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What is the state of digital marketing and e-commerce in China?
I'm just back from a week long trip to Shanghai where I talked to a lot of people in the digital industry there. Following are some of my observations about how the digital marketing landscape in China compares to the West.
I was attending Econsultancy’s inaugural Chinese event, Digital Cream Shanghai, and giving my keynote presentation on The Future of Digital Marketing. [NOTE: if you or a colleague are based in Singapore, we’re running our second Digital Cream Singapore event on the 29 November]
During my visit I talked to as many people as I could about the state of digital marketing in China to try and understand how it was similar, or different, from how it is in the UK and US. I moderated three roundtables with ten senior client-side delegates at each at which we discussed the value, and ROI, of digital, so this helped.
There were some obvious similarities. Everyone is interested in understanding how search engine algorithms work to optimise visibility and rankings. Indeed, one of our Chinese trainers, Eddie Choi, gave a fascinating keynote on his observations on how Baidu treats social content and signals compared to Google in China.
More than anything everyone wanted to know about social media: how to manage it, how to measure the value it is delivering.
But following are the five areas where I felt China’s current state of digital was most different to that of the West.
1. The digital media and e-commerce power players are completely different
In the west we understand the power players online as Google, Amazon, Facebook, Ebay, Twitter etc. In China they have a similar set of key power players but they are completely different. The majority of those western ones I mentioned are blocked most, if not all, of the time so you can’t access them even if you wanted to. I certainly couldn’t ever get access to Twitter or Facebook whilst in China, and Google access was patchy at best.
To get the full low-down on who’s who in China you should read our recently published China: Digital Market Landscape Report but my rough, brief, guide is:
Tencent = a mixture of AOL, Yahoo, Facebook, Twitter and MSN
We were fortunate to have Sophia Ung, one of Tencent’s General Managers, do a keynote presentation including some interesting case studies on integrated online advertising on Tencent. The presentation contains more details but I hadn’t realised that Tencent has a market capitalisation bigger than Facebook. And they claim to have reached 1bn users in China alone before Facebook reached that milestone globally recently (though they concede this is because many users have multiple accounts).
Tencent has more than 300m users accessing its properties via mobile. Tencent does pretty much everything (social, chat, instant messaging, search, portal) and is best known for products it owns, sich as QQ, QZone, WeChat and Tencent Weibo. Its 'weibo' (which means ‘microblogging’) platform, Tencent Weibo, may be lagging its competitor’s (Sina Weibo), the latter being considered the ‘Tier 1’ platform of choice for most businesses, but I was also very impressed to hear that the vast majority of Tencent’s revenue currently comes not from advertising but from payments from their users for premium services. Perhaps Facebook could learn a thing or two from it.
Renren = Facebook
Sina Weibo = Twitter
Baidu = Google
Taobao & Tmall (owned by Alibaba) = Google + Ebay + Amazon + PayPal
These guys are the 10,000 pound gorilla of e-commerce in China, turning over more than £50bn online. But it also has big search volumes and APIs that connect into Tencent's social properties.
The one digital media or e-commerce power player that was notably very similar in China as in the west was LinkedIn. If you are a mid-senior level professional in China it seems LinkedIn is the professional networking platform of choice.
Not only are the players different, but the way in which they work (e.g. Baidu vs Google) is different. So unfortunately digital marketing and e-commerce best practice does not transfer that well from West to East. The obvious implication of this is that whether you are an agency, or client-side, you need local expertise and knowledge to succeed. Just because you know what you are doing in the West won’t qualify you to succeed in China.
2. China’s state of e-commerce differs significantly from the UK or US
If you read our China: Digital Market Landscape Report you will notice that e-commerce penetration in China significantly lags where it is in the West. Whilst it seems that there are still some infrastructural challenges (e.g. lots of people still don’t have credit cards) China is fast catching up and e-commerce looks set to explode.
There is no shortage of consumer desire to buy online and the fulfilment/delivery infrastructure, whilst not nearly as sophisticated as in Europe or the US yet, is fast becoming so. There are almost 25m people in Shanghai alone and at least 200 cities in China with populations in excess of 1m people, so even if you only count the urban areas for e-commerce there is a massive market.
The biggest difference is the current focus on selling via third party platforms – dominated by Taobao and Tmall – as opposed to selling via your own site. These platforms have massive existing user bases, provide templates and have done a lot of the hard work for you around payment gateways, fulfilment, analytics etc. It seems that most merchants, even large e-commerce players in the West, are currently focused on selling via these platforms. At an internet trade show I visited in Shanghai there was only one e-commerce platform (Hybris) present and it appears to be one of the first to market in China. It is a similar story for content management systems (CMSs).
It is hard to say for sure, but I’d be surprised if we didn’t see more investment in owned e-commerce sites in the coming years as the infrastructure further improves, the e-commerce market grows, and brands start to want to own their customers’ e-commerce experience more directly. The growth of western brands entering the Chinese market might accelerate this development.
It was interesting to note that very few of the (very large) Chinese companies I talked to showed much interest in selling via e-commerce to the West. Whilst western companies are stampeding east in search of growth, it doesn’t yet appear to be happening the other way round in earnest. From my conversations it seemed the explanation was purely that they had so much opportunity and growth in their internal market that they had no need to look West. But I would expect this to change in the coming years. Despite China’s phenomenal growth and economic success, there are very few global brands that are Chinese (can you name even two?). When this changes, as I’m sure it will, it seems likely that e-commerce will form a big part of that drive.
3. Measurement and analytics significantly lags the West
You would be hard pushed to discuss digital these days in the UK or US without the mention of data or analytics. Entire new sub-sectors (e.g. CRO – Conversion Rate Optimisation) have sprung up. Data is getter bigger, more attributable, more real time.
But the Chinese digital marketers are largely still focused on customer acquisition and online advertising to drive brand and awareness. The levels of investment in people and technology for analytics and performance-driven digital marketing is quite low.
There is also quite a gap between the analytics around traffic generation (search, advertising, social etc) and onsite activity (web analytics, customer journey analysis, MVT etc). There is very little sense of the entire customer journey and not a single mention of attribution modelling.
I think this is just indicative of a market that is less mature. As e-commerce grows, and the investment in digital grows, it seems unthinkable that the level of scrutiny around ROI, and the desire to optimise performance, will not also follow.
Top Tip: if you want to make your fortune move to China (Shanghai or Beijing) and set up a digital analytics consultancy/agency/re-seller, find some smart people (loads of them around), train them in digital analytics, and then sell to any number of acquirers in three to four years.
4. Email – low levels of interest
I know email isn’t as sexy as social, mobile, local, video etc. But I’ve always been a big supporter of email because it works. It’s the unsung workhorse of digital marketing. At the trade show I went to there may have been only one e-commerce platform exhibitor but there were loads of ESPs (Email Service Providers) both local companies and well-known providers from the UK and US.
And yet not a single Chinese digital marketer I talked to mentioned email. At all. When I asked, a few people mentioned, as we also hear to a lesser degree in the west, that ‘young people don’t use email any more’.
It is clear, however, that there is plenty of emailing still going on in China and email is still the default communication medium for professionals. As e-commerce grows I would expect the use of email by marketers to grow. Email as a medium for customer acquisition (buying lists, etc) appears stillborn in China despite much less stringent privacy and data protection legislation. Email as a medium to confirm transactions, for cross/up-selling, for customer retention and CRM, surely has a big future in China similarly to the West.
5. Mobile – big with consumers but businesses slow to grasp the opportunity
More people use the internet on their mobile phone in China than there are people in the entire USA. In the West digital marketers are scrambling to try and catch up with their customers’ booming adoption of mobile for browing, search, social and commerce. Mobile devices are linking the physical world to the digital in increasingly personalised and experientially sophisticated ways.
But in China at the moment, despite marketers’ recognition that ‘of course everyone’s on the mobile internet’, there is surprisingly little excitement or interest around topics like mobile site optimisation, m-commerce, search for mobile, mobile advertising, etc.
I think there are two reasons for this. Firstly, as I described earlier, there is a big reliance on the dominant third party platforms who do provide mobile versions so, to some degree, mobile is being done by proxy. Secondly, the aforementioned lack of analytics, and nascent owned e-commerce properties, means it is perhaps hard for the digital marketers in China to see just how big an opportunity they are missing.
If you want to read more about how Digital Cream Shanghai went then feel free to look at the 'tweets' (though they're in Chinese and on Weibo of course).