China's New Obsession with Blogs and How Companies Can Benefit

What multi national corporation would ignore a market with a population the size of the UK and Canada combined? Not many if the companies’ senior executives want to keep their jobs. However, this is exactly what many companies are doing when they ignore the rising influence of blogs and BBS (online bulletin boards) in China and how these new forms of expression can impact the bottom-line of companies. Marketers that ignore blogs and BBS do so at their own peril as bloggers frequently post their opinions on new product launches, rumors, and marketing campaigns ― often with disastrous results for companies.

China: a Blog Nation

80% of Chinese youth in urban areas, approximately 50 million people between the ages of 18 and 25, actively use blogs and BBS to share their opinions on a variety of topics. Combined with the 25 million bloggers in the 25-35 age group, these two segments make up a considerable portion of the 110 million total internet users in China.

And Chinese consumers do spend time online ― an average of 17.9 hours per week versus 12.7 hours in Korea and 11.4 hours in America. They surf online communities. Nearly 1.5 million play Blizzard’s World of Warcraft online game alone. The Chinese Government has placed limits on the amount of time Chinese youth can spend in internet cafes because they spend so much time online.

Source: Saidi 2006

MNCs need to focus on blogs and BBS to get a better grasp of their target markets’ online behavior. Chinese youth are driving China’s shift from investment-led growth to consumer-led growth and are the plum target market for many MNCs like Nike and Motorola.

Although China has a high savings rate, the 18-35 age group is spending at rates comparable to youth in the US. They rely on their parents, grandparents, and employers to pay for their housing, food, and other basic necessities and allocate their money for leisure purchases. Even those who earn $120 USD a month as factory workers or waitresses are buying $300 USD Samsung and Nokia phones and are one of the great untapped consumer groups by foreign marketers.

One popular blog in China, the blog of actress Xu Jinglei on internet portal Sina (SINA), has registered 44 million hits since she started it less than a year ago. She has become more famous in China for her blog than for her movies.

The total number of blogs in China will grow over 200% from 37 million in 2005 to nearly 120 million by the end of 2006. This number will continue to grow as more broadband services are rolled out to China’s inner regions.

Source: CMR Estimates, Yiguan, Baidu

The major portals in China recognize user demand for blogs but have yet to figure out how to capitalize on them from a revenue standpoint aside from having ad placements. Sina and Sohu (SOHU) really just made major pushes in the blog space at the end of 2005 to catch up with early movers like Blogcn.

Aside from Sina, other popular blog portals in China include MSN Spaces (MSFT), QQ, Sohu, Bokee, Tianya, Blogcn, and Netease (NTES).

Source: CMR Estimates, Company Websites

Why Chinese Youth Like Blogs and BBS

Chinese youth are drawn to posting blogs and BBS, because they can express themselves freely to potentially millions of other people.

Unlike traditional media outlets, which copyright their articles, bloggers encourage others to repost their comments in order to get the rush from having millions of people read their opinions. Because of RSS feeds, bloggers’ posts get picked up by other blogs throughout the blogosphere automatically and instantaneously.

Chinese youth like to read blogs because blogging seems somewhat counterculture and different from mainstream China. Jaded by traditional advertisers and media, more and more Chinese youth are using blogs as a key source of information.

What Bloggers Blog About

Chinese internet users post and read blogs on a breadth of topics. They discuss lifestyle choices such as what clothing to buy, what music to listen to, and what movies to watch. They give product reviews, product comparisons, and discuss advertisements. If they like a product, they blog about it. If they do not like a product, they blog about it. Because of the setting of the forum, people express their likes and dislikes more strongly than they would face-to-face. News travels so quickly through these channels that a small group of dedicated individuals ― Malcolm Gladwell’s mavens, for example ― can effectively shape the opinions of large audiences rapidly.

What Does All This Mean For the Corporate World?

Companies can no longer overlook blogs and BBS as relevant forms of media. The Chinese government employs 30,000 people ― more than the number of workers in the Pentagon ― to ensure that harmful content such as pornography is not spread to the Chinese population. If the government is paying attention to the potentially polluting effect blogs and BBS can have on the country, why are companies not tracking the influence blogs can have on their bottom-lines?

Companies need to examine content and the way that these opinions can affect their operations. Companies can use blogs and BBS as a means of gathering consumer feedback and responding to both positive and negative opinion with a speed that was impossible only one year ago. Companies now are presented with a unique method to be proactive and to cater to their target market’s exact needs.

User Created Content [UCC] marketing campaigns where bloggers interact with a company online by directing a commercial for a company and the resulting blog comments can be beneficial for companies to generate buzz. Unfortunately, not all companies have realized the power of the new medium.

On the plus side, blogs can be used to benefit companies if pro-active methods are implemented. The wide number of consumers that use blogs can allow for companies to get real-time information on what their consumers want throughout an entire country. Not only can analysis be made quickly but online focus groups, surveys, blog analysis are more cost-effective than traditional focus groups, surveys, and one-on-one interviews when market research firms need to travel to ten cities.

Although blogs have a culture of being non-traditional and hip, they have become mainstream enough that companies need to realize and harness the power they have on the bottom-line.

Comments

[China Marke...:]

The China Market Research Group (CMR) published a full report entitled THE BLOGGING POINT on blogs and BBS in China and the impact they can have on MNCs doing business in China. The report includes 3 case studies on MNCs -- Volkswagen, Colgate-Palmolive, and Haagen-Daaz -- that have run into trouble in China because of blogs.

The article version you see on China Seeking Alpha is an abridged version.

For a free copy of the full report, feel free to email us directly at [e-mail] or email Shaun Rein, Managing Director of CMR at shaunrein@researchcmr....

researchcmr.com

2006 Jul 15 04:22 AM

[Sam Flemming:]

Great stuff. Some of these stats are truly impressive. Although they resonate with our experience monitoring BBS and blog conversastions in China as well as other statistics we often see quoted, I would be interested in learning more about how CMR came up some of these. Would be useful to promote the blog and BBS inteligence/research industry.

I think it is also important to understand that the real story is that these stats give basis for the existence of a Chinese net culture. As Shaun suggests, companies need to begin listening, learning and engaging consumers within this new world.

2006 Jul 17 08:30 PM

[Paul Denli...:]

The simple truth is that although blogs are an excellent media for communications, there is virtually no way for anyone, except for a few astute individuals, to monetize them. That has been the case in the US, and it is likely to repeat in China.

Since the commercialization of media is not as pervasive in China as in the US, there have been many disputes about who owns the revenue from advertising for the few popular blogs. This was why Xu Jinglei took her blog off the Sina network.

For the service providers who provide blogging tools, blogs provide valuable real estate which ads can be run on. The most outstanding success in this area has been Google's twin massive revenue-generating services, Adwords and Adsense. The winners are Sina, Sohu, Netease and Tencent. These companies are able to digest the huge ad budgets being thrown their way by ad agencies.

But ad agencies themselves are an old-world business whose revenue structure is under assault, as is attested to by WPP's Martin Sorrel in this quote: www.ft.com/cms/s/89c1d...

The simple fact is that the Internet is bound to change the rules, and that Google is the one company which is best positioned to lead: richardbrandt.blogs.co...

Because Baidu is perceived as a Chinese company and is protected by the Chinese government, in much the same way as Sina is, it will be a leader instead of Google.

Then, any ad buyer will have a full set of advertising and information tools at his fingertips, enabling him to make all of his ad buying decisions. There will no longer be any intermediaries. Read here: en.wikipedia.org/wiki/...

2006 Jul 19 10:03 PM

[Paul Denli...:]

This report on the BBC website says that most bloggers write about personal experiences and technology. This also applies to Chinese bloggers, and explains why it is so difficult to monetize blogging from the advertisers' point of view. To read the article, visit: news.bbc.co.uk/2/hi/te...

2006 Jul 20 11:41 AM

[Sam Flemming:]

But the real story here is not just blogs...it is ALL consumer generated media, including blogs, BBS, audio and video. If you include all of these, esp. BBS, then you will see there is a lot of talk about companies. For example, based on our data collection, we estimate that there are 4 million BBS messages a month about the automobile industry alone.

The issue is not if these sites are monetizing traffic or not--its that consumers are in control of a media that can have positive and negative effects on brands....and brands can't control it. They better be listening....

2006 Jul 20 12:17 PM