Ged Carroll

Category: china | 中國 | 중국 | 中華

Ni hao – this category features any blog posts that relate to the People’s Republic of China, the Chinese communist party, Chinese citizens, consumer behaviour, business, and Chinese business abroad.

It is likely the post will also in other categories too.  For example a post about Tong Ren Tang might end up in the business section as well. Inevitably everything is inherently political in nature. At the moment, I don’t take suggestions for subject areas or comments on content for this category, it just isn’t worth the hassle.

Why have posts on China? I have been involved in projects there and had Chinese clients. China has some interesting things happening in art, advertising, architecture, design and manufacturing. I have managed to experience some great and not so great aspects of the country and its businesses.

Opinions have been managed by the omnipresent party and this has affected consumer behaviour. Lotte was boycotted and harassed out of the country. Toyota and Honda cars occasionally go through damage by consumer action during particularly high tensions with Japan.

I put stuff here to allow readers to make up their own  minds about the PRC. The size of the place makes things complicated and the only constants are change, death, taxes and the party. Things get even more complicated on the global stage.

The unique nature of the Chinese internet and sheltered business sectors means that interesting Galapagos syndrome type things happen.

I have separate sections for Taiwan and Hong Kong, for posts that are specific to them.

  • Innovation stuckness + more 2018 trends

    There are a number of people who have done great trends / predictions for 2018. I thought that I would focus on what I would like to see across three trends: innovation stuckness, lean web design, machine learning ethical considerations, buffer bloat and redefining what a technology start-up is.

    Smartphones are stuck in a period of innovation stuckness. It is becoming increasingly difficult to justify upgrades to your handset. This has had knock-on effects to mobile networks. In markets where subsidised handsets are the norm like the UK we’re seeing that SIM-only contracts are becoming the norm.

    Apple is trying to innovate its way out of this problem with its work on augmented reality interaction. Consumer media consumption will take a good while to catch up.

    Smartphone cameras are as good as consumers need (at the moment). Displays are now good enough that improvements look indistinguishable. They are also large enough for you to watch Amazon Prime or Netflix during a commute. Mobile wallets are merely a back-up in case one leaves your wallet at home.

    Whilst the app names have changed, much of the smartphone usage now is for the same things I used a Nokia or Palm smartphone ten years ago:

    • Alarm clock
    • Web surfing
    • Entertainment
    • Media playback
    • Communications

    I hope that we start to see smartphones going back to the future and looking at different form factors. My iPhone would be much more useful as a productive device if it was available in a similar form factor to the old Nokia communicator. Different form factors of devices for different users. Gamers would benefit from better controls a la the Nokia nGage.

    Interfaces can make better use of haptic feedback, and be designed to take advantage of more hardware-optimised devices.

    Innovation isn’t only the responsibility of app developers and phone makers. What about a modern 4G version of ‘Enhanced Full Rate’ on GSM (GSM-EFR) ‘hi-fi voice calls’. UK operator One2One launched GSM-EFR on 2G networks in the late 1990s as part of their Precept tariffs, but I haven’t seen any other carrier try to do a similar thing since. Why not? I suspect part of the problem is that ‘innovation’ in your average mobile network provider now is testing vendor products in a lab to ensure they work properly on their network.

    The web has developed a digital equivalent of clogged arteries. Part of this is down to buffer bloat and a lack of lean web design approach. Unfortunately the mobile web has not brought a clean slate approach but hacked together adaptations. A bigger issue is the layers of advertising technology trackers, analytics and assorted chunks of Javascript. Ad tech hammers page load time and responsiveness.

    Share of time spent viewing video content in selected countries using ad blockers

    We’ve seen Apple and Mozilla try to redesign their browser technology to slow down or stimmy ad technology. Consumers are adopting ad blockers to try and improve their own web experience.

    There needs to be a collective reset button. I am not sure if we see a resurgence of the paid web or a kinder lighter footprint in advertising technology. Otherwise we have an unending conflict between the media industry and the rest of us.

    The debate around machine learning in 2017 highlighted a Black Mirroresque dystopia awaiting us. The good news is that we tend to overestimate technology’s impact in the short term. In the long term the impact tends to meet our expectations all be in a more banal way.

    Part of the current problem around machine learning is that Silicon Valley seems to only consider technology rather than the consequences of potential use cases. This needs to change, unfortunately the people in charge of technology companies are the least capable people to achieve it. We need a kinder more holistic roadmap. Legislation and regulation will be far too late to the party. We won’t be able to stop technological progress, but we can influence the way its used.

    Lying in bed ill over the Christmas period, I read that crypto currency mining currently required as much energy as Bahrain. By the end of 2018, it will require as much energy as Italy. That is insane.

    Apart from speculation and buying products on the dark web what is the killer app for crypto currencies? Why is worth the energy overhead? Steve Jobs focused on computing power per watt as part of his vision for laptops and moving the Mac range to Intel. Part of the move to the cloud was about making computing more efficient for businesses and providing computing power over the network for consumers on ‘low power’ mobile devices. Yet almost a decade and a half later, the hottest thing in technology is a grossly energy inefficient process.

    We are starting to see regulators in Korea and China step in to regulate the market and energy supply to miners, but western economies need to look at this. And I haven’t even got on to the ICO (intial coin offering) as Ponzi scheme…

    If you substitute the words ‘fax machine’ or ‘call centre’ for app would Uber, Deliveroo etc be considered as technology companies? I suspect that the answer is no.  A company may use a lot of technology – it happens a lot these days. But that doesn’t make Capita, Mastercard or Goldman Sachs a technology company, lets  apply a bit of critical thinking. I wouldn’t mind, but this same mistake was made in the late 1990s during the dot com boom.

    Many companies including Enron were ‘repackaged’ by management, venture capitalists, investment banks and consultancies (cough, cough McKinsey) as asset-light technology driven businesses aka ‘an internet company’. It didn’t work out well last time. It won’t this time either.

    More information
    Enhanced full rate (GSM) – Wikipedia
    Bitcoin Energy Consumption Index | Digiconomist
    Setback for Uber as European court advised to treat it as transport firm | Reuters
    Other trends reports
    Fjord: 2018 Fjord Trends
    iProspect: Future Focus 2018: The New Machine Rules
    Isobar: Augmented Humanity: Isobar Trends Report 2018
    J. Walter Thompson Innovation Group: The Future 100
    Ogilvy & Mather: Key Digital Trends for 2018 – Whatley and Manson are doing webinar presentations this week if you want to catch them
    Campaign Asia did a nice precise of them all
    Past prediction stuff that I’ve done
    2016: crystal ball gazing, how did I do? | renaissance chambara
    2016: just where is it all going? | renaissance chambara
    2015: crystal ball gazing, how did I do? | renaissance chambara
    2015: just where is it all going? | renaissance chambara
    2014: crystal ball gazing, how did I do? | renaissance chambara
    2014: just where is it all going? | renaissance chambara 
    Crystal ball-gazing: 2013 how did I do? | renaissance chambara
    2013: just where is it all going? | renaissance chambara
    Crystal ball-gazing: 2012 how did I do? | renaissance chambara
    2012: just where is digital going? | renaissance chambara
    Things I’d like to see in 2012 | renaissance chambara
    Crystal ball-gazing: 2011 how did I do?
    2010: How did I do? | renaissance chambara
    2010: just where is digital going? | renaissance chambara
    Predictions for 2009 | renaissance chambara

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  • Munich migration + other news

    Munich Windows migration

    And we return to Munich migration back to Windows – it’s going to cost what now?! €100m! • The Register – interesting to see this war over Munich public sector computing still being fought in the background by Microsoft two decades later. I remember working at Edelman when its open source competitive de-positioning work was just taking off. I had to write a two page document explaining what open source was. Munich was seen as one of the key battle grounds back then 

    Design

    Who Is Making Amazon Echo? (1) – Nikkei Technology Online – interesting teardown data and insights into manufacturing

    Legal

    Trump urges Justice Department to ‘act’ on Comey, suggests Huma Abedin should face jail time – The Washington Post – interesting poor information security – saving classified passwords in her Yahoo! account. More related content here.

    Lifehacks

    Boolean Query Writing: Everything You Need to Know | Brandwatch – I’ve been using Boolean for years, but many people haven’t come across it. Brandwatch have done a great guide

    Marketing

    ASA bans Captain Morgan Snapchat lens as it questions efficacy of app’s age verification policy | The Drum – surprising for a company that should know the Portman rules inside out

    Media

    BBC StoryWorks unveils new tool which measures impact of branded content | Marketing Interactive – “In addition, the product showed that the creative execution succeeded in driving a clear uplift in subconscious association between Huawei and key brand attributes such as being innovative, inspiring, environmentally responsible, and high quality. Following exposure, audiences also had a high desire to engage with the Huawei brand; brand awareness rose by 216%, brand association went up by 23% and purchase intent increased by 19%”

    Online

    How the Chinese vs Western battle of internet giants will unfold | Analysis | Campaign Asia – over the next 12 months the Western big three will find themselves head to head with the Chinese internet giants, across ecommerce, brand partnerships and most notably AI. What’s not certain is who will come out on top and whether BAT can adapt to succeed in a different environment- at least in non-Chinese Asian markets

    Security

    Massive Intel Vulnerabilities Just Landed — And Every PC User On The Planet May Need To Update – I can see the conspiracy theories starting about how this is a ‘feature’ requested by the deep state / military intelligence industrial complex – and they might be true

    Web of no web

    Maps | Mapbox – for building navigation services including turn by turn directions

  • Marzipan & other news

    Marzipan

    Daring Fireball: Marzipan – Gruber posits that Marzipan is a unified development environment that allows programmers to create apps optimised for iOS and macOS. Marzipan means that the only have to write the app only one time, rather than having to rewrite completely for each platform. It makes more sense than the original Guzman article on a future merging of iOS and macOS

    Business

    Behind the Fall and Rise of China’s Xiaomi | WIRED – interesting analysis of how Xiaomi made mixed retail / e-tail strategy and smart home products pull their business

    Apple Took the Lion Share of Smartphone Industry Profits in Q3 2017 at Close to 60% – Patently Apple – there are many ways to cut this data. Apple is still doing well, Samsung has made big strides to get back into the game over the last year and the largest Chinese manufacturers are still living on thin margins of $15 per handset. Huawei’s numbers are likely to be mixed. The Honor handsets will have a much lower margins and so pull down Huawei’s aggregate value.

    Consumer behaviour

    The politics of social status: economic and cultural roots of the populist right – Gidron – 2017 – The British Journal of Sociology – Wiley Online Library – the answers may lie on the ‘supply side’ of political competition, where recent movements in party platforms have made the populist right more attractive to many voters. A convergence over the past three decades in the economic platforms of the centre-left and centre-right toward the right have reduced the appeal of the centre-left to the working class. In this context, many voters now complain that no one speaks for them. At the same time, parties on the populist right have moved their economic platforms to the left, making them more plausible providers of jobs and social protection. Moreover, in order to mount distinctive appeals at a time when the differences between parties on economic issues has narrowed, many parties have put more emphasis on identity or values issues, which often draw middle-class voters to the left but working-class voters to the right

    Finance

    China puts US$15,000 annual personal cap on overseas bank card withdrawals | South China Morning Post – further clamping down on capital flight, overseas property investment etc

    China moves to impose order on mobile payments boom | FT – $76/day usage limit is going to kill their usage abroad since they have mostly penetrated duty free and high-end department stores (paywall)

    Marketing

    The Jeanius Style of Steve Jobs – Levi Strauss – wait a minute; Levi’s used to give billionaire Steve Jobs free jeans? Why?

    Daring Fireball: Italian Company Calls Itself ‘Steve Jobs’ – expect overpriced mock turtlenecks in any colour you want so long as it’s black

    Legal

    Trump Says U.S. Post Office Should Charge Amazon `Much More’ | Ad Age – actually a fair point, the problem is that Amazon has got too large and too powerful (paywall)

    China takes popular news app Toutiao offline for 24 hours over pornographic content | South China Morning Post – it was only a matter of when this would happen

    The Most Expensive Mile of Subway Track on Earth – The New York Times – public officials have stood by as a small group of politically connected labor unions, construction companies and consulting firms have amassed large profits. – When does pork barrel politics start to look like organised crime?

    Huawei executive detained on suspicion of taking bribes | HKEJ Insights – it is worthwhile bearing in mind that Huawei is a big ass company, so the odds of at least some employees being bent is a sure thing, just on the scale of numbers. It isn’t necessarily proof that the company is rotten. Huawei has its cultural foibles but corruption isn’t necessarily one of them

    Security

    Tencent denies storing WeChat records after Chinese billionaire reportedly questions monitoring | South China Morning Post – how does it comply with Chinese law for monitoring etc? Interesting privacy now a minor issue at least in China. I had heard of people moving to Ding as they didn’t trust WeChat

    China’s Huawei flags slower smartphone and overall revenue growth | Reuters – I thought that 5G infrastructure and continued enterprise sales would kick in for Huawei, they are still desperately trying to increase their slim margins on smartphone sales

    The strange story of “Extended Random” – A Few Thoughts on Cryptographic Engineering – you can deploy a cryptographic backdoor, but it’s awfully hard to control where it will end up

    Technology

    Researchers Made Google’s Image Recognition AI Mistake a Rifle For a Helicopter | WIRED – interesting implications for black SEO

  • China marketing agency landscape

    China marketing agency changes

    Chinese poster

    Over the past two decades the China marketing agency landscape had got used to go-go growth, just by showing up. The Xi-era of China has seen the end of the go-go years in economic growth in China.  This economic maturation was one of the factors picked up on Arun Sudhaman’s analysis of Chinese marketing agency landscape changes, with a particular focus on PR services.

    Arun also noted dirvergence in fortune of domestic and multi-national firms.

    Here are some of my thoughts on China marketing agency landscape changes.

    Digital disruption affecting China marketing agency landscape

    Multi-national PR agencies often led with corporate communications and public affairs expertise. This meant that their businesses were led by leaders who paid lip-service to digital at best. My experience trying to sell digital internally was one of the most painful processes that I have ever done. It was one of almost insurmountable cultural differences: not Irish-Chinese, but analogue-digital.

    To be fair many corporate and public affairs specialists in London are still trying to get to grip with what digital means. They know it’s important, but they don’t have a clue how it all comes together.

    That mean’t that they didn’t really get social media beyond being a publishing platform. Chinese KOL (key opinion leader) work whilst effective, is paid media. PR agencies generally don’t have the depth of tools and analytics to provide comprehensive planning and execution for KOL projects. It is hard to get management teams to invest adequately in tools and talent.

    Change in legal and regulatory environment

    Premier Xi has changed the landscape for public affairs practitioners. The government is less flexible, it feels that it no longer needs to be. China is on the ascendence in the face of western existential crises and America in rapid retreat from the world stage. Hence, new laws that discriminate against foreign technology companies as part of its wider approach to cyber sovereignty.  Public affairs still has a place in terms of research to provide understanding, but their foreign multinationals won’t like what the results will likely tell them.

    Digital media landscape

    Digital has hit the industry hard. It moved at an accelerated pace compared to other industries. Unlike the west were television isn’t in decline but has stopped growing, Chinese TV isn’t undergoing the golden age that we are seeing in the west. The government has made it less entertaining – which has only helped the acceleration of digital marketing channels in China. Government control of television content has meant less reality shows or remakes of Korean drama stories and more content extolling Chinese Communist Party values. Worthy content, but not particularly engaging.

    May online marketing

    Disintermediation and displacement

    In China, the major digital platform companies try and go direct to clients for social media advertising cutting out the media buying agencies. This gives media and digital agencies extra incentive to go and grab the paid engagements of key opinion leaders. These are often performance-related deals with directly attributable online sales or online-to-offline voucher redemption. Digital and media agencies are better equipped to handle influencer relations than their public relations peers. It is less about influence and more about performance.

    Changes in the client boardroom

    Multinational PR agencies also have problems with their established client base of international brands. Under Premier Xi we have seen a more confident China. This confidence is manifested in Chinese board rooms. The way strategy and goal-setting works in Chinese companies illuminates this difference:

    • Big board meeting where outrageous unrealistic targets are set by the Chairman
    • Planning department turns the ridiculous goals into plans
    • Management goes to arrange funding

    The business then goes to staff up and do whatever is needed. They will build massive conglomerates – what is known as building the eco-system – something that is frowned up in the West as being bad for shareholder value

    Chinese entrepreneurs care about market share more than profitability. And sometimes they fail spectacularly like LeEco or Evergrande, collapsing under the weight of their own debt.

    A lot of it reads like bubble-era corporate Japan. While it seems insane to outsiders, corporate China is much more closely knitted into the government than the keiretsus ever were. Corporate China may go pop in the future, but it won’t happen at the moment.

    Multinational clients struggling

    By comparison, multinationals are worried about activist shareholders and meeting their quarterly numbers can’t be as aggressive in comparison to their Chinese peers. This type of aggressive pursuit of growth would also be an anathema to the likes of WPP, Omnicom, Publicis and IPG who suffer from a similar risk of activist shareholder shenanigans as their multinational clients.

    Which is why Chinese brands have been blowing up across sectors. 91 percent of smartphones now sold in China are from domestic brands. Apple has somewhere around 7 per cent share. Foreign FMCG brands are being slaughtered, even Amazon has only a few percentage points of market share.

    Quite simply, multinational PR firms have generally bet on the wrong horse. China is the one market were American scale and capital actually diminishes in impact over time as the Chinese domestic market picks up. Multinationals in strategic business areas were always going to lose over time.

    Knowledge and business transfer

    Where Chinese brands have wanted to expand globally, they have taken on foreign PR agencies. Part of this process was knowledge transfer. If one looked at an organisation like Huawei, you can see how they have learned and built internal capability with Chinese characteristics in their corporate communications function over time. It would be a similar process in other companies.

    Even foreign luxury brands have struggled to be as agile as their Chinese customers. Between the crackdown on corruption and the rapid development of experienced luxury consumption – the only constant in the luxury market has been change. It is only a matter of time before China has its own answer to Michael Kors or Christian Dior. Western luxury brand problems will affect the agencies that work with them with massive fluctuation in marketing budgets.

    A second transfer of capability from foreign to domestic is the move of multinational agency talent into local agencies. You combine that Chinese entrepreneurship and foreign agencies look vulnerable. Clauses that have kept western agency staff in check from plundering clients and talent don’t hold up as well in China.

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  • Facebook API + more news

    Facebook Is Shutting Down Its API That Marketers Lean on for Research – Adweek – big for proprietary agency tools, social media tools and ad platforms that rely the Facebook API – it shows how vulnerable the ad tech sector is

    Spicing up Hong Kong’s Café scene | Marketing Interactive – great write-up of Café de Coral

    China’s central bank believes bitcoin will die | Quartz – I am more on the bearish side along with the Bank of China. A key function of bitcoin for China was aiding capital flight out of the country

    Unilever moves global comms planning to Mindshare from PHD | Media | Campaign Asia – huge win for Mindshare and a move away at the global level between planning guidance and media buying. It would be analogous to investment managers to go back to taking advice from sell-side analysts. I guess part of the problem is trying to get global guidance to be implemented at a country level

    Flotogram v1.1 Preview on Vimeo – interesting app that blurs the boundaries between AR and photography

    Google’s AI Built its own AI That Outperforms Any Made by Humans – one thing humans jump to is the implications of a more general purpose rather than narrow focus machine learning tool

    China’s Tariff Cuts Won’t Hurt Daigou Business For Now | Jing Daily  – China plans to reduce tariffs on 187 consumer goods, including cosmetics, apparel, health supplements, food, and pharmaceuticals. The new policy will go into effect on December 1. The average tax rate will drop to 7.7 percent from 17.3 percent.

    China’s Toutiao Tried to Buy Reddit — The Information – One reason was general skittishness among Reddit’s investors about selling to a Chinese internet company whose user and revenue numbers were tough to assess – and there is the burn

    Chinese Smartphone Maker Xiaomi Eyes 2018 Stock Market Listing — The Information – interesting move given Xiaomi’s challenges with other Chinese smartphone companies

    Futuristic Warfare Arena Ghost in the Shell: Arise Stealth Hounds – VR ZONE SHINJUKU – I’d love to have a go at this

    Are we witnessing the end of the jumbo jet? | Quartz – interesting mix of game theory and economics involved

    Apple: Chinese Buying Huawei et. al. but Sticking with iPhone, Says Morgan Stanley – Barron’s – The Jigaung data also highlights that in the 4 weeks ending October 22nd, more “switchers” left their Chinese branded smartphone for an iPhone than iPhone users left for a Chinese branded smartphone, across all local vendors. In fact, Apple’s net switching rate, or the net amount of switchers gained/lost as a percentage of all brand switchers increased to 7.6% in the latest 4 week period, up from 6.7% in the prior 4 week period ending October 8th. Comparatively, Vivo was the only Chinese smartphone vendor to gain “net switchers”, albeit at a significantly lower rate. We expect this trend to only accelerate as future data sets will include the period after the iPhone X first began shipping.

    Amazon (AMZN) is so good at keeping prices low, it’s changed how economists think about inflation — Quartz