Digital Media in China

1
Digital Media in China
BS5011 – Global Exposure Week
Dragon Consulting Partners
龍高手

BS5012 Global Exposure Week - 07 May 2014 ©2014 Dragon Consulting Partners
Executive Summary
Discussion of B2C cases of companies using digital media
Discourse: Vancl and selfies
• Vancl leverages on the viral effect of word-of-mouth recommendations
through digital media with its advertising portal, allowaing consumers to
upload “selfies” wearing Vancl clothing and earning a 10% commission on
sales.
Access to information: Nike, Adidas, price premium and differentiation
• Nike and Adidas, are perceived to be more expensive than their competition.
However, by openly through sharing more information on customer ratings,
these international have differentiated themselves against their peers and
reinforced their branding as quality manufacturers.
Network effects: Meters/bonwe, star power and omni-channel
• Meters/bonwe weaved a strategy of engaging consumers across an omni-
channel experience through both online and offline offerings. Engaged
consumers are also loyal customers who reinforce the network effect.
Discussion of B2B & C2C cases of companies using digital media
TaoBao: societal discourse and network effects
• TaoBao, famously dealt with the threat of new entrants (eBay China) through
amassing grassroots support and digital community marketing.
Alibaba: massively increasing access to information
• Alibaba is seen to be empowering businesses across China, particularly
because of its unique third party business model whereby new vendors offer
enhanced new services on top of Alibaba’s own ecosystem.
Conclusion
• Success in China will not come exclusively from mastering digital media. The
message is more important than the medium, and therefore businesses
looking for success must first develop their message to their stakeholders
and cultivate trust and a strong reputation.
2
In order to compete effectively in China, companies need to consider digital as a core
component of their wider business strategy. But success will not come from digital mastery
alone. It will be in the crafting of a wider strategy that incorporates digital as a key pillar.
China is laying the foundations for a knowledge based economy
Implication of digital
• The global economy is emerging in an “Information age” where it is
knowledge based activities that are the primary driver of economic progress.
• China, with the world’s biggest Internet user base, is well placed to
accelerate economic growth as the pace of digitisation also increases.
Three key factors that explain the rise of Digital’s popularity
Societal discourse
• Digital media has created a forum for Chinese citizens to participate in the
national dialogue. Society is now much more comfortable with the idea of
sharing and posting information online.
Massive increase in access to information
• The economics of information has shifted and has created the opportunity for
very rich communications to a very broad audience.
There is now a critical mass of users online that creates a multiplier effect
• As a result of these two, Chinese consumers have adopted digital platforms
very quickly and there is now a critical mass of users online.
Advantages and disadvantages of digital media
Easy to reach a broad audience and ROI is high
• The incremental cost of reaching one additional user through SNS is virtually
zero.
But astroturfing PR crisis can get out of hand very quickly
• However, that same virality can work against the same companies and cause
brand damage, especially when there are PR crisis that break out on
microblogs.
We have used these three key factors as an overarching framework
to analyse specific case studies of B2C, B2B and C2C interactions

Key terms used
Case studies
• Company visit to Touch Media, 10 April 2014.
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Throughout this report we refer to the acronyms, key technologies and corporate case studies
below.
Acronyms
• BBS – Bulletin Board Service
• GNI – Gross National Income, the total domestic and foreign output claimed
by residents.
• KOL – Key Opinion Leader
• P2P – Peer to Peer
• ROI – Return on Investment
• SNS – Social networking service. These include services like Facebook and
Twitter.
• UGC – User Generated Content
• USP – Unique Selling Proposition
Terminology
• Astroturfing – posting fake online posts with the hope of orchestrating what
appears to be positive PR and popular support
• Selfie – A photo taken by the subject, of the subject. Usually with a
smartphone and usually uploaded to an SNS.
• Weibo – the Chinese term for “micro-blog”. Typically the industry refers to
Sina Weibo here, which is largely considered to be the Chinese equivalent of
Twitter.
• Wikis – user edited online knowledge stores

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Deloitte PowerPoint timesaver
The impact of Digital
media in the Chinese
business context

“Digital media” defined
We define digital media as being “machine readable”
We are living in an Information Age
• As economies progress through the different phases of development, the
main driver of economic progress shifts from resource extraction through to
labour productivity through to capital accumulation.
• At the moment, the global economy is in an “Information age” where it is
knowledge based activities that are the primary driver of economic progress.
• In the past, economic success was won by economies with access to major
reserves of natural resources, or large workforces, or decades of capital
accumulation. However, this isn’t the case anymore in the Information Age.
Now it is economies who harness knowledge flows that will lead progress.
• PCs and smartphones put the ability to access, modify, share and store
digital media in the hands of billions of people. Countries that have high
penetration rates of technology will incubate a new generation of tech-savvy
leaders.
China is well placed to harness this shift to the Information Age
• Not only does China have the world’s biggest Internet user base, (513m
users versus 245m users in the US), but it also has the most active
environment for social media. This includes blogs, microblogs, social-
networking sites and other online communities.
• Referring to Figure 1 – we can see that while TV penetration has stayed at
roughly 1.5m households (roughly 96% - 99% of total) during the period from
2005 to 2010, PC penetration has doubled from 0.5m households to 0.9m
households (doubling from 30% to 60% of the total).
• In recent years, China’s growth engine has relied mostly on the employment
growth and rapid capital accumulation. This wave of digitisation will lead to
an acceleration of China’s fast growth as the infrastructure of a knowledge
based economy is being built.
5
Digital
media
Outdoors
Digital
TV /
Radio
The Web
Social
Mobile
We have defined “digital media” as: machine readable forms of mass communication. In
China, there is a trend of increasing PC adoption and we see this mega-trend as laying the
infrastructure for future growth as China transitions to a knowledge based economy.
Reference: Chiu, C et al (2012), Miles, D et al (2005) Chapter 4.Source: Yong, H., et al (2012). Please see Appendix 2 for details.
1,463,460 1,524,886
462,226
921,381
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2005 2006 2007 2008 2009 2010
Figure 1 - Households owning equipment, 2005-2010
TV sets Radio receivers PCs

“Digital media” defined
Digital technology has changed the way people communicate
Richness vs Reach
• In the past, businesses used to focus on one, mutually exclusive strategy:
– A “rich” strategy: developing content that targets a niche audience; or
– A “reach” strategy: appealing to the widest audience and capturing a large
addressable market, thereby sacrificing richness for broad appeal.
• Today we don’t need to choose between the two. Technology has disrupted
this trade-off and we can now achieve highly rich communication (tailored,
targeted messages) that can reach the broadest audience (online users).
P2P and cheap
• Furthermore, the design of the internet and the rise of SNS has meant that
users could communicate peer to peer in a very cheap fashion, without the
need for expensive broadcast infrastructure.
• In the past, getting a message out required printing presses or TV stations,
today anyone with a PC or a mobile can reach out to small and large
audiences, cheaply and quickly.
In recent years, UGC has rapidly gained popularity in China
• User-generated content, also known as ‘citizen journalism’ or ‘social media’,
has recently mushroomed in China. This includes all forms of user-generated
content from social networks, blogs, microblogs, forums or BBSes, video
sharing and Wikis. Figure 2 shows an analysis of some of the most popular
UGC sites in China. China’s online users spend more than 40% of their time
online on social media, and we expect the visitors per day to continue to
trend up.
• One unique feature of digital media in China is the role of the KOL. Now that
it is cheap and easy to reach a wide audience, these KOL’s are individuals
who have a large online following in SNS and are known to exert significant
social influence.
6
Rich
vs
Reach
• Digital technology
disrupts the
economics of
information
P2P
• An equitable
system – all users
are equally
exposed to
information flows
Cheap
• Easy to reach a
massive user
base and build
critical mass
Digital media has disrupted traditional media and changed the way people communicate. It is
now possible to reach specific audiences with very precise, targeted and tailored messages and
in recent years, UGC has rapidly gained popularity in China.
Source: Yong, H., et al (2012) Reference: Evans, P. (2000), Ogilvy PR, et al (2012), Touch Media case.
- 10 20 30 40 50 60 70 80 90
Sina.com.cn
Baidu Tieba
QQ.com
Qzone.qq.com
blog.sohu.com
blog.163.com
Tianya.cn
Renren.com
Baidu.com
Sohu.com
Youku.com
blog.sina.com
163.com
tudou.com
Figure 2 - Visitors per day of popular UGC sites in China

Major overarching theme
Based on our observations of Weibo, our own research and case
studies we generalised a model to understand adoption of digital
media in China
Weibo represents a large critical mass of Chinese speaking users
• Although Weibo’s monthly active users is estimated at 113m (about half that
of Twitter’s 213m), KOL on Weibo tend to have a larger following than their
Western peers.
• Weibo also ranks the “influence” of KOL’s, further driving their popularity.,
Kai Fu Lee in one instance, blogged about a frozen desert that he tried,
which resulted in more than 100,000 re-shares and a surge in sales for the
dessert maker.
In trying to explain this phenomenon, we developing the following model
• We generalised three factors to explain the rise of digital media following our:
– research in to how Chinese companies manage PR crises and Ogilvy
PR’s suggestions into how these risks can be addressed
– company visit to Touchmedia where we discussed the place that digital
media has in Chinese society.
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Kai Fu Lee
Former Google China
president. 51m followers
Xie Na
Chinese TV host, singer and
actress. 49m followers
Eric Schmidt
Executive Chairman of
Google and Former CEO.
808k followers
Lady Gaga
International Musician. 41m
followers.
There are many more Chinese speakers than English speakers (1.1bn vs 760m English-
speakers) and Weibo celebrities tend to have more followers than their Western peers. As a
result, they have more clout and influence, resulting in the emergence of KOLs.
increased
dialogue
Access to
Information
Network
multiplier
effect
Profile photos: Kai Fu Lee, Xie Na, @ericschmidt, @ladygaga Reference: Cheung (2013). Guco, C. (2013), Koh, Y., et. al. (2014), Touch Media case, Ogilvy PR,
et al (2012).

Major overarching theme
• Chinese consumers are now able to
define and interact with the national
conversation
Societal discourse
• Digital media has changed the
economics of information by disrupting
the Richness vs Reach trade off
Massive increase in access to
information
• As a result of these two factors, SNS
now have a huge critical mass of users
Resultant network multiplier
effect
8
Three factors
Moving the societal discourse online has changed people’s perceptions
• In the past, all forms of mass media were exclusively controlled by China’s
Communist Party. This stifling control and censorship limited the direction of
the social discourse and national dialogue.
• Digital media has created a forum for conversation amongst Chinese citizens
and has created an outlet for creative expression that never existed in the
past through sharing and posting information online.
• Netizens now participate in the multi-way national dialogue, and China’s
society and political administration have begun to embrace this new normal.
Massive increase in access to information
• The shift in the economics of information has made it incredibly cheap and
easy for a broad segment of the population to access information. Whereas
in the past, there was a tradeoff in richness vs reach, digital media has
created a new opportunity for very rich communications to a very broad
audience.
Resultant network multiplier effect
• These two factors above have driven Chinese consumers en masse to digital
platforms where there is now a critical mass of users.
• Network economics tells us that the value of a network is proportional to the
square of the number of connected users of the system (n²).
• Therefore:
– as society sees it as more “acceptable” to be on digital media, and
– as there has been an explosion in the massive increase in acccess to
information,
– there has therefore been a resultant acceleration of user base growth to
the level that there is now a critical mass of Chinese digital media users..
We have identified three key factors that resulted in the massive rise of Digital’s popularity.
They are: the societal discourse, the massive increase in access to information and the resultant
network multiplier effect.
Reference: Ogilvy PR, et al (2012), Touch Media case, Varian, H. R., et. al. (1999)

Pros and Cons of digital media
9
Digital media has the potential to reach a very broad audience, very quickly. However,
because of this viral feature, there is also a corporate reputational risk if digital media is
misused by astroturfing or through a badly managed PR crisis.
Advantages
• Easy to reach a
broad audience
• The ROI on
social media
campaigns can
be very high
Disadvantages
• Astroturfing
• PR crisis
Reference: Ogilvy PR, et al (2012), Touch Media case.
Advantages
Easy to reach a broad audience
• Unlike traditional media, the incremental cost of reaching one additional
customer through SNS is virtually zero.
• Once a critical mass has been achieved, users begin to recruit other users to
the cause and marketing becomes more word-of-mouth. And given the level
of distrust that the Chinese consumer has for brands, this actually works out
as a double advantage for companies reaching out through digital media.
The ROI on a social media campaign can be very high
• In Touch Media’s case there is the example of Nancy Pon’s videos that were
very cheap to produce. These spread virally over SNS and drove the societal
discourse over several weeks – a feat not easily achieved by traditional
media.
Disadvantages
Astoturfing can actually damage brands
• Consumer’s don’t trust brands as much as they do in Western economies
and peer recommendations have a far greater influence on buying patterns in
China than in the US. On average, 60% of Chinese consumers say they rely
on comments from colleagues on SNS before making buying decisions,
compared with only 38% in the US.
• However, this trend may be changing due to the increased level of
astroturfing and number of “zombie” accounts and fake PR spam on Weibo.
PR crisis can get out of hand very quickly, especially on microblogs
• Ogilvy PR give several examples where national and international brands
damaged their online reputations through mismanagement such as the Jiugui
liquor scandal with plasticizers, compared with how McDonalds reacted very
quickly to customer satisfaction on food safety.

B2C
Opportunity = “Urgent meeting”
Increased engagement  leads to increased loyalty and margins
• China currently ranks as the lowest online spend per capita amongst other
highly developed nations (see Figure 3).
• Online spend accounts for roughly 1.5% of GNI. If we assume that as the
Chinese market matures, that this rises to say 3% (an average of what the
UK and US currently spend online, as a % of GNI), then we can expect
online spend per capita to at least double to £102 per capita.
• Therefore there is a potential for the online market to double in size if China
catches up to the same level of sophistication and maturity as that in the
West.
Threat of cannibalisation
• On the other hand, this trend of increased online sales will take market share
away from existing channels and retail outlets.
• The “showrooming” trend is particularly bad in China, where 26% of
consumers surveyed admitted to showrooming, as compared to 7% in the
US. This is the practice of looking at goods in an online retail outlet, but then
shopping online for the cheapest price.
• This trend is also illustrated in the steady decline of LFL sales in Chinese
retail channels. As more consumers go online, retail stores face difficulties
with increased operating expenses but declining revenues.
• This double-edged nature of competing in the B2C segment can be summed
up in the following translation.
“Jīhuì”
• The Chinese translation for “opportunity” literally translates as “urgent
meeting”.
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The rising prominence of digital media is a double-edged knife for the B2C segment. On the
one hand it represents a significant opportunity for increased loyalty and margins but at the
same time it represents a threat of cannibalisation.
50
330
400
420
450
500
750
880
- 100 200 300 400 500 600 700 800 900 1,000
China
Japan
Germany
Canada
France
Australia
US
UK
Figure 3 - Online spend per capita, 2013 (£s)
Source: OC&C (2014), OC&C (2012A). Please see Appendix 3 for details. Reference: OC&C (2014), OC&C (2012A), IBM (2013) Touch Media case.
R² = 0.8787
(15.0)%
(10.0)%
(5.0)%
0.0%
5.0%
10.0%
15.0%
20.0%
2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4
Figure 4 - LFL sales in offline retail channels

Case examples of companies that leveraged digital media, and how
they mapped to our three factors identified:
B2C
We analysed B2C success stories with our model
Trust is critical and is the key driver of consumer brand perception
• As consumers tend to trust their friends and KOLs more than they do brands,
we have seen how the increased acceptance of using digital media to
communicate (and thus, how societal discourse has moved to SNS) has
increased the importance of Trust in a retail setting.
• Vancl is a clear favourite of consumers in the fashion space, with annual
sales ~5bn RMB. They have curated an online following that leverages on
Chinese consumer’s need to trust their peers and capitalises on the social
trend of sharing selfies.
Differentiation
• With unfettered and cheap access to information, businesses have found it
more difficult to stand out and communicate their USP. Market research has
show that this type of investment still resonates with Chinese consumers and
can “drive positive brand perception”.
• The need to differentiate has thus been driven by this massive increase in
access to information. Nike and Adidas are an excellent example of this as
they have differentiated themselves versus their competition by building a
superior brand reputation, and yet still have the perception of higher prices.
Sustaining a critical mass of users across an omni channel experience
• Companies should aim to allow consumers to access their product when
they want, how they want and where they want. Similarly then, the value of a
brand’s online presence is driven by how content is shared virally and how
broadly its user base is engaged across different customer experiences.
• Meters/bonwe weaved a strategy of using celebs, stores and its online
platform to create an omni channel experience. This resulted in a very high
brand appeal score amongst surveyed consumers, and highly appealing
brands tend to be more widely shared thereby reinforcing the network effect.
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Some successful B2C use cases of digital media have: (1) Built trust as a key part of their
value proposition, (2) Differentiated themselves through providing easy access to information,
and (3) Crafted unique omni channel experiences.
Reference: OC&C (2012B), Touch Media case.
(10)
13
(15) (10) (5) - 5 10 15
Low prices
Fashionability
Wide choice
Service
Value for Money
Store look & feel
Suited for me
Trust
Quality
Figure 5 - Nike and Adidas vs other brands
Source: OC&C (2012B)
Societal
discourse
•Vancl engages consumers through digital media
with an advertising portal, allowing consumers to
upload “selfies” wearing Vancl clothing and
earning a 10% commission on sales.
Increase of
access to
information
•Nike and Adidas, even though they are
perceived to be more expensive (see Figure 5),
through sharing more information on customer
ratings have differentiated themselves against
their peers.
Network effects
•Meters/bonwe is famous for engaging Chinese
model Lin Chi-Ling in both online and offline
consumer engagement.

How our overarching themes align with selected B2B and C2C
success stories
B2B & C2C
Digital media is an enabling technology
Grass roots advertising and engaging the C2C user community
• TaoBao is roughly the Chinese equivalent of the eBay online C2C
marketplace. When TaoBao was first dealing with the threat of new entrants
with eBay entering the China marketplace, eBay had originally signed
exclusive contracts with most of the major Chinese online media outlets.
• In response, TaoBao used a grass roots approach and posted messages on
BBSs, reaching out to TaoBao’s customers (in a B2B way, as the vendors
selling products on the TaoBao platform were TaoBao’s business customers)
to engage them and encourage them to use TaoBao instead of eBay. This
worked so well that even after eBay’s exclusive contracts expired, TaoBao
still uses this method of engaging with TaoBao’s customers.
• From a C2C angle, TaoBao enabled the development of a peer to peer
community through integrating instant messaging into their ecommerce
platform.
Increase in access to information and Network effects – Alibaba’s Third-
party business model and TaoBao’s no-fee model
• Alibaba is roughly the Chinese equivalent of the Amazon Reseller
Marketplace online marketplace, for businesses to sell B2B.
• Alibaba places great focus on the success of its ecosystem. That ecosystem
drives the livelihood of sellers and third-party service providers, aligning the
interests of participants with Alibaba’s own interests. As more users adopt
the Alibaba ecosystem, the more valuable it becomes for all users, and this
is again enhanced by new services offered by third party participants.
• The two systems – Alibaba (B2B) and TaoBao (C2C) are seen as platforms
that empower entrepreneurial businesses across China. In the same way the
TaiBao no-fee model creates a strong incentive for consumers to join the
platform and stay on the platform – further perpetuating the critical mass of
users.
12
Source: Shih, G. , et. al. (2014)
Alibaba, powers ~ 80% of all online commerce conducted in China. The three overarching
themes we identified can be seen in our unique case studies of TaoBao (C2C) and Alibaba
(B2B).
Societal
discourse
• TaoBao with advertised its services
on BBSes in a grassroots fashion,
gaining grassroots support.
• TaoBao integrated an instant
messaging service into their platform,
creating a sense of peer to peer
community amongst the C2C sellers.
Increase of
access to
information
• Alibaba and TaoBao are seen as
being a platform that empowered
businesses across China, even the
most remote entrepreneurs in rural
areas.
Network
effects
• Alibaba’s portal drives traffic growth
through its third party platform
business model.
• TaoBao was very successful with its
no-fee model that massively
increased its user base.
Source: Alibaba (2014)

The message > medium
Success in China
Distinctive
capabilities
Unique selling
proposition
Communication
Strategy
Branding
Trust and
Reputation
Outsized returns
13
Developing a strategy from capabilities, brands and culture
These are inimitable and unique characteristics
• In order to differentiate and successfully compete, businesses must develop
relationships with internal and external stakeholders that give businesses the
power to charge higher prices or get access to cheaper unit costs.
• In the context of China – this is particularly important because in such a
broad and diverse market, there is a great deal of competitive pressure from
the large number of businesses competing in the market and the continued
threat of new entrants as capital flows into profitable markets.
Defining the USP and communicating this to the market through brands
• Only once that USP has been developed, a communication strategy can be
crafted around it. Since the Chinese consumer is very savvy, businesses
must be mindful of the importance of crafting an omni-channel strategy.
• In this way, digital media only plays a smaller part in the wider picture.
Brands represent a shorthand by which businesses communicate their USP
to consumers. The strength of these brands are reinforced through the
company’s actions and interactions with stakeholders.
Cultivating trust and reputation through maintaining a corporate culture
• The main tool that managers have for orchestrating organisational behaviour
is through managing corporate culture. A system of espoused values, ethics
and shared meanings can help an organisation consistently manage its
interactions with outside stakeholders.
• This is emphasised in this definition of “trustworthiness”. When an
organisation reliably lives up to its espoused values, it can cultivate the trust
of its stakeholders.
• Success comes from an integrated strategy that is integrated with a
supporting corporate culture and reinforced through consistency in
stakeholder relations.
Success in China will not come exclusively from mastering digital media. The message is
more important than the medium, and therefore businesses looking for success must first
develop their message to their stakeholders and cultivate trust and a strong reputation.
Reference: Kay, J. (1993). Porter (1980), Schein, E. H. (2006). Ogilvy PR, et al (2012).
𝑻𝒓𝒖𝒔𝒕𝒘𝒐𝒓𝒕𝒊𝒏𝒆𝒔𝒔 =
𝑪𝒓𝒆𝒅𝒊𝒃𝒊𝒍𝒊𝒕𝒚 + 𝑹𝒆𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒚 + 𝑰𝒏𝒕𝒊𝒎𝒂𝒄𝒚
𝑺𝒆𝒍𝒇 − 𝒐𝒓𝒊𝒆𝒏𝒕𝒂𝒕𝒊𝒐𝒏
Source: Maister, D. H. et al (2000).

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Deloitte PowerPoint timesaver
Appendices

Appendix 1 – Bibliography
Bibliography
• Alibaba (2014). SEC F-1 Filing:
http://www.sec.gov/Archives/edgar/data/1577552/000119312514184994/d70
9111df1.htm
• Cheung, H. (2013). Who are China’s weibo super stars? BBC News:
http://www.bbc.co.uk/news/world-asia-china-23925364
• Chiu, C., Ip, C., & Silverman, A. (2012). Understanding social media in
China. McKinsey Quarterly, 2(2012), 78-81.
• Evans, P. (2000). Blown to bits: How the new economics of information
transforms strategy. Harvard Business Press.
• Shih, G. , Oreskovic, A., McBride, S., Seetharaman, D. and Leske, N. (2014).
China's Alibaba embarks on U.S. IPO journey. Reuters.
http://www.reuters.com/assets/print?aid=USBREA450VV20140506
• Guo, C. (2013). Social Networks in China: 10 Marketing Tips How to Win on
Sina Weibo. Search Decoder: http://www.searchdecoder.com/social-
networks-in-china-sina-weibo/
• IBM (2013). IBM Survey: Shoppers Poised to Dramatically Expand
Purchasing Power Beyond the Store http://www-
03.ibm.com/press/us/en/pressrelease/40138.wss
• Kay, J. (1993). Foundations of corporate success: how business strategies
add value. Oxford University Press.
• Koh, Y., Winkler, R. (2014). Sizing Up Weibo and Twitter. WSJ.com:
http://blogs.wsj.com/digits/2014/03/14/sizing-up-weibo-and-twitter/
• Maister, D. H., Green, C. H., & Galford, R. M. (2000). The trusted advisor.
Simon and Schuster.
• Miles, D., & Scott, A. (2005). Macroeconomics: understanding the wealth of
nations. John Wiley & Sons.
• OC&C (2014). Retail Nation. Retail Week:
http://www.occstrategy.com/sites/default/files/retail_nation.pdf
• OC&C (2012A). Fashion Redesigned.
http://www.occstrategy.co.uk/sites/default/files/fashion_re-
designed_fa_online.pdf
• OC&C (2012B). The Dawn of the E-Tailers.
http://www.occstrategy.co.uk/sites/default/files/the_dawn_of_the_e-tailers.pdf
• Ogilvy PR, CIC (2012). Crisis Management in the Microblog Era.
• Porter, M.E. (1980). Competitive Strategy, Free Press, New York.
• Schein, E. H. (2006). Organizational culture and leadership (Vol. 356). John
Wiley & Sons.
• Stanford GSB (2010). Taobao vs Ebay China case IB-88.
https://gsbapps.stanford.edu/cases/documents/ib88.pdf
• Varian, H. R., & Shapiro, C. (1999). Information rules: a strategic guide to the
network economy. Harvard Business School Press, Cambridge.
• Yong, H., Kun, F., Yang, L., Ha, I., Yuping, Z., Mengyao, W., Nute, K. (2012)
Mapping digital media: China. Open Society Foundations.
15

Appendix 2 – Households owning equipment
16
Statistics on internet penetration and popularity of UGC in China
Table 1 - Households owning equipment, 2005-2010
('000) of households 2005 2006 2007 2008 2009 2010
TV sets 1,463,460 1,457,318 1,477,281 1,495,709 1,520,279 1,524,886
Radio receivers 546,686 546,686 537,472 981,271 1,372,858 nav
PCs 462,226 502,153 752,461 813,887 844,599 921,381
As a % of total
TV sets 95.3% 94.9% 96.2% 97.4% 99.0% 99.3%
Radio receivers 35.6% 35.6% 35.0% 63.9% 89.4% nav
PCs 30.1% 32.7% 49.0% 53.0% 55.0% 60.0%
Sources:
Yong, H., et al (2012)
China TV Rating Yearbooks 2006 to 2010, Communication University of China Press, Beijing;
China Radio Yearbooks 2006 to 2009;
Household Ownership of TV Sets in National Sample of 154 Cities and Countries, CSM M edia Research 2005-2007
surveys.
Notes:
(1) The actual number of households was calculated by M apping Digital M edia editors based on data on households
from the International Telecommunication Union (ITU)
Table 2 - The most popular types of UGC and UGC sites 2011
Site Category Reach %share
%from
parent
visitors
per day
Baidu.com Search engine 957 96.9% 51
Baidu Tieba Online community 221 14.5% 12
QQ.com Portal 115 97.1% 12
Qzone.qq.com SNS, w eblog 212 21.1% 22
Sina.com.cn Portal 116 95.7% 11
blog.sina.com Weblog 855 15.9% 84
163.com Portal 541 96.8% 85
blog.163.com Weblog 201 13.4% 31
Sohu.com Portal 487 96.5% 65
blog.sohu.com Weblog 206 7.3% 27
Youku.com Video sharing 358 95.3% 68
tudou.com Video sharing 570 97.3% 85
Renren.com SNS, w eblog 53 93.6% 49
Tianya.cn BBS 2 96.5% 38
4,894 640
Notes:
(1) Reach = global reach, millions of pageviews
(2) %share = %of incoming traffic that is domestic (China)
(3) %from parent = %visitors to this site that are referred from the broader parent site, which this UGC site is a
subsidiary
(4) Visitors per day = daily unique visitors (million)Source: http://www.alexa.com/topsites/countries/CN, Yong, H., et al (2012)
Source: Yong, H., et al (2012) Source: Yong, H., et al (2012)

Appendix 3 – Chinese Consumer spending patterns
17
Online spend per capita and LFL sales in offline retail channels
Table 3 - Online spend per capita, 2013
£ per head Income Spend %share
UK 22,947 880 3.8%
US 31,058 750 2.4%
Australia 35,224 500 1.4%
France 24,774 450 1.8%
Canada 30,245 420 1.4%
Germany 26,264 400 1.5%
Japan 28,412 330 1.2%
China 3,394 50 1.5%
Average 25,290 473 1.9%
Source: Source: Conlumino, M intel, OC&C analysis, Wolfram Alpha, Dragon Consulting Partners analysis
Notes:
(1) Income = GNI per capita
Source: OC&C (2014)
Table 4 - LFL sales in offline retail channels
%
2011-Q1 17.5%
2011-Q2 7.0%
2011-Q3 0.0%
2011-Q4 (3.0)%
2012-Q1 (9.0)%
2012-Q2 (6.0)%
2012-Q3 (9.0)%
2012-Q4 (4.0)%
Average (0.8)%
Source: Corporate Annual Reports, Analyst Reports, OC&C analysis
Source: OC&C (2012A).

Appendix 4 – Social marketing core platforms
18
China Social Media Landscape 2014
Note: image is © CIC.
http://www.ciccorporate.com/index.php?option=com_content&view=articl
e&id=1204&catid=99&Itemid=208&lang=en
This image shows that for every one category-leader in Western social
media networks, that there are normally more than one Chinese
equivalents.

Copyright info
This work is licensed under the Creative
Commons Attribution-ShareAlike 4.0
International License. To view a copy of this
license, visit
http://creativecommons.org/licenses/by-sa/4.0/
or send a letter to Creative Commons, 444
Castro Street, Suite 900, Mountain View,
California, 94041, USA.
Dragon Consulting Partners are:
Georges Shayeb
Izam Ryan
Lisa Amin
Mike Tian
(Ram Chandramohan is a Partner, but was unable to
participate in the China fieldwork portion of this
research piece)
Rizwan Habib
19

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