and videos, and 62% of all a new significance. For example, inposts are reposts, twice as high as the 2011 an Internet scandal erupted2 Booz & Company
  5. 5. THE IMPACT OF Social media has developed a flat and interconnected structure, very interconnected media points now play a vital role in the formulationSOCIAL MEDIA different from the centralized of public opinion. According to theON PUBLIC structure found in traditional print media and television where there white paper Crisis Management in the Microblog Era released byDIALOGUE is a complex process of collection Ogilvy PR, 6 of the Top 10 PR crises and processing before information in China in 2011 were triggered is delivered to the public. In the by microblogging, and all of them social media era, each individual can generated a lot of attention on be a ‘citizen reporter.’ Information microblogs. originating from any media point will spread across the whole media Social media has transformed the environment rapidly but irregularly. mode of information spread from Any media point passing on linear to interactive. Nan Fang Zhou information can re-edit it and start a Mo (Southern Weekly), China’s most new round of distribution. Interactions influential newspaper, used to have a between media points may form famous advertisement boasting that consistent or conflicting expressions of it had more than 800,000 subscribers public opinion. This is the nature of and that each copy would be read by the public dialogue mechanism in the three readers on average. Nowadays, new social media era. each post on Sina Weibo is viewed by 189 people on average, and each This rise of this more vigorous repost leads to an exponential spread public dialogue enabled by social of information. Celebrities with media has weakened the influence hundreds of thousands of followers of traditional media. Social media each can easily become Internet have already created pop stars and Culture Icons. Almost all the top 50 celebrities through the ‘self-generated Weibo accounts are held by stars from media’ of grassroots fan campaigns. the worlds of pop music and movies. Media giant CNN has only 6.7 However, if activity, scope of spread, million followers on Twitter, while and coverage are also considered Lady Gaga has more than 20 million. rather than just the number of Similarly on Sina Weibo, the actress followers, the top 50 account holders Yao Chen has 21 million followers, come from quite diverse backgrounds, while one of the most popular print including entrepreneurs, business media titles, New Weekly, has only writers, commentators, and freelance 4.38 million. intellectuals. Each active blogger posts, comments and reposts a large Prior to the social media era, the amount of information, relevant traditional media proactively or irrelevant to their professions. investigated news and mounted Through social media, almost concerted campaigns to elicit a public everyone can participate in the response on key issues. Various formulation of public opinion. parties also publicized their opinions However, in the social media not all in the media, seeking to shape public media points are equally important. opinion. Now, the traditional media’s A small number of individuals play scope for such in-depth investigative key roles in spreading information reporting and campaigning is and online discussion is mainly based diminishing. Indeed, these media are on posts and comments by these becoming increasingly dependent on Internet Culture Icons. According to the realm of social media to identify the statistics of the CIC IWOM Data new stories. Traditional media’s Panel, during the crisis of confidence control over news reporting has thus in the Red Cross Society triggered been weakened, as social media can by the Guo Meimei scandal, reposts respond to breaking news instantly, triggered by the top three Internet and spread the news at lightning Culture Icons exceeded a third of all speed. These fragmented but widely reposts on the topic.Booz & Company 3
  6. 6. THE IMPACT OF Social media companies have been cultivated by angel investment media platforms. Ford Motors’ smart- talking puppet Doug proved to beSOCIAL MEDIA and venture capital firms, with the a big success in its 2012 advertisingON BUSINESS expectation that they will prove to be highly profitable. There has campaigns. Doug soon became popular on Facebook and was ‘liked’ by more certainly been a lot of interest in than 43,000 users. According to a the e-commerce or advertising survey done by Ford, more than 60% possibilities of social media. However, of interviewees would consider buying thus far the social media business new cars from Ford because of their model remains uncertain. fondness for Doug. Ford spent just USD 110,000 on its advertising on Facebook, the world’s leader in social Facebook, only a tiny part of its total media, has attracted 800 million advertising budget of USD 95 million registered users around the world, and in 2012. The small input brought a has diligently harvested information large output. Yet this kind of success on those users to entice retailers and story is not easy to repeat. Walt advertisers. GameTop, the largest Disney excels in image marketing and games retailer in North America, is one of the ten online advertisers opened an online store on Facebook who value Facebook advertising in April 2011. Apparel retailers Gap most highly; but it has yet to achieve and J.C. Penney, premium retailer any significant success on Facebook. Nordstrom, and many others have The ‘like’ economy is emerging, but followed suit. However, selling businesses are still seeking ways to products on a social media platform tap into it. has not proven easy. It seems people are usually more willing to shop on Many companies also hold high websites on which they have already expectation for Sina Weibo. More had a good experience, rather than on than 30,000 companies have begun social media sites. promoting themselves through the platform. One of the first movers, Traditional large advertisers have also 360buy initiated its Weibo marketing launched pilot programs on social in late August 2011. It added a4 Booz & Company
  7. 7. ‘promotion’ button on its Weibo of them has only attracted 20,000- effect is. Brand value needs towebpage which directly links to the 30,000 followers. Merely posting be maintained and enhanced by360buy official website where the sales promotions is not enough to genuine interactions within the targetproduct in question is shown already develop the marketing potential of audience, rather than through “zombieadded to a shopping cart. Although social media. followers” (automatic reposting from360buy has more than 1 million dummy accounts) or the “internetfollowers on Weibo, it has not yet Social media has created a ‘like’ navy” (paid posters). Companiesseen any substantial increase in its economy. Both direct e-commerce that have historically attached highsales volume. In September 2011, players and indirect social media importance to branding and valueorders generated through Sina Weibo marketing need to adapt to this creation should have an advantagewere only 5,000, compared to its total new context. According to Nielsen, in achieving this. It is a more difficultof 700 million online orders in 2011. brand information spread through challenge for companies whose growthTraditional retailers have also started interactions with friends on social relies more on a large amount ofto try marketing through social media platforms can achieve greater advertising promotion and expansionmedia. For instance, Beijing’s Xidan effects than traditional advertising of their distribution network. BusinessDepartment Store, the Shuangan in terms of brand exposure, brand competition in the social media eraDepartment Store, and Modern Mall identity awareness, and advance is ‘soft:’ the focus is on capabilityall opened official Weibo accounts at purchases. The higher the brand building, value creation for consumersthe beginning of 2011; but so far each exposure is, the better the branding and organizational commitment.Social media has created a ‘like’economy. Both direct e-commerceplayers and indirect social mediamarketing need to adapt to this newcontext.Booz & Company 5
  8. 8. PUBLIC Many customer management theories embrace a 90/10 strategy: In China too the rules of crisis management and public relationsRELATION IN to satisfy 90% of your customers, have been almost completely rewrittenTHE SOCIAL you may have to ignore the needs of the remaining 10% non-core thanks to the impact of social media. According to Ogilvy’s CrisisMEDIA ERA customers. Enthusiastic followers Management in the Microblog Era, of this ‘core customer’ theory use the Top 10 personal crises and Top operations analysis tools to identify 10 public credibility crises disclosed what percentage of customers are by traditional media in China in 2011 highly loyal and what percentage are were the same as those disclosed by picky, tailoring their services and so microblogs, but the degree of public controlling costs. Today, however, attention attracted by the coverage this business strategy is increasingly was sometimes different. Among the coming under challenge. On a social leading brand crises of the year, there media platform, the reputation were two, involving Siemens and of a company or a brand can be Coca-Cola, which were not on the affected by a variety of stakeholders. traditional media’s Top 10 but became Companies and consumers can all big stories on microblogs. Social media have their say on a brand, product has become the frontline for brand or service. Customers’ views may crises and public credibility crises. not only be based on their own experience but can also be affected Based on its wide experience in brand by the opinions of others, including management consultancy and on its non-consumers. analysis of the characteristics of the new media environment, Booz & Canadian musician Dave Carroll Company believes that companies made a very big splash on the Internet need to adopt the following three a few years ago. One of his guitars public relation principles in the was broken during a flight with microblog era. United Airlines in 2008. A furious Carroll wrote a song called United 1. Prompt Crisis Management Breaks Guitars and uploaded it to Mechanism YouTube. The song got 4 million In the social media era, the response views in just 10 days, and caused a time of all information points drop of USD 180 million in United’s has been shortened. Once a crisis market value. Such negative feedback breaks out, it will be reposted in from a single customer can easily a very short period of time and become a major talking point on cause serious social impact. For the social media and adversely example, when misconduct by a local affect brand image. Companies are furniture maker, Da Vinci Furniture, increasingly faced with such risks in was reported on the Finance and the social media era. Economics page of news portal Sina6 Booz & Company
  9. 9. Net on July 10, 2011, it was reposted line between internal information and growing flatter. Users of social mediamore than 5,000 times within 24 external information is getting blurry. vary from mainstream media withhours and became the hottest Weibo Senior management, general staff, and millions of subscribers, to top starstopic. Similarly, there were 100,000 all the stakeholders along the supply and Internet Culture Icons with tensposts and reposts on Weibo about chain can be an information source - of millions of followers, to ordinaryan accident on the Shanghai subway intentionally or unintentionally. Old users followed by friends. Althoughwithin hours of it happening. PR methods are no longer so effective. the amount of attention paid toReal-time spread of a large amount Enterprises and government bodies different social media accountsof information has brought huge need to systematically categorize varies enormously, the capacity forchallenges to enterprises and all their internal information and communication between differentgovernment bodies. For organizations set up an integrated mechanism accounts—via reposts, comments,caught in a crisis, providing prompt, for information management and following and being followed—is thereasonable and acceptable responses disclosure. For information that same for all. Most ordinary accountsis essential. The way the Shanghai will certainly become quickly may never attract much attention,subway accident was handled may known by the public, enterprises but each account can communicateprovide some guidance. Within thirty and organizations must disclose it with any other account on an equalminutes, Shanghai Metro posted two through official media in real-time. footing, allowing for incrediblyapologies and claimed the accident For information that is known by rapid dissemination of news andwas being carefully taken care of. lots of stakeholders and may become opinion. Once an incident is reportedTwenty minutes later, it advised known by the public, enterprises on a microblog, inappropriate PRcommuters to rearrange their travel and organizations should carefully responses—meaningless diplomaticroutes. Two hours later, it announced analyze it and eliminate any conflicts statements, excuses, and buck-passingthat all the injured had been taken to or inconsistencies it may contain, —only add fuel to the fire of the crisis.hospital. Five hours after the accident, and then disclose the information in Siemens for example, when facedit posted that all of its subway lines detail to major media and the public, with criticism over a problem withwere back in full operation. Such to avoid the reputation damage some of its refrigerator doors, hired aintensive and transparent release of that can be caused by non-official public relation agency to try to settle ininformation helped to maintain public release or distortion of information. private with the Internet Culture Iconconfidence in the subway network. For highly confidential information, Luo Yonghao. This approach might information channels must be clearly have worked in the traditional media2. Mechanism of Information defined in order to try to guarantee era, but here it actually escalated theDisclosure and Management the information’s security. Enterprises crisis to the next level. According toIn the era of self-generated media, and organizations must avoid being Cheaa.com, the retail market share ofthe entire audience can have its say. arrogant or complacent in taking the Siemens refrigerators dropped fromThe traditional media, especially the security of internal information for 12.5% in September 2011 to 8% inmajor outlets with mass audiences, granted. Appropriate information February 2012. The share drop causedused to have absolute power in categorization needs to be a key part by this PR crisis probably far exceededshaping public opinion, and this of an integrated PR mechanism for the original expectation of the Siemensmade it much easier for enterprises crisis management. management. If Siemens had conductedcaught in crisis to deploy their PR a serious investigation and a moreresources to effectively influence the 3. Two-way Communications on an direct communicated more withmedia coverage and so control public Equal Footing consumers, it could have been a goodopinion. In the social media era, the The media structure in the new era is opportunity for brand promotion.Booz & Company 7
  10. 10. CONCLUSION In the face of the challenges brought by the social media era, we believe strictly defines channels for information passage, sets up a crisis capability building is vital for management mechanism, designs enterprises to adapt and succeed. This processes for information release covers supply chain management, and PR, manages relationships with stakeholder management, quality customers and suppliers, coordinates control of products and services, the provision of necessary claim and improvement of company reputation, return services, and builds effective enhancement of customers’ acceptance information-sharing mechanisms of brand value, and PR capabilities grounded in the corporate culture. specifically directed to social media. In order to promote corporate In a fast-changing and dynamic values and enhance brand identity, market like China, having a capability enterprises need to design an all-round building strategies on social media has crisis management mechanism which become an imperative for business— categorizes internal information, whether multinationals or locals.8 Booz & Company
  11. 11. About the AuthorEdward Tse isBooz & Company’s seniorpartner and chairman forGreater China, specializing indefinition and implementation ofbusiness strategies,organizational effectiveness,and corporate transformation.He has assisted severalhundred companies—head-quartered both within andoutside China—on all aspectsof business related to Chinaand its integration with the restof the world.Andrew Cainey is aBooz & Company partner andleads our Digital practice inChina. He has over 25 yearsof management consultingexperience and has been basedin Asia for 15 years. He adviseslocal and multinational clientsacross all major industrieswith particular expertise infinancial institutions, health andconsumer.Adam Xu is a Booz & Companyprincipal based in Shanghai,focusing on consumer, retailand digital. He has extensiveexperience helping clientsachieve growth potentialin China. He has helpedboth “traditional” consumercompanies and e-commercebusinesses in China to developdigital strategy and build digitalmarketing and sales channelsoperating models.Booz & Company 9
  12. 12. The most recent Worldwide Officeslist of our officesand affiliates, with Asia Middle Eastaddresses and Beijing Canberra London Abu Dhabi Detroittelephone numbers, Delhi Jakarta Madrid Beirut Florham Parkcan be found on Hong Kong Kuala Lumpur Milan Cairo Houstonour website, Mumbai Melbourne Moscow Doha Los Angelesbooz.com. Seoul Sydney Munich Dubai Mexico City Shanghai Paris Riyadh New York City Taipei Europe Rome Parsippany Tokyo Amsterdam Stockholm North America San Francisco Berlin Stuttgart Atlanta Australia, Copenhagen Vienna Boston South America New Zealand & Düsseldorf Warsaw Chicago Buenos Aires Southeast Asia Frankfurt Zurich Cleveland Rio de Janeiro Bangkok Helsinki Dallas Santiago Brisbane Istanbul DC São PauloBooz & Company is a leading global managementconsulting firm focused on serving and shaping the senioragenda of the world’s leading institutions. Our founder,Edwin Booz, launched the profession when he establishedthe first management consulting firm in Chicago in 1914.Today, we operate globally with more than 3,000 people in58 offices around the world.We believe passionately that essential advantage lieswithin and that a few differentiating capabilities drive anyorganization’s identity and success. We work with our clientsto discover and build those capabilities that give them theright to win their chosen markets.We are a firm of practical strategists known for ourfunctional expertise, industry foresight, and “sleeves rolledup” approach to working with our clients. To learn moreabout Booz & Company or to access its thought leadership,visit booz.com. Our award-winning management magazine,strategy+business, is available at strategy-business.com.Printed in Greater China©2012 Booz & Company Inc.

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