Digital Transformation China TenCent

Five rules for digital China: Part one


By Humphrey Ho | Managing director

October 25, 2017 | 9 min read

Hylink Digital’s US office was opened a year and a half ago to help Chinese clients enter the US while also supporting American brands in their efforts to tap and approach China’s booming (sometimes chaotic) market. Being constantly inundated with questions from US clients on digital China, they’re always asking: what really gives?

Navigating China's market can be tricky

Navigating China's market can be tricky

Navigating the market in China can be tricky. For brands looking to enter the Chinese market, it’s critical to first understand its ever-changing ecosystem, all its opportunities and challenges before and when taking such a leap.

And don’t be mistaken, it is a leap. Here’s a unique key (a part one of a two-part series) that can help navigate a highly unique digital environment.

Keep hold of your e-commerce rights

Typically, e-commerce branding rights can last anywhere from 10-20 years. Today, brands that have a joint venture with an original Chinese retail partner are thinking about what’s next, as the time has come for many brands to take a step back and determine where they need to grab prime real estate (whether physical or online) to showcase brand presence in 2017-2018 and for the next several years.

In the past, many brands would give away their branding rights (the right to represent the brand across all sales channels). When 2012 rolled around, with it came e-commerce and the ability for brands to create microsites, campaign webpages, and sell across different platforms. Most brands gave rights to their partners. However, a lot of brand building at the distributor or trade level isn’t completed in a beautiful, elegant, brand-building way, but rather in a way that aims to sell, which many brands can’t accept.

In the years following, many foreign brands began to create e-commerce webpages in China aiming to sell, but, just as in the US, these brands cannot compete with purpose-built e-commerce sites like Tmall or Comparably in the US, many brands cannot compete with their industry’s e-commerce vertical, like Amazon or Shopbop.

Therefore, many brands adopted the familiar “if you can’t beat ‘em, join ‘em” philosophy. As brand ownership rights expired, many were still in need of a retail partner, but should have been cautioned to retain their e-commerce branding rights. Relinquishing your e-commerce branding rights can be to a brand’s detriment because an e-commerce website should be viewed as not just a marketplace to sell, but also as a place where brands can have a strong presence and the freedom to brand themselves so as to show their best attributes, history, run campaigns, and advertise to users/potential customers.

Register social accounts directly

Social media accounts follow a similar thought process. Being registered through a third-party social media agency used to be the norm. However, beginning in early 2017, the rules changed for WeChat, and as early as 2015, the policies were pretty strict to work around for Weibo. Regulations required businesses to have real-name registrations (实名登记), which meant that if you were the brand, your business registrations should correlate with your respective social accounts. WeChat only recently started to accept foreign business licenses for American, British, and German corporations as forms of proper documentation for registration of social accounts in China.

A plethora of companies and brands will soon fall victim to having too many fans or too much success on social media if they aren’t first registered using their first party business license. WeChat might ­–­ and has already begun to ­– ban, censor, or restrict these brands until their registrations are corrected. Presently, popular brands with successful accounts should be aware that if your account is blocked, censored, or frozen, your fans do not transfer over to your new account, so you will have to start your brand-building efforts anew.

Don’t forget censorship

Many clients assume they can buy media directly in China and forget that censorship regulations exist. Companies can’t buy media without a media agency because media agencies form one of the legs of government censorship. A media agency (like Hylink) that has the ability to buy media and apply your creative can also help with self-censorship so brands avoid falling afoul with regulators.

The publisher forms another leg of censorship because they are informed on the latest policies and rules. Their systems are and should be in place to block anything of concern. It’s important to stress to clients to remember that media agencies form one of the legs of censorship and as a result, media agencies should be consulted prior to buying direct on these platforms.

Clients should also keep in mind that there is a time lag for censorship. Depending on what you buy - whether it’s video, digital, or film - there is a certain amount of time needed for approval. Generally, digital display advertising takes a few days, a video might take one week, while lengthier films or documentaries could take months.

Moral of the story here? Don’t forget censorship. It adds significantly to lead times when inserting and buying media in China.

Mind the owner

Part 1:

Baidu, Alibaba, Tencent, and Sina are the owners of content, social media, and media platforms. If they are not actually owned by the “Big Four”, they are more than likely invested by them. It’s important to note that the four don’t typically (like to) share traffic, data, or users.

For example, to this day, you can’t open a Tmall (Alibaba) link inside the WeChat (Tencent) app. This is equivalent to Google not allowing a user to open an Amazon link in Gmail. So, when planning your brand campaigns and brand promotions, be aware of how specific or targeted your media campaigns are, otherwise you are wasting a massive amount of money with no ability to successfully generate meaningful awareness.

Part 2:

Tencent-invested content will always go back on QQ, while Alibaba-invested content will always return to Youku. Keep in mind that this impacts licensing, consumption behaviors, and how content is filmed. The owner always dictates the media platform and how content is produced.

Creative + media = big win

In the 1980s, American and European ad agencies experienced a tremendous shift from creative - with its own fees, understanding of user insights, brand planning, own ideas, interesting visuals and campaigns - to more specialized with the advent of digital.

Trouble arose as digital became more prolific and agencies became increasingly more specific. For example, in the US today, we have agencies solely focused on generating social creative, or only inserting media into TV and print, but not radio. These agencies simply become more and more specialized over time. In the US, this works simply because clients have systems in place to manage dozens of agencies working together.

In China, however, the 80’s didn’t really see the development of advertising, while the 90’s brought the advent of media companies formed by conglomerates. Therefore, there was no need to separate media and creative. By the time the West was talking about the “failure of the ad agency” in the 90’s, China had already anticipated this and decided to house creatives, ADs, copywriters and the like inside a bigger media agency that bought all forms of media and could produce content for the ads by creatives. This was often more effective because the “creative idea” could actually land on the media platform.

As digital started popping up in the late 90’s, it made even more sense to the newly-formed ad agencies, and as digital formats grew, creative and media could then work under the same roof. With planners who knew the media platform and understood the user, and creatives who could execute, big ideas could be generated more effectively. This saved cost for clients because there was no need to pay an extra retainer to a creative agency when you had account, creative and planners working together in one place. So, today major ad agencies that “grew up” in China don’t have the creative and media separation, but rather have two different departments within a company.

A caution to clients looking for these agencies ­– global creative or global media – they don’t always appear that way or work that way in China.

Digital Transformation China TenCent

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