Outlook 2021: China POV
Written by: Christine Hou, Head of Strategy, UM China
In the global version of the Outlook 2021 report, a key tension was identified between those who want to capitalize on the “forward momentum” towards digital transformation accelerated by the pandemic, and those who wish to return to the way things were down before, as the driving force for the digital landscape over this new decade. This tension can also be found in the Chinese market, albeit with a different set of approaches and manifestations, compared to the rest of the world.
During the last Chinese New Year, China was in the throes of the pandemic, with hundreds of millions of people on lockdown and forced to adopt additional digital tools and conduct more aspects of our daily life online. This did create strong forward momentum in terms of getting more people to try out various online platforms for remote work, education, and healthcare. Thanks to a strong centralized response, China contained the spread of the pandemic fairly quickly and things snapped back to the way they were before new digital habits could fully set in.
Now, as we celebrate another Chinese New Year, it is becoming clear that the end of the pandemic will mark the beginning of a new phase of China’s digital innovations. Although life has mostly returned to normal in China, the Covid-19 pandemic accelerated the transitioning of China’s economical structure and, similar to the global market, led to some rethinking around the digitization in domains such as healthcare, education, finance. This forward momentum may stern from different sources than the rest of the world, but it will nevertheless create new challenges and opportunities for Chinese and global brands to navigate.
The end of the pandemic will mark the beginning of a new phase of China’s digital innovations.
The Anyware Economy
As we mentioned, the pandemic was swiftly and effectively handled in China and most Chinese people returned to offices and resumed their normal routines since last April. Therefore, compared to our international colleagues, we have yet to witness the same level of adoption for the remote working tools and platforms, nor the same type of cultural indicators of a growing “Anyware Economy” that would free Chinese consumers from their daily commutes and office chit-chats.
That being said, the brief work-from-home period did encourage more office workers to try out new platforms like Microsoft Teams, Zoom, Tencent Meeting, Ali Ding-Ding. And even though people have returned to the office, adopting these new tools has led to a subtle mindset shift where in-personal meetings have been de-prioritized in favor of telecommunication. Although tourism has bounced back in most regions since May, most business travelers have remained cautious and avoided unnecessary trips, opting for online meetings instead.
Most business travelers have remained cautious and avoided unnecessary trips, opting for online meetings instead.
A similar shift also happened in remote education. In fact, adopting remote learning tools have sustained much longer for students and educators than office workers have with remote working. Although Chinese schools have reopened around the same time the offices did, certain aspects of remote learning remained intact thanks to the efficiency they bring to the process. In particular, tasks as scheduling and classroom check-ins, homework announcement, exams and assessments stayed on digital platforms, providing students and parents, teachers and professors with easy remote access.
Healthcare is another industry that sustained a lingering impact of the pandemic. As part of the most recent Five Year Plan, policymakers reemphasized the goal of achieving “98% digitization to all hospitals and medical institutions in China,” focusing on things like enabling digital prescription, legalizing and standardizing remote treatments, as well as digital medical insurance. Most of these telehealth developments will be powered by platforms such as Alibaba’s Ali Health, Chun Yu Doctor, and JD Health — all of which were free-to-use during the pandemic last year but has since started to monetize their products as China continues to transform its healthcare sector.
In conclusion, the Anyware Economy will impact key industries such as education and healthcare in China, and the fastening adoption of 5G networks will bring more network capability for those sectors to digitize their operations and products. However, in terms of its impact in the shift towards remote working, the pandemic’s impact is negligible, reducing the chance of new consumer behaviors or media habits due to the rise of hybrid work lifestyle that some in the West may start to see.
Gaming Eats the World
Gaming is eating the world, and China is no exception. Similar to how gaming platforms are expanding to cover non-gaming functions in the West, gaming companies in China are also experimenting with new types of experiences and use cases.
Tencent, the owner of WeChat, is also a leader in the gaming industry in China, and it has acquired many gaming companies to expand its global footprint. Gaming has long been Tencent’s biggest cash generator, as the company controls more than half of China’s $33 billion gaming market. It has also pioneered mobile gaming, where China leads the world, and added mini-games to WeChat in 2018 to make it a casual gaming platform. Interestingly, it is also a minor investor in Epic Games, the company behind the Unreal Engine, which is being expanded to many non-gaming use cases, as the global Outlook report laid out. However, because Tencent already controls the all-in-one mobile platform in China with WeChat, it has fewer incentives to expand into building bridges to metaverses or other virtual platforms that could undermine WeChat’s dominating control on mobile.
Nevertheless, there have been some interesting examples of how China is exploring the non-gaming use cases of gaming technologies. One example cited in the global Outlook included the digital twin that a Chinese company 51World has created with the city of Shanghai, using the aforementioned Unreal Engine by Epic. Powered with real-time weather and traffic data, this digital twin of Shanghai enables city officials to simulate proposed changes to its infrastructure and explore various scenarios. Implementation of digital world-building tools from video games, combined with big data, will help China stay ahead on the development of smart cities.
Implementation of digital world-building tools from video games, combined with big data, will help China stay ahead on the development of smart cities.
Also worth noting is the deployment of VR gaming technologies in entertainment and fashion domains. For its 2020 Single’s Day gala event, Tmall invited Katy Perry to perform on a 3D virtual stage, fantastically set on a carousel floating above the earth, which was live-streamed to millions of online and TV viewers. Another recent example came from Balenciaga, which designed a VR game named “Afterworld “The Age of Tomorrow” and launched its 2021 fall/winter collection within the game. This global campaign was activated in China via Balenciaga’s official WeChat account and generated great social buzz among younger consumers who are hungry for unique immersive experiences.
As gaming continues to gobble up consumer attention in China, especially among the younger generations, a backlash against gaming has also been brewing over the concern of “video game addictions” among young people. So far, this backlash has resulted in increasing regulations that aim to limit kids’ and teens’ time spent on video games, such as a “parent mode” feature that Tencent rolled out last year following new government mandates. If this backlash keeps building, it could limit the growth of Chinese gaming companies and force them to explore non-gaming use cases of their core technologies to supplement their lost revenues. How that would play out, however, is anyone’s guess at the moment, although Tencent remains in the best market position to make a play for building a metaverse platform in China, thanks to its control of the de-facto mobile platform and its dominating share of the gaming market in China.
Welcome to Splinternet
The internet as we know it is about to become a lot more fragmented, as countries take varying approaches to regulate tech platforms and protect data privacy. The development of the so-called “Splinternet” provides an opportunity for China to expand the border of its internet and enhance the international reach of its digital ecosystem.
The world has already seen the meteoric rise of TikTok, which has taken over the short-firm video space by storm. Created and owned by Chinese software company ByteDance, TikTok shares the same UI and infrastructure as its Chinese counterpart Douyin. Although they are being managed by separate entities and don’t cross-share data or content, their features and formats are evolving in lockstep. This might set a template for platforms moving forward, providing global brands with some much-needed respite from localizing their marketing creatives from scratch in every region.
Looking ahead, the development of the splinternet presents an opportunity for China’s tech giants, such as Tencent, Alibaba, and the aforementioned ByteDance, to extend their reach beyond China to compete with the likes of Facebook, Google, and Amazon in international markets, especially in regions like Southeast Asia and sub-Saharan Africa where China is already heavily invested in infrastructure building. Some Chinese technology sectors, such as 5G network equipment and mobile games, are already expanding overseas. Sensor Tower data shows that a total of 37 Chinese mobile games earned more than $100 million abroad in 2020, up from 25 games the year before.
Looking ahead, the development of the splinternet presents an opportunity for China’s tech giants to extend their reach beyond China.
.Although at the moment most consumer brands in China are focused on the domestic market, there will come a time when they may need to explore international territories. But the digital landscape outside of China is very different from the Chinese digital ecosystem that Chinese marketers are familiar with. Instead of activating on WeChat and Tmall live streams, they will have to navigate a world dominated by U.S. tech giants such as Facebook and Google.
Over the next decade, it is safe to assume that more apps and platforms from China could successfully break out onto the global stage. Even if they don’t achieve the kind of worldwide popularity that TikTok currently enjoys, some may still become leaders in regional markets. In that case, the splinternet would be a boon to Chinese brands, who will be able to leverage the homegrown platforms that they are already familiar with to reach international consumers, should they choose to. In contrast, this would complicate matters for global brands, as they will need to learn how to activate on Chinese platforms to reach audiences in markets in and outside China.
The Reinvention of Social Context
While Western consumers start to reinvent their digital contexts as they retreat from public social platforms into more private channels, Chinese consumers have been far ahead in the process of recreating various offline social contexts online. In comparison to the West, where social platforms like Facebook and Twitter dominates, Chinese consumers have always enjoyed a much more intimate and flexible social media environment thanks to the near-ubiquitous adoption of WeChat. Whether it’s through one-on-one messaging, group chats, influencers and brand accounts in the Moments feed, or the booming short video channel, WeChat contains a multitude of social contexts for users to choose from.
Besides WeChat, which forms the foundation of digital socialization in China, many other local platforms have also leveraged social elements to build their own interest-based communities. For example, Little Red Book started as a UGC platform aimed at beauty influencers to showcase imported cosmetics. It has since evolved into an encompassing lifestyle discovery platform — like Pinterest but filled with Instagram influencers. Similarly, local discovery platform DianPing, which is essentially China’s Yelp but with a stronger social component, is also a local favourite for discovering restaurants, stores, and out-of-home entertainment options. Users follow friends, along with opinion leaders in the categories they are interested in, to discover local businesses and share their experiences.
The Gen Z consumers in China set themselves apart from the older generations with a higher sense of individualism and self-expression. They refuse to settle for the dominant social platforms and are demanding their own online spaces. This has led to a recent resurgence of QQ, an instant messaging platform made by Tencent that was popular in China during the pre-mobile era. Besides, Chinese Gen Z has been ‘raised’ by BiliBili, which is essentially China’s YouTube, but with social elements designed to encourage users to comment and interact with each other while watching videos, and they represent the most creative energy and forces in this country. Bilibili recently announced strategic partnerships with NatGeo, Netflix, and BBC, signalling its ambition in laddering up from UGC and building co-viewing communities around video content.
Looking further down the road, over the next 3–5 years, live streaming might bring us to be more social online across various platforms. Along with the progression of 5G technologies, virtual reality, and virtual influencers, live streaming will contribute to an increasing blurring between reality and virtual social context as Gen Z consumers take over as the main cultural force. Although Tmall, Douyu, and Bilibili remain the top live streaming platforms in China, WeChat is also getting in on the trend and trying to make live streaming happen on its platform. Thanks to its user data and existing social graph, the open beta of WeChat’s live stream mini-program (mini-apps that run within WeChat) has been well received by brands, as nearly 83% of brands said they’d like to try or continue to live stream on WeChat.
Beyond the existing diverse set of social platforms and online communities in China, we are even starting to see some platforms extending the social contexts they forged online into the offline world. For example, Dedao, a popular social learning platform, recently shifted its focus to reinventing the offline experience by creating learning centres located in high-end malls in several cities across China. The company also launched a new “Ignite Club” program where users come together in these learning centres and hear Dedao founder Mr Lou Zhen-yu share his recent learnings in person, thus reinventing a real-world context for the learning communities Dedao created online. Moreover, these learning centres also serve as a user acquisition channel for Dedao, attracting people looking for intellectually stimulating conversations and networking opportunities.
Given the proliferation of live-streaming platforms, each with its own audiences and algorithms, it may become harder for brands to keep their brand identity consistent. Then again, brands, like people, can be multi-faceted. The real question is, will brand identity become more fractured across various channels, or can it be unified by brand value? The future will continue to challenge our focus on building a stronger brand that aligns with our core value, especially on private social channels like the ones that WeChat provides.
The real question is, will brand identity become more fractured across various channels, or can it be unified by brand value?
In addition, the shifting online social context provides an opportunity for brands to attract more users to owned channels where brands can have a better chance at establishing strong, long-term connections with customers and, as they strive to take complete control of their customer data and feed it back into their CRM systems without sharing their data with platform owners.