Outlook 2019: The APAC POV
How the trends from our Outlook report are playing out across the diverse Asia-Pacific region
By Sharon Soh (Head of Strategy, APAC, UM Worldwide)
Editor’s note: this is a special regional POV that dissects the four technology and media trends from our Outlook 2019 report. We’ll have more POVs coming up from each of the key global regions, so be sure to check back in the following weeks.
Unintended Consequences
In the West, privacy scandals, the spread of propaganda on social platforms, and a growing perception of monopolistic practices have turned public sentiment against the big four technology companies collectively known as GAFA (Google, Amazon, Facebook and Apple). Meanwhile, the tech-lash in the Asia-Pacific (APAC) region has been much more muted.
Much of that has to do with the fact that media in Asia is much more regulated than in the West. Governments in the region already have a strong hold over media organizations, and APAC consumers are already conditioned by a regulated and monopolistic environment. At the same time, as digital adoption across Asia increases, governments have become more sensitive to the need for data protection and security. The new hope for the APAC region is the continued rise of major Asian players alongside the likes of GAFA that will drive the economy and the culture in Asia and perhaps even globally.
Unbundling Social & Search
The search and social ecosystems in APAC can be broadly placed into three buckets. The first is the Chinese giants Baidu, WeChat and Weibo, which possess high market share across China as well as Taiwan and Hong Kong. The second is Korean platforms Naver and Kakao. And the third is Google and Facebook, which serve the rest of the APAC region.
Across the APAC region, internet penetration, particularly mobile internet penetration, and social media usage continue to grow more rapidly than the global average. Naturally, the dominant platforms are the main beneficiaries, but we are seeing the emergence of smaller players that blur the lines between social, search, video and commerce. They provide deeply engaging communities built around the modern Asian consumer, fueling their thirst for discovery and shared experiences.
One of the hottest social media apps in the region, Douyin, is a viral, short-video platform also known as TikTok. It recently launched its first mini game, which allows users to play games inside the app without having to download a separate app, intensifying the rivalry with WeChat, which had pioneered mini-games. TikTok has also started to offer users direct access to online shopping while watching videos, directing them to Alibaba’s ecommerce platforms.
Facing tough competition from upstarts, the incumbents are not standing still. WeChat’s mini programs are proving incredibly popular. They have seen astonishing growth since they were first launched in 2017, offering WeChat users advanced features that turn their accounts into platforms more suited to ecommerce, task management, and more.
Outside China, we also see the rise of LINE, a messaging app akin to China’s WeChat. Originating in Japan, where it is the number one social platform with more than 50% penetration, it has emerged as one of the top platforms in APAC markets such as Taiwan, Thailand, and Indonesia. It sets itself apart with features like virtual stickers, cartoon-like animated emojis and mobile games.
The Chinese search market is now loaded with different options for voice search technology. Baidu and Alibaba were among the first to adopt the technology. Baidu launched its own smart speakers, signaling the likelihood that voice search will become an increasingly mainstream tool in China. Alibaba, on the other hand, has built voice search into its ecommerce platform, enabling users to search for products using the Taobao app and find relevant search results.
While this region was never a digital media duopoly, Google and Facebook have had significant success here in the last decade. However, the rise of newer and more dynamic social players together with the continued advancements of incumbent behemoths will surely threaten the global players’ foothold in the region.
Media Haves and Have-Nots
Content streaming is growing rapidly everywhere in Asia. The emergence of innovative video streaming apps, combined with the wide variety of content providers and distributors, had led to hyper-fragmentation in the media space. Consumer preference for affordable local content has been the impetus for paid content business models, which are being developed in various markets across the region.
In China, a fierce competition is underway to see who can gain a bigger slice of the country’s fast-growing online content market. The goal is to increase paid subscriptions, as consumers become more open to paying for content in a market previously rampant with piracy. Leading the charge is the Baidu-owned iQiyi, which offers exclusive content to subscribers. Close behind are Tencent Video and Alibaba-owned Youku Tudou; each has had success with in-house productions.
India’s online content market is similarly expected to accelerate over the next few years. With its open media ecosystem, we foresee major international players like Netflix and Amazon Prime playing alongside local digital and entertainment platforms like Hotstar, offering varying business models for subscription (Netflix and Amazon) or a hybrid of free, ad-supported and subscription-based content (Hotstar). Consumer preference for international versus local content will likely separate the market.
It’s somewhat surprising that Japan has taken longer to embrace subscription-based video streaming services than other APAC countries, but it has finally started to gain momentum. Amazon Prime and Netflix have taken advantage of Japanese broadcasters’ reluctance to adopt streaming technologies and have captured a segment of the market with a mix of local content and partnerships with Japanese studios. Nonetheless, overall penetration is still low for an internet savvy population, and it’s an open question as to whether consumers will pay for unique content or would rather stick with traditional broadcast content.
In short, with content proliferation, and providers racing to become the provider of choice, the tipping point for the varying divides will come down to how much APAC consumers are willing to pay for content access.
Every Brand is a Lifestyle Brand
Asian Millennials now account for close to 15% of the world’s population. Many in this generation have grown up in a world that straddles the old and the new; experienced unprecedented economic, political and social changes; and leapfrogged some of the digital and technology evolutions. The region remains diverse, economically: Japan has been as an economic powerhouse since the ’80s, while China has come into its own only in the last decade. Much of the rest of Asia is still in various stages of development.
The meaning of being a lifestyle brand therefore needs to be carefully considered. For developed markets like Australia and New Zealand, being “purpose-driven” has been a success factor for many brands that have adopted the approach in their product philosophy and marketing. For consumers in China, Japan and Korea, freedom of thought and action, together with empowerment of a more personalized style, are much-desired attributes. For countries growing in affluence, consumers are essentially still seeking a better life. That being said, there are a few themes that appear to be relatively common across APAC.
Leading brands from the West are still influential in many APAC markets, where status and image remain an important driver of purchase. Brands like Apple, Chanel and Nike continue to be highly sought after by the Asian consumer. In spite of its pricey iPhones and tough competition from its Chinese and Korean rivals, Apple has done well in affluent markets like Japan, Korea and Singapore. Beyond being status symbols, these brands have also made themselves appealing to the Asian consumer through their product innovation, design philosophy and marketing.
As APAC takes more of a central role in global innovation, there is increasing openness to, and even pride in, homegrown brands and products. From smartphones to fashion to skincare to packaged goods, there is a rise of new Asian brands like Huawei, the Chinese smartphone maker; Youk Shim Won, the Korean fashion brand; Patanjali, an Ayurvedic brand from India; and Karma Cola from New Zealand, who are winning over Asian millennial consumers and giving international brands a run for their money.
For many of these homegrown brands, a direct-to-consumer strategy has also been tantamount to their success. Capitalizing on a diverse and fast-evolving ecommerce and social media environment in this region, these brands have taken ownership of their consumer relationship, building an authentic connection through direct conversations and interactions. For the Australian founder of toxin-free beauty brand Nourished Life, her first action was to build a community using a blog and several social media channels. Only later was ecommerce added on. Now a full-scale online retail player to be reckoned with, community engagement to maintain its own media channel remains a core business activity.
Automation Interrupted
Technological innovation has become decentralized globally and Asia is arguably the hottest innovation region in the world. Development and applications continue to advance, fueled by governmental policies, investments by leading tech companies, dynamic start-up environments and tech hungry consumers.
China continues to gain momentum with the increasing success of Chinese technology companies developing customized products and services. In December 2018, Alibaba made its foray into the hospitality business with the launch of FlyZoo, a fully- automated hotel. Check-in, room service by robot cleaners, facial recognition door locks and voice-controlled lighting are among some of the key features of this futuristic hotel. Meanwhile, Baidu introduced Apollo 3.5, its latest and most sophisticated iteration of the open autonomous driving platform. It also announced the launch of 100 robo-taxis, which will operate in Changsha on 130 miles of city roads equipped with Baidu’s V2X technology.
The Chinese government’s support for automation is clear, reflecting its “Internet Plus” strategy to harness the potential of the Internet and emerging technologies for China’s economy. In recent decades, it has focused on several elements of AI-powered automation including urban infrastructure systems, transportation, and various smart city initiatives.
Japan continues to show its strength with expertise in robotics and home electronics. The government is moving forward with the initiative “Society 5.0” to focus on the opportunities that digitization offers to improve the quality of life for a quickly aging society. A low number of people in the labor force — due to the aging population — and high labor demand, have created a challenge for Japanese workers. Robotics technology is seen as an effective solution to address remedial tasks that can free up more time for employees.
Indian start-ups are playing a crucial role in driving innovation in the country. For example, driven by digital initiatives and the demonetization of high currency notes, fintech has gained momentum in India, and the use of AI, robotics and smart technologies will continue to propel the transformation of the financial services sector.
