Strategic marketing analysis of the Chinese online space. The presentation was the final stage of a large strategic marketing consulting project for a Dutch MNE that I worked on for about 3 months. The company considered and acted upon our recommendations.

1. China eMarketing 2009 How does eMarketing work in China? Milestone Team Research April 15th 2009

2. Objective To provide ------- with knowledge about how eMarketing works in China. 2

3. Content The Chinese Online Space: an Overview Search Engine Marketing in China The Chinese Search Engine Baidu 5 Ground Rules for Email Marketing in China Conclusions Executive Summary 3

4. 1 The Chinese Online Space: an Overview 4

5. The Chinese Online Space: an Overview Let’s look at the entire Asian continent Social Networking:S. Korea Most Online Users: China Broadband:S. Korea Mobile eCommerce: Japan Online Gaming: China eGovernment:S. Korea Mobile Search: Japan Asia is already leading the world in the categories mentioned. Asia now owns more than 40% of world’s total internet population and growing rapidly. Blogging: Japan MicroTransactions via SMS: Philippines Source: Morgan Stanley Research, Internet World Stats Business implication: if you want to build a strong brand in Asia, then you have to include the internet in your marketing communication. 5

7. Japan represents the biggest search market in Asia

8. Korean search is proportionally the highest spend (almost 60% of total online spending)

9. China is the largest growth marketMillion Source: Sozon, 2009 Search Engine Marketing will become more and more important for business in China 6

11. People still communicate in Chinese and there are many dialects.

12. Simplified or traditional Chinese depending on region.Chinese internet users mainly located in the coastal regions. In order to be successful in market communication, you need to fill to language and culture gap.

13. The Chinese Online Space: an Overview The size of the Chinese Internet population is growing rapidly Source: CNNIC, 2009 8 Online presence will become more significant in the future because the market will continue to grow

15. high educated;

16. high income;

17. urban area

18. The proportion of Chinese internet users to the population (1.3 billion) is 22.6% (82% in the Netherlands).

19. The percentage of Chinese internet users accessing the internet via broadband is 96%.

20. The use rate of search engines is 68%, equal to 203,000,000 million Chinese internet users. Source: CNNIC, 2009 Internet World Stats 9

21. The Chinese Online Space: an Overview What are the Chinese doing online? Source: CNNIC, 2009 10

22. Internet Community participation: more active, more vibrant than the West 11 The Chinese Online Space: an Overview Source: CNNIC, 2009

23. 12 The Chinese Online Space: an Overview Internet Community participation: More active, more vibrant than the West Source: IAC and Netpop, 2007 “I have expressed personal opinions and/or written about myself online” 72% 56% 73% “Online I feel free to say and do things I wouldn’t do or say offline” 32% User-generated content influences purchase decisions 19% 58% Percentage broadband users commenting blog, chat room or forum 28% 47%

24. Chinese Internet users at a glance The Chinese Online Space: an Overview Profile: Young, urban, high income, they love entertainment and new exotic stuff. 3 main activities on the internet: Entertainment (music, video, games) Communication and social media (email, instant messaging, blogs, forums) Information retrieval (news, search, recruitment) Business Implications: Marketing campaigns have to be original and interactive. Entertainment and social media can be utilized to connect intimately with the Chinese: creating blogs and communities are a first step. 13

26. In compliance with the “Internet censorship policies of the People’s Republic of China:, the Chinese language version of Baidu filters material from its search results as dictated by the government.

27. 85% of Chinese Internet users approve of Internet Censorship14

29. Branded online advertising will have a YoY growth of around 35% in 2009

30. Brands use a multichannel approach, including internet-word-of-mouth

32. Lack of domestic mass entertainment

33. Internet as the most influential mediumSource: Business Week, XPD Media and Trendspotting, 2008 15

34. The Chinese Online Space: an Overview The bigger picture of online marketing campaigns in China You’ll need to redesign completely for this market: 16 Source: BDL Media and Technorati

35. 2 Search Engine Marketing in China 17

36. Search Engine Marketing in China Key statistics Source: Sozon, 2008 18

37. 19 Search Engine Marketing in China Engines preference varies by location Source: Sozon, 2008

40. Unique ad layouts & structure

42. Offline search integration

43. Click to call

44. Video / social media contentSource: Sozon, 2008, WebPro China 2009 20

46. Among all companies who just used one search engine for SEM, 72.2% selected Baidu; among those who chose multiple search engines, there were 93.1% who selected Baidu

47. 64.9% of search marketing advertisers use multiple search enginesSource: China Internet Watch, 2009 21

48. 3 The Chinese Search Engine “Baidu” 22

49. The Chinese Search Engine “Baidu” The Chinese Engine Baidu Web search Picture News Post-it 23

50. The Chinese Engine versus Google Search Engine Marketing in China The Chinese Search Engine “Baidu” “Fire Zone” Exact Match Paid Listings Intelligent Match Natural Search Listings Paid Search Listings General Ads Natural Search Listings Source: Sozon, 2008 24

51. The Chinese Engine: “Baidu” Search in China – Comparative user search patterns 25

53. Paid listing have a higher priority.“Cache” (natural listing) 26

55. Paid for a fixed fee for a year per keyword

56. Not popular among advertisers

57. Not all ads in the Fire Zone are; some are PPC27

59. Page wide advertising

60. Baidu brand click-trough rate up to 75% versus 21% on GoogleSource: China Internet Watch and IPA.co.uk 28

62. Relevant advertisements for relevant website

63. Baidu TV is the video advertisement version of Baidu Union29

64. 4 5 Ground Rules for Email Marketing in China 關係 30

65. 5 Ground Rules for Email Marketing in China 5 Ground Rules for Email Marketing in China 31 In the end, the Chinese prefer to do business face-to-face. Source: Danny Levinson, CEO of BDL Media

66. Conclusions The size of the Chinese Internet population is growing rapidly. The use of forums, blogs and games has shown substantial growth and offers a new medium to connect brands with customers. Marketing campaigns should revolve around the customer, creating an emotional bond, and use a multi-channel strategy to get it done. Baidu is the dominant preference for SEM in China; firms advertise on multiple search engines. Email marketing has to be done with extra precision; use a 100% opt-in list (database) and watch your content. 32

67. Executive Summary If you want to build a strong brand in Asia, then you have to include the internet in your marketing communication. Search Engine Marketing will become more and more important for business in China 3 main activities on the internet: Information retrieval (news, search, recruitment) Communication and social media (email, instant messaging, blogs, forums) Entertainment (music, video, games) Touching clients at multiple points is essential: an integrated strategy of various online channels (email, websites and other forms) and offline . The client should always be the center: guanxi. The challenge is to create a personal, intimate and emotional relationship with the client. Social media (blogs and online communities) are an opportunity to connect with the Chinese, it is perceived as personal and intimate. Baidu is the dominant search engine and consequently the best choice to reach internet users through online ads in China. 33

68. How to start a successful Baidu campaign: Start your BaiduSem campaign on a low level, include a test to figure out what works and what doesn’t Determine the goal of your online marketing strategy Clear and good ad test copywriting Landing page and microsites using Chinese webdesign standards: it has to look slick, creative, innovative and most important interactive. Tracking and daily campaign optimization 5 ground rules for email marketing in China Use correct markup Work with Internet Service Providers and Web portals in China Keep a close watch on your content Honor the feedback loop All marketing activities require the use of a proficient Chinese and within the borders of Chinese law. 34 Executive Summary

70. the campaign focussed on a game that consumers downloaded to their mobile phones