Digital Marketing in Asia Pacific

It’s no secret that newspapers are in trouble. The massive shift from offline to online (of both consumers and advertisers), was compounded by the financial crisis, which seemed to speed up it’s demise. Many small publications have had to close shop, and many of the larger ones are having to seriously reconsider their business models. In fact, aside from the collapse of the US automotive industry, many speculate that traditional journalism has been the hardest hit, in recent years.

To tackle this there have been many attempts to tackle the problem, the majority have been all too panicky, targeting and demonising Google for providing such easy and free access to all the content. Earlier this year Rupert Murdoch announced that News Corp. would go back to charging for online content. Last week the Sydney Morning Herald broke news that News Corp. was satisfied with the research they had done and would move onto Phase 2 within Australia. According to News Corps Digital Chief Executive:

“News has conducted some audience research here in Australia and in the UK and US, which gives us confidence that, if we get the product and delivery system right, people will happily pay for news content online, on their computer, mobile, e-reader or other device,” Mr Freudenstein told staff. “Here in Sydney we are about to move into the second phase of the project.”

I’m not sure what research was conducted, and while I’m sure some people are prepared to pay for content… I just can’t see how
this is going to work?!? Almost everyone I know has vehemently denied their willingness to pay for News Corp. content. Will News be able to survive the coming years on a much smaller user base (even if they do pay)?

Wouldn’t it be better for News Corp. to package access to their online content with one of their other products that people are paying for,
like Sky or FoxTel?

“It’s clear that the worst is behind us,” he said. “What we see at Google is some level of improvement and what is more important is we see it not just in the United States but outside the United States.” That’s what Eric Schmidt told Reuters in an interview last week.

According to the article, and Eric Schmidt’s statement: ”Acquisitions are turned on again at Google and we are doing our normal manoeuvres.” … Google is clearly back on the acquisition trail.

What does this mean for start-ups in APAC?

Well throughout the financial crisis, the world has witnessed a shift of economic power from West to East… and as many of the APAC markets fall under the ‘Emerging Markets’ category there is likely to be a lot of interest. Google has still not cracked China, Japan or Korea.. not to mention a lot of the other markets… so clearly something to monitor and observe.

Could we be seeing some Google acquisitions soon?

Update:  It looks like Yahoo7 (a joint venture between Yahoo! and Channel 7 in Australia) is also on the acquisition trail.

Last week saw the unveiling of Google Public Sector in Australia, by Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy. This comes as part of the Aussie government’s recent steps towards embracing the web as a vehicle to breed  innovation and engage more with their communities, through the Gov 2.0 Taskforce.

It’s not the first time Google has teamed with local governments, take for instance the NSW Government map for instance. But it is interesting to see Google packaging so many of it’s products as a box set of solutions for the Public Sector.

Here’s a clip of Google Public Sector for Australia:

As for the Government 2.0 Taskforce itself it is primarily responsible for advising and assisting the Government to:

• make government information more accessible and usable — to establish a pro-disclosure culture around non-sensitive public sector information;
• make government more consultative, participatory and transparent — to maximise the extent to which government utilises the views, knowledge and resources of the general community;
• build a culture of online innovation within Government — to ensure that government is receptive to the possibilities created by new collaborative technologies and uses them to advance its ambition to continually improve the way it operates;
• promote collaboration across agencies with respect to online and information initiatives — to ensure that efficiencies, innovations, knowledge and enthusiasm are shared on a platform of open standards; and
• identify and/or trial initiatives that may achieve or demonstrate how to accomplish the above objectives.”

Facebook announced that it had crossed 300 million users and more importantly, had also turned cash flow positive. Mark Zuckenburg was quite happy with this, as the goal had been to achieve a positive free cash flow  some time in 2010. There have been speculation always about an IPO and its timing -  Facebook has put it to rest that the IPO will not happen in 2009, though there are skeptics.  Tracking Facebook’s valuation has become quite a sport with the VCs.

Facebook stated that it was on track to earning over $500 million this year. This has important ramifications. Facebook added about 50 million users in just under 3 months.  It continues to grow faster than the search engines and is narrowing the gap in visitor numbers.  User interest in facebook has surged past myspace and continues to grow. While  Facebook is continuously spending money in adding capacity, hiring new talent and investing in better technology, it is also more successful in generating ad revenues for the large volumes it attracts.

All this has the makings of a dream internet IPO. There are a few “look before leaping” points -

- How efficient is Facebook in generating its dollars? How many user page views does it take to generate $1?

- How great is Facebook from an advertisers point of view? Are both large and small advertisers as happy with Facebook as they are with Google?

- How well do ads perform on Facebook? (My personal experience has not been that great. Facebook click reporting has always over-reported on clicks in each trial)

Will China be the next Silicon Valley? Being an occasional traveler to China, I have always been awed by the speed of economic development in such a vast country. The online channel has develop at such a pace that China is currently home to around 253 million Internet users and in terms of unique visitors, it is the largest Internet market on earth – representing 18% of the world’s online population. The size of the Internet population is large enough to be self-sustainable with its own modus operandi and business models.

In order to be successful in China, business model will have to take into considerations language, infrastructure, consumer behavior as well as legal and political system (which tend to be very different from the “west”). Thus new and innovative model will need to be formed to adapt to the online/offline structure in China.

To date, many of the online initiatives have been an adaptation of the business models in the US and UK. The following are some of the more prominent online initiatives from China.

• Alibaba – Largest online B2B market place. Alibaba turns 1o this year as well and announced that it aims to create 100 million jobs, employ 10 million people – really exciting isn’t it (click here for more details on that)
• AliPay – Subsidary of Alibaba, providing payment services in China
• ChinaUnionPay – Payment service provider in China that is integrated to the China banking system. They are portray as the “Visa / MasterCard” of China.
• Baidu – The dominant search engine in China with over 65%
• CTrip – The largest and most successful online travel agency in China
• Kaixin001 – Dub as the “Facebook” of China. Very similar to Facebook model, Kaixin001 is the biggest social network sites in China. There are many more of such sites in China that basically emulate the Facebook model.

Just few weeks back, we saw that news that Kai-fu Lee quits Google China to start his own venture (Innovation Works) – to fund Chinese technology start-ups : a platform where young Chinese can get “angel funding” to start their enterprises. According to Hong Kong’s South China Morning Post, Lee was expected to establish an investment firm with about 800 million yuan ($117.1 million) in funds to help technology start-ups grow in mainland China.

It will really be interesting to know how this new venture will pan out in China and whether it will fuel new business model / products originating from China – only time will tell, but it will definitely be exciting times ahead in China.

Google Wave is due to be released at the end of this month…  well to 100,000 invitees first. I’m sure a lot of you have seen the now infamous Google Wave demo at the Google I/O conference. If not, you can see it here, it’s long… but worth watching.

Essentially, Google Wave resulted out of the notion that communication over the internet as we know it ‘is broken’ and has not evolved much since the first email was sent. The premise for the platform is to combine all aspects of communication, whether it be Email, Instant Messaging, Social Networking, Blogs or Wiki-contribution… into one fairly revolutionary platform. Users create a ‘Wave’ much like they would an email thread, which is hosted on Google and viewed in realtime by all users, without needing to proactively ‘Send’ or ‘Update’. I know what you’re thinking… Google Docs already does this.. but to be honest it’s still quite rigid and clunky when it comes to other forms of Media. What Google Wave is setting out to change is to bring together the dichotomy of communication (email, IM…etc.) with the content creation (blogs, wikis…etc.) into one collaborative platform.

A couple of weeks ago, I had the pleasure of attending a casual talk by Lars Rasmussen, who leads the Google Wave project out of Sydney… and I have a few quick insights to share that resonated with me:
- Through their testing they have found that the tone set by the creator of the Wave filters down to other contributors and impacts the way it flows.
- Wave will connect to email eg. If several users are using Wave and they include someone into the wave who is not registered to use that platform… they will still receive updates from the wave and be able to contribute by email.
- It’s not just Google itself but the Google Wave ecosystem is what is likely to have a lasting impact, and Google have been encouraging developers and entrepreneurs to play with the Google Wave API and develop their own platforms.
- So far Waves are being developed and used in arenas such as collaborative research, academic peer reviews, education, Business Process Modelling, integrating existing software… and evidently just planning a trip with some friends.

This is the first Google Wave application I’ve seen so far.. a cool BPM app developed by SAP. (Have a look at the clip down the bottom of the page).

So what impact will Google Wave have in APAC? will the Asian user-base be quick to ride it? I’m personally very looking forward to it… both as a user and as a potential platform for an app I have in mind. One thing’s for sure… it’s going to be big… are you ready?

According to various online news sites… it looks like Yahoo is to shed the investment it made in Alibaba.com. Four years ago Yahoo invested in 1.14% of AliBaba, a deal which gave AliBaba management control over Yahoo China.

It appears that AliBaba’s plans for global expansion followed by Yahoo and Microsofts search deal have complicated this relationship… and is resulting in Yahoo dropping it’s full stake (as largest shareholder) of $150 Million.

I see this as a benefit for both companies. Yahoo probably doesn’t mind having some cashflow for some of it’s plans in the emerging markets such as the recent acquisition of Maktoob in the Middle East, not to mention the gains it’ll have made from this investment. While for AliBaba this gives them a bit more control over their destiny… and boost liquidity.

What does this say about Yahoo’s ambitions in China though? Are they looking to manage Yahoo China themselves? or are they looking to reduce activity and focus on other ripe markets with much less competition?

We recently blogged about the rivalry between Baidu and Google in their quest to take over the massive Chinese online search market.

It appears this rivalry has taken another quite interesting turn. Largely down to the Chinese government putting some pressure on homegrown music services, to clean up their act… and link to licensed MP3 files only. This of course includes Baidu which currently deep links to unlicensed MP3 files.

This is seen by many observers as Baidu’s main vulnerability, and without this depth of MP3 files in it’s network… Baidu may not survive Google’s more legitimate approach. According to The Register:

Our investigation discovered how Baidu “deep links” to unlicensed MP3 files, more than half of which are on a network of closely-related domains, which are unreachable outside Baidu. Domains are rotated, ensuring the MP3s are always available. By effectively running a Pirate Bay beside its main search engine, Baidu has managed to keep Google in a distant second place.

Interestingly, Google launched it’s own free and legal Chinese music service in March 09.

Will this move by the Chinese Ministry of Culture prove to be Baidu’s undoing? Will the last bastion standing in Google’s way fall? If so … it could be as early as 2010…

The Indian PM – Dr. Manmohan Singh is on facebook, which is a small step in the same direction as the giant leap taken by Barack Obama. Obama’s mastery of facebook and the internet is folklore but even Dr. Singh’s unprompted interest is an interesting development.  This marks a small but important step. India politicians are remarkably unapproachable except for during elections.

The internet is yet to take political mainstream in India because of its demographics . The numbers stack up against it.  Only 8% of the population is online, while a much larger section is rural and illiterate. The urban middle class, which is by and large internet friendly also has the lowest turnout on election day. The internet featured as a tool for the first time in the national election is 2004. However, in the 2009 national elections, it made its presence felt in a significant manner.

Candidates were tweeting their electoral leads while the electorate was warming up to twitter making#indiavotes09 the top search trend on twitter.  Leading candidates tried their hand at generating a buzz online – some such candidates might have failed but the internet is here to stay.  Websites recorded candidate educational qualifications, income disclosures as well as their criminal records. Indians generated up to 100,000 hits per minute on the day the results were declared.

It set me thinking about a recent TV ad for a cellular network in India phone in India, where a novice politician uses the uses the phone to conduct flash opinion polls to weigh in their decisions.

Would Dr. Singh be using status updates to tell us what he really thinks?

Last Friday, Google announced the departure of Kai-Fu Lee, President of  Google China. Considering Kai-Fu’s popularity and talent, it is largely seen as bad news for Google in it’s quest to gain market share or claw some market share away from Baidu.

So what next for Google?
Kai-Fu has left the reigns in the hands of  two Google Executives who succeed him in the Engineering and Sales disciplines… and it looks like a re-structure is on the cards, that is likely to include a ramp-up in hiring new talent for their Beijing and Shanghai offices.

What next for Kai-Fu Lee?
Well according to the blogosphere he has left to establish his own venture. This is exciting because many ex-Googlers in Silicon Valley have been at the forefront of many innovative startups over the years. It’ll be interesting to see what Lee has up his sleeve… and how his venture will help feed a burgeoning eco-system of Asia tech startups.
Update: TechCrunch are reporting that Kai-Fu Lee will be starting an incubator  entity called Innovation Works with a plan to hire some of the best Chinese engineers, nurture them and then help them spin off their ideas.

If you have some time, here’s an hour long lecture by Kai-Fu Lee at the University of Carnegie Mellon where he discusses Google’s relative successes in China (Feb 2008)…