Bitcoin’s PR challenges

brand

Source: agmarketing.com.au

What kind of feedback has my book received over the past week?  Here are a few threads on reddit:

I am called any number of names on these threads and stylistically was equated with “Gish Gallop” and a “word soup” thesauri.

Hass McCook (“Bit_by_Bit”) weighs in at one point in the first thread saying that these claims are only valid in August 2014.  McCook had similar sentiments as noted in Chapter 3.  However, no word on the MV=MC issue that was brought up in that same chapter, it will always apply no matter what the efficiency of the mining equipment.  This cost basis was also independently confirmed by a miner.

Today a friend pointed to a new post by Mircea Popescu which takes aim at me (not my book): “No, you don’t have something to say on the topic.”  In it he claims I am a “boneheaded teenaged male approach to learning.”  Not a word about the marginal costs of mining.  In fact, he also claims that there is no data “per se” in the book which is curious since there is actually a lot of data in the book.

This is a common rejoinder; some vocal advocates not looking at actual data from the blockchain.  In some ways their timeline looks like this:

  • 2007: First lines of BTC code written
  • 2008: Whitepaper revised and published
  • 2009: Blockchain put into production
  • 2009 – 2014: data created, but the only valid data is fiat prices, the rest is not real data “per se”

Other responses

Aside from the ad hominem’s above what has been the criticism?

Peter Surda, a researcher, disagreed with my points on inelastic versus elastic money supply but didn’t go into many details in a short email exchange.

I received a number of encouraging emails from a variety of readers and was named one of thirteen “Big Thinkers” in this space, though I doubt some of the other candidates would like me to remain in company with them.

I have had some responses with a couple others, including L.M. Goodman (creator of Tezos), on Twitter this past weekend — though this is largely unrelated to the book itself.

What does this mean?

Partisanship may be impacting scholarship, especially the Myth of Satoshi variety.

No, Leah Goodman did not uncover who Satoshi was.  But one thing was clear from that episode in February was that some partisans do not want the individual who created Bitcoin to be taken down from the pedestal they have put him on; they want their caricature to be immutable.  Just like some historians have tried to revise history to make their heroes look impeachable, so to has the veneration of Satoshi.  If Bram Cohen had anonymously released BitTorrent a decade ago, would BitTorrent have had a similar following due to its mysterious beginnings?

I hold no ill-will to the person or group that comprised Satoshi, but it is clear from the evidence cited in chapters 9 and 10 that he, she or they did not consult an actual economist or financial professional before they created their static rewards and asymptote money supply.  This is a mistake that we see in full force today in which the quantity of money available has shrunk due to theft, scams, purposeful burning, accidental destruction, etc.  Satoshi recreated a deflationary inelastic economy and much to the chagrin of the self-appointed purity police, it is not being used the way he expected it to (actual commerce) and is instead being used for things it is relatively useful for (e.g., donating to Wikileaks, gambling).

What other economic and environmental issues are still being ignored?

Jake Smith, creator of Coinsman recently published a new article on mining in China.  Yet despite being, in his own words, a “true believer” and interviewing other “true believers” in the mining space, he missed the unseen calculation, the economics of extracting and securing rents on this ledger unit which consume scarce resources from the real economy.  This is not something that it is unknown, there is an economic formula to explain it: MV=MC (as described copiously in Chapter 3).  There is nothing magical or mysterious about mining as other people in the reddit thread point out how mining is currently an environmental albatross or as Fred Trotter dubs it, a “black hole.”

Moving forward

Today the Consumer Financial Protection Bureau (CFPB) issued its Consumer advisory: Virtual currencies and what you should know about them.  The advisory (PDF) gives a cursory look, in layman’s terms of what are the challenges and risks of participating in this space.

What does this mean?

While it is unclear as to the motivations of some of the “true believers” are, they collectively did underestimate the costs of consumer protection and/or did not put it as a top priority for mass consumer adoption.  But why would they?  Consumer protection is usually expensive, its unglamorous and its centralized (which apparently is a “no-no”).

For example, generally speaking, most people do not like having their possessions stolen.  And in the event something is stolen, in practice, individuals prefer to take out insurance and even sue those responsible for damage (torts). If instead of promoting and building illicit markets (like Dark Market and Dark Wallet), these same developers and early investors had funded a start-up that helped track down these stolen funds, or start a non-profit to help get stolen coins, it would have been an amazing public relations coup.

To be balanced, theft takes place across the spectrum of services.  It also happens on the edges of Visa’s network. The difference is Visa offers insurance which is built into their cost structure (highly recommend reading Richard Brown’s recent post).  Insurance alone is just another product and has nothing to do with the protocol.  And this specific point (for the individual user) could be resolved sooner or later (e.g. Xapo already offers some home-made insurance).  However, insurance does not change the economics behind Bitcoin, especially since lost coins are permanently and constantly removed from the money supply.

Then again, there is a built in incentive to allow this theft to occur — stolen coins need mixers and exits which could potentially benefit developers and investors of those services; and simultaneously as more coins drop out of circulation this increases the value for those holding the remaining supply.

In addition, a vocal group of these “true believers” do not think Bitcoin has an image problem.  Yet it has a massive PR problem, for similar (albeit smaller) reasons that Tylenol had in 1982: customers and their families do not like getting burnt.  The only group I am aware of that tried to immediately help the victims of the Mt. Gox debacle was Goxcoin (here’s the LTB interview of it).  In contrast, thread after thread on reddit was filled with bullies saying “no big deal.”   It is a big deal to normal people with real responsibilities beyond downvoting skeptics on reddit and pumping stories about Bitcoin curing cancer and ending wars.  And Mt. Gox liabilities won’t be resolved for at least another year.  Instead of cyber bullying merchants into adopting bitcoin payments, these same hectors could have created a company catering towards recovering stolen property (e.g., loss recovery specialists).  It was a lost opportunity.

my wallet transaction volume

Source: Blockchain.info

In contrast, Blockchain.info has a mixing service called SharedCoin based off the CoinJoin feature from Greg Maxwell.  Blockchain.info recently crossed the 2 million ‘My Wallet’ mark but as I noted in Chapter 4, the vast majority of these likely go unused.  This past spring, one of their representatives claimed that they receive about 15 million visitors a day, but what this actually is, is largely API traffic (external websites pulling charts from their site). They probably do not have close to 2 million users let alone 15 million visitors.

How few?  We have an idea based on their own internal numbers, MyWallet transactions is flat over the past 12 months.  If there were 2 million or 15 million users, we would probably see a gigantic uptick in usage elsewhere on the blockchain (e.g., TVO would skyrocket, tx fees to miners would skyrocket, etc.).

What this all means is that, while they do not release actual user numbers, that at least a minority of wallets are probably ‘burner wallets,’ dumped immediately by individuals wanting to mix coins.  This is great for those who need to mix coins but not so great for consumers who just had their coins stolen.  How to resolve this going forward?

Incidentally in May, Roger Ver (an angel investor including in Blockchain.info) was extorted by a hacker who had figured out a vulnerability in Ver’s security.  Ver put a 37.6 bitcoin bounty on the hacker and the hacker eventually backed down; Wired and CoinDesk each did an article on it.  Yet during the same month, coins were stolen from others and when the users came to reddit for help, they were ridiculed for not having done the 27 steps to make a paper wallet.  No Wired article was written for them and in turn — speculatively — their coins could have been mixed on a site like Blockchain.info.  As a result, why would normal consumers ever want to use Bitcoin after that experience?

Perhaps user behavior and therefore the data will change in the future.  Consequently blockchains in general will probably find other niches beyond what Bitcoin is being shoehorned to do today.  This includes, other chains and platforms that may be able to help firms like Wageni Tech accomplish its goals in Kenya by helping farmers move, manage and track produce to market in an attempt to bypass middlemen and introduce transparency.  Bitcoin may be able to do that one day, but maybe not at the current $40 per transaction cost structure.  Start-ups such as Pebble, Hyperledger, Tezos, Tendermint, Dogethereum (Eris), Salpas, SKUChain, Stellar and several other funded projects in stealth mode may be able to as well (remember, Google was the 15th search engine and the iPod was at least the 9th MP3 player).

This is not to say that “Bitcoin” has collapsed or will collapse, nor is this to single out Ver (he has done a lot to try and create value in this space and even donated 1,000 bitcoins to FEE last year).  Instead it may continue to evolve into is something called Bitcoin-in-name-only, (or BINO as I refer to it in chapter 16) and it probably will continue to be used for what most risk-tolerant consumers use it for today: as a speculative commodity and as a way to pay for things that credit cards cannot be used for.

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Chapter 12 – Social Media and marketing your brand

[Note: below is Chapter 12 from Great Wall of Numbers]

Unlike Chatroulette, parachute pants and cabbage patch dolls, social media is not a passing fad.  Despite its IPO growing pains, with more than one billion users Facebook is here to stay.  And organizations like Pew Internet continue to note the strong embrace of social media by digital denizens.  For example, in September 2012, Pew reported that 46% of internet users (in the US) post original photos and videos online.1 Similarly, there are 564 million internet users in China (growing at a rate of 4 million more each month, a number expected to reach 800 million in 2015), a large portion of who – as I detail below – have also adopted and incorporated social media into their daily lives.234

Keep in mind, as Matt Garner notes in Red Flags, that you will not be able to establish a long-term presence in China as a foreign company without establishing yourself as a brand – using social media services.  This is because domestic Chinese companies will continually benchmark your bottom-line and undercut you on price.  The situation can be likened to the consumer goods company that sells excess product to a private in-house label.  Before long, the company has diluted its own brand image and the private label has cannibalized its market share.  The original benefit to an American company sourcing its goods from China is a low cost overhead. But when the American firm decides to turn around and sell its goods directly in China it often discovers it cannot because the source company has already started selling its own domestic brand of the same product.  One way to establish your brand is by using social media.

Yet social media services in China are typically no different than those in the West.  For example, I remember exactly where I was when Youtube, Facebook and Twitter no longer worked in China – at my apartment in Bengbu in the summer of 2009.  Yet, irrespective of what you might think about the Great Firewall and internet censorship, the humbling reality of China is in the words of Bill Bishop: one worlds, two internets.5 In fact, in a short email exchange in January 2013, Bishop explained to me that “If they [foreign social media experts and firms] are not tracking and engaging on Chinese social media they will not be talking to most of their Chinese customers who are online. Facebook and Twitter are basically irrelevant on the Chinese Internet.”

Or in other words: an intractable situation that will not change anytime soon.  But while international web 2.0 technology titans such as YouTube, Facebook and Twitter are effectively blocked, this is not to say that domestic internet users are not proficient with similar services.  And with its 564 million internet users (and 420 million mobile net users), it would arguably be a significant segment too important to ignore even if you think it is not worth the trouble.6

Do Chinese users spend much time on these services or buy anything?  Incitez, a market research firm, found that “consumers in China spend 46 minutes a day visiting social-media sites.”7 In comparison, in Japan the time is 7 minutes a day and in the US it is 37 minutes.  And according to a report from the Boston Consulting Group published last fall, China’s online shopping population was the largest, 193 million compared with 170 million in the US (though it trails both the US and Japan in total online spending).8 China’s shopping population has since grown to 242 million people through December 2012.9

How big is this in revenue numbers?  Altogether in 2012, e-commerce revenue totaled $196 billion.10 During the 2012 Single’s Day (November 11th or 11-11) on the mainland, Alibaba Group e-commerce properties (Tmall and Taobao) purportedly broke the single day sales record with over 100 million visitors and $3.03 billion.11 And as noted earlier in Chapter 7, the BCG report also estimates that China’s e-commerce market will become the world’s largest in 2015.  In fact, Analysis International projects that China’s e-commerce market will hit 2.57 trillion RMB ($410 billion) by 2015 and $457.6 billion in 2016.12 For comparison, e-commerce sales in the US reached $186.2 billion in 2012; the previous revenue records were $1.3 billion from Cyber Monday 2011 and $1.04 billion of merchandise was sold on Black Friday 2012.13

What are the domestic alternatives to the international social media site?  In place of these Silicon Valley firms are a slew of Chinese-based solutions, most notably:14

–          Tencent is China’s largest tech company, generating $4.5 billion in 2011 and $3.24 billion for the first half of 2012.1516 It develops the popular instant messaging clients, QQ (784 million users) and Weixin or as it is known in English, WeChat (300 million users, doubling its userbase in 6 months) and operates two microblogging sites called Qzone and Tencent Weibo.1718192021 Its success has prompted Western marketers such as Nike, Intel and Starbucks to build marketing campaigns around it.22 WeChat’s Western-equivalent is WhatsApp and the Chinese companies influence may have rubbed off on Facebook which itself has been purportedly stealthily adopting some of WeChat features for mobile users (e.g., communications tool).23 And messaging applications like WeChat have become so popular in China that SMS usage grew at a mere 2.1% in 2012 even though wireless service penetration grew at 9%.24 Furthermore WeChat now has 10 million overseas users and has recently opened a US office with a team focused solely on developing the app for developed countries.25 According to the same Incitez report above, Qzone and Tencent Weibo are the 1st and 3rd most popular networks for social sharing in China.  All told Tencent is the 9th largest web platform in the world.  For perspective, the collective instant messenger userbase in China reached 1.21 billion in Q3 2012 and the mobile instant messenger active userbase reached 480 million in the same timeframe.26

–          Youku/Tudou recently merged in the summer of 2012 to become the largest video sharing site in China’s fragmented market.  Altogether they receive a combined 400 million visitors a month.  By one estimate, their combined marketshare was originally 32.3% but decreased to 25.2% in May 2012 while their main competitor, iQiyi (which itself was recently acquired by Baidu) has jumped up to 18.4% marketshare in July 2012.  In Q1 2011 all three of them had a combined 70% marketshare.27 Tencent-related properties have reportedly gained at their expense.  Despite this challenge, Youku’s revenue increased 84% in Q3 2012 and posted its first ever profit during the same time frame.28 And in December 2012 Victor Koo (founder and CEO of Youku) now estimates that “Youku gets 74% of the Chinese Web audience in a given month [for streaming videos].”29

–          Renren is one of the largest domestic social networking sites, with about 200 million registered users and more than 45 million monthly active users.30 According to Incitez it is the 4th most popular network for social sharing.  Its feature-set serves as a very close proxy to what Facebook offers, including many of the popular games and apps.  For perspective, eMarketer estimates that China is already the largest social networking market with an expected ad revenue of $612.8 million in 2013 (based on a conservative estimate of 307.5 million users).31

–          Sina Weibo, is now the world’s second largest microblogging service after Twitter.  As of February 2013 they had 503 million accounts, 300,000 enterprise customers and at least 46.3 million daily active users, second only to Twitter (which also more than 500 million registered users and 200 million monthly active users).32333435 It has a number of additional features that differentiate it from Twitter, such as a built-in instant messenger.

–          Baidu is the largest search engine in China (with 78.6% marketshare through 2012) largely because of preferential regulatory policies that have stymied Google (which only has about 15.6% marketshare on the mainland.36 Baidu also now owns iQiyi, the Chinese equivalent to Hulu that streams licensed HD video content.37 Incitez estimates that Baidu properties account for roughly 12% of social media sharing.  It now has 80 million daily active users on its mobile search product and serves up five billion search queries daily across all of its partner sites; it is the 3rd largest tech company by revenue, $3.558 billion in 2012 (up from $2.34 billion in 2011).38 And in an effort to internationalize, in February 2013 it launched an English website for developers.39

While the start-up culture is still young and maturing, some domestic start-ups are funded by the likes of Kai-Fu Lee (former head of operations for both Google and Microsoft in China) and Digital Sky Technologies (DST) or through incubators in Shenzhen financed by Tencent.40 Others are even financed directly by Silicon Valley venture capitalists (VCs) like 500 Startups which opened a Beijing office in Q1 2013 headed by Rui Ma, an experienced venture capitalist.4142 There is even a venue similar to TED-talks called Geek Park which has held 40 forums since 2010, bringing together thousands of developers, product managers and investors.43  In fact, after initial success this past year, Microsoft now plans to incubate 100 companies annually on the mainland and will provide “the space, the technology, mentorship, access to funds” to the start-ups.44

Yet Duncan Clark, a technology analyst in Beijing, has noted that the insular protectionist policy making by officials renders it increasingly difficult for international companies to enter the domestic market.4546 What this means is that you should not wait for the Great Firewall to open back up.  Instead, take the initiative to create company accounts at Chinese social media sites.

Starting from scratch

Arguably the first service a foreign firm should start working with is QQ international.  It is free and easy-to-use because it is in English (Sina Weibo is also internationalizing and creating an English-based version).47.  It also puts you into direct contact with more than 700 million active QQ users.  But it does not stop at the desktop as many TV commercials and retailers prominently display company QQ numbers (like the AOL keyword).  In addition to the traditional contact information, many Chinese business cards also have QQ numbers displayed as well.  So if you plan to do business in China and want to interface with potential customers, having a QQ number is a must.

While micro-blog Twitter-like sites such as Sina Weibo and Tencent Weibo follow the same 140 character constraints as their Western counterparts, one distinct advantage written Chinese has over English is that the language is more compressed.  Chinese users typically only need 1-3 characters to make a word whereas English words typically need more, even when abbreviated.  While this may seem trivial minutiae, every little bit helps to better understand your potential customer base more.48

Pin-boards and group-buying

Pinterest is an increasingly popular “pin-board” style content sharing web service, breaking the record for fastest time to reach 10 million unique visitors (accomplished in less than 1 year).49 It was founded in March 2010 and raised $100 million this spring at a $1.5 billion valuation.  It competes head-to-head with Facebook’s newly acquired Instagram photo sharing site.  And it has a significant advantage in this region: it is not blocked in China.

As a consequence its usage rate is not only soaring, but its popularity has inspired the sincerest form of flattery, copying.  One recent estimate from Zhang Dan at ZDNet is that there are now about 30 Chinese clones of the site.50

One of the key differences between Pinterest and clones like Faxian and Mogujie is that users not only “pin” things that interest them, but can also buy items as well.  Typically users can make purchases directly from Chinese e-tailers like Taobao who have formed revenue sharing partnerships with the Pinterest-clones.51 As a consequence many of these start-up Pinterest/ e-commerce hybrids in China have found relatively “quicker return on capital.”

What about other services that have moved West-to-East?  The seemingly instant success of group-buying sites such as Group-On has inspired a plethora of copy-cats in China as well.  According to an August 2012 China e-Business Research Center report, there were 3,210 group-buying sites operating in China, whose transaction values reached $2.3 billion in the first half of 2012, “an increase of 124 percent from the same period a year ago.”52 It is a highly crowded space with about half of all group-buying websites closing down in 2012 including 24quan, which was shut down in September (it had been the 5th largest).  In fact, Lashou was at one point the market leader yet has dropped to 6th by revenue.5354 While it may be very difficult to start a similar service, placing your product on one of the sites could enable your company to expand its brand awareness to an entirely new customer base.

The immediate takeaway for you and your company is this: how can you position your idea, your brand, and your products in China?

If you sell consumer goods, components or even services you can utilize Pinterests organic grassroots community sharing to help promote your goods and services.  And you can also try to get your products placed on Meituan, the current group-buying leader in China.

There are of course legal concerns to regarding copyrights in Pinterest-like sites.  Because of the relative ease and viral nature of copy/pinning, Pinterest has attempted to help alleviate some of the legal headaches by implementing a “nopin” tag that companies can use to prevent copyrighted images from being pinned on the site.  Another issue that Brian Heidelberger recently noted, that touches on this viral marketing and positioning of your product: if you open an official company Pinterest page and allow your customers and fans to pin images for your promotion, these users may not own, thus creating copyright complications (e.g., because when a copyrighted image is attached to a commercial product, your company must receive legal permission to use it).55

Brand Positioning

Just like there was a virtual land rush for unique domain names in the 1990s and with Facebook Pages, so too is there a land rush for social media positioning in China.  And with that rush comes branding and market research.

In October 2012 I spoke with Pieter Nooren, Research Manager at Wildfire Asia, a social marketing firm with offices in Shanghai and Singapore.  Wildfire Asia provides technology for understanding and changing online conversations; a service with high demand in a country where word-of-mouth is shown to drive 55% of consumer purchase decisions.56

In particular, the company combs Chinese social networks to discover conversations and trends, helps brands to understand and engage in conversations, and recruits unpaid influencers to a brands’ cause.  In Nooren’s words, “We monitor the internet. We index any conversations and comments on forums, BBS and social networks according to our client’s strategic objectives. We then analyze this data to provide consumer and market insights, as well as to identify advocates and influencers in the brand’s category.”

To help their clients manage all of the data, Wildfire provides them with an online dashboard providing key conversation metrics, Weibo performance, and influencer management tools. Based on the data, Wildfire can provide “insights and strategic recommendations to the client.”  This is important, especially to foreign companies unfamiliar with both the Chinese marketplace and social networking services.  And Wildfire’s business model has been effective thus far, as the firm has grown to 25 full-time staff since its founding in 2009.

What does this mean in a nutshell?

It means that Wildfire not only tracks what consumers are saying about your brand, but gives you the ability to impact those conversations through social customer relationship management (CRM) and influencer marketing.  You can also find out what is going on with your competition using the same tools.57

You might already be thinking to yourself, “I already have a Facebook strategy, why should I bother with Weibo or Renren?”  As both Duncan Clark and Bill Bishop have noted above, it would be foolish to assume that Facebook will be allowed back in anytime soon.  And unfortunately the harsh reality is that Facebook’s reach is very limited within China.5859

Back in September 2012 there was a rumor regarding a speculative Facebook user-base number being floated around parts of Western media: that there were up to 63.5 million Facebook users in China.  This however was quickly verified to be untrue.60 Nor are there millions of Twitter users on the mainland.61 While we may never know the real number, Facebook’s own indirect estimate is closer to 600,000 (and perhaps only 18,164 active Twitter users).62 While relatively low, this falls in line with another number: there are approximately 600,000 permanent foreign residents in China.63 It should be noted that not all foreigners use Facebook in China nor do all foreigners have a VPN to access it in the first place.  Furthermore, the average Chinese user does not currently have access to a VPN or other “Wall Climbing” software such as UltraSerf, WebFreer or Hotspot.  In their mind, why should they have to pay to access foreign services when there is a similar Chinese version available for free?

Brand awareness

Social media provides important benefits in improving company brand awareness.  According to a 2012 McKinsey & Company report, Estée Lauder created a drama series exclusively for China called “Sufei’s Diary” to promote the brand Clinique.64 The 40 episode series was broadcast on a variety of digital venues in China (websites, buses, trains, airplanes).  Its online viewership alone was viewed “more than 21 million times” and as a consequence, Clinique’s online brand awareness “is now 27 percent higher than its competitors.”   Estée Lauder’s use of social marketing has paid off financially, as the company generated $500 million in China in 2011, which is an integral part of its 9.2% increase in overall corporate revenue.65

Another consideration for foreign cosmetic firms is that what Chinese consumers view as beauty may not be the same as Western tastes and preferences.  For example, fair porcelain skin is traditionally considered more preferable over tan skin due to historical social status (e.g., the affluent could afford to sit inside whereas manual laborers had to withstand the elements including sun light).  Thus Unilever, the 2nd largest consumer goods company globally plans to expand its business on the mainland “five fold” by marketing products like Pond’s Flawless White.66

While this is not to say your company will also reap immediate success, creating a social media plan today will enable your company to reach new customers and generate additional revenue streams.  Or as Incitez recommends, do not become too obsessed with return-on-investment in social media – “digging out insights is more important.”67

Using social media to find customers

As I discuss later in Chapter 13, another way that SMEs can leverage domestic social media sites is through a start-up called Mila.  Mila is a new cloud service that combs social media websites and helps companies find potential customers.  For example, if you are a real estate agent, you can post pictures of vacant apartments and then Mila can help to find people who are looking for apartments for you.  Or if you are a plumber, you can create a company profile on Mila which will then search across social networks for potential customers looking for plumbers.

Mila has been localized for the Chinese marketplace through a partnership with China Unicom and is even rebranded as Womaiwomai (沃买沃卖) for the Android ecosystem (its Mila name remains the same on the iTunes App Store).  Together with Unicom they integrate Sina Weibo (the largest microblog platform in China) and Alipay (the largest e-pay platform in China) into their product.

Thus before even moving to China your company can create accounts on a wide-variety of social media services in China like Youku.  You can then promote your brand through Pinterest-style websites and communicate with customers, clients, fans and even critics through Sina Weibo and Renren.  And perhaps most importantly, you can even find potential leads through Mila, which searches social networks to discover who is looking for services that your company offers.

Culture and branding

While there are numerous historical case studies regarding mistranslations of company names and slogans that are typically cited in business schools, creating a Chinese name for your company or product is just as important as it is in the West.6869 For example, whereas Apple and Microsoft literally translated their names into Mandarin, Pepsi was a little more creative and chose the name baishi which means “wishing 100 happy things.”70 Similarly, Coca-Cola is pronounced ke kou ke le “which includes characters for delicious and happy” and as a consequence is considered a prime example – or gold standard – of how to brand your company and product on the mainland.71 In contrast one tone of Bing (病) – the name of Microsoft’s search engine – sounds like “sickness” in Chinese and thus was mocked by netizens when it was first introduced.72

Why is this language component important?  According to a 2012 Economist Intelligence Unit report, “43 percent of nearly 600 global executives admitted to incurring financial setbacks as a result of communication misunderstandings standing in the way of a major cross-border transaction.”73 Furthermore, “90 percent of the executives [surveyed] felt that company profits, revenue and market share would climb if cross-border communication is improved.”  What this means is that you and your company should be cognizant of communication barriers and limitations at both the negotiation table and marketplace for brand recognition.

Takeaway: with nearly 600 million internet users (and as of January 2013 more than 420 million of whom are mobile users), China has a digital populace almost twice the size of the US total population.74 So what is your company’s social media plan and strategy in China?  If you do not have one, you still have time to develop and roll one out.  And while you may be unable to understand Mandarin, there are a number of free, easy-to-use online tools that can help you register a namespace at popular Chinese social media sites.  Ignoring these potential customers is the last thing your company should do.  Be safe rather than sorry – register your brand name at social media sites today.


Endnotes:

 

  1. Photos and Videos as Social Currency Online from PewInternet []
  2. See MIIT: China’s Internet User Base to Hit 800 Mln by 2015 from People’s Daily, SMS growth in China slows as mobile users turn to alternatives like Tencent’s WeChat from The Next Web and Social, Digital, Mobile China (Jan 2013) from We Are Social []
  3. See Chinese Web Users Hit 538 Million from PCMag and China’s Internet population surges to 564 million, 75 percent on mobile from ZDNet []
  4. As of 2011, the amount of rural internet users was 136 million.  According to China Internet Watch, “In other words, there is still 82% of rural population that could not access the Internet. Paralleling that, Chinese penetration of broadband connection is low. Only 39% of families have fixed broadband connection in China. In some middle and western provinces, less than 70% of population has phones.”  See 74% Chinese Netizens Acquire News Online from China Internet Watch []
  5. One World, Two Internets by Bill Bishop []
  6. China Had 564 Million Netizens By End Of 2012; Fewer Using Desktop Computers To Surf from China Tech News []
  7. China Social Media Whitepaper (October 2012) from China Internet Watch []
  8. See Singles Day: China’s online shopping holiday from USA Today and Singles’ Day promotions draw in shoppers from China Daily []
  9. China Had 564 Million Netizens By End Of 2012; Fewer Using Desktop Computers To Surf from China Tech News []
  10. Bezos’ Kindle-Less Amazon Mashed in China by Ma’s Alibaba from Bloomberg []
  11. See Black Friday in Red China by Evan Osnos and Singles Day: China’s online shopping holiday from the Associated Press []
  12. See China Now Has 242 Million E-Commerce Shoppers, Spending $40,000 per Second from Tech In Asia and E-commerce in China – Statistics and Trends from Go-Globe []
  13. Black Friday surpasses $1B in online sales from Computer World []
  14. I would be remiss if I mentioned Group-buying and Pinterest clones but not about Kickstarter-like crowd-funding sites in China.  See Tapping into Crowd Power with Website Finance from Caixin []
  15. Tencent announces $4.5 Billion in 2011 revenue from NASDAQ []
  16. Unaudited 1H 2012 revenue was 20 billion RMB ($3.24 billion).  See Interim Report 2012 from Tencent Holdings []
  17. See Tencent’s WeChat messaging app passes 300m users, adding its latest 100m in just 4 months from The Next Web, Tencent: WeChat App Set to Surpass 300 Million Users Next Month from Tech In Asia, 200 million users strong, Tenecent’s WeChat messaging sees huge adoption outside of China from The Next Web []
  18. According to their Q3 2012 results, Tencent generated $1.82 billion in Q3 and their WeChat service passed the 200 million user mark.  See Tencent continues modest growth in Q3 with $1.8b in revenue, $511m in profit from The Next Web []
  19. WeChat is quickly gaining on Sina Weibo.  See Tencent’s WeChat Takes Bite Out of Weibo from The Wall Street Journal []
  20. See WeChat Bests Weibo in Monetizing Social Media from Caijing and Wechat’s Monetization and Overseas Quest from TechNode []
  21. For more about WeChat and how to effectively use it to reach consumer see: Conquering WeChat: Effective B-2-C Communication by Digital Jungle and The best blog posts about marketing and branding on WeChat from China Internet Guru []
  22. China’s Fast-Growing WeChat Shakes Up Weibo. Could It Jump to the U.S.? from AdAge []
  23. Facebook looks more like WeChat every day from Pando Daily []
  24. SMS growth in China slows as mobile users turn to alternatives like Tencent’s WeChat from The Next Web []
  25. See China’s Tencent Aims Mobile App at U.S. Market from The Wall Street Journal and WeChat to set up US office from Global Times []
  26. See China’s Instant Messaging Users reached 1.21 Billion in Q3 2012 from China Internet Watch and China Mobile IM Active Users Reached 480 Million from China Internet Watch []
  27. See Youku Tudou May See Postmerger Static from Barron’s and China Online Video Market Update Q1 2011 from China Internet Watch []
  28. Youku Revenue up 84% in Q3; Reports Net Profit for 1st Time from Caijing []
  29. Youku’s Now The King Of China Web Video: Can It Make Money? from Forbes []
  30. As of September 30, 2012 Renren had approximately 172 million users and is expected to hit 200 million within the next year.  See Renren Has 45 Million Monthly Active Users, Eyes on Mobile from Tech In Asia []
  31. To be even handed, some of these social media numbers require more objective analysis and may be artificially inflated.  See The myth of Chinese social media user numbers from South China Morning Post and Asia-Pacific to Top Western Europe Social Network Ad Spend in 2013 from eMarketer []
  32. See Sina Weibo poised to launch new version from China Daily, Twitter reaches 500 million user mark from The Washington Post and Twitter monthly active users: 200 million and growing fast. from Slate []
  33. See Sina Weibo Passes 500 Million Users, But Needs to Monetize More on Mobile from Tech In Asia and Of Sina Weibo’s 500 Million Registered Users, Are 90% Actually Zombies? from Tech In Asia []
  34. Monetizing your company’s fan base from social media sites like Sina Weibo is a challenge that was recently discussed by Ken Hong, the general manager of the Sina Weibo platform at Sina.  See Turning Brand Fans into BFFs from Thoughtful China []
  35. How many people actually use Weibo is another issue as a recent study conducted by researchers Hong Kong University found that a large percentage of users may be “zombies” – fake accounts used by marketers to boost follower numbers (an attract higher advertising premiums).  See Reality Check for the Chinese Microblog Space: A Random Sampling Approach by King-wa Fu and Michael Chaus []
  36. The 15.6% is an estimate from EnfoDesk regarding Google.cn; CNZZ estimates that Google’s marketshare is lower at 4.72% in October 2012.  See China Search Engine Market Share in 2012 from China Internet Watch and Google decline in China continues as its search share falls to 4th place, maps to 6th from The Next Web []
  37. Baidu acquires dominant stake in online video firm iQiyi, buys out ex-Hulu investor Providence from The Next Web []
  38. See Baidu Handles 5 BILLION Search Queries Per Day from Tech In Asia, Baidu Reaches 80 Million Mobile Apps Users, Reveals Full 2012 Financials from Tech In Asia, Qihoo Looks to Cut Into Baidu’s Market Share of China’s Internet Search Engine Market from Marketwire and Baidu Announces Fourth Quarter and Fiscal Year 2011 Results from PRNewsWire []
  39. China’s Largest Search Engine Baidu Launches English Site For Developers from TechCrunch []
  40. DST is a Russian-based venture capital firm headed by Yuri Milner that focuses in part in emerging market tech firms including those in China such as 360buy.  See China Deals Represent Half of DST Global’s Recent Investments from The Wall Street Journal []
  41. VCs coach Silicon Valley startups on investing in China from China Daily []
  42. In a bit of a role reversal, InnoSpring is a new US-China incubator based in Santa Clara, California.  See 500 Startups Is Setting Up Shop In China, Adding Beijing-Based Venture Partner Rui Ma from TechCrunch []
  43. Geek Park Lures Google’s Schmidt in China App Hunt from Bloomberg []
  44. Ibid []
  45. Could China Rival Silicon Valley from Australia Network News []
  46. This also provides a challenge for domestic Chinese internet companies wanting to expand and internationalize into the global marketplace.  See Now China’s WeChat App is Censoring Its Users Globally from Tech In Asia, If Tencent wants WeChat to go global, it has to stop international censorship from Pando Daily, China’s Tencent Apologizes for Message Problems from The Wall Street Journal and All Eyes Are on WeChat, Including the Chinese Government’s from Motherboard []
  47. Sina Weibo introduces beginnings of an English interface from Shanghaiist []
  48. In terms of understanding internet market opportunities and consumer behavior, it is highly recommended that readers peruse the 2012 China Internet White Paper from IDG-Accel which goes into detail about several areas that are sometimes overlooked.  For example, Chinese internet demographics can be broken down into the “Baigujing” (educated urban net users) and “Grassroots” (everyone else).  Understanding this type of consumer segmentation could help focus your marketing strategy. []
  49. Pinterest Hits 10 Million U.S. Monthly Uniques Faster Than Any Standalone Site Ever from TechCrunch []
  50. China’s “Pinterest” in a faster profit-making mode from ZDNet []
  51. Pinterest clones flooding Chinese web space from BBC []
  52. Nearly Half of China’s Group Buying Sites Now Closed Amid Heated Competition from PCWorld []
  53. See Popular group-buying site in China shutters from ZDNet and 24Quan, Once China’s 5th-Biggest Daily Deals Site, Suspends Operations from Tech In Asia []
  54. China’s Lashou Has Lost its Mojo, its IPO, and 50% of Market Share from Tech In Asia []
  55. How Brands Can Use Pinterest Without Breaking the Law from Ad Age []
  56. Experience Brands and the New Engagement Model from Jack Morton in 2010 []
  57. Readers are encouraged to peruse the analytics provided in several case studies.  See Case Studies from Wildfire Asia []
  58. This image was released in December 2010 showing the active regions of the world based on Facebook usage.  China is notably dark. []
  59. There are also a number of social networks designed for professional business people akin to LinkedIn; collectively their userbase has now reached 100 million.  To illustrate the dynamism in this space, one of the former leaders, ChinaHR is currently in decline and its parent company (Monster.com) has sold off all but 10% of its stake by February 2013.  See China’s Professional Social Networking Users to Reach 100 Million from China Internet Watch, Rumor: ChinaHR.com May Be Dumped By Parent Company For Measly CNY55 Million from China Tech News and Ireland’s Saongroup Acquires 90% Stake In ChinaHR.com; Half Staff Will Lose Jobs from China Tech News []
  60. No, Facebook does not have 63.5 million active users in China from The Next Web []
  61. There are NOT millions of Twitter users in China: Supporting @ooof’s result and refuting GWI’s survey from Blocked on Weibo []
  62. New Study Proves that Twitter Users in China are Rare Birds from Tech In Asia []
  63. 593,832 foreigners live on Chinese mainland: census data from Xinhua []
  64. Understanding social media in China from McKinsey Quarterly []
  65. Estee Lauder’s New Skin Care Brand in China: The Potential for High-risk, High-reward from Knowledge@Wharton []
  66. Redefining the Chinese Beauty Standard from China in Focus []
  67. China Social Media Whitepaper (October 2012) from China Internet Watch []
  68. Perhaps the most popular urban legend, which is false, is the Chevy Nova.  It is sometimes mentioned in business school textbooks as having sold poorly in Spanish-speaking countries due to a retranslation of “nova” as “no go.”  This is incorrect.  See Don’t Go Here from Snopes []
  69. In China, Air cheow-DAN Cries Foul from The Wall Street Journal. []
  70. What’s In a Name? by Meredith Rodriquez []
  71. Naming in Chinese, the Coca-Cola Story from About.com []
  72. Microsoft Launches Search Engine for China — But Don’t Call It Bing from The Wall Street Journal []
  73. See Competing across borders from Economist Intelligence Unit and Bridges and Barriers by Linda Yu []
  74. See China’s Internet population swells 10% to 564m in 2012, with 75% logging on from a mobile device from The Next Web and Sohu’s mobile traffic nears PC volumes from China Daily []
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