profile - younger, poorer, less educated
navigates almost entirely by mouse
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food
viral marketing taken off more rapidly
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The internet: A missing link
By Kathrin Hille
Published: January 19 2010 22:59 | Last updated: January 19 2010 22:59
The flowers left by free-speech advocates have gone; in their place has come disillusionment. “We came here because we believed that the internet could help open China up. But now we’re effectively giving up,” says an employee at Google China – which last week threatened to quit the country in protest over a wave of cyber-attacks – who has started looking for a new job. “We are saying here’s the global internet, and there’s China, and that’s two different things.”
To many internet industry executives, that is old news. “We have a very differently flavoured internet here,” says Calvin Chin, the Chinese-American founder and chief executive of Qifang, a student loan website in China. “Things ... are going to remain different and mature differently. So it’s like different islands at Galapagos.”
Since China allowed the first internet connection to be established 16 years ago, global attention has been focused on how the web is changing the country. To those in the west who saw the web as an inherently open and free medium, it could only be a matter of time before the reactionary forces of censorship and authoritarian control succumbed to the inevitable.
At the forefront was Google, the world’s richest media and internet company. Justifying their decision to bow to censorship four years ago, its executives argued that this was the first step towards a freer Chinese web, with their local search service one of the main forces helping break down barriers to the flow of information.
They were wrong. Instead, China has developed its own cyberspace. It is growing less like the internet in the rest of the world, not more like it. And it is not just the baleful presence of a vast, assertive and highly flexible censorship apparatus that accounts for this evolution: the formative forces of “.cn” also include cultural preferences and social structures that are very different from those of the west. Google itself has often struggled to adapt to these differences.
That makes the search company’s fight with censors and threatened withdrawal pivotal in the development of the Chinese web. If Beijing calls Google’s bluff and it leaves the country, it could hasten the online divergence between China and the rest of the world already taking place.
With 384m internet users, the country already accounts for more than one-fifth of the 1.73bn global internet population. For multinationals, that means adapt or lose a substantive market. Just like Google, many western internet companies have struggled to make that call.
Only after years of suffering in China did Yahoo decide to sell its operations there to Alibaba, China’s leading e-commerce company, and take a stake in Alibaba in return. Yahoo China has since withered further, and the group has put the brakes on any future investments.
Alibaba triumphed in China over Ebay, the US-based company that is the world’s largest online auction site, by building the world’s largest online marketplace for trade among businesses. It is building Taobao, its consumer e-commerce site, into a similarly formidable force.
Google itself took years to find out that Baidu – its Chinese rival, which has more than 60 per cent of the domestic market in online search – offered a search box formatted in a way much better suited to Chinese characters than its own. The US company was also slow to tackle one of Baidu’s main strengths in attracting user traffic: its free music download service. Only last year did Google launch an equivalent.
One reason for these difficulties is that US companies took a long time to realise that Chinese people use the web differently from their counterparts in other markets. Simply put, they tend to roam the web like a huge playground, whereas Europeans and Americans are more likely to use it as a gigantic library. Recent research by the McKinsey consultancy suggests Chinese users spend most of their time online on entertainment while their European peers are much more focused on work.
Behind this difference is the fact that Chinese internet users are comparatively young, poor and less educated – a result of the fact that the country is moving online at the same rapid pace as it is expanding its economy. According to China Internet Network Information Center, 61.5 per cent of users are below the age of 29, and only 12.1 per cent have a university degree or higher. Some 42.5 per cent have a monthly income of Rmb1,000 ($146, €102, £89) or less. As the government is encouraging rural computer and handset sales, and mobile operators move beyond saturated urban markets in search of new subscribers, even larger numbers of low-income users are expected to join in the years ahead.
But there are also cultural differences. Foreign companies have taken a long time to figure out – then adapt to – one of the key features of Chinese consumers: they do not like to type. “Typing is a pain in Chinese,” explains Zhang Honglin, demonstrating how he has to enter a search word in Latin transcription, then pick the right character scrolling through sometimes dozens of different choices in a pop-up window. This is because Mandarin has many thousands of characters. So when 35-year-old Mr Zhang sneaks away from his family’s tobacco and liquor shop in Beijing to an upstairs internet café for hours on end, he navigates almost entirely using the mouse.
Most portals have reacted by filling their pages with hundreds of colourful links competing for attention – creating a cluttered and disorderly view to the western eye but making life easier for Chinese users.
Beyond aesthetics, Chinese web users are much more lively than their western peers – a characteristic that forms consumption preferences. “The amount of comments posted per user in China is double that of other geographies,” says Dan Harple of GyPSii, a mobile social networking application that allows users to post recommended places and events, and comment on them. One Chinese GyPSii user posted 300 places and 7,000 comments within a few months.
Just as in “offline” China, food is a particular focus. “Typically when a GyPSii user signs up in China, they’ll take a picture of what they’re eating at that point in time,” says Mr Harple.
The government has skilfully used the preference of its internet users for entertainment. Loose enforcement of intellectual property rights means that – despite pledges from Beijing that say otherwise – Chinese consumers can easily find the latest music and movies for free on a host of websites, a situation that helps keep the minds of many off topics that could prove inconvenient to their rulers.
When controversial debates arise anyway, the authorities use an army of “internet commentators”, paid to speak up in online forums to keep sensitive comment in check and support the government’s stance. The standard technique is to invoke nationalism as a conduit for dissatisfaction.
Overall, the censorship machine has had only patchy success. All but the most sensitive information on absolute political taboos – such as the 1989 massacre that ended the Tiananmen student movement – falls within easy reach of internet users.
Sun Yunfeng, Baidu’s design chief, summed up the uneasy acceptance most Chinese feel towards this censorship regime. In a blog post, now erased, he said: “For the normal man on the street, the most crucial information is not secrets from Zhongnanhai [the residence of Communist party leaders] but normal economic, cultural and technology information ... In China, every company and every individual must dance in shackles.”
In addition to censorship, politics has formed the distinct character of the Chinese web user, and created habits that matter for marketing.
In spite of heightened censorship in the past year – leading to Google’s complaints – the internet is still the freest space in Chinese society. So blogs and social networks, though dominated by gossip, rumour and light-weight comment, can become a crucial source of information suppressed in the traditional media.
“The internet in China has too much responsibility. In the US or the UK, it is just one more communication tool or platform. But in China, it got an enlightenment role,” says Alex Lin, chief executive of ChinaValue, a business portal.
Raised on a diet of propaganda in real life, many are mesmerised by the feeling of authenticity that comes with user-generated content. “I get most of my news from Kaixin and Renren, items passed on by friends there,” says Ma Rutao, a 19-year-old estate agent who spends most of her daily two or three hours online on the two Facebook equivalents.
Uncritical adoption of information from unchecked sources makes it easier to create a herd effect on the internet in China than elsewhere. Over the past few years, “human flesh search engines” have become all the rage. The targets have included a woman filmed stomping a kitten to death with high heels and a local official accused of corruption because he was pictured wearing a luxury watch and smoking expensive cigarettes.
Such manhunts have introduced public opinion into stale authoritarian politics. They have been matched by similar developments in the commercial realm, where viral marketing has taken off much more rapidly than in western markets.
Consumers are increasingly using blogs and other user-generated consumer reporting when deciding what to buy, according to McKinsey. “In an environment where word of mouth is more trusted than advertising, internet marketing is moving from an opportunity to a critical necessity,” says Yuval Atsmon of McKinsey in Shanghai, who has researched web habits across China.
He adds that consumer product companies will increasingly need to target “key influencers” – people whose online comment is widely read and trusted – and spend much more effort on forms of marketing that might not be deployed in the west.
“Some of the best media companies in China now are developing software that allows you to find not only the key bloggers but the bloggers that everyone else reads and copies,” says Mr Atsmon. “Some people talk about paying them, obviously, but the preferred way ethically is to invite those people, and educate them about the company and the product.”
The habits of China’s users are already making an impact beyond the web. Samsung, the Korean technology group, is working on a handset with an extra keyboard that allows users to play online games and take calls at the same time. The company concluded that Chinese internet users want such functions because they are obsessed with online games and increasingly use their mobile phones to go online, says Gregory Lee, Samsung’s marketing chief.
“The Chinese consumer,” he explains, “is the most important consumer in the world.”
Additional reporting by Richard Waters in San Francisco
ALIBABA: ‘WE WILL GIVE AMERICANS THE MEANS TO SET UP THEIR OWN BUSINESSES’
Ebay “believed they were smarter than Chinese local people”, Jack Ma (below) once said. The founder of Alibaba, which operates the world’s largest internet marketplace for trade among companies, never tires of lecturing that western companies such as Ebay and Yahoo failed to thrive in China because they tried simply to transplant business models from their home markets.
Now Alibaba has set out to master the same challenge. The company, which began in 1999 as a Yellow Pages-style service for Chinese would-be exporters, has grown into a sophisticated site offering dozens of services, such as helping small enterprises gain working capital bank loans. It now has more than 45m registered users, 6m virtual storefronts and 580,000 paying members, most of them Chinese companies offering everything from machines to nail polish for export.
Alibaba has now launched an aggressive push to sign up foreign customers . In November 2008, as the world descended into financial crisis, it drastically cut fees. Extra services were offered to those paying for Gold Supplier membership. In addition, it launched a starter pack for less than half the normal price.
Last year the company budgeted $30m for a marketing push outside China. It also approached companies such as Google and Ebay to discuss co-operation. In September it opened a headquarters in the UK, followed by a transaction platform in the US. It is in talks about setting up a joint venture in India.
Mr Ma’s push for expansion was because of the crisis rather than in spite of it. As Chinese small and medium-sized enterprises seeking to sell overseas form the backbone of Alibaba’s paying customer base, he saw that, with the country’s double- digit falls in exports, the company would be in trouble unless he helped support his customers and found new ones. The new ones are SMEs overseas. “Many people in Europe and America will be out of a job. Now we give them the means to set up their own businesses,” he says. He also argues that Alibaba should help foreign SMEs unlock the Chinese market.
So far, the numbers look good. At the end of September 2009, Alibaba had more than 18,000 Global Gold Suppliers, 24 per cent more than a year ago. Registered users in the US rose 32 per cent to 1.66m in the first three quarters of 2009. But the real test – under way right now – is whether the customers attracted by discounts retain their storefronts when fees rise after the first year.
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