Serial Entrepreneur |Blockchain 4 Social Impact |Sharing/Subscription Economy Researcher|
Today, there are more than 900 million Internet users in China -- about three hundred million more than Europe’s total population. It is also more than twice the total U.S. and Canadian populations combined in 2019.
Chinese Internet users make up the world’s largest single Internet market. Every day, millions of them use online platforms to book a car for transportation, scan a code to ride a shared bicycle, order and share food online and offline, and purchase items. In one of my previous articles, I shared what happens in China every 60 seconds.
This article is derived from years of experiencing Chinese Digital Culture and talking to countless numbers of expats inside and outside of China, which motivated me to communicate how China is shaping its digital future to effectively take over the world.
Here are the 10 Lessons I believe everyone should learn about Digital China
But before we get started, I encourage you to always remember when analyzing Digital China is that the Chinese government, as well as Chinese culture, is far different than anywhere else. If you want to truly understand it, you need to set aside your preconceived notions and attitudes long enough to view it from a Chinese perspective. Once you are able to do that, many things that would otherwise seem nonsensical or counterproductive end up making perfect sense.
Lesson 1: The Beginnings of the Chinese Internet & the Making of the Great Firewall
In September 1987, a Beijing laboratory sent what became China’s first email. The message to a German university, read: “Across the Great Wall we can reach every corner of the world.” This ground-breaking communication forever changed the future of China's internet landscape.
Since that first email, although China remains connected to the global Internet, it has also developed its own “domesticated” version, to the extent that it is now possible, even necessary, to talk about the Chinese Internet, as opposed to the Internet in China. “Domesticated” here means “localized” more than “tamed”. “Localized”, however, does not mean that the Chinese Internet is not global or that it has become an intranet. It still has global features, and yet it has assumed distinctly Chinese characteristics.
Whereas the Chinese Internet is accessible to the world at large (at least the part that the Chinese government allows its own people to see), the opposite is not also true. That’s because, since the 1990s, the Chinese government has built a system of Internet control and monitoring, blocking or filtering information from outside China and censoring information inside. A system popularly dubbed as the “Great Firewall” was erected as a virtual boundary, selectively separating Chinese cyberspace from the outside. Using both human power and software technologies, the “Great Firewall” filters keywords and blocks selected foreign websites. Censoring the Chinese Internet has thus evolved into an integral part of the national strategy of weiwen, or “maintaining stability”.
The Chinese Internet operates in a commercially competitive and politically regulated environment. Government regulatory policies and business practices channel user behavior in specific directions, for example, more toward entertainment and less toward political dissension (refer to chart).
From the Chinese perspective, this is a smart move that would be enough to remember the rise of Arab Spring, Ukrainian Revolution, Edward Snowden Leaks , and many others.
Lesson 2: The Partnership between Corporations and Governments, both Nationally and Locally
China has 9 of the world’s 20 biggest (some of which are listed on Nasdaq) tech companies, so how come in less than 25 years Chinese unicorns that shaped domestic dominance in their respective industries went global and compete directly with globally acclaimed companies that shape Chinese netizens and their lifestyles?
One of the smartest moves undertaken in China was to copy global brands and localize them by integrating/applying Chinese characteristics. This effort evolved into a number of smart phone and internet users that increased in a decade and will continue to do so for years to come.
The rise of Baidu, Alibaba, Tencent, and other unicorns sharing the economy, e-commerce, retail, F&B, and many other industries have shaped the ecosystem that has empowered the Chinese digital infrastructure and that intersects with massive mobile, internet consumption and adoption.
Lesson 3: The Rise of Alibaba or Tale of a Crocodile in the Yangtze River
If I could choose three words that represent Chinese giants that are responsible for initially developing the Chinese digital infrastructure as we know it today, they would be e-commerce for Alibaba, messaging/gaming for Tencent, and search for Baidu, all of which expanded well beyond their initial industries.
Although Alibaba was founded five years after Amazon in 1999, its strategy and philosophy significantly differ from the U.S.-based e-commerce company, which is more partnership based than a brand assassin.
Not only did Alibaba develop domestic dominance and triumph over eBay by creating Taobao, but it developed Tmall, providing access for international brands to sell to consumers. In other words, the key difference between Tmall and Taobao is that while Tmall is a B2C platform, Taobao is C2C (think of it like the difference between Amazon and eBay).
The difference is that Amazon and Alibaba's have different business models. Even though they have the same objective – to sell – their logistics are not the same:
Alibaba doesn’t sell products. Instead, it simply offers a web platform that facilitates the exchange of goods. It is the world’s largest e-commerce company, but it actually operates much more like a software company than a retailer. Amazon, by contrast, is in the business of selling directly to consumers. It has to deal with all of the logistically complex and expensive physical aspects that go along with it, namely, building out a vast warehouse network.
It’s this difference that explains why Alibaba has been able to grow so quickly and remain highly profitable, while Amazon has had to sacrifice profits for two decades to get where it is today.
Jack Ma explains his perspective on how both operate. Since its inception Alibaba expanded its operations, acquired startups and developed an ecosystem, making it the dominant powerhouse in e-commerce and other industries.
For a better idea of the bigger picture about this ecosystem, refer to the following image:
Lesson 4: Baidu Is Not Google
Google maintains its stronghold in the global Internet search arena; Baidu has the upper hand in China with 82% of the nation’s online search queries.
In China, Baidu is undisputedly the leader in China’s search world. Ranking well on Google, Bing, Yahoo, and other Western-based search engines does not mean that you will be searchable on Baidu, China’s No. 1 search engine
In one of my earlier articles, I shared more detailed information on how Baidu actually works.
Baidu offers almost everything that Google, Yahoo, and other Internet content sites have, such as Baidu Knows or Baidu Zhidao (similar to Yahoo Answers), Baidu Maps (similar to Google Maps), Baidu Shopping (similar to Google Shopping), Baidu Baike (similar to Wikipedia), and more.
Google and Baidu share some other similarities, as well. Both monetize through paid advertising platforms, both have their own proprietary search algorithms, both have their own Webmaster and keyword analysis tools, and both use geo-targeting to generate more relevant results for users.
For those interested in more differences, here are 20+ more differences between Google and Baidu. Just like other fellow giants, Baidu keeps shaping its ecosystem.
However, Google doesn’t censor anything on the web, except for promoting content that is illegal. But for Baidu, it is different. First, it works closely with the Chinese government and all of its servers are based within China.
Lesson 5: Connecting More than One Billion Users in a Single Platform (WeChat) Tencent
As one of the pioneers that connected the nation by developing the first messaging app that is widely known and still used today as QQ, Tencent has been unmatched. Expanding its operations and activities across multiple industries, it developed one of the most fascinating and admired projects, which is WeChat.
Technically, WeChat is one universal ecosystem designed to keep users within the app. It acts as a platform for third party service providers and users. Consider the image below. For all of those apps, a user in the U.S. would have to download them one by one; WeChat has all of them in its application, making it easy for users. It’s a genius solution!
To get a better idea of the user experience, the following video is a brief, informative guide for non-China residents to learn about WeChat.
WeChat has approximately one billion users today and remains the No. 1 must-have app in China. Tencent is the mother company of WeChat that has shaped its ecosystem across many fronts. Since WeChat is one of the most fascinating apps I have ever experienced, I’m sharing this image to provide a better perspective on its ecosystem:
Lesson 6: Sharing is Redefined
“Adam Smith never heard of it. Nor did Karl Marx and John Maynard Keynes. The great 20th century economists such as Paul Samuelson, Milton Friedman and Ken Arrow never wrote about it. But practically every Millennial knows about the “sharing economy.”
For the past decade, the “sharing economy” has been the name given to a wide variety of online services, ranging from Uber to AirBnB to WeWork and dozens of others.
Even though the concept of sharing services didn’t originate in China, in recent years the Chinese have been increasingly embracing many concepts of the sharing economy. Several innovative startups have been on the forefront of China’s sharing economy with some achieving major success in record time.
Living in China makes me think what can be shared next? More and more affordable smartphones allow users to benefit from the ecosystem, making China a global leader in the sharing economy industry.
Have a new idea for the sharing economy? After reading and understanding the number of smartphone/internet users, come and try the idea in China
Lesson 7: The Rise of The KOL (in China)
Influencer marketing or KOL (Key Opinion Leader) marketing is a relationship-based game that is deeply interconnected in China’s digital infrastructure. Influencers/KOLs depend on their fans, and are valued by the number of followers they have. Now think about an influencer that is able to sell 100 Mini Coopers in five minutes in China. In case of Becky Li that happened! Tao Liang, who is known as Mr. Bags, sold 3.24 Million RMB worth of bags in six minutes. Another example is Joe Escobedo, who tapped into the industry sharing his perspective on how one could pay $150K per post or what one has to know about KOLs in China.
Social media platforms have become great tools to get your voice heard. When it comes to Chinese KOLs, not only is their benefit massive to a growing number smart phone adopters, but they are also rewriting the rules of brand/activity promotion.
Lesson 8: The Smartphone Nation
China has more smartphone users than the U.S., Brazil, and Indonesia combined, according to Business Insider.
The number of smartphones sold worldwide passed the one billion mark in 2014. In 2018, smartphone users reached 49%, compared to just 15% five years ago.
The current, healthy ecosystem in China`s digital, marketplace, app stores, and emerging apps optimized delivery, making it the golden grail for those who are selling to Chinese locally and globally.
A big part of this ecosystem is WeChat`s massive impact and open APIs to sell products, integrate bots, offer shops, and even learn, teach, and do more. Simply, those who know how to sell to Chinese consumers can greatly benefit from the growing number of smartphone users that can easily access shops online, WeChat (official) accounts, Weibo, and anything else the creative mind can imagine. Former WeChat employee Dan Grover`s insightful article gives a better picture and detailed history on how China's WeChat and other apps UI evolved. Click here to learn more.
Lesson 9: The Shift in AI Dominance
America may have created AI, but China is taking the ball and running with it when it comes to one of the world’s most pivotal technology innovations. One of the leading AI pioneers in China, Kai Fu Lee is convinced that China is beating the U.S. in AI.
According to Kai Fu Lee, “Now, China, as the largest marketplace with the largest amount of data, is really using AI to find every way to add value to traditional businesses, to internet, to all kinds of spaces. The Chinese entrepreneurial ecosystem is huge so today the most valuable AI companies in computer vision, speech recognition, drones are all Chinese companies.”
Per the following image, the digits speak for themselves:
AI is not the priority of corporations, as mentioned in the beginning of the article, but AI is one of the priorities of China's five-year plan.
The government’s call to action will accelerate what has already begun to happen. The country’s tech companies, led by the Internet giants Baidu, Alibaba, and Tencent, are hiring scores of AI experts, building new research centers, and investing in data centers that rival anything operated by Amazon, Google, or Microsoft. Money is also pouring into countless startups as Chinese entrepreneurs and investors envision a huge opportunity to harness AI in different industries.
Lesson 10: 11.11 Phenomena or Singles Day
One of the last phenomena that I would like to discuss is China’s online shopping frenzy, which is bigger than Black Friday and Cyber Monday combined. November 11, known as Singles’ Day, is a major holiday that comes with a big surge in online shopping. In 2018, Alibaba set the record with more than $30.8 billion in sales in 24 hours.
In conclusion, China has become highly powerful and influential in the digital landscape of the 21st century (not to mention the economy and politics) across APAC and the globe.
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