Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
According to Shanghai-based business analyst Shaun Rein in The Global View, capital is moving back to China, and the country will be back in business in six to 12 months. In the short run investors in the stock markets have to be careful, as China’s stock markets behave more like volatile retail markets where institutional investors have little influence. He adds that the tech markets will especially be booming again now Xi Jinping showed his full support for the sector.
The metaverse is poised to grow fast in the coming three years, says Rupert Hoogewerf, chairman and chief researcher of Hurun Report, who published a report about the industry, according to the state-owned China Daily. Technology giant Huawei tops the list with the greatest potential in the metaverse for the first time, followed by Alibaba, Baidu, China Telecom and China Mobile.
The China Daily:
China’s metaverse-related industry is expected to grow fast in the next three years, thanks to continuing maturity and the application of key technologies including 5G, artificial intelligence, blockchain, cloud computing and virtual reality, according to an industrial report.
“Whether it’s entertainment, social media, online education, telecommuting, or digital marketing, the metaverse can offer entirely new experiences and models in the years ahead,” said Rupert Hoogewerf, chairman and chief researcher of Hurun Report.
Hoogewerf made the remarks after the Hurun Research Institute released a ranking report of 200 Chinese companies with the greatest potential in the metaverse in 2024 in Nansha district of Guangzhou, the capital of Guangdong province, in late August.
“The metaverse is considered a strategic emerging industry and will accelerate the promotion of Nansha to become an innovation highland and emerging industry incubation highland in the Guangdong-Hong Kong-Macao Greater Bay Area,” said Hoogewerf.
The report refers to companies based in the Chinese mainland, Hong Kong, Macao and Taiwan. For the main list, companies considered have a value of $1 billion or more.
“There has been a clear trend of metaverse-related businesses in the past three years, especially in the fields of education, finance, tourism and healthcare,” said Hoogewerf.
Technology giant Huawei tops the list with the greatest potential in the metaverse for the first time, followed by Alibaba, Baidu, China Telecom and China Mobile.
Chinese companies and emerging government regulations have marked the rise of AI tools in China. Marketing expert Ashley Dudarenok most certainly keeps an open mind to using those tools when they become available, she tells at Campaign Asia. “Their availability could offer us access to innovative solutions and capabilities to enhance our operations and drive further efficiency.”
Campaign Asia:
Ashley Dudarenok, a China digital expert and founder of ChoZan and Alarice, says she maintains an open mindset towards embracing Chinese AI tools when they become widely available. “Chinese AI technologies, such as Huawei’s Mindspore and Baidu’s PaddlePaddle, have demonstrated great potential in advancing the field,” says Dudarenok. “Their availability could offer us access to innovative solutions and capabilities to enhance our operations and drive further efficiency.”…
Whereas American artificial technologies have pretty much had free rein, China has already mandated that it will require a security review of generative AI services before they’re allowed to operate. But many feel that more stringent controls would not hamper China’s AI but instead improve it. “Some of the tight measures may enhance its safety and ethical use,” says Ashley Dudarenok. “Beijing’s focus on user privacy, content discrimination, and model development demonstrates their commitment to responsible AI practices and aims to establish clear boundaries for AI development without stifling innovation too much, allowing companies to innovate within defined limits. This proactive approach instills confidence in AI technology and encourages wider adoption.”
Observers got alerted when internet giant Tencent said it wanted to take search engine Sogou private, even tough Soguo is smaller than Baidu. Marketing specialist Ashley Dudarenok explains to KR-Asia why the move makes sense, "Sogou lacks Baidu’s larger market share but possesses better search technology and algorithms, allowing for better user experience," she says.
KR-Asia:
Sogou has performed well with a 21% market share in the Chinese search engine market. If Tencent was marking its territory in the search engine sector with its previous investment, a potential bold acquisition now plants a flag.
“It is probably in Tencent’s best interest to gain a secure share of the search market. By doing so, Tencent has to increase the width and depth of its contents,” told KrASIA Ashley Galina Dudarenok, marketing expert and founder of ChoZan and Alarice.
“Tencent would be able to improve ad performance and potentially benefit from higher revenue in ads, as Sogou’s search contains a large amount of users’ baseline data,” she added.
According to Dudarenok, Sogou lacks Baidu’s larger market share but possesses better search technology and algorithms, allowing for better user experience. In particular, its ability to scour specific verticals such as WeChat, Mingyi (Medical), Xueshu (Scholar), and Zhihu (China’s Quora) are core differentiators.
The privatization also makes sense for Sogou since its performance on the public markets has not been ideal. Since Sogou’s listing in 2017, its stock price has fallen below intrinsic value. Privatization under Tencent would offer a modicum of financial assurance to push forth with its extensive R&D ventures.
In addition, Tencent’s ecosystem of apps already contributes to over 35% of Sogou’s traffic, while competition is increasing Sogou’s traffic acquisition costs. As of the first quarter of 2020, this remained the primary driver of Sogou’s costs of revenues, increasing by 27% year-on-year (YoY) and representing 70.5% of total revenues compared to 56.6% the previous year.
Sogou’s acquisition is an anomaly in Tencent’s playbook, however, as Tencent is known to shy away from outright acquisitions and instead favor strategic partnerships, in contrast to other giants such as Alibaba (NYSE: BABA) and Baidu (Nasdaq: BIDU).
Yet, the high stakes behind the search engine market might be the reason behind Tencent’s move. “Internet companies have now very tight control over their own content and data, and have very clear-cut strategies in locking users in their own platform,” suggests Dudarenok, emphasizing the security perspective as essential in this acquisition.
Shaun Rein, founder of the China Market Research Group, believes a major challenge will be the growing strength of China's online movie sector, which is hugely competitive with platforms such as Iqiyi, Youkou and Tencent Video.
He said subscriptions were cheap at around $2 a month for a basic package, while movie tickets often sell for $20.
"Chinese players are just so cheap, often because they are subsidised as they are owned by giant internet players like Alibaba, Baidu or Tencent," he said.
"Aside from fears over catching Covid-19, consumers won't go back to cinemas anytime soon as the digital offerings are too good and cheap,"
He also predicted more pain for cinemas if film companies start to launch direct-to-digital offerings and charge higher prices for online movie releases on a pay-as-you-go basic on top of subscription rates. "I expect the cinema sector to face a massive bloodbath and many will go out of business," he added.
When Google entered the China market in 2006 it notified its users they are looking at a censored search engine. The government hated it, says Kaiser Kuo, former head international communication of competitor Baidu to the Go Tech Daily.
Go Tech Daily:
Central to that decision by Google management was a wager that by serving the market—even with a censored product—they could broaden the horizons of Chinese consumers and nudge the Chinese world-wide-web towards increased openness.
At initial, Google appeared to be succeeding in that mission. When Chinese customers searched for censored information on google.cn, they saw a notice that some benefits experienced been eradicated. That community acknowledgment of internet censorship was a initially between Chinese search engines, and it was not popular with regulators.
“The Chinese government hated it,” claims Kaiser Kuo, former head of global communications for Baidu. “They in comparison it to coming to my household for supper and stating, ‘I will concur to consume the meals, but I really do not like it.’” Google hadn’t requested the govt for permission just before employing the notice but wasn’t ordered to eliminate it. The company’s international prestige and technical knowledge gave it leverage.
China may well be a promising current market, but it was nevertheless dependent on Silicon Valley for expertise, funding, and know-how. Google required to be in China, the contemplating went, but China wanted Google...
“[Chinese officials] have been truly on their back foot, and it appeared like they could possibly cave and make some sort of accommodation,” says Kuo. “All of these folks who apparently did not give significantly of a damn about world-wide-web censorship right before have been really offended about it. The total internet was abuzz with this.”
China's internet giant Tencent has become a winner, first by copying US competitors, but now it has become their inspirator, says Tencent-watcher Matthew Brennan to Leadersleague. “WeChat does not monetize data, but it is a growth lever for other businesses in the Tencent group. It’s a bit like iOS or Android in that regard,” says Brennan.
Leadersleague:
Tencent does not sell access to user-data to third parties, such as advertisers. The data of the Chinese app is to all intents and purposes the handsets of the users. “It would have been possible to compare We Chat to Facebook, Baidu to Google or Alibaba to Amazon ten years ago, but that’s no longer possible today,” insists Matthew Brennan a consultant specializing in Chinese IT...
The most widely used of WeChat’s secondary functions is WeChat Pay. Until recently, Chinese people’s attachment to paying with hard cash was the norm. Nowadays, e-commerce represents 14% of all retail sales, against 8% in France. With WeChat Pay, you can use your phone to settle a bar tab or pay an electricity bill. Even the famous hongbao red envelopes Chinese use to exchange monetary gifts are being replaced by the application. During the 2017 Chinese New Year period, 14 billion transactions were carried out using the app. “Tencent has taken advantage of the lack of a developed baking sector in China, where the use of credit cards is not commonplace,” adds Brennan. By cannibalizing all the different services available on smartphones, WeChat has become a killer app, which the competition find impossible to match.
Tencent is the big winner from the success of WeChat. Not only does the company take a percentage of every transaction made using the app, but it has developed its own content for the platform. “WeChat does not monetize data, but it is a growth lever for other businesses in the Tencent group. It’s a bit like iOS or Android in that regard,” stresses Brennan. Via WeChat Tencent can commercialize other businesses, such as Tencent Video or Tencent Music. In total the average mobile phone user spends 55% of their time on a Tencent service. The case of streaming services is particularly instructive. Thanks to WeChat, Tencent has managed to increase the subscriber base of its VOD platform Tencent Video, seizing a quarter of the Chinese market. The company claims to have more subscribers than Netflix even.
Between 2016 and 2017, Tencent made 318 investments in startups and diversified number of sectors it is involved in in order to propose more services on WeChat. Tencent has invested in Karius, a platform specializing in the diagnosis of infectious diseases, and branched out into the connected agriculture sector.
Google's effort to enter China's censored search market has failed a second time, first in China itself, now because of opposition in the US and Google staff. Former communication director Kaiser Kuo at China's leading search engine Baidu looks back at how the internet company failed at its first move back in 2006, for the MIT Technology Review.
The MIT Technology Review:
Central to that decision by Google leadership was a bet that by serving the market—even with a censored product—they could broaden the horizons of Chinese users and nudge the Chinese internet toward greater openness.
At first, (in 2006) Google appeared to be succeeding in that mission. When Chinese users searched for censored content on google.cn, they saw a notice that some results had been removed. That public acknowledgment of internet censorship was a first among Chinese search engines, and it wasn’t popular with regulators.
“The Chinese government hated it,” says Kaiser Kuo, former head of international communications for Baidu. “They compared it to coming to my house for dinner and saying, ‘I will agree to eat the food, but I don’t like it.’” Google hadn’t asked the government for permission before implementing the notice but wasn’t ordered to remove it. The company’s global prestige and technical expertise gave it leverage. China might be a promising market, but it was still dependent on Silicon Valley for talent, funding, and knowledge.
Google wanted to be in China, the thinking went, but China needed Google...
The Google announcement shoved cyberattacks and censorship into the spotlight. The world’s top internet company and the government of the most populous country were now engaged in a public showdown.
“[Chinese officials] were really on their back foot, and it looked like they might cave and make some kind of accommodation,” says Kuo. “All of these people who apparently did not give much of a damn about internet censorship before were really angry about it. The whole internet was abuzz with this.”
But officials refused to cede ground. “China welcomes international Internet businesses developing services in China according to the law,” a foreign ministry spokeswoman told Reuters at the time. Government control of information was—and remains—central to Chinese Communist Party doctrine. Six months earlier, following riots in Xinjiang, the government had blocked Facebook, Twitter, and Google’s YouTube in one fell swoop, fortifying the “Great Firewall.” The government was making a bet: China and its technology sector did not need Google search to succeed.
Americans find it hard to get China is ahead of them in terms of technology and innovation. Chinese American Kaiser Kuo sits down with Steve Sjuggerund of the Daily Wealth to discuss his observations after he spent two decades in China, partly as communication director for internet giant Baidu.
Daily Wealth:
Steve: When I tell Americans that China is ahead of us in technology use, they don't want to hear it.
Kaiser: I think when we're talking about innovation in China and in the United States, it's important to understand the cultural and social matrix in which these take place...
You look at China, China has seen technology develop very much in lockstep with its really rapid growth. There's a kind of faith in the ability of technology to deliver better lives.
Compare that to the United States right now, where there's a lot of anxiety about technology...
If you look at some of our leading technologists, people like Bill Gates or like Elon Musk, they're out in public warning about the perils of – Elon Musk called it "summoning the demon" of artificial intelligence – that there are going to be armies of killer robots and we better really start worrying about that now.
That conversation is barely happening in China...
There are concerns raised about the jobs that might be lost to advanced robotics and things like that. But by and large, there is this faith that this will deliver better lives. It's a really big contrast.
Steve: In my travels to China, I can't believe the changes I've seen in the last five to 10 years. What would you say is the biggest change you've seen?
Kaiser: I have to say the biggest changes weren't at all in the last 10 years...Really, I think it was the decade of the '80s where the light in people's eyes changed.
Look, I think one thing Americans need to keep in mind when they look at China is: all this change that they've witnessed has happened in the space of one biological generation.
You can do a lot in terms of "hardware" change in a biological generation – all the magnificent forests of steel and glass [the skyscrapers] that we see now.
But the more important change that has to take place is in the "software." That is really in the psychology of people, the mentality of people. That changes more slowly, but those changes are ultimately much more important.
And where I saw the biggest sort of transformation in that was in that decade of the '80s, where there was almost insatiable curiosity about the outside world just because it had just opened up.
People were on fire and they didn't stop trying to drink deeply of all this suddenly available knowledge that was around.
A lot of Google’s new users will have to come from China, if the company is to achieve its stated target of reaching ‘the next billion people online’. Government interference saw Google quit the China market in 2010, but it is now trying to re-enter.
“It is going to be very difficult,” says Shaun Rein, founder and managing director of the Shanghai-based China Market Research Group (CMR). The company will have to change how it operates, bend to a very different set of rules, particularly in terms of content curation.
“Also,” says Rein, “the Chinese-language Google was just not as good as [the Chinese search engine] Baidu the last time they were here.”
China is more innovative than most people think. Europe is over-regulated while China is one large experimentation group for new companies, technologies and innovations. One of those areas of interest is digital technology, in particular digital payment. Despite – or because? – a centrally led economy, entrepreneurs are the digital innovators.
We have seen nothing yet: Malong Tech’s artificial intelligence, Lens Technology’s leading thin glass, Mobike’s bike sharing, Hikvision’s global market leadership in security technology and Zongmu Tech’s technology for autonomous driving. The list is long and expanding.
The investment splurge by Chinese technology companies is not too dissimilar to that of their US counterparts, many of which historically acquired or invested in firms that were deemed as key to future growth. Facebook, for example, bought photo-sharing app Instagram in 2012 and messaging platform WhatsApp in 2014, while Google acquired YouTube in 2006 and navigation app Waze in 2013.
“Companies like Baidu, Alibaba and Tencent have become like investment companies. They are sitting on top of piles of money and they are figuring out how to try and make the best use of it,” said Shaun Rein, managing director at China Market Research Group.
“The rate of investments is increasing because they’re trying to stay ahead of each other. Their major business lines have got so big that they are not going to get the same growth they are used to and it’s faster to buy technology and market share than to grow it organically and sustain a similar pace of growth.”...
“Baidu is looking to become a technology leader. They’re trying to come up with innovation in artificial intelligence and autonomous driving,” said China Market Research Group’s Rein. “Baidu needs to find another growth driver, as the search business doesn’t have the same stickiness factor with consumers and advertisers that Tencent and Alibaba have with social media and e-commerce. So in a way, their back is against a wall where they must innovate to keep up.”
Western observers wrongly assume that China's rigid censorship is stopping the country from being innovative. As China is becoming a leader in global innovation, that misunderstanding should be dealt with, says China veteran and former Baidu communication director Kaiser Kuo to Time about Baidu's CEO Robin Li.
Time:
But in fact, business thrives inside the firewall’s confines–on its guardians’ terms, of course–and the restrictions have not appeared to stymie progress. “It turns out you don’t need to know the truth of what happened in Tiananmen Square to develop a great smartphone app,” says Kaiser Kuo, formerly Baidu’s head of international communications and a co-host of Sinica, an authoritative podcast on China. “There is a deep hubris in the West about this.” The central government in Beijing has a fearsome capacity to get things done and is willing to back its policy priorities with hard cash. The benefits for companies willing or able to go along with its whims are clear. The question for Baidu–and for Li–is how far it is willing to go.
Greeven, who co-wrote Business Ecosystem in China: Alibaba and Competing Baidu, Tencent, Xiaomi and LeEco with Wei Wei, said Chinese companies have found a new method of organisation that will help it become a global innovation leader.
The business ecosystems of Chinese companies differ sharply from those of US juggernauts such as Google, Amazon, Facebook and Apple, according to Greeven, whose book came out in September.
In the US, one company usually creates a platform which outside companies either plug into or use. In China, an outside company does not plug in, but becomes part of the business as one of hundreds of players in an ecosystem, Greeven argues.
A distinct trait of a Chinese innovation ecosystem is the “glue” that exists between all the participants. For example, in the case of Alibaba – the owner of the South China Morning Post – the payment function is shared in its ecosystem.
The five companies in the book’s title are all digital driven, but they mix hardware and software, online and offline and old and new industries. They include relatively old companies such as Tencent, which was set up in the 1990s, and younger companies.
What they have in common is an aversion to adopting the standard metrics structures used by most multinationals. Greeven found. Their unique ecosystem, under which suppliers, distributors or customers become partners, helps them achieve early success in a highly uncertain business environment.
Who will survive in the travel industry: the global giants or the local ventures, was a question for William Bao Bean, managing director of the Shanghai-based Chinaccelerator, at the WIT 2017 Conference in Singapore. William, who guided hundreds of startups, believes the big internet firms will crush the small ones, writes WebinTravel.
WebinTravel:
One critical question on everyone’s mind was who would emerge victorious in the online travel market: Local or global players?
Bean offered a slightly pessimistic view, remarking, “the big is getting bigger and the small are getting crushed,” and citing the example of how Facebook and Google currently control the majority of global advertising; or how payments and e-commerce are now owned or invested in by Tencent and Alibaba.
He did also add that “travel is insulated,” but nevertheless, its turf will be harder to defend from global players over time. “If they don’t have a short, they’ll use money as a weapon and acquire” businesses that will let them get ahead...
So, the big are getting bigger, but “they can be quite myopic”. It grants smaller companies and startups with a slim but existent window of opportunity to sneak ahead. But they must also be aware of common pitfalls, to avoid common mistakes that befall many entrepreneurs.
Bean argued, “the dumbest thing entrepreneurs do” is trust their gut when trying to expand their brand globally from the get go. “You cannot go with your gut, because it will take you in the wrong direction.”
Instead Bean recommended “focusing on data and trying things,” encouraging “companies to use data to back up their decisions.” He continued, “you will fail, but it will help you to fail faster” and recover sooner.
Robin Li, the founder and CEO of internet giant Baidu, likes to mix things up.
He turned his performance at the company's summer party into a family affair this year. His daughter sang "Call Me Maybe" while accompanied by professional dancers. Proud papa, dressed in jeans and a polo shirt, strolled on stage at the end of the song, strumming the last few bars of the song on an acoustic guitar while his daughter crooned along.
Many other Chinese business leaders like to put on a show, according to Jeffrey Towson, a private equity investor and professor at Peking University.
"You see these kinds of crazy events all the time," he said. The outlandish galas allow bosses to be playful and self deprecating while also demonstrating how successful the company has been, according to Towson.
Internet giant Baidu has been under attack by Chinese internet users for medical ads. Former Baidu communication director Kaiser Kuo, defends his former company and says criticism has been unfair. Main Baidu problem: failing sales, he tells TechNode.
TechNode:
China’s internet exploded with outrage over the company’s perceived lack of supervision over sales of medical ads. Chinese state media joined the chorus, while authorities formed a task force to investigate the case bringing in Baidu’s CEO Robin Li for a talk.
“In this case, to me, it was obvious that the anger that was directed at Baidu was out of proportion with Baidu’s crime,” said Baidu’s former communications officer Kaiser Kuo during a recent episode of the China Tech Talk podcast.
Kuo, who spent six years with the company, believes that Baidu was scapegoated by authorities to avoid lashing out on China’s scandal-ridden health care system. The incident, however, can also be viewed as a tragic culmination of a series of controversies related to medical and health care ads which used to comprise 20 to 30 percent of the company’s search revenue.
It is not surprising then that in 2010 when Google announced its departure from China because of government mandated information filtering, doubts rose over Baidu’s involvement. At that point, for many Chinese internet users, Google’s “Don’t be evil” slogan and their decision to withdraw stood in contrast to Baidu’s pragmatism–and so Baidu became “evil.”
“There is a kind of psychological habit that we have that when you have a narrative that casts one character as an obvious protagonist of the story,” said Kuo. “The narrative wasn’t exactly fair. There was never any evidence and it just wasn’t true that Baidu had something to do at all with Google’s decision to decamp from China. They were certainly the beneficiary of it but there was nothing sinister going on.”
For Kuo, Baidu is a company of great technology, but one in which sales are often done ineptly. PR has also been the company’s weak point. Baidu’s poor response over the death of young Wei Zixi coupled with failed opportunities to capitalize on several major tech trends has left experts wondering about its future. After the incident, Baidu was ordered to revise its medical ads policy at a time when web search ad revenues have already been shrinking.
This summer journalist and internet expert Kaiser Kuo left his position at Baidu, to return to the US and works as a host of the Sinica podcast at China-focused media startup SupChina. At CCTV he looks back at almost 30 years of change, he experienced. The 1980s saw still most profound change, he tells. Then the software, the mentality changed profoundly. Later it was mostly the hardware of the country that adjusted to those earlier changes.
