East West Hurricane: Recent Episodes
Anthony McGuire
I recently interviewed Nafez Dakkak. Nafez is originally from Jordan and currently lives in the UK, where he is the CEO of the Queen Rania Foundation for Education and Development. Nafez is also pursuing a part-time Master’s Degree at the Harvard Graduate School of Education.
Nafez spent most of his career working in the Middle East, where he founded the Ed Tech platform Edraak. Nafez took Edraak from concept to full execution, reaching over 250,000 learners across the Arab world in under 12 months and with the company now reaching millions of learners across the Arab world. He has been at the forefront of Ed Tech in the Middle East, and has written a seminal piece on the topic titled, “MENA: Ed Tech’s Sleeping Giant.” Nafez went to university in the US and currently lives in London.
What did we talk about?
His work with the Queen Rania Foundation and founding Edraak
Growing up across MENA
The evolution of the Ed Tech industry in the Middle East
Analysing companies targeting cultural niches, particularly in the Arab world
The global implications of remote work, Covid, and education
Fleabag, The Queen’s Gambit, The Art of Persia, and The Anarchy by William Dalrymple, Invest Like The Best, Arabic podcasts
Find Nafez on Twitter here: https://twitter.com/ndakkak
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I recently interviewed Yang Liu. Yang is originally from China and currently lives in the UK, where she is the Co-Founder and CEO of JustWears, a direct-to-consumer underwear brand.
Yang is originally from Kunming, China and started her career working in startups in Shenzhen in 2011. Throughout her experiences, she has seen first hand the cultural differences between technology business leaders in China vs. the West and the evolution of China’s technology industry. She was also featured on Dragon’s Den!
Yang’s career has given her unique first hand perspective in the development of Chinese Tech. She talked about her experience meeting Zhang Yiming, the founder and CEO of Bytedance, the parent company of TikTok. She talked about her admiration for Jack Ma—I never realised how of an emphasis he put on female representation in his company. It’s fascinating to hear Yang describe the differences between what character traits are admired in China vs. the West. Listen to this episode for some stellar cultural insight!
What did we talk about?
Yang’s experience working in the earlier days of Chinese tech back in 2011
The evolution of China from ‘copycat’ to leading innovator
Differences between the consumer market in China vs. Europe
Her approach to building a brand over time
The Chinese CEOs she admires and why - Jack Ma, Zhang Yiming
The differences between Western and Eastern business culture
Yang’s Recommendations:
General Magic
Donald Trump’s Speech on Election Fraud
Venture Deals Audiobook
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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Chinese Vaccines as Soft Power?
In my recent interview with Peony Li, we talked about the idea of Chinese soft power. As Covid vaccines (hopefully) start to move the world out of the current crisis, China can play a huge role in this movement. There are several vaccines around the world, and a handful are being developed in China. While big name vaccines from Pfizer, AstraZeneca and Moderna are being scooped up by the major Western countries, emerging markets are turning to vaccines produced in China. Countries across South East Asia, Africa, and the Middle East are all in the middle of negotiations to receive the Chinese Covid vaccine.
With unfavourable views of China at all-time highs in several countries, China needs to do whatever it can to improve its international reputation. If these vaccines don’t work as well as expected, there will be backlash. If the vaccines work well, this helps build a closer relationship between China and emerging markets. It’s a big gamble—with huge upside and huge downside. So far, initial results from Brazil and Turkey have been positive.
Sequoia and KKR lead $2B round for Bytedance, valuing it at $180BN
Sequoia Capital and KKR are two of the biggest US investors leading the latest round of funding for Bytedance, the parent company of TikTok. This round values Bytedance at $180 Billion, and TikTok is expected to go public sometime next year. It’s a good reminder that there are many Western stakeholders with a lot of money invested in Bytedance who have a huge incentive to see it succeed.
One of the realities of globalisation is the globalisation of capital. If the world’s biggest companies have a mixture of investors from literally all parts of East and West, the idea of national interests defined by corporations becomes trickier to understand. So whenever the next ‘Chinese app’ is under threat of being banned in the West, there are plenty of Western investors who don’t want to see this happen.
Disney Hotstar, The International Growth Engine
Disney+ has been one of the most impressive media stories of 2020. The Disney Plus streaming service launched in November 2019 and around a year later, the platform now has 86 Million subscribers. That’s incredible growth.
For reference, when Disney first launched they forecasted that they would reach 60 to 90 million subscribers by 2024. Now they have revised their forecast to reach 260 million subscribers by the end of 2024. What drives this growth?
One major factor is international markets. Disney Hotstar is part of Disney Plus streaming platform that focuses on Asian countries like India and Indonesia. Right now, Hotstar accounts for 30% of Disney Plus’s total subscriber base and has more room for subscriber growth than in Western markets. Rebecca Campbell, Disney Plus’s head of streaming recently said, “We are uniquely positioned for India because of the rapidly growing middle class and their purchasing power.”
Indian Ridesharing With Global Ambitions
Ola is India’s largest ride-hailing service, valued at several billion dollars and funded by investors that include SoftBank. Ola’s business was hit hard by the pandemic but they have recently announced the creation of a new factory in Tamil Nadu, which aims to be the world’s largest scooter manufacturing facility.
At the beginning of this year, Ola launched its taxi-hailing service in the UK after previously launching in Australia and New Zealand. Ola has expanded into Europe and acquired Dutch electric scooter company Etergo several months ago. Now the UK is their big hope. Let’s see if Ola ‘the Uber of India’ can break into Europe. If they can, then we’ll have yet another example of tech innovation flowing from East to West.
Stripe expanding into Asia
The major US Fintech company Stripe plans to expand their Asian presence and has had a 40% increase in staff across the region this year. Digital Payments/Fintech is already huge in Asia - with plenty of challenges, lots of complexity, and an abundance of local competitors.
One strategy that might be best for Stripe to follow is acquiring or investing in fintech companies rather than directly trying to compete with them. Earlier this year, Stripe led the funding round of Filipino fintech startup PayMongo. Stripe could follow a model similar to Chinese tech giant Tencent. Over the last two decades, a large part of Tencent’s growth has come from investing in companies and acquiring companies rather than creating their own competitors. That might be the best option for Stripe in a super competitive Asian fintech market.
Indonesia’s New Sovereign Wealth Fund
Indonesia is launching a new sovereign wealth fund worth around $15 Billion to help finance infrastructure projects across the country. Japan’s Bank for International Cooperation plans to invest $4 Billion and the US Development Finance Corporation signed a letter of intent pledging $2 Billion. The Indonesian government is hoping to attract foreign investors to provide much needed capital, especially as they cope with Covid.
One of the biggest and most interesting infrastructure projects is the creation of a brand new Indonesian capital city. The Indonesian government plans to move the capital city from Jakarta to East Kalimantan by 2024. This would reduce the burden on an overloaded Jakarta and place the capital in a more strategic location closer to the center of the country. I lived in Jakarta back in 2006 and remember how the city infrastructure struggled to keep up with growth.
This reminds me of when I visited Pakistan’s capital city of Islamabad. Islamabad was created in the 1960s as a new capital to replace Karachi, and you’ll notice that Islamabad feels a lot cleaner and more modern than Karachi. The Brazilian government did something similar by creating a new capital city of Brasilia in 1960.
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I recently interviewed Peony Li. Peony is originally from Hong Kong and now lives in London where she has her own stealth startup in the elderly healthcare space.
Peony moved from Hong Kong to UK in her teenage years, driven by a desire to study, work, and live in the UK. After graduating from Cambridge, she started her career within investment banking, followed by an incredible role as Head of Investments at Founders Factory, and then Head of Operations at Daye. Afterwards, Peony was driven to entrepreneurship and inspired to build a great business of her own.
Peony’s professional experience has brought her to the forefront of the most exciting businesses in Europe and her own life experience makes her attuned to China’s relationship with the rest of the world.
When you hear Peony’s perspective, you’ll learn a lot about the Chinese experience and the evolution of Asia over the last two decades. We talked a lot about soft power, which describes economic and cultural influence within international relations. There’s a major difference between being Chinese and being from Mainland China, a nuance that’s often misunderstood in the West. Different generations of Chinese immigrants to the West have pursued different things. The role of China (and more broadly, Asia) within Western society will continue to grow and become one of the most important topics of the next decade.
What did we talk about?
Peony’s story through investment banking, technology, and startups
The evolution of China’s economy and Chinese culture on the world stage
The role of soft power when talking about international relations
Misunderstandings and cultural stereotypes of the Chinese in the West
The future of business relationships between the East and West
As the world enters economic turmoil, the bright opportunity ahead
Peony’s Recommendations:
Jordan Peterson
Sara Blakely’s Masterclass on Self-Made Entrepreneurship
The Wise Pen Pal campaign
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I recently interviewed Bea Trinidad. Bea is from the Philippines and we met through the On Deck Writer fellowship.
Having grown up in Manila, Bea decided to go to university in Australia, where she set up her own restaurant and worked across the advertising and media industry. She is now back in Manila working on her family business in the culinary industry.
Bea’s experiences make her a cross-cultural diplomat who has dealt with the true cultural complexities of working both in the East and West.
When you hear Bea’s story, you’ll learn a lot about the differences in culture between a place like the Philippines and Australia. The Philippines, like many emerging markets, works differently compared to countries in the West and requires a sophisticated level of cultural understanding in order to get business done. It’s also important to consider that Philippines is heavily influenced by Latin culture, which is unique compared to other Asian countries. A large part of our conversation revolved around this topic!
What did we talk about?
The biggest business opportunities and coolest companies in the Philippines
Comparing business and life in the Philippines vs. Australia
How Latin culture influences the Philippines in terms of emotion and language
Typical misunderstandings in board rooms, kitchens, and more
Crafting brand strategy and messaging in the middle of the coronavirus
What makes the Philippines a major emerging market opportunity
Bea’s Recommendations:
TV/ Film: The Godfather series, Rocky, The Queen’s Gambit, The Last Dance
Books: Barbarian Days, On Writing Well, Charles Bukowski, Atomic Habits
Audio: The Art of Happiness, Hollywood’s Bleeding from Post Malone
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
Follow us on Twitter and Instagram! ⚡️
I’ve recently joined the OnDeck Writer Fellowship. I’ve met some great people and received some amazing advice regarding the frequency of posting newsletters.
As per some feedback, I’m going to experiment with sending a news update on a weekly basis, rather than daily. It has taken A LOT of work to write 86 weekday updates over the last few months, and I think a weekly update should provide the same level of value.
Of course, I will still be having interviews and longer-form analysis on topics in Asian tech, media, and business.
Always feel free to reach out and give me any feedback!
Everything is Bigger in China
A few months ago, I read an article in the Financial Times called The Asian century is set to begin. It sounds pretty obvious, but the FT put together the most cohesive, data-driven argument I had ever seen on the rise of China.
Last week, billionaire hedge fund investor and macro-thought leader Ray Dalio wrote an article in the FT called “Don’t be blind to China’s rise in a changing world.” It’s another amazing article that succinctly summarizes why you should care about China.
In the US, there’s a saying that “everything is bigger in Texas.” My takeaway about the modern world today is that “everything is bigger in China.’
In 2020 so far, 23 Chinese companies have gone public on American stock exchanges, 180 companies have gone public on the Shanghai Stock Exchange, 115 in Shenzhen and 99 in Hong Kong.
Ant Group, a financial services company spun out of Alibaba, is in the process of going public on the Hong Kong and Shanghai Stock Exchange. This will be the biggest IPO of all time, with the company aiming to raise $34.5 Billion on a $313 Billion valuation.
The last biggest IPO in the world was Saudi Arabia’s Aramco, which raised $29 Billion last year.
Many investors are betting on Ant Group as a bellwether for the Chinese economy, as Ant Group is essentially the biggest fintech company in China, a country of 1.4 Billion people who likely all need financial services.
At the same time, Bytedance is making plans to take their short video app Douyin public, either in Hong Kong or Shanghai. Douyin is the Chinese version of TikTok, so does this mean a TikTok IPO comes next? Probably.
I don’t think it’s hard to see that TikTok is following the path of Douyin, which is probably 18 months ahead of TikTok in terms of product development. As an example, TikTok just announced a partnership with Shopify to have a more integrated social commerce experience on the app.
Douyin has had much deeper social commerce features for a while. As described in an article from SupChina last year, people on Douyin can directly buy products on the app after watching a video. You can also book hotel stays on Douyin, or coupons for restaurants.
If you believe that TikTok follows Douyin’s lead, it’s kind of obvious to think what comes next in TikTok’s product road map…
Western Investments
People working at Snapchat are probably in a good mood right now, as the company reported positive results at their most recent earnings call last week, which sent their stock price to all time highs of $44 a share.
A big part of Snap’s focus is India, where their user numbers have grown 150% year-on-year. India is Snap’s biggest market outside of the US. Snap has created augmented reality training programs in Indian schools, Indian content on the app, and support for nine Indian languages.
In Vietnam, Apple is building new factories and employing Vietnamese workers as part of their new supply chain. This has caused an increase in wealth within several rural Vietnamese towns who have experienced a local boom thanks to investment from Apple.
Sheldon Adelson, the Las Vegas casino billionaire, is considering selling $8 Billion worth of his casino empire to focus exclusively on his properties in Macau and Singapore. For Adelson’s company Las Vegas Sands Corp, 63% of their revenue comes from Macau and 22% comes from Singapore. In the case of Adelson, the US might be too small a market for him to have as his focus.
In line with this trend, China’s Box Office has suddenly become the world’s biggest for the very first time. In major part due to a quick Covid recovery, the Chinese film industry is functioning right now and has brought in more revenue this year than the US film industry. While still not at its full strength, Chinese cinema currently has a more predictable recovery plan vs. its US counterpart.
We should also remain mindful of the fact that international perception of China is at an all-time low. Pew Research has released a report saying that many countries around the world like Australia, the UK, and Japan now have historically unfavourable views of China, partly due to the country’s response to Covid.
The Rising Global Internet
I’ll close with this. Benedict Evans, one of the world’s leading tech analysts, has written an article called The End of the American internet. Here are the opening two paragraphs.
“When Netscape launched in 1994 and kicked off the consumer internet, there were maybe 100m PCs on earth, and over half of them were in the USA. The web was invented in Switzerland, and computers were invented in the UK, but the internet was American. American companies set the agenda and created most of the important products and services, and American attitudes, cultures and laws around regulation and speech dominated.
This is not quite so true anymore. 80-90% of internet users are now outside the USA, there are more smartphone users in China than in the USA and western Europe combined, and the creation of venture-based startups has gone global.”
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I had the great pleasure of interviewing Christine Ng, Talent Acquisition at the Financial Times.
Christine is originally from Hong Kong but came to study in the UK for university, which led to her getting a masters in Business Psychology & Organisational Behaviour. After working in finance, launching her own chatbot startup and recruiting both at agencies and in-house across startups, SMEs, and corporates, Christine moved to the Financial Times.
At the FT, one of the world's leading business news and information organisations, Christine leads talent acquisition for all Product and Technology teams.
Christine is actively involved in advising, mentoring, and training startups on their talent acquisition strategy, both in London and in Hong Kong.
This interview is an experiment in audio and video. You will have the opportunity to listen to the audio interview above or the video interview below.
Here are some links to the content Christine mentioned in our interview:
BBC’s The Homecoming - “Historian David Olusoga concludes his series with the three African kings who stood up to empire, an irresistible crooner, race riots in Liverpool and the shaping of black British identity in the 20th century.”
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
Follow us on Twitter and Instagram! ⚡️
Analysing Pakistan’s Ban on TikTok 🇵🇰
The government of Pakistan banned TikTok earlier this month, based on complaints around the app’s “immoral” and “indecent” content. Kalsoom Lakhani, a friend of this newsletter, has written an amazing article in the Atlantic Council outlining the consequences of this ban. The claim of “immoral” and “indecent” content has been used by the Pakistani government to ban other apps, including livestreaming app Bigo, and dating apps Tinder and Grindr.
Kalsoom talks about the potential impact this has on Pakistan’s startup ecosystem. There has been significant positive momentum within Pakistan’s tech landscape over the last five years. A critical aspect of this is the increased interest of foreign investors towards Pakistani startups. Whenever a top-down ban by the government occurs, this affects how foreign investors assess the risks within a country like Pakistan. Compared to India’s ban of TikTok due to political tensions with China, Pakistan banned TikTok for reasons around morality. This sets a dangerous precedent that can challenge the livelihood of content creators on platforms like TikTok and shake the confidence of startups who now need to consider the potential situation of getting banned. Check out the full article here!
The Shifting Attitude of Chinese Students in the West
In a recent survey released by Chinese education startup Babazhenbang, we see that Chinese parents and their children are feeling increasingly hesitant to go to the West for university. 81% of affluent Chinese families are postponing their plans to send their kids abroad for higher education. The survey included stories from many parents who are now considering sending their children to universities in Asia rather than the typical destinations of the US, UK, Canada, and Australia.
The top two reasons why parents have shifted their mindset include health concerns around the coronavirus and increased discrimination due to political tensions. With recent events like the US revoking the visas of 1000 Chinese students deemed ‘security risks,’ it’s understandable that people in China feel new levels of hesitation. The main revenue stream for Western universities is foreign students, who get charged higher rates than local students. Chinese students abroad spend about $55.7 Billion a year. It’s an open question as to how big of a financial hole this situation will create for Western universities.
Oppo’s Smartphone Play in Europe
Huawei has faced challenges globally, getting variations of bans in the US and the UK. Amidst this challenge, Huawei’s biggest smartphone rivals like Oppo, Xiaomi and Vivo are doing pretty well. Oppo is currently the fifth largest smartphone maker globally but is now making big moves into Europe. Overall, Oppo forecasts 38% growth over the coming year and Xiaomi, another major Chinese smartphone maker, has grown market share 6 to 13% this year. In Europe, Samsung has 35% market share and Apple has 17% market share.
Oppo has just struck a deal with Deutsche Telekom, the biggest mobile carrier in the European Union, to allows Oppo to sell 5G devices in Germany, Poland, and the Netherlands. The company has set a goal of achieving 5% market share in Europe by next year. This is only the second year that Oppo has been operating in Europe and sales have tripled in 2020. The shifting tides of global technology players show us how the momentum of large Chinese companies cannot be stopped. While compliance and regulation might still pose an issue for Oppo in the future, for now the company has found success where their rivals Huawei have not.
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
Follow us on Twitter and Instagram! ⚡️
Vietnam and UK Agree to Free Trade Agreement 🤝
On September 29-30, British Foreign Secretary Dominic Raab visited the Vietnamese capital of Hanoi. After the meeting, the UK and Vietnam announced their intention to finalise a free trade agreement between the two countries. Bilateral trade between the UK and Vietnam totalled $6.7 Billion last year, and Vietnam is the second largest Southeast Asian exporter to the UK after Thailand. This agreement is one part of a complicated chess game the UK is playing. Earlier this year, the UK also finalised terms for a free trade agreement with Japan.
The UK is wallowing in the messy hangover of Brexit and struggling to cope with the coronavirus, all the while trying to recalibrate its economic future. Brexit will at the very least decrease the strength of the UK’s trade with the EU. And the UK’s harder line stance against China means that the UK will need to build stronger bonds with their other Asian allies. The UK has been increasing its investment in Asia, outside of China, both in terms of political ties and economic trade. It’s probably the right strategic move.
Chinese Livestreaming Through the Lens of Viya 🤳
How big is Livestreaming in China? One way to answer that question is by looking through the lens of Viya, China’s largest livestreaming star. Viya sells products online through hours-long livestreams she usually hosts on Taobao Live, the e-commerce shopping platform owned by Alibaba. Last year, Viya sold $6 Billion worth of products through her livestreams, which is about the same as the annual China revenue of supermarket chain Carrefour.
Brands partner with Viya to reach her audience of millions and provide consumers with new perspectives on their products. Viya’s livestreams help customers learn more and develop a sense of trust before buying certain products, which range from food to cosmetics to rocket-launching services and more. Not every livestreamer has the talent and audience of Viya, but the scale and growth of livestreaming has inspired most of the the country. One third of China’s internet population has participated in livestreaming in 2020.
The Growth and Popularity of Shein 👗
Shein is a Chinese fast fashion retailer that has been getting really popular in the West. A recent survey of Gen-Z Americans found that Shein was the second most popular online retail brand, behind Amazon but ahead of Nike, Lululemon, Pacsun, and Urban Outfitters. The company was founded in Nanjing in 2008 and generated $2.8 Billion in revenue last year, with customers all over the world.
Shein is a fast fashion e-commerce site like Fashion Nova or Boohoo, operating entirely online without any physical retail stores. The company sells primarily fashion items at low prices, usually lower than $20. Shein actually doesn’t target Chinese customers at all. Right now, Shein was one of the hundreds of Chinese apps banned in India. Their popularity seems to be increasing in America and given the political climate towards Chinese companies, they would probably benefit from keeping a low profile.
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I had the great pleasure of interviewing Ali Samir Oosman, who is currently leading Strategic Partnerships and Deal Flow at Microsoft for Startups, based in Dubai.
Ali is originally from Karachi, Pakistan and has spent many years working within the startup ecosystem both in Pakistan and across the wider region. He has worked in both developed and emerging markets as an investor, advisor, and executive in areas like social development, digital mapping, insurance, venture capital and media.
Having lived and worked in both the East and West, Ali has great perspective that you’ll see in this interview!
This interview is an experiment in audio and video. You will have the opportunity to listen to the audio interview above or the video interview below.
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
Follow us on Twitter and Instagram! ⚡️
Indian Podcast Consumption Rising Because of the Coronavirus
In India, people are increasing the amount of time they spend listening to podcasts. Major Indian podcasting companies like Gaana Podcasts and Aawaz.com have seen double to triple digit growth in listeners over the first half of 2020. With new increases in time spent on digital entertainment due to the coronavirus, the podcasting industry is one of the main beneficiaries. With a lot of local video production paused by the coronavirus, this also gives Indians another reason to listen to podcasts.
This behaviour mimics similar trends we are seeing in the West. Time spent listening to podcasts has been steadily increasing over the last five years and the trend has continued through the coronavirus. As podcasting gets bigger, so does the commercial opportunity. More advertisers are looking to podcasts as a marketing channel to reach new audiences and Indian consumers can provide one of the world’s biggest audiences.
Donald Trump’s New Target Might Be Ant Group
Ant Group, the Chinese tech company spun out of Alibaba, is planning an IPO later this year that would value the company at around $250 Billion. That would be the biggest IPO of all time and is going to take place as a dual listing in both Shanghai and Hong Kong. Given US-China tensions, some American politicians are looking to impose new regulations on Ant Group. Donald Trump is reportedly exploring sanctions against Ant and its payments app Alipay. US Senator Marco Rubio has also proposed measures to delay Ant’s IPO.
Ant Group is a Chinese company that will be listing on stock exchanges in Chinese locations and the overwhelming majority of their customers are Chinese. Compared to TikTok’s huge international userbase, it’s less clear how the US can affect the outcome of Ant Group. I don’t think the US government will be able to create any major hurdle for Ant Group right now, but it might send a message of caution for any large Chinese tech company looking to do business in America.
NBA Finals Finally Gets CCTV Broadcast in China
Ever since the general manager of the Houston Rockets Daryl Morey tweeted in support of the Hong Kong protests in October 2019, the NBA has faced increased scrutiny by the Chinese government and public backlash from segments of the Chinese population. Since then, CCTV (China’s state broadcaster) has not shown a single NBA game in the country. However, CCTV has finally decided to start airing NBA games again, starting with Game 5 of the NBA Finals last weekend.
I’m often optimistic about the ability of culture and entertainment to overcome politics. The NBA has made major efforts to repair their relationship with the Chinese government and Chinese people. Of course, not everyone hated the NBA because of Daryl Morey’s comments, but the negative PR in China was big enough to cause a major blow to the sports organisation. Moving forward, this move by the CCTV indicates that the NBA should be on good footing to do business within their biggest international market. At the end of the day, I think people on all sides of the issue can put aside their differences, even just temporarily, in order to unite over their common love for basketball.
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
Follow us on Twitter and Instagram! ⚡️
The BTS Live Virtual Concert That Broke Records
Over the last weekend, K-pop group BTS hosted a two-day virtual concert that was watched by nearly 1 Million people from 191 countries. People could watch the live concert from a variety of different angles and much like the virtual fans of sports leagues like the NBA, BTS fans could have their faces featured on screens at the stadium where the group was performing.
This is the second virtual concert BTS has hosted this year. The first took place in June and was called “Bang Bang Con: The Live.” Technology like augmented reality and virtual reality was used to make the concert even more visually impressive and interactive. Several K-pop groups, like many other musicians, have hosted virtual concerts this year but this latest BTS concert broke the Guinness World Record for most viewers of a livestreamed performance. This cements their position as the world’s biggest musical group.
Baidu Releases Free RoboTaxis in Beijing
Baidu is the company behind China’s biggest search engine and is sometimes referred to as the Google equivalent in China. Similar to Google’s own work in autonomous vehicles, Baidu has been doing a lot of research in autonomous vehicles. Last weekend, Baidu kicked of a program of self-driving robotaxis in the city of Beijing called Apollo Go. For a test period from October 10 to November 6, people in Beijing will be able to hail Baidu’s electric robotaxis for free.
The Apollo Go vehicles currently only drive within a predetermined set of specific routes but there are ambitious plans to expand further as soon as possible. Baidu isn’t the only tech company releasing self-driving vehicles. Others include projects from their rivals WeRide, Didi, and AutoX. Autonomous vehicles in China are progressing at a similar rate as the West, arguably even faster. When surveyed, Chinese consumers are currently more comfortable with self-driving cars vs. American consumers. As the world moves towards more autonomous vehicles, keeping an eye on progress made between rivals in China and the US is a look into the future of transportation.
Shenzhen Pilots New Digital Lottery Powered by Blockchain
In the Chinese city of Shenzhen, local residents will be able to enter a lottery to win up to 10 Million yuan ($1.47 Million) of digital currency. For people who register for the lottery, they will be getting the chance to earn a digital ‘red packet’ of 200 yuan ($30 USD). In order to register, people will need to use iShenzhen, the local blockchain-based public services platform created by Shenzhen’s government. Blockchain is the decentralised technology behind many digital cryptocurrencies like bitcoin and ethereum.
If someone is chosen as a winner, they will receive their red packet through the official government digital wallet. Right now, you can use this digital currency to buy goods at a select number of stores across Shenzhen, but can’t transfer it to another person or into your own bank account. To those of you interested in the adoption of digital currencies, you’ll realise that this move by Shenzhen’s government is incredibly bold. China has goals to become a completely cashless society and believes that a digital yuan, backed and controlled by the government, is the best way to achieve this. While not everyone is going to support this idea, it’s going to be fascinating to see how China’s aggressive adoption of digital currency affects the country’s financial services industry.
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I had the great pleasure of interviewing Jay Thornhill. Jay is an Australian-American whose one-year stay in China has lasted thirteen years. He is a cofounder and Head of Product Development at Baopals.Near the end of 2015, Jay and two close American friends, Charlie and Tyler, set out to make China’s largest online shopping platforms accessible and convenient for non-Chinese. They had no experience in ecommerce, no funding or guanxi, and plenty of legal, financial and technological uncertainty. However, they knew this problem needed to be solved, and there was nothing in the market like the solution they wanted.On March 1st, 2016, they launched Baopals (baopals.com). Baopals is a bridge to all products and sellers from Taobao, Tmall and JD, updating in real time and catered to foreign shoppers. In 4 years, the platform has helped expats in China purchase over 4 million items for CNY250 million in gross merchandise value.
What are the most exciting trends you are seeing in China today?
The speed with which China and its people build new infrastructure, adopt new technology, and take up new habits is a sight to behold. It’s taken for granted now that you can purchase anything you want with a few clicks on the phone and have it delivered to your door quickly and cheaply. Easy access to low-cost products and services is nothing new here, but consumers’ preferences are evolving too. Because China’s economy and culture changed so drastically the past 50 years, the generation gap might be wider here than almost anywhere in the world. The younger generation tends to be more open-minded, competitive, individualistic, and optimistic. A growing number want to carve their own paths, take more risks, try out more hobbies and interests, and live a more varied lifestyle than previous generations. It’s all relative, and China remains far off from the individualism and “pursuit of happiness” ethos of American culture, so it’ll be interesting to see what kind of balance is struck going forward.
How has the coronavirus affected your business and other businesses in your industry?
At the start of 2020, the outbreak looked as if it was going to have a dramatic effect on China but not the rest of the world. A lot of expats in China hurried to fly back home or travel while waiting for COVID to get contained in China. Since Baopals is built entirely for non-Chinese shoppers, we saw a drop of about 35% in sales almost overnight as expats fled the country. Then the outbreak turned into a worldwide pandemic and the borders were closed, so it became clear to us we weren’t getting those customers back for a while, and we wouldn’t benefit from new foreigners arriving in China for a while.
Because of lockdown measures, we had nearly all of our staff working remotely in February, which meant there were 3 or 4 of us working in a 3-story house built for a team of 50 and costing us an arm and a leg. Without an end in sight, we built new backend tools to better manage remote work, including a fully automated points and rewards system for our staff. When we saw how well everyone was working from home, we decided to ditch the office and we never looked back. The pandemic forced a lot of companies and individuals to experiment with remote work, and I think many have found it to be more viable than expected.
Our numbers rebounded more quickly than expected, possibly from shoppers preferring online shopping more now than in pre-pandemic times. With the improved efficiency we’re set up nicely for growth, and we’ve recently soft launched international service to do just that.
What is one thing people outside of China misunderstand about the region
Over the years I’ve become a bit guarded whenever the topic of China comes up with family or friends back home. I have to first assess whether they are genuinely curious about Chinese people and my experience in China, or whether they’re merely seeking to confirm views shaped by western media. If it’s the latter, then they likely won’t be receptive to certain ideas. For example, that many expats feel they enjoy more freedom and opportunity in China than they did in their homelands. Or the idea that Chinese people are not brainwashed – at least, no more brainwashed than the average person nowadays. Most Chinese are proud of their country’s achievements without blindly agreeing to all of the ruling party’s politics. They tend to be defensive when China is criticized, and they’re justified in feeling that western media has a negative bias towards China. The truth is often more nuanced than what is presented, and western media typically avoids anything positive that might be said about China. When one’s homeland is criticized by those who have little to no experience with the country, some defensiveness is to be expected.
What are some companies you admire in China?
China’s tech giants deserve a lot of admiration. Alibaba built the world’s best shopping platform in Taobao, with the most products at the best prices. The only problem is that it was built entirely for Chinese – and therein lay the opportunity for us to create Baopals, making Taobao easy for non-Chinese to enjoy.
Tencent has created, in my opinion, the most useful app in existence. WeChat has grown from a typical messaging app to a do-it-all digital platform that those in China can’t imagine living without. It’s an ecosystem for social life, payments, media, online shopping, gaming, events, and a wealth of other services. One of the first things we did as a company was create our official WeChat service account, which allows users to easily shop on Baopals without leaving WeChat. The bulk of our content and payments come through WeChat, so much so that in over four years we still haven’t built stand-alone apps (they are coming, though!).
I’m also a big fan of other platforms that make life in China more convenient, including DiDi (China’s Uber, with incredibly low fares and an English version to boot), Ele.me and Meituan for food delivery, and Hello Bike or Mobike for biking all over the city.
What is the single most important piece of advice you would give to someone trying to get their business to thrive in this time period?
If there’s any one-size-fits-all advice, it’s to focus on profitability above all else. That may seem obvious, but this seems to be forgotten all too often in the startup scene today. In the second year of Baopals, we got caught up in the hype of top-line growth, media attention, and potential fundraising instead of focusing on what really matters: the bottom line. Our sales doubled while our net profit fell nearly 70%. Once we shut out the distractions and honed our focus on profitability, we found all kinds of ways to improve efficiency and earnings. With the right focus, you can grow your net earnings and improve cash flow even when top line sales are falling. That helps you get through difficult times and thrive on the rebound.
Quickfire Questions
A - What’s the best thing you have watched recently? (Film, TV Show, Ted Talk, Youtube Video, etc.)
I’m enjoying the sci-fi series Raised by Wolves, about androids attempting to raise children and build a colony after leaving a post-apocalyptic Earth. It’s well crafted, visually stunning, and thought provoking. I always enjoy science fiction for being imaginative and exploring the unknown, while ultimately being about us. It’s also a great way to take my mind off anything that might be stressing me out in the real world!
B - What’s the best thing you have read recently? (Book, Article, Research Report, Tweetstorm, etc.)
I’m a big believer in Bitcoin, and there are a lot of exciting things happening in the crypto space these days. Bitcoiners have long anticipated corporations and central banks beginning to hold Bitcoin reserves, so the recent news that MicroStrategy allocated the vast majority of its cash reserves (over $400 million) to Bitcoin feels like a watershed moment. News just broke that Square has also begun purchasing Bitcoin, and no doubt more corporations are discussing how to do the same.
C - What’s the best thing you have listened to recently? (Song, Album, Artist, Podcast, Audiobook, etc.)
“Burn the House Down” by AJR. Never mind the dark lyrics; you can’t help feeling good and adding bounce to your step with this song playing.
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I had the great pleasure of interviewing Michael Yang, CEO of TikTok Agents. TikTok Agents is a California-based TikTok Marketing and Advertising agency. Michael is originally from China, went to university in the US, and has worked across several companies in gaming and consumer tech.
Michael’s professional and educational background gives him perspective on the East and West that I don’t hear often enough. I really enjoyed reading his answers and hope you will too.
What are the most exciting trends you are seeing in China today?
There are so many trends happening in China right now. 5G and AI both unleash great imagination and prospects for the country. As far as the industry I am working in, I think the most promising sector in the near future is the new consumer retail industry. With the rapid development of platforms such as Douyin and Kuaishou, the time for a brand to go from creation to becoming a major player in the market is getting shorter and shorter. And the whole integration of online e-commerce stores with brick-and-mortar stores is getting better and better. I think in the near future, online and offline will be fully integrated. Merchants will be able to comprehensively evaluate and quantify store performance from multiple dimensions, and consumers can also have a better shopping experience.
How has the coronavirus affected your business and other businesses in your industry?
I run a TikTok marketing & advertising company in the United States. This year, affected by the pandemic, billions of people left their jobs and were forced to stay at home. It is during this time period that many creators jumped into TikTok to become TikTok influencers. Many users also found joy and relaxation by coming to TikTok. This has brought TikTok rapid growth in its worldwide user base, including rapid expansion in the US.
Therefore, in terms of overall environment, the pandemic has created favourable external growth for TikTok. Of course, the impact of the pandemic is reflected elsewhere. For example, because of shelter in place in California, our team was forced to work online. This was the first time that I led the team through online collaboration. This is a new challenge for me and the team. Fortunately, our business is mainly online. We were able to accomplish most of our online tasks seamlessly, but we still need to improve on management and collaboration.
What is one thing people outside of China misunderstand about the country?
Wow, this is a very big topic. I think first, it depends on how you define the term “people outside of China.” I have lived in the US and the UK for the past 10 years, talking with people in different cities and different places. I have heard highly prejudiced opinions or bias about China, and I have also heard far-sighted and considerate views about China. I think this mainly depends on the person’s positioning and experience. Just like me 10 years ago, when I first set foot in the United States, I discovered that the United States was completely different from what I saw on TV in China. I only discovered and felt all of these things by experiencing them in person.
Overall, a lot of foreign people have a fixed stereotype that the Chinese government uses heavy-handed control to suppress the people, and the Chinese people will need to accept rules that may lead to a lack of human rights or freedom. But in my opinion, China is a completely pragmatic country and society. The Chinese government’s management model is totally results-oriented. For example, since the start of the epidemic, many Western media outlets have blamed the Chinese government for shutting down Wuhan. However, the fundamental reasoning of the government is that everything needs to be results-oriented. They were controlling the pandemic, reducing the speed of spread, and halting the number of infections and casualties. That is the purpose of their work.
So the foreigners were surprised and worried about human rights when the Chinese people were willing to accept the government’s compulsory control during the pandemic. Meanwhile, the Chinese people were worried and surprised about the irresponsible and ridiculous actions of foreign people who refused to wear masks and quarantine.
An important concept in economics is the trade-off between fairness and efficiency. An excellent social structure is able to maximize efficiency while ensuring fairness. In my view, Western society emphasizes fairness, while Chinese society emphasizes efficiency. The same principle is applied when we talk about doing business in China. If the result can be achieved in a short time, no matter what measures one may possibly use, it will be the most favorable choice.
What are some companies you admire in China?
Personally, I admire Bytedance. Bytedance’s products are very attractive and have strong user stickiness. As a young CEO, Zhang Yiming manages a team of more than ten thousand people. He has strong leadership and personal charisma, which makes him a role model for our generation.
What is the single most important piece of advice you would give to someone trying to get their business to thrive in this time period?
Hard times create heroes. The mission of starting any business is to solve problems and create value. In this year of frustration, loss, risks, and challenges, each of these “problems” need a solution. And every one of these solutions means an opportunity. So difficult times may also be a good thing for entrepreneurs. Without these problems, how can you talk about starting a business after all?
Quickfire Questions…
A - What’s the best thing you have watched recently? (Film, TV Show, Ted Talk, YouTube Video, etc.)
The BBC’s documentary—The Planets. When I start to look up in the sky and realize how small human history is, I feel humbled and relaxed.
B - What’s the best thing you have read recently? (Book, Article, Research Report, Tweetstorm, etc.)
The Deer and the Cauldron - a historical fiction novel written by Jin Yong. It depicts precisely Chinese characteristics and values. I recommend it strongly if you are interested in knowing more about Chinese culture and social behaviours, especially the way government interacts with normal people.
C - What’s the best thing you have listened to recently? (Song, Album, Artist, Podcast, Audiobook, etc.)
10 Minutes of relaxing meditation music
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China’s Box Office Recovering Better Than Expected 🎞
In the midst of China’s famous Golden Week holiday season, Chinese movie theaters are getting more business than expected. Total box office receipts in China within the first few days of Golden Week were $368 Million, which is 14% lower than the same period last year. Cinema owners have been pleasantly surprised by the recovery, citing facts that Chinese people might have more need for cinema entertainment, especially since they cannot travel overseas for this year’s Golden Week.
On the other hand, the world’s second biggest cinema operator Cineworld announced that they will be cutting 45,000 jobs across the US and UK. While Western films like James Bond’s No Time to Die and the latest film version of Dune have been postponed until 2021, most domestic Chinese blockbuster films are still coming out this year, contributing to the optimism of China’s film industry. For many people working in Hollywood, China has been slowly rising over the past few years to become the most important cinema market. With the coronavirus, that entire process may have sped up.
Stats around Livestreaming = Huge in China 🎥
I’ve been enthusiastically writing about Chinese livestreaming for a few months in this newsletter. A recent report has come out saying that there were 309 Million e-commerce livestreaming viewers over the first half of 2020. That’s one third of China’s total internet population. This makes livestreaming the fastest growing internet sector in China. People from rural farmers to lawyers to property developers to major tech CEOs are now using livestreaming to sell products.
Could we soon see a world where livestreaming becomes popular in the West? Certain cultural and technological factors make livestreaming more relevant to Chinese audiences right now, but the authenticity and interactivity of livestreaming is something I think will become more popular across the world. Western social apps like Instagram are already experimenting with this and I only see this trend growing even further.
A TV Network in the Philippines Turns to Streaming 📺
The largest TV network in the Philippines, ABS-CBN, has been denied a broadcasting license by the government, forcing the network to go off the air in June. Part of this stems from a dispute between the network and Philippine president Rodrigo Duterte. While ABS-CBN has struck a partnership with another network in order to create a new brand that will start broadcasting on free TV later this month, ABS-CBN has still been forced to get creative over the last few months.
Instead of closing down, ABS-CBN has shifted all of their programming to social media and their own streaming platform iWantTFC. While ABS-CBN’s core business is still reliant on success in broadcast TV, they have seen good results from their online platforms in terms of views and new digital subscription revenue. They say necessity is the mother of invention. I foresee a world in the future where major networks are online-only, rather than TV broadcast networks. While ABS-CBN had to do this because of a government order, the world is moving into the direction where even the most traditional TV companies are shifting to digital.
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China’s Golden Week is Tourism Health Check 🗺
Right now is China’s ‘Golden Week,’ a national holiday that usually involves people traveling both domestically and internationally. Given the coronavirus, most people in China are adjusting to how they approach Golden Week this year. China’s tourism ministry reported that 425 Million people have travelled domestically within the first four days of Golden Week, which is lower than the 542 Million people from last year. Overall tourism revenue from the first half of Golden Week is reported to be $45.9 Billion, which is a 31% decrease from the same time last year.
Trip.com, China’s largest online travel agency, has said that domestic travel bookings are at about 80% of pre-pandemic levels. These numbers are all very large, but overall shows a decline in travel and tourism-related spend. While restrictions have been pretty much lifted and people still flocked to major tourist sites this week, the travel industry is still in trouble. This shows signs of recovery, but there’s still a long way to go before consumption and tourism reaches pre-Covid levels and people feel safe enough to travel.
Burberry is First Luxury Brand On Chinese reality TV 🧣
Much like in the West, reality TV shows are a super popular category in China. As I’ve written about before, some of the most popular Chinese shows are based around street culture—like hip hop and street fashion. One example of this now is the show “Street Dance of China,” a hit show produced by streaming platform Youku. For brands, these reality shows are great opportunity to form a creative partnership and get in front of young audiences.
Well Burberry has now become a trailblazer as the first Western luxury brand to partner with a Chinese reality TV show, “Street Dance of China.” Burberry has launched a co-branded box with the show and souvenirs from the show have also been featured as free gifts with certain Burberry purchases. And there was a special livestream on Tmall, where people could buy a limited edition Burberry item inspired by the street fashion on the show. In a world where it’s difficult for a brand to stand out, especially in China, having more of an integrated commerce partnership with a hip, young TV show will probably work better than just running ads.
Alibaba Partners With Swiss Duty Free Giant
Chinese e-commerce giant Alibaba has just announced a partnership with Swiss company Dufry, the world’s largest operator of airport duty free shops. Dufry was founded in Basel, Switzerland in 1865. The two companies have now entered a joint venture where Alibaba purchased a 10% stake in Dufry for $273 Million. People estimate that the logical next step is for Alibaba to start launching airport duty free stores across China. Right now, the state-owned China Duty Free Group dominates airport stores across the country.
When I think of offline commerce, I usually don’t think of airport duty free stores. However, duty free retail in China has grown 31% over the last two years, reaching a size of $7.6 Billion. Alibaba is always looking for growth, and this partnership with Dufry gives them much more legitimacy to get into duty free retail. At the same time, Dufry is aware of the huge opportunities in China that could be essential to the future of the company.
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Netflix Releases Controversial Indian Documentary ‘Bad Boy Billionaires’ 💰
There’s a new show on Netflix called ‘Bad Boy Billionaires,’ which profiles four Indian billionaire businessmen who are currently under investigation for fraud. Netflix had planned to launch the show last month but Subrata Roy of the Sahara Group had filed an injunction preventing the show from being released. Since Roy is one of the four billionaires profiled in the show, his legal team argued that the show would damage his reputation. However, an Indian state court lifted an injunction over the last week and now ‘Bad Boy Billionaires’ is live on Netflix in India.
Netflix has faced some challenges in India before, receiving complaints and censorship challenges against content deemed offensive. From Netflix’s perspective, the company is arguing for free speech and their own financial well-being. The new ‘Bad Boy Billionaires’ show is just the latest incident the American company is facing in their Indian operations. The four billionaires they chose to profile have some of the most high profile legal cases in the country—Roy is currently out on bail and two of the other billionaires are currently in the UK facing extradition to India.
India Plans To Launch Their Own App Store 📲
Last week, a group of prominent Indian tech companies formed a coalition against Google’s Play Store, vowing to create their own app store. This comes after Paytm, India’s largest tech startup valued at $16 Billion and with 350 Million users, was pulled from the Google Play Store—a decision Paytm’s CEO called ‘arbitrary’ and “a sanction by an American company on an Indian one.” Google’s reasoning was that some of the cashback and prize functionality of Paytm violated their policies against online casinos and gambling.
Google also had plans to create a new 30% fee for any in-app purchases in the Indian Play Store in 2021. This caused particular outrage for Indian startups as in-app purchases are a primary revenue driver for Indian startups vs. Western startups. Due to pressure from this Indian coalition of companies lobbying against the Play Store, Google announced yesterday that they are deferring this new 30% fee to 2022. At the same time, Paytm has launched their own mini-app store. Indian technology companies are developing more clout. This bold decision would have been unthinkable a decade ago, and the Indian companies would have had significantly less leverage.
China Investigates Google’s Android Mobile Operating System 🤖
Meanwhile in China, the Chinese government is planning to launch their own antitrust investigation into Google’s Android mobile operating system. The antitrust complaint was initially filed by Chinese tech company Huawei, who is accusing Google of anticompetitive practices that have hurt local Chinese companies. An official investigation is expected to be announced soon.
There are many motivations behind this. The tensions between the US and China spill over from politics into business. It’s not a coincidence that Huawei is filing the antitrust complaint against Google, as Huawei has been blacklisted by US President Trump. The ongoing drama regarding the forced sale of Tiktok adds even more fuel to the fire. And looking beyond international politics—we can see both in India and in China that Western tech giants like Google are getting more and more pushback, which is a function of the growing leverage of Asian countries. And unfortunately for Google specifically, the company is now being accused of antitrust violations both in the US and China!
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I had the great pleasure of interviewing Ken Uehara, an award-winning filmmaker based in London who currently works at UniDays and previously worked at UNILAD. Ken is half-Dutch, half-Japanese, and grew up in Manila, Philippines.
Having lived and worked in both the East and West, Ken has great perspective that you’ll see in this interview!
This interview is an experiment in audio and video. Compared to all the previous written interviews, you will have the opportunity to listen to the audio interview above or the video interview below.
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Disney’s Asian Hope Is The Realest Fairytale 🏰
It’s a tough time for Disney. Earlier this week, the company announced that they will be laying off 28,000 employees in the US, primarily people working at their theme parks. Disney has laid part of the blame on California’s governor Gavin Newsom, who refuses to allow Disneyland to reopen. Disney is truly an international company and outside of the US, they have theme parks in Paris, Hong Kong, Shanghai, and Tokyo. While all of their parks closed down earlier this year, the Asian parks are now back open.
Shanghai Disneyland reopened in May; Tokyo Disneyland reopened in July; and Hong Kong Disneyland reopened last week, after a couple months closure between July and September. Parks and resorts is the single biggest revenue driver for Disney. Given their restrictions in California, Disney should be looking to their Asian properties as their biggest opportunity for immediate growth. While Disney has suffered from the poor reception of the recently released film Mulan, they can look to their Asian parks as a potentially strong revenue stream in the time of covid. For now, it looks like Disney’s potential Asian customers could have a bigger impact on their bottom line than their Western customers.
Apples Launches New Public Health Initiative in Singapore 🍎
Apple has partnered with the government of Singapore to launch a new mobile app called LumiHealth, which provides users with a personalised program to encourage healthy physical activity through the Apple Watch. This is one part of a broader program created by the Singaporean government called the Smart Nation Initiative, where technology will be used to find solutions to improve the lives of all Singaporeans. The LumiHealth app was a joint project by Apple, the Singaporean government, and a group of physicians and public health officials. The app provides users with a set of wellness challenges that they can complete using their Apple Watch.
The app is meant to be very interactive, personalised and provide strong incentives such as cash rewards. Users must have an Apple Watch and must download the LumiHealth app in order to participate. From my point of view, I have more faith in technology companies providing better wellness solutions than government. But what could be even better is a public-private partnership, like this one between Apple and the Singaporean government. And honestly, if you were to rank the world’s governments by level of competence, Singapore would be near the top of the list. Apple gets more Apple Watch sales and App downloads, and the Singaporean government should get healthier citizens. Considering the scrutiny Apple is facing from many governments around the world, getting into a cozy relationship with Singapore’s government should have long-term benefits.
Declaring The Golden Age of Southeast Asian Tech 🏆
Tech in Asia is a brilliant publication covering Asian tech news. You may remember my interview a couple months ago with Andrew Baisley, Managing Director of Tech in Asia Studios. From October 19-22, Tech in Asia is hosting a Virtual Conference called “Southeast Asia’s Golden Age: 2021 and Beyond.” The enthusiasm of that title is underscored by some key takeaways and highlights Tech in Asia has put together in this article, which talks about the biggest growth drivers, opportunities, and challenges in Southeast Asian tech.
Over the last two years, the top-funded startup vertical in Southeast Asia has been logistics and transportation, indicating the need for the fundamental infrastructure of the digital economy. Covid poses challenges to the growth of the tech industry, but there are still untapped opportunities in verticals like food, health, education, and more. These facts are just a preview of a full report that goes into much more detail. You can get the full report by signing up for the 2020 Tech in Asia Virtual Conference! At the end of the day, Southeast Asian tech is at an all time high, and growth is expected to rebound in spite of the coronavirus. The young, fast growing, dynamic region of Southeast Asia can’t be stopped.
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Lessons from China’s Domestic Tourism 🛫
All over the world, professionals in the travel industry are struggling because of the coronavirus. In China, the tourism industry isn’t doing as poorly as you might expect and right now, Chinese domestic tourism is going through a strong recovery. From all time lows at the beginning of the year, the Chinese domestic tourism industry has emerged out of the global pandemic by doing some innovative things. Livestreaming has been used as an entertainment/commerce channel for most travel companies, who are using livestreams enthusiastically to sell products.
Ctrip, China’s largest online travel agency (OTA), has put on several livestreams hosted by their co-founder James Liang. On each livestream, James Liang really puts himself out there by dressing up in traditional Chinese outfits and selling products related to major domestic tourist destinations. And each livestream has sold millions of dollars worth of products. Airlines, hotels, and destinations are all using livestreams to sell aggressive discounts. For example, China Eastern airlines now has an ‘all you can fly deal,’ which allows you to travel on an unlimited number of domestic flights over a several month time period. You can find even more examples in this presentation from Jing Daily and Dragon Tail Interactive. I hope other countries can take some inspiration from the Chinese travel industry.
The ASEAN Tourism Plan 🌏
A.S.E.A.N. stands for the Association of Southeast Asian Nations, which is an intergovernmental organisation you might think of like the UN of Southeast Asian countries - Singapore, Indonesia, Thailand, Philippines, Malaysia, Vietnam, Brunei, Myanmar, Cambodia, and Laos. All of these countries have suffered from drops in tourism due to the coronavirus. Beginning with an agreement on joint tourism cooperation several months ago, the ASEAN nations are trying to work together in order to encourage more inter-country tourism.
Malaysia and Singapore currently allow cross-border travel for essential services, and Tourism Malaysia is looking to open up a travel bubble with other ASEAN nations. Vietnam has also proposed a travel bubble with their ASEAN neighbors. Unfortunately, new covid spikes keep pushing back these well-intentioned plans. In the short term (and for who knows how long), we’re moving to travel bubbles that will first start opening up at a regional level, such as within ASEAN, within Europe, or between Australia and New Zealand.
Thailand’s Wealthy Tourist Strategy 💸
Next week, Thailand will begin receiving its first foreign tourists, flying into Phuket from Guangzhou, China. Since April, foreign visitors haven’t been allowed into Thailand. The tourism industry makes up 11% of Thailand’s GDP, and is expected to contract dramatically this year. On the flipside, Thailand might have a tourism advantage, since there have been zero cases of local transmission of the coronavirus over the last hundred days. This might make Thailand appear to be a safe, attractive tourism destination.
At the same time, Thailand is looking into a broader mass-scale border opening at the beginning of next year. The Thai government has also discussed the possibility of issuing new special tourist visas to attract more foreigners and new local investment incentives to attract international investors to come to the country. Two days ago, I wrote about the Japanese government creating a new startup visa category for foreign university graduates. Because of the coronavirus, it seems that every Asian country will slowly start rolling out new incentives to attract foreign tourists, investors, and businesses. So if you’re looking to travel, work, or live in Asia in the near future, you may have more options now than ever before.
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China’s Vow to Go Carbon Neutral by 2060 ☁️
Last week at the UN General Assembly, Chinese President Xi Jinping declared China’s new public plan to go carbon neutral by 2060. As the world’s biggest climate polluter, China’s announcement was a major step forward in the human battle against climate change. Making this statement is one thing, but actually marshalling the resources and regulations to make this happen is a different story. This requires the replacement of pretty much China’s entire current energy system.
It was a bold move for Xi Jinping that many people did not expect. This should also prompt a response from the US, the world’s second biggest carbon emitter. President Donald Trump has not set any specific targets for the US and actually plans to pull out of the Paris Climate Agreement in November. There are political undertones to the conversation around climate change, which is now opening as another front in the tensions between the US and China. With this new declaration by Xi Jinping at the UN, China wants to increase its soft power as China comes across as a forthcoming team player.
Virtual Events and Experiences in Indonesia 💻
The events industry, like many other industries, has had to pivot their model because of the coronavirus, shifting many of their events from offline to online. You have seen this across the East and West. And in Indonesia, it’s a similar story where local tech companies are responding to more online demand by creating new virtual products, such as KiosTix and Gojek. KiosTix is a ticketing management company that launched an online event hosting platform in April called KiosLive. This new platform focuses on providing a space for musicians to host live concerts online and also has interesting features like allowing people to simultaneously order food delivery while watching an online event.
Gojek is the multi-billion dollar Indonesian tech company best known for their ride-hailing app. Gojek has been expanding into other areas in a quest to become more like a SuperApp, and they launched GoPlay Live in July. This is a new on-demand live video platform for people to host large events. In September, Gojek launched a similar product called Loket Live Studio, which is focused more on helping content creators host online events. Gojek has also integrated features like live shopping and virtual donations into these platforms. Whether these companies succeed or new startups come into the picture, the commercial opportunity of online events is huge in a country like Indonesia, which has a population of 260 Million people.
Hiding Your Chinese Apps in India 🕶
Since the Indian government banned hundreds of major Chinese mobile apps a couple of months ago, some Chinese companies have been trying to figure out workarounds to get back into the Indian market. One common tactic is sneaky rebranding. For example, Chinese company Kuaishou had an app banned earlier this year called Kwai. However, Kuaishou has just launched Snack Video in India, which is very similar to the banned Kwai app. It’s a game of cat and mouse, and there are always going to be ways to get around the rules.
Some have reported Chinese developers now teaming up with Indian developers to be seen as an Indian company. Other Chinese companies are registering as new companies with a Southeast Asian headquarters. And technically, one could argue that if the Indian government bans a specific app then a thinly veiled clone app should be allowed…until the new clone app is banned. The Indian government has actually followed up with more ban lists that specifically target these new clone apps. Either way, India is so big that many Chinese companies can’t afford to lose access to the market. Or at the very least, they will do everything in their power to stay connected to Indian consumers.
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We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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Apple Opens First Online Store in India - It’s Just The Beginning 🇮🇳
On September 23, Apple launched its first online store in India. What does that mean? Now, Indians can go online to order Apple products and services directly. You might be surprised to learn that this is the first time this has ever been possible in India. In the past, you could only purchase Apple products through authorised local partners offline. It has also been hard for Apple to open a retail store in India considering local government regulations. These regulations are being relaxed and Apple plans to open their first offline retail store in India sometime next year. The Indian government has also offered billions of dollars in incentives for smartphone makers to move more of their operations to the country.
Apple started manufacturing iPhones in India two years ago, which now allows Apple to sell more affordable phones for the market. This is the 38th country in the world where Apple has launched an online store. But as you know, India is the 2nd biggest country in the world by population. Opening an online store (and eventually offline retail) indicates just the beginning of Apple increasing their marketing investment within the country. India is becoming a more important market for Apple and we should start seeing more investment soon.
Japan Wants More Foreign Entrepreneurs - Are You In? 🗾
The Japanese government will now start offering a two-year entrepreneurship visa for foreign students graduating from a Japanese university who want to open up a business in the country. Previously, it was a lot more difficult to stay in Japan after your graduation. These sorts of programs usually come with lots of hidden details, but at the very least it signals that the Japanese government is taking an interest in attracting more foreign entrepreneurs to the country.
At least within my world of friends, colleagues, and influences, Japan has a really strong, positive brand. These ‘country brands’ will matter more in the increasing world of remote work. And I’m personally predicting mass significant global migrations in both students and workers in the aftermath of the coronavirus. As a country, there are a lot of things you can’t control about what makes you attractive. But laws and regulations around visas play a big role in the decision-making to attract more people and you can definitely affect that. Let’s see how seriously the Japanese government wants to invest in this and let’s see how many people—especially entrepreneurs—end up moving to Japan over the next years.
Even More Investing in Asia from KKR and SPACs 🌏
KKR, one of the world’s biggest private equity funds, has just finished raising a new $11 Billion dollar fund to focus on investments in Asia. This is the biggest Asian-focused private equity fund ever raised. In related news, Hong Kong-based Pacific Century has combined with the investment fund of Silicon Valley tech billionaire Peter Thiel to create a new $625 Million SPAC focused on Asia. SPAC stands for Special Purpose Acquisition Company, which is a new financial tool to help private companies go public through an acquisition.
This new Asia-focused SPAC is called Bridgetown Holdings and is specifically targeting companies in Southeast Asia within sectors like tech, financial services, and media. For small startups or bigger companies across Asia, this means that there are more foreign investors and potential acquirers. You can usually interpret a trail of money as a leading indicator for economic growth. These new Western investment vehicles focusing on Asia show us that the global investment community is looking even more to Asia’s fast-growing companies.
BONUS TikTok Marketing & Advertising 101
At the urging of some readers, I wanted to share something else I’m working on outside of East West Hurricane. If you are a company struggling to achieve the marketing results you really want, I would highly recommend you looking into TikTok. I fully believe it’s currently the world’s most underrated marketing channel. I’ve put together a crash course on TikTok, which you can check it out here.!
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It was December 2018 and I had just walked into an office building. I escaped from the hot, sweaty outdoors into the cool air conditioning inside.
I took the elevator to the eleventh floor and soon found myself in a conference room sitting across the table from the CEO of an artificial intelligence (AI) startup.
But I wasn’t in San Francisco or New York or London. I was in Karachi, Pakistan.
The founder/CEO of this startup had received his master’s degree in AI from Stanford University and was blowing my mind describing his company’s product. A few minutes into our meeting, his COO walked into the room and apologised for being late. This COO had received his MBA from the University of Michigan.
Both the CEO and the COO were born and raised in Pakistan, and went to the US for school. After years of academic and professional achievement at the highest levels in America, they decided to come back to Pakistan.
Their stories are indicative of a broader trend in the country’s development.
In 2005, the city of Karachi was a lot more dangerous. The country of Pakistan was in a lot more turmoil. If you were a young, ambitious high school student with the means to afford it, your likely choice was to get a one-way ticket to a university in the West.
And when you went to school in a Western country, your goal was to stay in that country after you graduate, get a job, and eventually walk the path to citizenship.
While that’s still a common path, the tides are slowly shifting. Part of that is because Pakistan provides better opportunities now vs. fifteen years ago.
I asked the two startup founders sitting in front of me, “Why did you decide to come back to Pakistan?”
They replied telling me that the Pakistan they grew up in is completely different from the Pakistan of today.
The country is now safer and more stable. The opportunities are bigger and more untapped. And considering their Western pedigree, they would have a huge competitive advantage in Pakistani business.
And part of them really wanted to help contribute to improving their home country.
Twenty years ago, that romantic notion of helping your country would be considered a lot more foolish and futile for Pakistanis. In 2020, it’s becoming more common for the younger generation.
But the altruism is combined with a very rational assessment of Pakistan’s commercial opportunities.
Pakistan is a country of 212 Million people, the fifth most populous in the world. 65% of Pakistan’s population is under the age of 30. Pakistan is one of the fastest growing emerging markets.
You can see the obvious billion dollar opportunities - in e-commerce, fintech/digital banking, edtech, and much more. Whether it’s next year, in five years or in ten years, we’re going to start seeing more Pakistani tech unicorns, startups with a valuation over $1 Billion. Currently, there are none.
It’s playbook that you can see play out as countries become wealthier. The biggest e-commerce and fintech companies in Southeast Asia are worth billions of dollars and are continuing to ride the Asian wave of growth over the last decades.
As much as you feel love for America as an international student (which I personally experienced), you always have some sort of connection with your family, friends, and the identity of your home country.
If your home country is struggling, then you’re less likely to want to go back after you graduate.
What we see today is that when emerging markets are growing, people from those emerging markets are more likely to go back after university.
My previous interview guest Rashi said the same thing about Indian international students in the West increasingly returning to India for job opportunities.
She said, “Another misunderstanding is that people just assume all Indians aspire to come to the West. That may have been true twenty years ago but not now, when opportunities are more attractive in India. I don’t think all people in India look to the US and say ‘that’s where I want to be’ or ‘that place is miles ahead.’”
The story of growth, optimism, and hope I heard from these two Pakistani founders is something I would like to see in every country around the world.
After our meeting, I walked out of the building with a smile. Pakistan is a great country with huge opportunities and good people.
That AI startup in Karachi, founded by two Western-educated Pakistanis, is the kind of company I’m interested in hearing about. Most Western tech reporters won’t bother covering them. But that’s one of the reasons why I have created East West Hurricane, to share stories like this.
And these two founders I met in Pakistan are the tip of the iceberg. There are going to be many more people from Asia who get educated in the West, and return to Asia to start their entrepreneurial journey.
There’s already a phrase for this in China = ‘Sea Turtles.’ This is the term given to young Chinese who may have studied and worked overseas, but have now come back to China to pursue their career and startup companies.
And it’s not just China. Here are some notable examples from around Asia:
Colin Huang - Founder of Pinduoduo, China’s largest social commerce company currently worth $89 Billion; masters degree from University of Wisconsin.
Nadiem Makarim - Founded Indonesian tech startup Gojek in 2010, now valued at $10 Billion; undergrad at Brown University and MBA from Harvard Business School.
Chatri Sityodtong - Founded One Championship in 2011, Asia’s biggest MMA promotion; undergrad at Tufts University and MBA from Harvard Business School.
Whether it’s Chinese Sea Turtles or Pakistani Sea Turtles or Indonesian Sea Turtles, more people are swimming back to Asia.
Because they can see that Asia’s future is brighter than its past.
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We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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Indian Tech Unicorn Flipkart Decides On an IPO 🛒
Flipkart is India’s biggest e-commerce company and one of the country’s most successful tech startups. In India, Flipkart aggressively competes (and wins) against Amazon! In July, Flipkart raised another $1.2 Billion from Walmart and other investors including Tencent, Tiger Global, and Microsoft. This puts Flipkart in a comfortable place to deal with the coronavirus. Indian e-commerce is supposed to be worth $99 Billion by 2024 and Flipkart is poised to play a leading role in that growth.
Amidst their recent success, Flipkart has announced that they plan to take the company public sometime next year with a target valuation of $50 Billion. Flipkart is incorporated in Singapore but it might make sense to go public in the US, considering their connection with American retailer Walmart. In 2018, Walmart spent around $16 Billion to acquire a majority stake in Flipkart, which is still the single largest foreign direct investment in India. Walmart now owns about 80% of the company. If they can pull of an IPO in 2021, Flipkart will reach new levels of giant success.
Developing Verdicts on China’s Economic Outlook 🇨🇳
Chinese society continues to progress at a different pace from the rest of the world. The OECD (Organisation of Economic Cooperation and Development) has revised their latest growth forecast for China, reporting that China will be the only G20 country to see positive economic growth this year. Goldman Sachs expects the Chinese Yuan currency to strengthen over the next year. If China’s recovery is similar to the recovery the rest of the world will eventually experience, we can learn some things from China.
In China, online grocery and food delivery peaked during the coronavirus but has now stabilised as a more permanent habit for many people. E-commerce (and specifically livestreaming) has increased massively, which still remains at all time high levels of behaviours. At this point, cinemas are reopening in China and displaying a promising (though not amazing) recovery. If looking at China is looking into the future of post-Covid consumer behaviour, we will all be ordering online and going back to movie theaters. And maybe we can start looking even more to China as a place of the future.
China’s Very First Virtual Idol Talent Show 🤖
Speaking of futuristic China, the streaming platform iQiyi has announced the launch of a new ‘virtual idol variety show.’ This is a new talent show consisting entirely of 30 virtual CGI-created influencers ‘competing’ in different tasks to be crowned the winner. This will be called Dimension Nova, and the judges will be actual people who are popular idols—Esther Yu, Wang Linkai, and Angelababy. iQiyi is the same network behind Rap of China and The Big Band, two of China’s biggest talent shows.
Trying to digest the concept of a ‘virtual idol variety show,’ I’ve got so many questions and points I need to clarify, but overall I’m really excited to see how exactly this works. I’ve written about virtual influencers before and it’s a fascinating new take on marketing. The world’s first virtual influencer is considered to be Hatsune Miku, who was created in Japan in 2007. Since then, Japan and China have been the two countries who have most passionately embraced the virtual influencer concept. If this show takes off in China, maybe the rest of the world will eventually start creating virtual idol variety shows. Think about that.
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We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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European Fintech Companies Strive for Success in Southeast Asia 💳
As you may have noticed from my previous articles, fintech in Southeast Asia is one of the biggest business opportunities in the region. The quality of financial services in Southeast Asian countries is quite poor; mobile penetration is high; and the coronavirus is pushing even more consumer behaviour online. This article from Sifted highlights how Asia is the main priority for European fintech companies thinking about international expansion.
Companies like Revolut, Thought Machine, and Transfer Wise see Asia as their biggest opportunity and have made recent moves to establish a presence in the region. They face competition from local Southeast Asian players and Chinese players, on top of government regulation on topics like digital banking licenses. The articles notes how many European fintechs are prioritising expansion in Asia over any other region, including North America. In the global fintech world, it seems that Asia is increasingly becoming seen as the ultimate prize.
Kuaishou’s Next Step in Growth Leads to IPO 📽
Kuaishou, the Chinese short-form video app that serves as primary rival to Douyin (the Chinese TikTok), has had a stellar year. Much like Douyin, TikTok, and most other mobile entertainment apps, Kuaishou’s growing user numbers and engagement have also led to major increases in revenue. To cap off their success in 2020, Kuaishou has announced that they plan to go public in Hong Kong early next year.
Kuaishou’s latest valuation is $28 Billion, which makes them one of the top 20 most valuable tech startups in the world. The company was founded in Beijing nine years ago and has around 300 Million daily active users. This year, the e-commerce livestreaming behaviour has exploded on the app, with 170 Million people doing daily livestreams. While TikTok might go public in the US next year (depending on the latest news in the acquisition saga), Kuaishou is purposely choosing the Hong Kong Stock Exchange, which is at least partially impacted by the difficult state of US-China relations.
Pinduoduo’s Moving Even Deeper into Groceries
Pinduoduo is China’s premier social commerce app, a publicly traded company on the Nasdaq worth $93 Billion dollars that is only five years old. They set very ambitious goals and usually achieve them. One of the next priorities for Pinduoduo is selling groceries and helping the Chinese agricultural industry. Pinduoduo has just announced a strategic partnership with China Post, which is basically China’s national postal system, like the US Postal Service of China.
Right now, the China Post has the ability to deliver products anywhere in the country. With a Pinduoduo partnership, this expands the levels of access for both sellers and buyers on the e-commerce platform. Now even more remote farmers can sell their produce more easily on the platform and buyers can receive their goods more quickly through China Post. Fresh produce is one of the most commonly sold items on Pinduoduo, and one of the main sales methods comes through livestreaming. This should help take China’s agricultural industry into the future, even just by one further step.
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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Indian Unicorn Zomato Plans to Go Public Next Year 👇
Zomato, the Indian food delivery company, has just raised $250 Million and described their plans to go public in the first half of next year. As previous interview guest Rashi has said, Zomato is a prime example of an inspiring Indian tech startup that has found global success. The 12-year-old company is currently worth $3 Billion and this new fundraising round was partly to provide more cash reserves in the time of the coronavirus.
While Zomato has struggled a bit because of the coronavirus, their latest announcements are optimistic for the future. Another Indian competitor in food delivery Swiggy has eliminated hundreds of jobs this year. At a global level, food delivery companies are benefitting from the coronavirus as eating at home becomes a forced, newer behaviour. If Zomato can hold on and succeed with this new investment, they should be able to have a large IPO next year. That would be a major success story for Indian tech.
Tencent Wins Contract to Broadcast Premier League in China
After the Premier League cancelled their $665 Million agreement with PPTV earlier this month, it was unclear how Chinese fans would be able to watch matches from England’s biggest football league. Last week, the Premier League announced the signing of a one-year broadcast deal with Chinese tech giant Tencent. Tencent will have the exclusive rights to play Premier League games in China, hosted on their platforms including WeChat, QQ, and Tencent Video.
The TV rights to England’s Premier League are some of the most sought after in the world. And China has hundreds of millions of football fans eager to watch the games. For the Premier League, China is their most lucrative emerging international market and TV rights is the biggest revenue driver for the league, as with most sports leagues. However, the sports industry is in a precarious position considering that full stadium attendance is currently impossible, and sponsors/advertisers might want to renegotiate their deals in light of Covid. In the situation of Tencent and the Premier League, right now the Premier League needs Tencent more than Tencent needs the Premier League. Before Covid, it was the other way around.
Youtube Shorts Launches in India 🎥
With TikTok still banned in India, many companies are trying to fill the TikTok-sized consumer hole with their own mobile apps. This includes local startups, but also American companies like Triller, who have partnered with India’s JioSaavn, part of Reliance group. Another example is Youtube, who have just launched YouTube Shorts in India.
YouTube Shorts is basically a short-form (less than 15 seconds) video app that gives people different creative tools to upload a video with background music. Much like Instagram Reels, this is a blatantly opportunistic move to capitalise on the short-video trend that has been best captured by TikTok. While YouTube Shorts has been launched first in India and then will expand globally, India is the one market where YouTube Shorts won’t have to compete with TikTok. So long as TikTok is banned in India, the country is now the world’s biggest market ‘up for grabs’ for any short-form mobile video app. And that’s a very big opportunity.
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I had the great pleasure of interviewing Ryan Molloy, CEO of RedFern Digital. RedFern Digital is a full-service marketing agency based in Shanghai that helps international brands succeed in China, with a particular focus on e-commerce. Their clients have included Burger King, Fireball Whisky, and Panasonic. Ryan is originally from the UK, but grew up in Suzhou and has been living in China for most of his life. Prior to RedFern, Ryan worked in market research and consulting.
Having lived and worked in both China and the UK, Ryan has a great East West perspective that you’ll see in this interview!
What are the most exciting trends you are seeing in China today?
There are two main angles to trends in China. You’ve got platforms and you’ve got consumers. And we’re constantly trying to find our balance between the two.
Chinese platforms are so dynamic. Douyin changed their commission structure this week. Little Red Book changed their commission structure the previous week. These little changes have major and immediate impact on both our strategy and profitability. Although I hate it, it keeps me on my toes. Our digital strategy for brands last November is completely different than the strategy today. A client might say to us ‘Well this isn’t what you told us six months ago.’ and we’ll reply, ‘Well things have dramatically changed over the last six months and some platforms we don’t even use anymore!’
The other angle is consumer trends, because China is very young in the way people react to products. Consumer trends in China will just hit all at once. For example, I was talking to a friend who works in the Japanese hair dye industry. I was telling him how hair dye is this insane recent trend in China. Everyone in our office has multi-colored hair now. One year, everyone had these little stems and flowers in their hair. And each time, I kept asking myself, ‘Where did this start?’ You talk about trends in the West and they’re more vague, larger concepts. In China, they’re right in front of you.
In China, modernisation is still pretty new and Chinese people want to add their own spice to modern trends. When consumers come up with something new, it’s always very different. We had plant-based food become a hit recently. Within the first week of this trend, there were 10 million searches on Baidu. All of these trends suddenly appear and we have to jump on them quickly. Part of our job is go out and help these brands in the West realise the opportunity. As an example, we are working with a Western plant-based meat company right now. Based on what we’re seeing in market, we might approach them and say, ‘You guys have to come to China.’ We had a similar case with Sara Lee cheesecakes. Who would’ve thought that cheesecakes would become a big thing in China? In the West, cheesecake is something we’ve always had. We’ve seen the category change a little bit and maybe there are new flavors like chocolate cheesecake, but the category hasn’t dramatically changed. But in China, the category is born overnight. I like that.
How has the coronavirus affected your business and other businesses in your industry?
Our business is up a lot. We’re likely going to double this year. We were struggling in the first four months of 2020 and then things started turning around in April or May. I think a lot of global brands are looking to China since it’s now been open for so long relative to other countries. But at the same time, I definitely see the overall industry struggling. I interviewed six applicants for a role at our company yesterday. All of them had come from advertising agencies that had gone out of business because of Covid.
We work in the young, digital e-commerce space and lots of brands now have to put their product online. So e-commerce is a necessary channel for your brand. On other hand—events, traditional media, traditional advertising agencies or anything considered not 100% essential for your business are the first things a major brand will cut this year.
What is one thing people outside of China misunderstand about the region?
People misunderstand how difficult it is. That is the number one thing. Brands might sell in the US and UK by dropping off a few containers that find their way to a supermarket. You can do a large campaign on Facebook or Instagram and you’ll get traction if your product is good. In China, offline retail is so segmented. The top 100 chain stores are the same size as Tmall. In the US, CostCo and Wal-Mart will take something like 20% of the market but in China you have this situation where there are so many offline stores, it’s hard to break in. For brands doing e-commerce in the West, there’s pretty much Amazon. In China, there are like seven main e-commerce platforms. You need to decide which ones to choose, how to work with them, etc.
Western brands are also very overconfident. People believe that in China a product will just sell itself, since the purchasing power of China is growing. That doesn’t easily happen because there’s a lot of competition. People also underestimate the scale of China. I was speaking to a client the other day and there were clearly misaligned expectations on how many people you can reach with a certain ad budget. If you come into China with a $50,000 ad budget, you’ll be able to reach one suburb in Shanghai. You won’t hit the entire East Coast of China.
What are some companies you admire in Asia?
One that’s really, really impressive is Pinduoduo. We haven’t worked with them personally, since all of our brands are premium. That said, all of your products end up getting sold on Pinduoduo, whether you like it or not. We have a set distribution price, but Pinduoduo usually picks it up, makes a tiny margin, and has the investment to bring in a huge number of users. I think their user base might be bigger than Tmall now. All of the e-commerce companies in China are extremely impressive. In comparison to Amazon, the number of tools that Chinese e-commerce companies have to drive more purchases are really insane.
In terms of Western companies, the most successful ones really understand what Chinese consumers are looking for. They understand the power of e-commerce. They grow as many channels as possible, using marketing with direct channel relevance rather than just making this big, loud noise everywhere. They make the packaging simple. They make their brand story simple. Some Western brands can have tiny market share in places like the UK while having a much more dominant market position in China.
One good example is the milk brand A2. They do fresh milk, powdered milk, and more. They told a story from Australia, managed to own their IP in China, and are now making billions of dollars here. They did a great job and followed the playbook we usually suggest to clients—they started with small, direct activations. As they got bigger, their marketing budget grew and now they’ve got some of the most famous Chinese celebrities in their campaigns. They were also investing in Chinese marketing within Australia, like targeting Chinese tourists and Chinese students in Australia.
What is the single most important piece of advice you would give to someone trying to get their business to thrive in this time period?
Go online. If you look at the sales of retail in the West, they’re not necessarily down. We know that certain categories and clients in the West have had an increase in sales during Covid. People still need to eat food and still want to buy things. If you don’t have an online offering, then people can’t access your products.
The second thing - brands need to be faster in their adaptability. The geopolitical situation has now meant that we can’t just make decisions over six months. Brands need to change their business quickly in order to match things like Covid. We’ve worked with some large food and beverage companies who don’t know what to do right now. I kept thinking to myself, ‘You guys have the ingredients. You should make a retail product. Why not?’ Brands need to move more quickly. We’ve seen smaller brands be very agile, increase their budgets and do well in China this year. Although at the same time, a lot of brands have suffered.
Quickfire Questions…
A - What’s the best thing you have watched recently? (Film, TV Show, Ted Talk, Youtube Video, etc.)
I watched a really good British movie yesterday. It’s called Tyrannosaur. It’s not about dinosaurs. It has Olivia Coleman and is a great story, though quite depressing. It shows the power of circumstances people find themselves in that although they might appear to be bad people, they aren’t necessarily bad people.
B - What’s the best thing you have read recently? (Book, Article, Research Report, Tweetstorm, etc.)
I read Shoe Dog a few months ago. I’m not really into business books but thought that was a good balance between life lessons and business lessons.
C - What’s the best thing you have listened to recently? (Song, Album, Artist, Podcast, Audiobook, etc.)
‘Postcards from Italy’ by Beirut. I was listening to that song this morning.
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‘Brain drain’ refers to the concept of smart, ambitious people migrating somewhere away from their home country in order to find a better life.
One common example of this refers to people from poorer countries in places like Asia moving to places like the US for school and job opportunities. The classic story you might hear is the earnest, ambitious kid who left their home from somewhere in India or China in order to seek a better life in America.
Well let me tell you, the world has changed and especially right now, East West ‘brain drain’ is turning into East West ‘brain gain.’
One of my good friends is from Korea. He went to high school in Seoul and then ended up studying at one of the top universities in the US for his undergraduate degree. Afterwards, he worked in finance in New York and was accepted into Wharton for an MBA earlier this year.
He was really looking forward to attending, but uncertainties around the coronavirus have changed everything. And because of the confusing situation around both student and work visas for international students in the US, he has decided to defer his MBA by a year. He may end up not attending business school at all.
When he told me this story, I started thinking about what could have been. If he ended up going to Wharton, he probably would’ve stayed in the US, gotten a job there, eventually got a green card, bought property, paid taxes, and lived out his life as a high-functioning, productive member of the United States of America.
But now, he’s working in Hong Kong. This is a loss for the US, and a win for Asia.
My friend’s story is emblematic of a broader shift in human capital across the world. People are moving because of the coronavirus, and that changes the makeup of the globe.
There are hundreds of thousands of Asian international students around the world right now in a similar situation to my friend. Several of my previous posts have dealt with Indian, Chinese, and Korean students (the three biggest international student populations for the US) increasingly deciding to not go to the US for education.
The US is expecting a major drop in international student enrolment. This is partly because of the coronavirus, partly because of changing visa regulation and partly because of geo-political tension between the US and China.
It’s a topic very close to me, as I was an international student myself who studied in the US for both high school and college.
Similar changes are happening in other countries. This year, Australian universities have experienced a decline in international student applications from Asian countries. The Australian Department of Home Affairs saw a 46% decline from India and 20% decline from China compared to the previous year.
Countries like the UK and Canada seem to be suffering less, but there’s an existential crisis going through the heads of every international student office at a Western university.
For many Western universities, seeing a decline in international students is like a big retail store seeing a decline in their most profitable customer segment.
But for the international students’ countries of origin, this results in a positive ‘brain gain.’ Tons of Asian students looking to stay closer to home for the foreseeable future could make a huge impact on Asian economies.
I moved from London to New Zealand two months ago, which was never part of my plan.
There are close to 50,000 New Zealanders who have come back to the country since the beginning of the year, and it’s expected that the number will significantly increase depending on the coronavirus.
For a country of 5 Million people, that’s a sizeable chunk and represents close to 10% of the overseas New Zealand population.
This ‘brain gain’ of some of the most internationally minded, ambitious New Zealanders is a hot topic in the country right now.
Little stories like mine and like my Korean friend’s will all add up and reshape the way the world works.
Just like the saying ‘one man’s trash is another man’s treasure,’ I believe that one country’s loss is another country’s gain. And right now, the biggest losses in human capital are in the West and the biggest gains are in the East.
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Welcome to East West Hurricane! 🌪
We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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Amidst Political Tension, More Chinese Companies Look to Singapore 🇸🇬
Bytedance, the Chinese company who currently owns TikTok, plans to invest billions of dollars into their Singapore office that will serve as their greater Asia headquarters. The plans include the creation of a new data center and hundreds of new jobs. In addition to Bytedance, both Alibaba and Tencent have announced that they are opening new regional headquarters in Singapore. In the middle of a trade war between the US and China, these Chinese tech companies see Singapore as a place to invest their resources.
TikTok is on the verge of getting sold to Oracle in the US. Hundreds of major Chinese apps have been banned from India. Hong Kong is experiencing controversy over new Beijing-imposed security laws. Amidst all the geopolitical drama, Singapore is seeming like an increasingly attractive place to be if you want to do business in Asia. These companies doubling down on Singapore strengthen the importance of the city as a global tech hub. The wave of Chinese tech companies is the 21st Century’s biggest shift in global economic power. Singapore might end up becoming one of the biggest beneficiaries of this.
The Underrated Love of Chinese Hip Hop Fans 🎧
When you think hip hop, you probably don’t think of China. Well, one of the biggest Chinese TV shows of the last five years is the hip hop reality audition show called Rap of China, which achieved billions of views online and turned aspiring rappers into household names. And this summer, there are new Chinese shows that aim to capitalise on the hip hop trend. In addition to the latest season of Rap of China, there’s also Rap Star on Mango TV and Rap for Youth on Bilibili.
Rap of China debuted in 2017 as the original Chinese hip hop show and in a short four year period, the hip hop industry has evolved significantly. 2020 brings the fourth season of Rap of China, and one of the judges is GAI, the winner of the show’s first season. As these new shows like Rap Star and Rap for Youth have started coming out, rappers associated with each show have actually began referencing each other in diss tracks. As this beef between rappers should make clear to you, hip hop is becoming a staple of modern Chinese pop culture.
Indian Companies Might Have New Options To Go Public 🏦
‘Going Public’ is an important milestone in the lifecycle of a company, oftentimes signalling that a company has reached a new stage of growth and maturity. Right now, Indian companies are not allowed to go public on a major foreign stock exchange (like the Nasdaq or NYSE) until they first go public in India. This has caused some problems in the past. The $1.84 Billion Indian startup MakeMyTrip decided to leave India and incorporate in Mauritius so they could list on the Nasdaq. It’s not good for India if their most promising businesses don’t want to incorporate in the country.
So the Indian Ministry of Cultural Affairs has recently been working on a way to change the current laws. A new government proposal should allow Indian companies to list on foreign exchanges without needing to list in India first. It’s still a work in progress, but it’s directionally moving towards that outcome. Doing this should encourage more Indian startups to stay in India and also attract more global investors to invest in Indian companies. If the government can pass this law, it will help the country capitalise on its growing role in the world of technology and business.
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New Chinese Report Fuels Controversy Around Delivery Drivers 🏍
Last week, an investigative report on the conditions of food delivery drivers went viral in China. The report outlined the working conditions of drivers for food delivery companies like Meituan and Eleme. Drivers are required to deliver food within a certain time frame, and otherwise will have their pay cut by failing to meet that standard. Drivers are often overworked, easily penalised for delays out of their control, and have to deal with hazardous job conditions.
In response to this report, Meituan and Eleme announced new flexibility around drivers’ delivery time and pledged to review driver conditions. The PR fallout won’t be easy to fix, however. We live in a world where the gig economy has created all new types of issues around modern working conditions, both in the East and West. Last month, a court in California blocked an order to enforce a new law AB5, which would require ride sharing companies like Uber and Lyft to classify drivers as employees rather than independent contractors. These two companies were granted a temporary stay to submit appeals, but there’s still a chance AB5 will be enforced and both companies have publicly considered shutting down their services in California. While AB5 doesn’t exist in China, I’m sure that both Meituan and Eleme are keeping an eye on the precarious relationship between their companies and their ‘gig worker’ delivery drivers.
A Profile of SEA Group - Singapore’s First Unicorn 🦄
This KrAsia article profiles the story of the founding of Sea Group, the Singaporean tech company now worth $65 Billion. Sea owns Garena (the biggest gaming publisher in Southeast Asia), Shopee (the biggest e-commerce company in Southeast Asia), and Sea Money, a digital payments platform. Sea has been a publicly traded company since 2017 and has been one of the world’s best performing stocks over the last year, significantly outperforming even the most hyped companies like Tesla.
I have a few observations from this article. All of the three Singaporean founders are originally from China, and you can see the influence of Chinese tech in their company. Their first success was in the gaming industry through Garena, and their game Free Fire is still the highest grossing mobile game in Southeast Asia and Latin America. They used the profits from Garena to launch SeaMoney and Shopee, which was basically inspired as a Southeast Asian version of China’s Taobao. I admire the ambition to branch out into three different, large tech companies, and I don’t see that level of tech diversification apart from companies like Tencent and Alibaba. Another learning, Garena didn’t necessarily reinvent the wheel with their products. My impression of their story is as triumph of execution rather than innovation. And it’s incredibly impressive.
Telegram Becomes Go-To App for Pirated Content in India 😲
Telegram is a popular private messaging app that provides end-to-end encryption for people chatting and interacting with each other securely. For a while, Telegram was infamously known as the company that raised over $1 Billion worth of cryptocurrency in an initial coin offering (ICO). Today in India, Telegram has become well known as a platform for sharing pirated content like films, TV series, and games. Some of the most popular Indian media properties have been frustrated by piracy on Telegram, and a Hindi newspaper even filed charges against Telegram when it discovered PDFs of the newspaper were being distributed on the platform. By 2022, it’s expected that OTT players will lose $3 Billion in revenue from India due to piracy.
Pirating content is a behaviour that happens all over the world, but in India’s fast-growing, huge economy, the country is on track to potentially become the world’s biggest consumer of pirated entertainment. Telegram has 40 Million users in India and is the largest single market for the messaging app. Technology will never be able to completely prevent piracy, but the Telegram situation outlines an interesting tradeoff of privacy with piracy. The more secure a messaging app, the easier it is to share pirated content. Telegram also benefits from laws around the legal provision ‘Safe Harbour.’ Like Youtube and other digital platforms, Telegram itself isn’t directly responsible or legally liable for illegal content since they are an ‘intermediary’ and don’t create the content themselves. So this will remain a problem for India’s entertainment industry.
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Reliance Courting Even More Investors and Customers 💰
Indian technology conglomerate Reliance has been on a fundraising spree all throughout 2020 and has raised over $20 Billion from investors over the last few months. These investors have included Facebook, Google, KRR, Qualcomm, and Intel, all of whom are likely thinking that a bet on Reliance is a bet on the Indian growth story. With this illustrious group of investors, what I’m about to say next may not come as a surprise. It has been reported that Reliance is offering to sell a $20 Billion stake in its retail business to Amazon.
Currently, Amazon competes against Reliance in the Indian e-commerce industry. If this deal goes through, the two rivals will turn into allies overnight. Reliance is currently the most valuable company in India and has also announced plans to deliver 100 Million low-cost smartphones by December, built on Google’s Android operating system. Regardless of whether or not the deal with Amazon happens, Reliance’s continued growth signals the growth of increasingly powerful Indian technology companies who are able to court some of the world’s biggest Western companies as investors.
TikTok’s Acquisition Saga Act IV: The Buyer is…Oracle? ⚖️
Ever since President Donald Trump declared that TikTok had to be sold to an American company, there has been huge speculation on who would end up as the final buyer. While it seemed that Microsoft would be the winner, on Monday Treasury Secretary Steve Mnuchin confirmed that the US Government received an official bid from Oracle to buy TikTok’s US operations. We should receive a decision later this week from the Committee on Foreign Investment in the US on whether the deal will go ahead.
No one knows the exact details of the deal, but Bytedance (TikTok’s parent company) has referred to Oracle as its “trusted tech partner” and most people speculate that this is not an outright sale, but Oracle becoming the owner of TikTok’s US operations and the host of TikTok user data. Some people have accused Trump of favoritism, as Oracle is owned by Larry Ellison, one of Trump’s biggest political supporters. Considering China’s new export controls on technology, this Oracle deal leaves out TikTok’s actual source code and algorithms. There are many complicated pieces of this puzzle and this will not be the last technology conflict between China and the US. This evolving, half-political drama, half-business case study is truly an East West hurricane.
Korea’s Kakao Games IPO Makes Waves Around the World 🔥
South Korea’s Kakao Games became a publicly listed company last week, beginning the day trading at $20 a share and then ending the day at $52 a share. The $323 Million IPO broke records in Korea for being one of the most oversubscribed stocks in Korean history. Kakao Games is the gaming unit of the broader Kakao group, which owns Korea’s biggest messaging platform.
Kakao is the third big Korean IPO of this year, with the other two being SK Biopharmaceuticals and Big Hit Entertainment. The success of Kakao Games speaks to the broader growth of the gaming industry, which has seen huge success across the world as people spend more time gaming because of the coronavirus. With such major Korean business success stories this year, this should also inspire confidence in Korea’s growth story.
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I had the great pleasure of interviewing Anup Dhalwani, one of the sharpest product minds I know in Silicon Valley. Anup is originally from India, and has spent over a decade working both at high growth startups and some of the world’s most important tech companies like Facebook, Uber, and Snap. Having lived and work in both India and the US, Anup has true East West perspective and I’m happy to share our conversation.
You can find Anup on Twitter —> @__anoop and here’s an introduction from Anup…
I’ve created technology products from the ground up as an entrepreneur starting with Ospinet, a consumer healthcare product many years ago. The last few years I’ve invested time in shipping products in the consumer space at Facebook, Uber, Snap and other companies. As a startup advisor I help about 2-3 startups at any point in time scale their offerings or find product-market fit. I came to the US in 2008 as an engineer and have built startups and worked in tech my whole career, except a couple of years at McKinsey & Co. after business school.
Over my many years shipping products I’ve developed a sense for what makes successful tech companies in the Valley tick and what features separate the winners from everyone else. The other area I’ve gained a lot of insight on is what makes a consumer product successful. There are some higher order features that are a must but then there is always some secret sauce. I love spending time with my family, watching foreign language movies, and generally building products and helping other entrepreneurs build and ship successful products.
What are the most exciting trends you are seeing in Asia today?
Many come to mind but a couple standout: 1) Innovating from Asia for a global market and 2) Adapting a global trend for the Asian market. Both of these are meta-trends but I feel capture the key trends in a Mutually Exclusive Collectively Exhaustive (MECE) way.
On 1) I think the single best example is Postman [which was founded in Bangalore]. If you’ve ever dealt with startups that have an API layer, you’ve seen this be a key part of their API strategy. Postman recently raised a massive private round and I think it serves as great proof and inspiration for an entirely new crop of startups from Asia building for a global market. Postman used many of the best practices that’ve made Silicon Valley SaaS type companies successful, including the classic ‘Freemium Model.’
On 2) We see the other end of the spectrum. Taking a concept like Instacart and making an Asian version of it successfully. My friend Albinder started Grofers in India and it’s a massive hit because he and his co-founder could tailor it for the Indian market. This is an example of the second key trend I am seeing. I anticipate both of these trends to continue and fork over time, spawning new models.
How has the coronavirus affected your business and other businesses in your industry?
It’s an understatement to say there has been a massive impact of the virus on all industries. Within consumer tech though, it’s a different story. It’s been a boon for many of the core consumer companies. The reason is simple. As people are staying at home and are not able to spend time with friends and family in real life, they’ve had to expand their use of social media (which was already quite high) and similarly we’ve seen people start using Robinhood for trading in record numbers. So the companies that were well poised to benefit from a pandemic did just that.
There is another crop of companies that got hit hard though, especially in the travel space. From AirBnB to TripActions to expense reimbursement cards and others. Not to mention WeWork, which was already in a tough spot. So it's a case of haves and have nots even within the consumer technology space.
What is one thing that people outside of Asia misunderstand about the region?
The number one thing would be how upwardly mobile the region is. People, especially the younger ones, are very focused on increasing their standard of living and until the pandemic hit, they were executing quite well on that. Now the employment picture has become a bit bleak. However, I am confident this will be a short term hit and the region will come roaring back.
The other thing people might misunderstand is that building technology products for the Asian market isn’t as easy as it is in the USA. The reason is the amount of diversity from language to local regulations is quite a lot. While many might know about the amount of diversity in the region, its impact on shipping products might go unnoticed. For example, alcohol and age related laws are different state to state within the same country sometimes, and if you are a food delivery app for example, you’d need to account for that diversity.
What are some companies you admire in Asia?
In technology, Flipkart, Oyo, Grofers are some of the modern ones but there are a lot of companies from the 90s and 00’s that laid the foundations albeit from a services standpoint, like Infosys.
Outside of technology, I think there is a vast range of companies and industries I admire. One example is Sula Wines in India. They’ve done an amazing job of fusing the wine business with lifestyle and culture. There are many, many such examples I feel aren’t as known outside.
What is the single most important piece of advice you would give to someone trying to get their business to thrive in this time period?
Borrowing from Taleb, the one thing I’d say is try to be antifragile. The world is only going to get more volatile in the coming years and simply being robust won’t help you thrive. If your startup’s business model isn’t one that will benefit disproportionately with volatility, it’ll be hard to thrive. More and more it seems the world is living in the ‘tails’ of a distribution where Black Swan events come from and have driven almost all of the outcomes in human history. We’ve already seen this with the pandemic (which isn’t even a Black Swan as it was predictable and predicted) and even there we saw companies like DocuSign benefit and those like AirBnB get hit (the antifragile vs fragile model).
Quickfire Questions…
A - What’s the best thing you have watched recently? (Film, TV Show, Ted Talk, Youtube Video, etc.)
I’ve seen some recently uploaded old Steve Jobs clips from the 80s and 90s, which to this day are some of the most outstanding marketing examples I’ve seen.
B - What’s the best thing you have read recently? (Book, Article, Research Report, Tweetstorm, etc.)
I’ve been spending a lot of time exploring the art world and there's a bunch of really great art podcasts I’ve been discovering. There isn’t one specific channel or podcast but rather a collection I’ve been curating and thats’ been a lot of fun.
C - What’s the best thing you have listened to recently? (Song, Album, Artist, Podcast, Audiobook, etc.)
The Biggest Bluff, it’s a great book about Poker and how it applies in life. And then, Kings of Crypto on Audible.
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PUBG Finds Distance Away from Chinese Ownership 👋
The hugely popular video game PUBG was one of the hundreds of Chinese mobile apps banned by the Indian government last week. A few days after the ban went into effect, PUBG has removed Chinese company Tencent Games as their official game publisher and distributor. PUBG is created by a Korean company, but Tencent Games officially distributes the game in India. The hope is that this new change should allow PUBG to satisfy the Indian government enough to revoke the ban.
PUBG had 40 Million users in India before the ban, many of whom were emotionally devastated by having the game banned. If this allows PUBG to continue operating in India, maybe this is an option for other companies with tenuous connections to China. Moving forward, it’s going to be hard to figure out what level of Chinese connection a company will need to have in order to satisfy the Indian government. Most Indian tech companies have already received money from Chinese investors. On the other hand, completely native Chinese companies, headquartered in China and with majority Chinese ownership, may struggle to operate in India while political tensions are high. Since PUBG is technically Korean, they have a unique-ish loophole.
English Premier League Pulls Chinese Broadcast Deal ⚽️
The English Premier League has just cancelled their $665 Million agreement with PPTV, the company that was supposed to be their broadcast partner in China until 2022. Allegedly, Suning Holdings (the owner of PPTV) failed to make a payment of $210 Million to the Premier League that was due earlier this year and therefore this was considered a breach of contract. While that’s the official messaging, many people speculate that the increasing political tensions between the UK and China have played a role in this decision. To be clear, there was definitely disagreement between the Premier League and PPTV over whether broadcast fees should have been paid earlier this year. Considering Covid’s effect on football matches, you could argue that the value of the product of the Premier League broadcast rights has decreased. The Premier League has given $438 Million worth of rebates to broadcast partners for the three-month pause in games, but PPTV was not included.
The Premier League, like all sports leagues, has lost a lot of money due to covid and the path forward for commercial sports is unclear. What’s next? Right now, it looks like they will be looking for another Chinese partner to broadcast games in the country. Much like how Indian PUBG fans consider it a tragedy that the game was banned from their country, I’m sure Chinese football fans are upset that it’s now harder to watch games of their favourite teams. While sometimes it feels trivial, sport is an important part of culture. Surely, the rights to broadcast the Premier League are a valuable asset to many Chinese companies.
Netflix to Release Their First K-pop Documentary 🇰🇷
If you want to know one of the hottest global music trends, you need to know K-Pop. K-Pop refers to popular music coming from Korea. With K-pop group BTS currently #1 on the US Billboard Hot 100, the worldwide level of K-pop interest is at an all-time high. Streaming platform Netflix will be launching their very first K-pop documentary on October 14. The new documentary focuses on the female K-pop group Black Pink and is called ‘Black Pink: Look Up The Sky.’ Netflix, like most other Western platforms, has been increasing their investment in international content, most notably in Asia.
Earlier this year in June, Black Pink’s music video for the single ‘How You Like That’ broke the world record for number of Youtube views in 24 hours. Fittingly, their record was broken by fellow K-pop band BTS’s song ‘Dynamite,’ which was released last month. Last year, Black Pink became the very first K-Pop group to perform at Coachella, arguably the biggest music festival in America. The key takeaway is that K-Pop is a growing global phenomenon that has reached yet another pop culture milestone.
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The Chinese Bottled Water Billionaire You Haven’t Heard Of 💦
Chinese company Nongfu Spring made its debut on the Hong Kong Stock Exchange earlier this week, surging 85% higher than their IPO price. Nongfu Spring is a company headquartered in the city of Hangzhou that makes bottled water. The company was founded by Zhong Shanshan, who briefly became the third richest man in China with the share price at its peak, giving him a temporary net worth of $50 Billion.
Nongfu Spring was founded in 1996 at Qiandao Lake in Zhejiang province, an area known for its natural beauty. Over the years, the company has built a strong brand around building ‘natural products,’ primarily focused on bottled water but also extending into tea, coffee, and other beverages. The investor interest in the company seems to be based on the new post-Covid trend of Chinese consumers placing importance on their health and wellness. With a market cap of around $48 Billio, Nongfu still has lots of room to grow and capitalise on what is becoming a global trend of increased demand for products perceived to be healthy and natural.
India’s Film Industry Targeted by Western Streamers 🇮🇳
While the Indian film industry has been struggling due to the coronavirus, Western streaming companies like Netflix, Disney, and Amazon have been acquiring several Bollywood films to host on their platforms. Struggling Bollywood studios have sold blockbuster films that were originally intended to receive a theatrical release. Since India is a huge priority market, now these Western platforms can provide better Indian content for their customers.
India is a huge entertainment market - the country produces more films and sells more movie tickets than any other country in the world. The tough situation for Bollywood studios is similar to other markets around the world, such as the US and China. In the film industry, there has been this concept of the theatrical window—usually several weeks or months where a new film is distributed through theaters and is not allowed to be broadcasted on any other platform, like an online streaming platform. In China, the US, and now India, the theatrical window has been shattered by the coronavirus, as companies like Disney are now taking blockbuster films directly onto streaming platforms. And across all three of these countries, movie theater companies are angry at the ‘violation’ of the theatrical window on top of their own coronavirus-related closures. Disruption in the entertainment industry is a global phenomenon, and the stakes are very high in Asian countries like China and India.
Surveys and Data on American Business in China 📊
The South China Morning Post reported on data released by the American Chamber of Commerce in Shanghai, who creates an annual survey for American businesses operating in China. In this world of increased political and economic tension, it’s fascinating to parse through the data in order to understand how American businesses in China have been affected. 92% of the respondents say that they have no plans to leave China and 5% say that they do plan to leave the country. 85% of the respondents are companies who have operated in China for over a decade. One major concern brought up by American companies—if President Trump actually bans WeChat and this applies to American businesses in China, this could be a huge problem. Another concern reflected in the survey—many Chinese workers have less of a desire to work for an American company, given the current relationship between the two countries.
You have to wonder what’s going through the heads of people running American companies in China. The biggest source of fear must be the lack of certainty around what’s going to happen next in the US-China relationship. Also, right now China’s economy is one of the world’s healthiest and fastest growing in a post-covid situation. Companies who have a long-term strategy in China seem willing to ride out these short-term fluctuations. The way I see it—no matter what happens over the coming months, China’s mid- to long-term importance will continue to increase. And every international business should keep that in mind.
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Korea’s Big K-Pop Export is Worth Billions 🎤
The Korean government released a report saying that the new #1 single ‘Dynamite’ from K-pop band BTS will generate $1.4 Billion for the Korean economy. It’s an estimated amount (I wonder how many holes you can poke in the methodology), but South Korea’s Ministry of Culture, Sports and Tourism factored in new economic activity and 8,000 new jobs created by the song. The report claims that the song’s popularity also leads to sales of Korean cosmetics, food and beverage, and more. In 2018, the Korean government estimated that BTS’s contribution to the economy that year was $3.5 Billion.
Whatever the exact economic activity generated by BTS, K-Pop definitely increases Korea’s brand awareness and increases tourism. This can trickle down into a micro-level, with increased demand for Korean goods, Korean cuisine, and so on. I wrote last week how ‘Dynamite’ is the first song from an Asian act to get a #1 single on the US Billboard Hot 100 since 1963. Previously, Korean musician Psy got to #2 on the Billboard charts in 2012 with his song ‘Gangnam Style.’ BTS’s musical career probably has more longevity and already has more appeal than Psy. The Korean Wave keeps on coming!
Alibaba Starts B2B Sales of Livestreaming Tech 🎥
Alibaba will now start selling their livestream technology to other companies. Alibaba’s e-commerce platform Taobao has livestreaming functionality called Taobao Live, which is the most widely used livestreaming e-commerce platform in China. The Taobao livestreaming product was first released in April 2016 and now the overall Chinese livestreaming industry is expected to reach $129 Billion by the end of this year. Alibaba has set a 2020 goal to achieve $73 Billion in gross transaction volume for e-commerce livestreaming by end of the year. As I mentioned in a previous article this week, other platforms like Kuaishou and Douyin are also setting aggressive targets for their livestreams.
Livestreaming is THE big new trend for e-commerce in China and Alibaba owns one of the main livestreaming platforms with Taobao Live. With this new business decision, Alibaba has basically spun out a B2B SaaS product, which means they are selling livestreaming technology as a service to other enterprises. It’s hard to really comprehend this in the West, because the livestreaming behaviour is so tiny compared to China. One way to picture this—imagine Alibaba has created video technology like Zoom, but it’s primarily used by people hosting livestreams where they sell products. And now they’ve put that in a bundle together to sell to enterprise clients. It’s a pretty good idea, and it’s a pretty huge opportunity.
China’s Post-Covid Boom in Autonomous Retail
While many shops in China are ‘back to normal’ after the worst parts of the coronavirus, we need to start examining what normal really means. One big trend in China right now, especially Post-Covid, is ‘autonomous retail.’ Autonomous retail refers to stores that use technology to directly replace typical staff you would find in retail experiences—which often involves vending machines, no cashiers, and unstaffed shelves. Most of these experiences still include some small group of staff, but the development of technology decreases the need for human staff over time.
One example of this is the F5 Future Store in Guangzhou, which uses robotic arms to serve food to customers who place their orders from electric ordering terminals. Over the last four years, the Chinese autonomous retail category has doubled and the total number of autonomous retail customers is expected to go from 91 Million this year to 245 Million in 2022. It’s interesting to read about these new retail experiences happening in Asia, and I wish I could see it myself in person. There are so many non-obvious changes to our daily life that have been accelerated by Covid, and autonomous retail might be one that becomes ‘normal’ more quickly than we realise.
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Chinese Audiences Reflect on New Mulan Film 🇨🇳
To people in my generation, we remember watching the animated Disney film Mulan back in 1998. I was too young to realise that the film was not well received in China at the time. So far, it seems like Disney’s Mulan remake has touched on a similar nerve for many Chinese viewers. The new $200 Million live-action version of Mulan came out on Disney+ a few days ago after much anticipation. Despite some controversy around lead actress Liu Yifei posting about the Hong Kong protests last year, Disney expected this new Mulan to do well in China.
While the film will officially be released in Chinese theaters on September 11, pirated online versions have already appeared on the Chinese internet and tens of thousands of people have already written reviews on Chinese ratings site Douban. Right now, the film has a 4.7 out of 10 rating. Chinese reviewers have complained about the film’s Western writers generally misunderstanding Chinese culture. The problem of Hollywood whitewashing ‘Asian’ films has been perceived to be improving against the backdrop of successes like Parasite and Crazy Rich Asians. There’s still a chance that the film will do well when it comes out in Chinese theaters in three days on Friday. Whether Disney misses on Mulan or not, they can’t ignore the huge Chinese film market.
China’s Millennials Riding Solo 🕴
In traditional Chinese culture and throughout most of Asia, people are expected to marry and start families at a young age. The first thing my relatives in the Philippines ask me is if I have a girlfriend and when I’m getting married. But today, this trend is starting to shift as young people do these things later in life and increasingly pursue a single life living in big cities. The number of single people in China reached 200 Million last year, and the number of single people living alone is expected to reach 90 Million by 2021. Another country that has seen this happen more quickly is Japan, where the government has even provided subsidies to encourage dating.
Chinese companies are capitalising on this new consumer class of young, single working professionals, which would have been a smaller group in previous generations. Chinese hot pot restaurant chain Haidilao has started putting teddy bears in empty chairs as companions for solo diners and other restaurants have started building dining booths for individuals. ‘Solo dining’ is becoming a popular content category on social media and appliance companies are starting to create mini-appliances for people living alone. It’s interesting to see how business adapts to changing consumer demand. From a cultural perspective, I’m most happy with the fact that being young and single is now seen as less negative in Chinese society.
An Indian Funeral for PUBG Mobile ⚰️
To you, it might just be a silly video game. But for millions of Indian gamers, PUBG Mobile was an immersive, social entertainment experience that played a meaningful role in their lives. So when the Indian government banned PUBG last week, it hit harder than the hundreds of other banned Chinese mobile apps. Arguably, losing access to PUBG could be considered even more impactful than India banning TikTok, since many gamers (especially young men) spend more time playing video games than they do consuming social media.
A group of young gamers went viral in India this week for recording a video of themselves holding a pretend funeral procession for PUBG.
On a more serious note, I think this highlights the disparity between public policy and popular culture. While the political conflict between India and China continues, people will suffer in many ways. If things like media and entertainment need to become regionalised, it could lead to interesting new developments for companies that understand popular culture. In the meantime, fans of PUBG will continue to suffer. All they wanted was a video game to play with their friends.
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Disney Launches New Indonesian Streaming Platform 🕹
This last weekend, Disney launched their own streaming service specifically for the Indonesian market called Disney Plus Hotstar. The ‘Hotstar’ refers to the Indian streaming company that Disney acquired in order to roll out across Asian markets. This new service will feature tons of local Indonesian content and also includes a partnership with Indonesian telco Telkomsel.
Indonesia is the biggest market in Southeast Asia and has always been an attractive country for Western multinationals looking to expand across Asia. The timing of this launch should be positive—as overall streaming consumption has increased because of the coronavirus. Two local rivals, Hooq and iFlix, have recently shut down, which allows more room for Disney. Indonesia’s population is still price sensitive to paying for premium content, so the initial pricing strategy is really important. In partnership with Telkomsel, Indonesian consumers can purchase data and content bundles from Disney at different levels and over a set of options around subscription length.
SoftBank + Unacademy = Growing Indian EdTech Scene 🎓
The investment firm SoftBank has just injected $150 Million into Indian online education platform Unacademy, with the startup now valued at $1.45 Billion. Unacademy is a five year old company whose valuation has now tripled over the last six months. As a fund with the ability to write some of the biggest checks in the world, SoftBank’s latest investment is an encouraging sign for the hot Indian EdTech Scene.
Online education is booming around the world because of the coronavirus, and India is one of the largest countries to witness this. Unacademy works by connecting teachers with students through a subscription service that includes live video lectures and exams. The company has 30 Million users and 350,000 paying subscribers, which is a 4x increase since February of this year. Overall funding raised by Indian ed tech startups in 2020 has increased seven times since the same time period one year ago. In an age of many winners and losers because of Covid, online education continues to be one of the biggest winners.
Kuaishou’s E-Commerce Plans 🎥
Chinese mobile video app Kuaishou is one of several competitors in the Chinese digital media market. In an attempt to both differentiate and grow, Kuaishou recently announced ambitious new plans for expansion. They plan to incubate 100,000 businesses and help them achieve $146,000 in annual sales this year. They also have a goal to build 100 industrial bases, train 100,000 new livestreamers, and host 1,000,000 e-commerce livestream sessions over the coming year.
What’s the motivation behind these plans? Growth, timing, and opportunity. Across the board, all Chinese companies engaged in e-commerce have seen booms in usage because of the coronavirus, and livestreaming has become the most popular e-commerce subcategory. One of Kuaishou’s biggest rivals, the Bytedance-owned Douyin, has similar plans to expand their livestreaming capability. Many Chinese companies realise the power of livestreaming and they need to move quickly to get an advantage against their competitors.
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K-pop’s Big Hit Entertainment Plans an IPO 🎤
Big Hit Entertainment is one of the world’s largest K-pop agencies and this week they announced their intention to go public. Big Hit Entertainment plans to raise $812 Million in an IPO that would be the biggest Korean IPO of the last three years. Big Hit manages the absurdly popular K-pop group BTS, who has become one of the world’s most popular music groups and grossed $170 Million from live events in 2019, which made them the fifth largest live music act in the world.
BTS’s latest single ‘Dynamite’ just reached #1 on the US Billboard Hot 100, which is the first time an Asian act has done this since 1963. K-pop’s popularity has increased massively over the last few years, which contributes to the growing wave of Korean influence in global pop culture. This Korean cultural wave also includes the major film success of Parasite and the growing popularity of K-drama. I’m super bullish on the continuing influence of Korean culture on the world stage. It’s all part of this increasing relevance of Asia that East West Hurricane was built to witness and document.
India Issues New Ban That Includes PUBG Mobile
On Wednesday, the Indian government announced a new list of 118 Chinese mobile apps that are now banned in the country. This comes after the government banned 59 apps just over a month ago, including TikTok. The big news from this round is that one of these apps is PUBG Mobile, which was one of the most popular games in India. For PUBG, India was their largest market with 175 Million downloads and 24% of their total downloads globally.
As per the previous group of banned Chinese apps, the Indian government is citing security reasons as the reason for the ban. First TikTok, and now PUBG? Brendan Ahern, who writes the newsletter China Last Night, described it best when he called this situation an “Indian Teenagers’ Worst Nightmare.” The Global Times, a Chinese publication, has described the move essentially as a way for the Indian Prime Minister to deflect away from domestic failures, especially related to Covid. Whatever the truth behind the decision, it seems like we could start seeing more regional technology - where legislation makes internet services like social media and gaming different on a country by country basis.
Bilibili’s New Content Acquisition 🎥
Bilibili is kind of like ‘the Youtube of China,’ with over 170 Million users and a particular focus on ACG, which stands for Anime, Comics, and Gaming. As the platform grows, their strategy is increasingly to expand outside of the initial ACG niche. On Monday, Bilibili announced a $66 Million strategic investment in Huanxi Media, one of China’s largest media production companies. This gives Bilibili exclusive broadcasting rights to a large part of Huanxi’s TV and Film productions. The two companies also agreed on other partnership revenue opportunities like joint merchandise, film production, and shared ad revenue.
A Western equivalent of this would be like Youtube investing into a major film studio like Paramount Pictures in order to have exclusive rights to broadcast their content on Youtube. As I’ve written about previously, Bilibili is an interesting company that has made tons of progress recently, including a listing on the Nasdaq in 2018 and continued growth over the last two years. They also received a $400 Million investment from Sony in May. Keep your eye on Bilibili, because another priority for them is international expansion.
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Sea Group Gets Bigger and Bigger 🎯
Sea Group has been one of Southeast Asia’s biggest tech success stories. The eleven-year-old company owns Shopee (E-Commerce), Garena (Gaming), SeaMoney (Fintech) and their share price has increased 880% over the last 18 months. This KrAsia article makes the bull case for Sea potentially becoming the dominant Southeast Asian tech company, similar to a combination of Chinese Alibaba and Tencent. Shopee is currently the most popular e-commerce platform in Southeast Asia and Garena is the biggest games publisher in Southeast Asia.
Relatively speaking, there is more white space for technology companies in Southeast Asia vs. China. The technology startup scenes are currently less developed in Southeast Asia when compared to China. While not all parts of Sea Group are profitable, their performance is formidable and they continue to grow. I remember when Andrew Baisley mentioned Sea in our interview last month. Considering their incredible accomplishments, they are relatively unknown in the West and I look forward to keeping a closer eye on Sea.
Pinduoduo’s New Goal for Farm Produce 🍑
The massively impressive Chinese interactive e-commerce platform Pinduoduo has just set yet another ambitious goal. Pinduoduo aims to sell $145 Billion worth of agricultural goods by 2025. The company already sells tons of produce. Based of their official Q2 results, Pinduoduo sold $58 Billion worth of agricultural goods in 2019. 38% of Pinduoduo’s users made purchases within the fruit and vegetables category on the platform.
Currently, 2.5% of China’s agricultural goods are sold online and the structure of agriculture and produce is much more fragmented vs. the West. The US has much more industrial farming while China has a larger number of small farms. Compared to their rivals like Alibaba and JD.com, Pinduoduo has placed special emphasis on agriculture. If they are able to succeed, they might inadvertently create the most forward thinking agriculture e-commerce in the world.
The Digital Sports Platforms in China ⚽️
For several years, growing the local sports industry has been a key priority of the Chinese government. With such a large population, this presents huge opportunities for companies looking at sports fans. There are currently 213 Million people in China streaming sports online, which will likely continue to grow in the aftermath of Covid. This article highlights the top five sports news and streaming platforms: Tencent Sports, PP Sports, Sina Sports, CCTV-5, and Alisports.
Out of all the popular sports in China, two in particular stick out—Basketball and Football. The NBA is the most popular foreign sports league and the Chinese Super League is the most popular local sports league (CSL). For Western leagues, tapping into China is generally their biggest international opportunity. These sports platforms are growing off the back of increasing Chinese sport interest, which makes the sports industry one of the hottest to watch over the coming years.
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New Chinese Rule Has Potential to Affect TikTok Sale ✋
On Friday, China’s Ministry of Commerce and Ministry of Technology changed a rule that would ban the export of technologies related to “artificial intelligence” and “personalized information push service based on data analysis.” Any Chinese company selling that technology to a foreign buyer now has to go through new layers of scrutiny. And both of those quoted technologies are key components of TikTok, the Chinese company currently being forced to sell its US operations. On Sunday, Bytedance, TikTok’s parent company, issued a statement saying they would “strictly comply” with any new Chinese regulation.
At this point, TikTok’s acquisition is imminent and its unclear how this new rule will affect the deal. It was expected that the official TikTok announcement of an acquisition would happen sometime this week but the Wall Street Journal is reporting that talks slowed down this past weekend after the new Chinese rule change. I still think the deal will go through, but this shows how important of a political football TikTok has become for both the US and Chinese government.
New Access to Financial Services for Filipinos 🇵🇭
In the midst of Covid, 27 Million people in the Philippines are unemployed. It’s estimated that only 2 out of 10 Filipinos have a bank account and even fewer have credit cards. At the same time, 7 out of 10 Filipinos are mobile internet users and more people have digital wallets rather than credit cards. Against this backdrop, several fintech startups are beginning to see big opportunities in the Philippines.
The Philippines is a huge country with a population of 106 Million. Companies like Hong-Kong based fintech Cashalo entered the market in 2018 and have offered products like ‘buy now pay later’ credit schemes and personal loans. Since there is not a strong credit scoring system in the country, extending credit to Filipinos can be risky for startups. Regardless, companies like Cashalo, BillEase, and Home Credit have seen millions of app downloads and are still bullish.
The Potential Weakness of Western Celebrity Beauty in China 💄
Nearly half of all global beauty industry growth is expected to come from China over the next five years, an increase in sales representing $38 Billion. This article from Jing Daily highlights the changing consumer preferences of young Chinese consumers. Several Western celebrities like Victoria Beckham, Kim Kardashian, Miranda Kerr, and Rihanna have launched their own beauty brands but success is not always guaranteed from a Western brand name. Local Chinese beauty brands, known as c-beauty, are increasingly more relevant products for local Chinese buyers and are also more affordable than Western celebrity beauty brands.
While the article doesn’t necessarily mean Western celebrities are struggling to launch beauty brands in China, I think it says a lot about Chinese consumers. Modern Chinese consumers are more proud of their national identity and correspondingly have stronger support for local brands. Twenty years ago, it would have been sufficient to launch a foreign brand in China and people would buy your product because it’s foreign. Today, there are much higher standards for Chinese market entry and there is more support for local brands.
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Ant Group’s Relationship with Paytm
Ant Group, the fintech company that was spun out of Chinese e-commerce giant Alibaba, is on track to have the largest IPO of the year, with a planned $200 Billion public offering in both Hong Kong and Shanghai. In their recent filing documents, Ant revealed that they have a 30% stake in One97 Communications, which is the owner of Paytm, India’s largest digital payments company and most valuable startup. This matters because it adds a new layer of risk for both Ant and Paytm, given the currently strained and complicated relationships between China and India.
The Indian government has recently imposed new restrictions on foreign investment that has especially affected Chinese investors in Indian companies. Earlier this year, Indian startup Zomato had $100 Million of investment coming from Ant that was temporarily blocked by the Indian government. The truth is that more than half of the top 25 biggest Indian tech companies have at least one Chinese investor. Until political tensions or legislation changes, Paytm will be making sure to distance themselves from their relationship with Ant.
China’s Valentine’s Day Sales Festival
Last week was China’s Qixi Festival, one of the biggest sales holidays of the year that is often compared to Valentine’s Day. This festival is especially important for beauty and luxury brands. This year, we saw more of the same record breaking post-Covid e-commerce growth that China experienced during the 618 Festival in June. Of course, many European luxury fashion brands like Salvatore Ferragamo and Estée Lauder paired with Chinese KOLs to do livestreams. The early data from the Qixi Festival indicate strong year-on-year growth across categories.
JD.com released a report saying that luxury goods saw a 20-30% increase in sales. Gold, silver, and jewellery sales increased over 100% and intercity flower orders increased 33%, perhaps indicating more long-distance relationships in the time of Covid. It’s still amazing to me that Chinese e-commerce sales festivals keep breaking records. Part of this might be pent-up demand from a restricted lockdown Covid period, but it also indicates the sheer size and scale of Chinese buyers coming online.
Facebook Threatens to Sue Thai Government Over Censorship
The Thai Government recently ordered Facebook to shut down a Facebook group that contained over one million members critical of the Thai monarchy. The group was shut down but now Facebook is threatening to file a lawsuit against the Thai government to challenge the order. There are certain laws in Thailand that prohibit defamation of the monarchy and the most harsh sentences for breaking the law include extended jail time.
As a former Facebook employee, I still feel a strong connection to the company that was such an important part of my life. I can understand the difficulty in balancing respect for local laws while also fighting for certain principles and ideas the company values. For several years, I thought that Facebook was not putting sufficient investment into their government and public policy teams. Given all the scandals, government scrutiny and new regulation over the last three years, I’m sure Facebook has reevaluated the importance of public policy. It will be interesting to see how the situation plays out in Thailand. In some countries (like Pakistan, India, and Vietnam), Facebook has actually been temporarily banned by the government for violating local laws.
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Pinduoduo Joins Nasdaq-100 as Fastest in History 📈
Chinese e-commerce platform Pinduoduo just became the quickest company in history to reach the Nasdaq 100, which is an index of the top 100 largest companies on the Nasdaq stock exchange by market cap. This means that Pinduoduo has reached a new level of success that places them in the same list as Apple, Microsoft, and Alphabet. Don’t forget—Pinduoduo is only five years old and was founded in 2015.
As I’ve written before, Pinduoduo has one of the most impressive growth stories in Chinese tech. They are one of the very few Chinese companies on the Nasdaq 100. Others include Pinduoduo’s rival JD.com and China’s largest search engine Baidu. Given tensions between the US and China, JD has opened a secondary listing on the Hong Kong Stock Exchange and Baidu has considered delisting from the Nasdaq. Whatever happens with Pinduoduo’s listing in the future, we should still take note of this world class achievement.
Douyin to Cut Off Third Party Sellers 🎩
Douyin is a short mobile video platform sometimes known as the TikTok of China, as it is owned by the same parent company Bytedance. Compared to TikTok, Douyin has a lot more advanced e-commerce features that plug directly into the user experience. One way people can buy products off Douyin is by clicking on a link during a livestream that directs them to e-commerce platforms like Taobao and JD.com. As of August 26, however, users will no longer see third party seller options like Taobao and JD.
With 500 Million monthly active users, Douyin is looking to sell products directly on their platform and cut out third party middle men. By selling directly from Douyin’s shop, they take a larger percentage of the sale. This is similar to a situation if Amazon were to kick out third party sellers from their platform. Many people look to Douyin as a future signal for TikTok’s product roadmap. Regardless of how TikTok’s sale proceeds over the coming weeks, we can expect deeper shopping and commerce integrations within the app, just like how things are already happening on Douyin.
Tokopedia Launches New Lending Platform 💳
Tokopedia, one of Indonesia’s largest e-commerce companies, has just released a peer-to-peer lending platform called Dhanapala. This allows small businesses around Indonesia to access loans and a set of different financial services to support their enterprise. This shift from e-commerce to financial services makes a lot of sense, but what’s interesting about the timing is that Tokopedia is currently being investigated by the Indonesian government about a security breach earlier in May that exposed the information of 15 Million users.
In the midst of this scandal, you can imagine that Tokopedia’s reputation for trust and safety will be at risk and might harm the success of Dhanapala. While it’s generally perceived that people in Southeast Asia have fewer privacy concerns compared to people in the West, especially in Europe, recent scandals like this one from Tokopedia are making privacy a more important issue to Asians. In a situation like this, the next step might be new government regulation around privacy and data security.
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In my ongoing quest to better understand Chinese pop culture, I made the decision to watch this show called Fourtry.
Fourtry is a Chinese reality TV Show where a group of five celebrities go to Japan and try opening up a successful fashion boutique in the middle of Tokyo.
Fourtry was created by iQiyi, a Chinese video streaming platform with over 500 Million monthly active users, one of the many ‘Netflixes of China.’ The first episode became the number one trending reality show on Chinese platform Weibo, reaching 19.8 million viewers.
The celebrities in the show are some of the biggest in China:
Kris Wu is a Canadian-Chinese pop idol with 49 Million followers on Weibo. He got his start as part of the K-pop band EXO and has gone on to become a major film star, singer, and model for fashion brands like Burberry.
Angelababy is a Chinese model, actress, and entrepreneur with over 100 Million followers on Weibo. She has recently starred in Hollywood films like Independence Day: Resurgence and also set up her own venture capital fund AB Capital.
Rounding out the five main characters is singer Wilber Pan, actress Jinmai Zhao, and rapper Fox.
The show explores their trials and tribulations with selling clothes in the trendiest part of Tokyo. Kris Wu was also the host of the super famous show Rap of China and is sometimes referred to as “China’s King of Streetwear.” Fourtry attempts to capitalise on the emerging Chinese street culture trend.
Compared to Western reality TV shows, I noticed a few differences in Fourtry.
Editing
The editing was out of this world. Special effects, while crude, were heavily emphasised in almost every situation to accentuate the emotions felt by each cast member in that particular moment.
Product Placement
The show was sponsored by Vivo, along with other major brands like Pepsi, Mazda, and Ikea. The Vivo product placement was incredibly blatant in certain scenes and a Vivo logo would frequently appear in the bottom right hand corner of the video.
Sometimes the camera would awkwardly pan to a sponsor’s product shot without much relation to the conversations between the cast.
I thought this explicit acknowledgement of sponsors actually made things feel more natural. Rather than hiding the sponsorship, it was front and center.
Another show I’ve watched recently is J-Style Trip on Netflix. It’s a reality TV series with a similar format. Taiwanese pop star Jay Chou travels around different cities around the globe with a group of friends and their adventures are recorded on camera. While the sponsorship seemed less blatant compared to Fourtry, the editing was similarly wild and vivid.
I’m beginning to think this over-the-top editing in media is a Chinese characteristic that is also reflected in the design of mobile apps.
Compared to the UX of Western mobile apps, Chinese mobile apps are a lot busier. To Western eyes, Chinese apps might look crowded and confusing.
Here’s an example of bullet comments, a common way for people to leave comments on video platforms such as Bilibili.
Admittedly, this is an extreme example above, but bullet comments are used very often across several apps. These features might be overwhelming to Westerners, much like how Fourtry’s editing seemed crazy to me.
Why does Fourtry exist? Because the creators of the show recognised the opportunity to capitalise on a recent Chinese consumer trend of street fashion, especially among younger audiences.
iQiyi collaborated with dozens of fashion brands to allow people to buy the specific clothes they saw in the show directly on e-commerce channels. iQiyi also hosted a Fourtry Popup in Shanghai. So iQiyi made money not only by advertising on the show, but also by selling products after the show.
As much as some people might consider reality TV a lowbrow genre, it’s one of the truest reflections of our popular culture. Fourtry, as with all popular Chinese media, can tell us a lot about culture and consumer preferences.
I’m not yet an expert, but I have to admit that Chinese reality TV is quickly become my guilty pleasure to watch at night. Depending on how deep I go down this rabbit hole, I can always shift careers to become a reviewer of Chinese TV shows.
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Update #55 - Hong Kong Stock Exchange, SEA Luxury, and Fake Universities
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Triller Partnership With India’s Reliance 🎥
Triller is one of the biggest competitors to TikTok globally. It’s a US-based short-video mobile app that was released in 2015 and is very very similar to TikTok. Since the controversy around TikTok has increased over the past year, Triller has seen a huge increase in user numbers, with now 250 million total downloads globally. This week, Triller announced a partnership with JioSaavn, the Indian music streaming platform owned by Indian conglomerate Reliance. Users will be able to create Triller videos directly on the JioSaavn app.
JioSaavn has over 100 million monthly active users and provides services in India similar to Spotify. As I’ve written about before, Reliance is one of the biggest and most influential companies in India. They have received billions of dollars in new funding from companies like Facebook and Google over the last few months and are best placed to capitalise on India’s digital transformation. Last week, it was reported that Reliance was looking to potentially acquire TikTok. It looks like those talks may have fallen through as this partnership with Triller would be directly competitive against TikTok. With this new relationship, Triller now has a powerful ally with Reliance and even more chances of success in India.
Didi Expands to Russia and More 🇷🇺
This week, Chinese ride-hailing company Didi Chuxing announced that they have expanded their service to Russia. It’s focused on the specific region of the Tatarstan Republic, with operations in the city of Kazan. Didi has also been expanding in South America over the last few years and has set the goal of achieving 800 million active users globally. CEO Cheng Wei announced earlier this year that Didi has reached the milestone of 1 billion rides outside of China.
Didi is basically the Uber of China. In 2015, Uber had actually launched in China and became a major competitor to Didi. The fierce battles between the two companies resulted in Didi eventually acquiring Uber China in 2016. Ride-hailing has become one of the biggest tech industries and there are strong rivals in many different countries, like Uber, Careem, GoJek, and Grab. Watching where Didi plans to expand says a lot about their specific strategy. Didi expanding in places like Russia and South America also means they are not expanding in the competitive Southeast Asian markets, where ride-hailing is dominated by companies like GoJek and Grab.
Who Wants TikTok, Who Is Leaving TikTok ⏰
It’s wild how a single Chinese video app has created a geopolitical storm and one of the most contentious tech acquisitions in recent history. Ever since President Trump issued an executive order requiring TikTok to be sold by next month, several major US companies have been reported as potential buyers. At first, the obvious frontrunner appeared to be Microsoft. Now there has been talk about Oracle, Netflix, and most recently Walmart interested in buying TikTok. Most of these actual acquisition conversations happen behind closed doors, so we really won’t know the truth until things become official.
At the same time, Kevin Mayer, TikTok’s American CEO who joined the company four months ago, has just resigned from his new role. One can imagine that being TikTok’s CEO right now is probably one of the world’s toughest jobs. Again, we will never know the full story as major executive departures like this are usually the result of several internal factors unknown to the public. I am still bullish on TikTok. Amidst all the commotion and drama, the underlying product and audience are still unprecedented successes and that won’t die easily.
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Chinese Autonomous Cargo Drones Fill the Skies ⛅️
If you happened to be standing in a field in northwest rural China last Friday and looked up into the sky, you would have seen China’s largest delivery company SF Holdings complete its very first autonomous cargo drone flight. This was a major milestone in unmanned air drones operating with major capacity. The SF Holdings cargo drone was said to be able to fly with a payload of up to 1.5 tonnes. The target markets for these new drones are rural areas in China that struggle to receive deliveries given their geography.
In the US, Amazon has presented their own delivery drones that have the ability to transport packages weighing 2 kilograms across a distance up to 24 kilometres. Other major drone companies in the US include Sabrewing, Nautilus, and Wing, a subsidiary of Alphabet. Drone technology will likely become a major part of logistics and supply chains for countries across the world and the potential market size is pretty huge. There’s enough room for many big drone companies, but the leading technology will likely come from China and America.
Hong Kong Businesses Explore Virtual Solutions 💡
Tourism, Restaurants, and Retail are some of the industries most affected by Covid. In the first half of 2020, visitor arrivals to Hong Kong were down 90% from the previous year. To survive and hopefully thrive through this time period, many of these tourism-related businesses realise that they need to explore digital business models. Cosmetics brand Sasa started livestreaming to Mainland Chinese customers in order to sell their products online instead of relying on tourists visiting from Mainland China. As another example, health and food company AbouThai started hosting online livestreams to sell their products.
Shifting your traditionally physical business online isn’t easy for everyone. For some people, this requires completely new skillsets that might not currently exist amongst their employees. Businesses that understand how to sell their products online will have a competitive advantage in a difficult economy. And for the labour market, digital marketing skills should become even more valuable.
China Opens Doors to More Europeans ✈️
China has eased their travel restrictions on visitors coming from 36 European countries. Earlier this year, almost all foreigners were restricted from entering China, even if they had work permits and family in the country. Travellers to China still have to go through a 14-day quarantine and take mandatory Covid tests and to be specific, it’s Europeans with a valid residence permit who can now apply for a visa to enter China. So there is still a long way to go before travel is normalised.
This incremental step in the direction of progress indicates China’s slow, but steady confidence in the country’s recovery. The idea of easing travel restrictions on a country-by-country basis is something we will start seeing more often. Here in New Zealand, the government is discussing the idea of soon creating travel bubbles — allowing people from specific, low Covid-risk countries to eventually travel to New Zealand. For China, I’m sure the government is making very deliberate steps to decide which countries to open up travel bubbles with. The health of your country will become a more important factor in your ability to travel around the world.
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Ant Group Makes It Official, Time For An IPO 📈
This week, Ant Group filed for its initial public offerings (IPOs) in Hong Kong and Shanghai, with a goal to raise $20 Billion and an estimated company valuation of over $200 Billion. This will make Ant the biggest IPO of the year and likely the biggest IPO of all time. Ant Group owns Alipay, a fintech and digital payments platform that has over one billion users, $15 Trillion in transactions processed last year, and $10 Billion in revenue throughout H1 2020. It’s pretty much the premier fintech company of China and possibly the whole world.
Funnily enough, the previous record holder for ‘world’s biggest IPO’ was Alibaba, the company founded by Jack Ma that also spun out Ant Group. Unlike Alibaba however, Ant has decided not to list on a US Stock Exchange. Ant is a prime example of a company that is literally one of the world’s biggest and influential, but most people in the West are unaware of what the company does. This cultural blindspot places Ant in a position to take advantage of the world’s fastest growing emerging markets, which are in places like Asia.
Chinese Reality TV Returns Post-Covid 🥤
A popular type of program in China is Reality TV shows. While the regular TV season was delayed because of the coronavirus, things are now relatively back to normal. With this reopening comes new opportunity for brands sponsoring these TV shows. International beverage brands (alcoholic and non-alcoholic) are the most popular sponsors of Chinese reality TV, including Pepsi, Coca-Cola and Absolut Vodka. Major luxury automotive brands like Mercedes-Benz and BMW are also sponsoring China’s biggest reality TV shows.
I’m currently watching Fourtry, which is a popular Chinese reality TV show about celebrities who try to create a fashion boutique in Tokyo. Compared to Western reality TV shows, Fourtry strikes me as more in-your-face with the sponsorship, video production, and commercialisation. Having worked in marketing, advertising, and media across several continents, I have noticed the cultural differences in how customers respond to advertising. In China, brand partnerships and sponsorships seem more direct and explicitly selling.
China Mobile’s Strategy for Gen-Z 🗼
China Mobile is one of China’s largest telco companies and their new product M-Zone is geared towards Gen Z audiences. To appeal to this target audience, M-Zone has been promoting their 5G services and AI by partnering with streaming platform Mango TV to celebrate youth culture through interactive content. M-Zone worked with popular Chinese influencers, used virtual reality/augmented reality (VR/AR), and created tons of content they streamed across several digital platforms.
All companies targeting younger audiences next to adjust their marketing strategy. Whether in the East or West, reaching younger audiences requires your brand to understand the latest technology, influencers, and interactivity. China Mobile’s latest campaign for M-Zone is very futuristic and embraces some of these cutting-edge trends for the sake of relating to younger audiences. It’s pretty forward thinking and I don’t see this type of marketing from Western telcos.
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The Purchase Potential of Female Consumers in China 👚
There’s a term in China called “Little Sisters,” which refers to Chinese women between the ages of 20 and 40, a key group of consumer spending. For companies looking to advertise to Chinese consumers, the ‘Little Sister’ target audience is becoming even more important. In Mainland China, women make three out of four purchases. There have been several hundred-million dollar mergers and acquisitions in China over the last few months in industries such as personal care, baby care, and health care. The people behind these deals were all targeting female Chinese consumers.
As a sub-segment of the ‘sheconomy,’ the Chinese cosmetics industry has become the second largest in the world after the United States. In Q2 2020, cosmetic sales in China increased 16 percent year-on-year. The recovery of cosmetics post-Covid has been very rapid compared to other industries. In the West, consumer goods companies put a lot of effort into positioning their marketing towards female consumers. The same thing is now happening in China as we see the rise of ‘Little Sisters.’
Rise of the East Asia Super League 🏀
The East Asia Super League (EASL) is a new professional basketball league that will feature teams from countries across Asia, including China, Japan, Korea and the Philippines. The inaugural season will begin in October 2021 and the league has a ten-year agreement with the International Basketball Federation (FIBA). The first season will have eight teams and the plan is to increase to sixteen teams by 2023.
Asia is the biggest untapped market for Western sports leagues. With over two billion potential sports fans in Asia, pretty much every sports league from European football to American basketball makes Asia their main international priority. While it’s interesting to look at what the Premier League and NBA are doing in Asia, some of the most exciting developments are sports leagues native to Asia. Another example apart from the EASL is One Championship, which has become one of the fastest growing and biggest sports properties in the world. One Championship is an eight-year-old mixed martial arts sports organisation based in Singapore and operating across several Asian countries. While you could call One Championship something like ‘the UFC of Asia,’ One has actually overtaken the UFC in global online viewership numbers.
The Best Performing Stock Market in Asia 🇵🇰
What is currently the best performing stock market in Asia? Right now, that title belongs to Pakistan, whose KSE-100 Index has rebounded with a 36% increase since March. While the country is still suffering many covid-related effects in its economy and the overall health of society, there are a few investment funds from places like Sweden and Dubai who have made early, contrarian bets on Pakistan. It’s too early to draw long-term conclusions from this, but Pakistan’s rebounding stock market should bring at least a moment of positivity and pride.
I’ve personally visited Pakistan three times and worked with organisations there ranging from small startups to universities to multinational conglomerates. For years I have been saying that Pakistan is the most underrated emerging market and perhaps most misunderstood country in the world. Over the last couple of years, the country has made both critical progress and large missteps. In the time of covid, I’m cautiously short-term optimistic and definitely long-term bullish.
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Hong Kong Stock Exchange Is Looking for More 🏦
Given Hong Kong’s reputation as a global financial center, the Hong Kong Stock Exchange is one of the world’s most important stock exchanges. In terms of total IPO fundraising size, Hong Kong has been world’s biggest stock exchange six out of the last ten years, capitalising on China’s growth. For mainland Chinese companies, listing on the Hong Kong Stock Exchange is an attractive, obvious option.
This KrAsia interview with Christina Bao, Head of Global Issuer Services at HKEX (Hong Kong Exchanges and Clearing Limited), highlights some of the hot topics being discussed regarding the role of the Hong Kong Stock Exchange. Because of US-China political tension, many Chinese companies are choosing to delist from the US and instead list in Hong Kong. On top of that, HKEX is making major marketing efforts to attract Southeast Asian companies to list in Hong Kong. The next generation of Southeast Asian tech companies will be an attractive target for all stock exchanges around the world, and the Hong Kong Stock Exchange might have the best chance of being the home of their new listings.
Luxury Consumption in Post-Covid Southeast Asia 💅
Many Southeast Asian countries continue to suffer from the coronavirus, but there’s a surprising new trend around the demand for luxury goods in this region. A recent study by iPrice Group has recorded significant increases in the amount of Google Searches across Southeast Asia for luxury brands like Chanel and Louis Vuitton. Increases in search volume have also been recorded for luxury watches like Rolex and sportswear brands like Adidas/Yeezy. This study doesn’t explain why, but that leaves us with some interesting hypotheses.
Are people searching for more luxury goods to take advantage of Covid-related sales and discounts? Are people searching because more overall commerce is happening online? Another concept people are describing is “revenge spending,” when people decide to spend even more money after a significant period of deprived demand because of the coronavirus. Considering the current boom in sales in China as the economy reopens, you can definitely see examples of revenge spending. Whatever the reason behind these increases in luxury search volume in Southeast Asia, this makes it even more important for your brand to have a high-quality online presence. Your ‘virtual’ storefront might matter more than your physical storefront.
Alibaba Clamps Down on Fake University Admission Letters 🎓
Before getting shut down by Alibaba’s security team, merchants on Alibaba’s online marketplace Taobao were selling faked university admission letters for as low as $28. The results of the Gaokao, China’s national college admission exam, were released recently—essentially deciding where millions of high school students around the country would be attending university. There was a high profile case in local news describing a high school student who got caught with a fake admissions letter to prestigious Tsinghua University.
Taobao is huge, with 874 Million monthly active users. On such a big marketplace, you can expect that there will be a certain percentage of fake, counterfeit, or illegal goods. There is an entire category of ‘informal services’ people can trade on the platform, and these fake university degrees are just one example out of many. With new demand for new industries resulting from the coronavirus, I’m sure there will be many new hustles people will sell as an informal service on Taobao. Overall, Alibaba is still thriving despite the coronavirus, with increased revenue and user engagement.
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I spent the last week in the city of Napier, here in New Zealand.
New Zealand is in this surreal, dreamlike situation. On August 9, the Ministry of Health declared 100 consecutive days without local coronavirus cases. The only cases in the country came from people traveling into New Zealand from other countries.
However, a new cluster of cases was discovered a week ago and the city of Auckland went into lockdown with a Level 3 alert. The rest of the country is on Level 2, which means that most places are still open—schools, businesses, restaurants, and hotels.
While staying at my hotel in Napier, a hotel employee told me that things were understandably slower because of the coronavirus. Typically, there would be busloads of Chinese tourists coming to stay at the hotel but now there are none.
Tourism is New Zealand’s biggest export industry, contributing to 20% of total exports. The biggest source of New Zealand tourists come from Australia, followed by China, followed by the US.
To deal with this gap in tourists because of the coronavirus, New Zealand’s travel industry had tried using technology to solve their challenges.
In June, Tourism New Zealand hosted a two-hour livestream of penguins hanging around the Christchurch International Antarctic Centre. The livestream was hosted on Chinese app Weibo and 1.6 Million viewers tuned in to see the penguins.
Two professional travel influencers Xiaomo and Ahou have partnered with Tourism New Zealand on a series of New Zealand-themed livestreams on Weibo. Travel companies all around the world are experimenting with livestreaming.
The purpose of these livestreams is to entertainment, inform, and hopefully make a sale. You could reach more Chinese people virtually vs. physically. So could you also make more money virtually vs. physically?
Last year, New Zealand Tourism partnered with Viya, China’s biggest livestreamer, who flew to Auckland to showcase a host of local goods. Within a four hour livestream where she reached 10 Million Chinese viewers, Viya sold $30 Million worth of New Zealand products including skin cream, honey, and cereal.
And China is New Zealand’s largest trade partner. In 2008, New Zealand became the first OECD country to sign a free trade agreement with China, which still exists today. On top of tourism, China receives goods from New Zealand in industries such as dairy, wood, and meat.
The interests of this small island nation may not create earthquakes on the global stage, but it can carve out a profitable niche for buyers and tourists from China. While New Zealand can’t welcome Chinese tourists, the internet still allows you to connect with Chinese buyers.
In the meantime, hotels around the country will have to rely on domestic tourism.
This Week’s Most Popular Update:
Update #52 - Unicorns, Joyy, and Disney Indonesia
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Sea Group is Booming 📈
As a combination of e-commerce, gaming, and financial services, Sea Group is one of the best positioned companies in Asia to benefit from the coronavirus. They just reported their Q2 earnings, where they experienced 93% year-on-year revenue growth. Free Fire, one of their mobile games, reached 100 Million monthly active users and became the highest grossing mobile game in Latin America and Southeast Asia.
Their e-commerce app Shopee competes directly with Alibaba/Rocket Internet backed Lazada and is in a strong position right now. Shopee was the number one ranked app in Southeast Asia on Android, in terms of downloads, monthly active users, and time spent. In Indonesia, Shopee’s largest market, Shopee experienced 130% year-on-year revenue growth. SeaMoney, Sea’s digital payments arm, added five million new users over the last quarter. Sea’s areas of focus (gaming, e-commerce, and financial services), are quite literally some of the best bets you could make in a post-covid world. From their Q2 results, it shows.
Bigo Moves From Hong Kong to Singapore 🇸🇬
Joyy Group, a competitor to TikTok in the social/video/mobile app space, operates a group of apps including livestreaming app Bigo Live and short video app Likee. Both of these apps were part of the recent Indian ban of several Chinese mobile apps. While the scrutiny being faced by Joyy is a lot less than TikTok/Bytedance, this Chinese tech company still realises the importance of optics and positioning in the current business environment.
Joyy has recently moved its servers from Hong Kong to Singapore, in an attempt to distance themselves from Chinese association. Bigo was originally founded in Singapore before being bought by the Chinese Joyy Group, and 91% of their 460 Million monthly active users are in international markets outside of China. Considering their revenue and user base is so heavily weighted internationally, it’s critical that Joyy keeps governments happy. Otherwise, they could start facing similar threats as TikTok.
Chinese Electric Scooters, With the Help of Vin Diesel 🏍
Yadea Group Holdings is a Chinese electric scooter company currently worth around $22 Billion. Due to the coronavirus, demand for electric scooters has been increasing and Yadea has seen 91% year-on-year growth in H1 revenue. The company sells 162 electric scooter models and exports around the world. American actor Vin Diesel, best known for his roles in the Fast & Furious film series, is one of the main faces behind the Yadea brand.
90% of Yadea’s revenue still comes from Mainland China, so employing an international Western star like Vin Diesel might help increase their brand’s appeal outside of China. Electric vehicles, and in this specific case the subsegment of electric scooters, is a rapidly growing market. 30% of mopeds, scooters, and motorcycles were electric in 2019, and that number is expected to reach 77% by 2040. Consumer behaviour in China, which soon may translate around the world, has influenced people to turn to electric scooters for economic, environmental, and safety reasons.
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Shenzhen Becomes World’s First 5G City 🗼
The Chinese city of Shenzhen claims it has become the world’s first city to achieve stand-alone 5G coverage. This means that you can receive 5G cell phone service and high speed wireless internet across the entire city. Chen Rugui, Shenzhen’s mayor, made this announcement in a press conference earlier this week. There are apparently 46,000 5G stations in the city, more than any other city in the world, and 5G tech providers Huawei and ZTE are both headquartered in Shenzhen.
Shenzhen’s history symbolises the ascent of modern China. From becoming a special economic zone in the 1980s under Deng Xiaoping to now being called Silicon Valley of China, Shenzhen may be home to the new forefront of 5G technology. China has prioritised developing 5G infrastructure and applications as a national policy, with most other major Chinese cities already aiming to achieve similar levels of 5G coverage as Shenzhen very soon. Apart from making everything faster, there are many ways (some hard to predict) that the power of 5G technology could change the way many parts of society operate. However it changes things, we might see it first start to happen in Shenzhen.
Bytedance’s Other Ventures in Education 🎓
While Bytedance might be best known as the Chinese company that owns TikTok, many people don’t realise that Bytedance is a multi-faceted tech holding company that operates several diversified business ventures. And with all the scrutiny TikTok faces, Bytedance may need to double down on their other companies. One major area of focus for Bytedance right now is education. The company has launched two new online learning apps in China—Xuelang and Qingbei Xiaoban.
Xuelang offers one to three hour long livestream classes for K-12 students and also courses for professionals. Qingbei Xiaoban focuses on small online classes run by a teacher with a limited number of concurrent students. These are just the latest in dozens of apps launched by Bytedance over the last few years, including other education apps. As I have written about before and has been profiled in publications like the FT, edtech (education technology) startups have really benefitted from the coronavirus, especially in Asia. It makes sense for Bytedance to treat education as a strategic priority. People have described Bytedance as an App Factory, so launching several edtech experiments at once is a typical strategy for them.
Live Chinese E-Sports, Back in Business 🎩
Many people across China have been attending large social gatherings in the relative aftermath of the coronavirus, including places like Wuhan, which hosted a packed music festival in a water park just a few days ago. This week, Honour of Kings, one of China’s and the world’s biggest competitive e-sports games, hosted the Honour of Kings World Champion Cup 2020. This was the first live, physically attended e-sports event of the year since the coronavirus outbreak. Things have changed, however.
While the event took place in a stadium in Beijing with a capacity of 19,000, only 2,000 tickets were available for fans. As has become the norm, attendees had their temperature checked and mobile health codes scanned before entering the event. In fact, you could only purchase tickets to the event if you had a level 30 Honour of Kings account, which means you are a high ranked player in the top percentile of gamers and most likely a superfan. Whether you like these ideas or not, they present some pretty interesting options for stadium attendance and ticketing that could also be utilised in other countries around the world.
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Chinese Fitness Post-Covid 🏋️♀️
One of the biggest shifts in fitness due to the coronavirus is the shift online - virtual classes, digital personal training sessions, recorded workouts, and more. In China, health and fitness influencers have adjusted their content to target the at-home audience of people trying to stay fit. On video platform Bilibili, workout videos accumulated 660 Million views during the lockdown, which was a 200% year-on-year increase in number of views and a 164% year-on-year increase in total viewing time. On average, fitness creators have also experienced a 240% year-on-year increase in new followers.
Many people appreciate the fact that virtual fitness gives them more flexibility and convenience, often at a lower cost. These growth trends have been consistent across many Chinese fitness apps, virtual gyms, and health training programs. Not every company can easily switch to digital models, especially if they have a traditional approach to business. Whether you like it or not, digital fitness is a new worldwide reality and the post-Coronavirus era is a land grab for the platforms who can quickly take advantage of this trend.
China’s E-Sports Industry: Best Year Ever 👾
The China Game Industry Research Institute released a report on the performance of China’s game industry over the first half of 2020. There were 484 Million Chinese E-sports players (roughly 35% of the population), which was a 10% year-on-year increase. The esports industry generated $10 Billion in revenue, which was a 55% year-on-year increase. Out of revenue from the overall gaming industry, 75% came from mobile games.
These numbers are very impressive. While many industries are struggling to survive as the world is on fire, the gaming industry is clearly thriving. China’s overall adoption of gaming is generally at higher levels than most of Asia and the West, but the data from other countries on the growth of gaming is pretty similar.
Amazon Hits New Milestone in India 📊
Last week, Amazon hosted their annual sales holiday in India called Prime Day. Over two days, Amazon India processed a record $600 Million in sales. The biggest selling products were smartphones (including Chinese manufacturers Xiaomi and OnePlus), consumer electronics, and appliances. Amazon launched their Prime service in India two years ago, and over one million Indian Prime subscribers participated in this recent sales event.
91,000 small business sellers participated in Prime Day 2020, which was another record for the company. Overall, Prime Day was a major success for Amazon and signals broader consumer confidence amidst the coronavirus. Or at the very least, people are moving their purchases online out of necessity. We have already seen Chinese online sales holidays set new records, like JD’s 618 Festival in June. We are now seeing new records in Indian online sales holidays. Will we see similar recoveries once we get to Cyber Monday in the US? We will have to wait and see.
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Louis Vuitton’s Physical Fashion Show 👚
Luxury brand Louis Vuitton partnered with media publication GQ China to create the Louis Vuitton Spring-Summer 2021 Menswear show in Shanghai. Several Chinese celebrities like singer/actor/model Kris Wu played important roles during the show and in the promotion leading up to the event. Virgil Abloh, the global artistic director of Louis Vuitton Menswear, was unable to attend in person so he broadcasted a virtual message to the audience. GQ China was responsible for the show’s promotion on Chinese social media channels like Weibo and Douyin.
As I’ve been writing over the past weeks, China has already been recovering and hosting several physical events like last week’s gaming & entertainment conference China Joy. This Louis Vuitton show is the first luxury fashion show to physically take place in China post-Covid. Compared to their Western counterparts, GQ China is taking a more active role to diversify into other ventures like GQ Lab to take on digital projects. This collaboration between a fashion brand and a media brand is pretty unique. Look to see more of that.
Chinese EV Giant XPeng Motors Plans an IPO 🚙
XPeng Motors is one of Tesla’s biggest competitors in electronic vehicles (EV). The Chinese company targets mid- to high-end EVs and has raised a combined total of $900 Million in investment this year from a group of investors that includes Alibaba and the Qatar Investment Authority. Last week, the company made a filing with the US SEC to prepare for an IPO on the New York Stock Exchange. XPeng currently has two electric vehicles on the market, one of which competes directly against Tesla’s Model 3. They plan to launch a third electric vehicle in 2021.
XPeng was founded in 2015 in Guangzhou, China. The electronic vehicle market is huge and competitive, as XPeng competes against other EV makers like Tesla, Li Auto, Nio, Fisker, Lucid Motors. Tesla has been increasing their Chinese presence with a new Shanghai factory and Li Auto is another Chinese OEM that listed on the Nasdaq last month, raising $1.1 Billion. XPeng currently does not export vehicles to the US, but anytime a major Chinese company plans US listings, you have to expect that US regulations and tariffs will need to be a serious consideration in doing business.
Pinduoduo’s Deepening Relationship With Manufacturers 🏭
Chinese social commerce giant Pinduoduo has been making a lot of moves recently. After a $200 Million strategic investment in Chinese electronics retailer GOME, they have now started major livestreams of electronics products under the fast growing category of flash sales. Pinduoduo has opened up a new wholesaling program for its merchants and also partnered with a Singaporean food agency to develop better ways of testing fresh produce for pesticides.
As the third-largest e-commerce company in China, Pinduoduo is definitely poised to take advantage of the coronavirus’s effects on Chinese consumption. Their consumer to manufacturer (C2M) model paired with social commerce makes them in my opinion one of the most interesting Chinese companies. By investing in retailers, working with governmental agencies, and going even deeper into a manufacturer relationship, their level of vertical integration is pretty intense vs. more lightweight e-commerce companies and I’m pretty bullish on their future.
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How Google Helps Indian Students 🏫
Google plans to create digital classroom programs in the Indian state of Maharashtra, which will reach 23 million students and teachers across 190,000 schools. Maharashtra, like most of India, has been affected by Covid and most physical schools have shut down. Google will partner with the Maharashtra government to provide new digital classroom tools and services free of charge. This includes products like G Suite for Education, Google Forms, Google Meet, Google Classroom, and more. Google has already started working with India’s national governmental body that regulates secondary schools (Central Board of Secondary Education) and has helped fund a grant for the Kaivalya Education Foundation to provide educational opportunities for underprivileged children.
This fits within Google’s broader announcement earlier this year that they will be investing $10 Billion into India across a series of different programs and partnerships. As the world’s second most populous country, India is an important and huge market for Google’s products and services. Google’s investments in the country go all the way from government to schools to infrastructure to startups to non-profits and more. Of course, since Google’s CEO Sundar Pichai is originally from India, that adds an extra layer of prioritisation Google has for the country.
Can Samsung Ride the Anti-China Wave? 📲
The political tensions between India and China have made it harder for Chinese companies to operate in India. Samsung, as a Korean company, has been able to use this to strengthen their position in the Indian market. In Q2 of this year, Samsung moved up to become the country’s number two smartphone maker with 26% market share. In Q1, Samsung was the number three smartphone maker with 16% market share. Since June, Samsung has launched seven new smartphones. These are lower-priced smartphones, with the cheapest one priced at $75.
This could be an important turning point for Samsung. Over the last few years, Samsung was losing market share in India to the newer, lower priced Chinese smartphone brands like Oppo and Xiaomi. These Chinese smartphone makers are still major players in the market, but they will need to aggressively change their marketing strategy given the current geo-political climate. India’s importance will only increase as the population and economy grows, so smartphone makers from all countries will continue prioritising India. There are so many second and third order consequences of this Chinese-Indian political tension, it’s kind of mind-blowing.
Grab’s Next Priority: Financial Services 🏦
After raising $856 Million earlier this year focused on expanding payments and financial services, Singaporean ride hailing company Grab has now announced a set of new consumer-facing financial products. Grab has already been providing B2B financial services to drivers and small businesses, but will now start offering consumer products like micro-investments, loans, and health insurance. One of these products is Autoinvest, which allows users to invest small amounts of money through the Grab app.
Financial services has always been a priority for the company. Over the last couple of years, Grab has partnered with several financial services companies and acquired the startup Bento in order to provide investment and wealth management products. Similarly, ride-hailing companies around the world like Gojek, Uber, and Careem have all expanded into financial services as a logical next step on their strategic roadmap. Covid has actually unleashed increased consumer demand for digital financial services, which is especially important in a place like Southeast Asia. So Grab, eager to capitalise on this demand, is going to be moving fast to expand their product offering.
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Chinese Real Estate Company Beike to Raise $2 Billion in US IPO 🏘
Beike Zhaofang is a Chinese online property platform backed by Tencent and Soft Bank that was last valued at $10 Billion. The company was launched by one of China’s biggest real estate companies Lianjia as an online property brokerage platform. Last Friday, they made a filing with the US Securities and Exchange Commission to raise $2 Billion in an IPO on the New York Stock Exchange. This would be the largest Chinese IPO in the US since iQiyi raised $2.4 Billion in March 2018.
Over the last few months, several Chinese tech companies (JD, Netease, Ctrip, etc.) have chosen the opposite path. They have either delisted from US stock exchanges or chosen to list in Hong Kong instead. While the US government still continues to pose financial restrictions on both individual Chinese companies and Chinese firms more broadly, Beike is accepting these risks while some of their peers are not.
The Thousands of Newly Banned YouTube Accounts 🚫
YouTube announced last week that they have banned thousands of Chinese accounts on their platform for engaging in “coordinated political influence” on political issues. For more detail on the scale of the ban, 2,596 Chinese accounts were taken down in Q2 of this year versus 277 in Q1. Google’s message came from their publicly available Threat Analysis Group Bulletin.
This news implies that there is a significant increase in pro-Chinese spam and propaganda on YouTube. The research firm Graphika posted a full report outlining their analysis on the proliferation of pro-Chinese spam across not only YouTube, but other social media platforms like Facebook and Twitter. Even outside of purely China-related spam, Google has reported a uniquely busy year for taking down threatening political channels. Whoever is behind content we see on social media, there are many people who would benefit from enhancing the tensions between the US and China on platforms like YouTube.
An Indian Hypergrowth Startup Story = WhiteHat Jr. 🚀
WhiteHat Jr. is an Indian edtech startup founded 18 months ago that offers online coding classes for students in India and the US. Another Indian ed tech firm Byju just acquired WhiteHat Jr. for $300 Million, which makes WhiteHat Jr. the fastest, largest startup exit story in Indian history. The company hosts live online coding classes that assign one teacher to each student and cost around $10 per class.
This is a wonderful success story for India’s tech ecosystem. One of the most important parts of building a startup ecosystem is having successful exits, which increases the startup community’s number of role models, strengthens psychological belief, and theoretically allows ‘alumni’ from those startups to invest in the next generation of founders. And to double down on the specific vertical, ed tech is a very hot space right now given the move to virtual/remote education because coronavirus. It’s estimated that 250 Million students in India have had their schooling disrupted over the last few months. Byju has raised $400 Million this year and other Indian competitors like Unacademy and Vedantu have received similarly large recent funding rounds.
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The Struggles of Jollibee 🐝
If you are Filipino or have any familiarity with the Philippines, you will probably know Jollibee. Jollibee is a Filipino fast food chain and one of the most successful companies ever produced by the Philippines. The 42-year-old Jollibee Foods Corporation controls 56% of the Philippines’ fast food market and also owns other brands like Smashburger and The Coffee Bean and Tea Leaf. Jollibee operates around 6,000 stores globally, half of which are in the Philippines and the rest are spread across Southeast Asia, North America and the Middle East.
Unfortunately, Jollibee has reported a net loss of $240 Million over H1 2020 and saw a decrease in market cap of $2.2 Billion dollars. During the recent lockdowns, Jollibee had to shut down half of their total stores worldwide. While many have reopened at this point, recovery still seems distant as the Philippines has just surpassed Indonesia as the Southeast Asian country worst hit by Covid. The company still maintains optimistic goals of getting back into profitability in 2021 and achieving a growth rate of 15% in 2022.
Chinese Banks Testing Digital Yuan 🏦
The Chinese government has talked about the idea of testing a digital yuan currency for a while. Earlier this year, China’s central bank announced pilot programs with a specific group of banks in select cities around the country. This new Digital Currency/Electronic Payments (DCEP) project has begun and these whitelisted banks have already started using the digital yuan to transfer money and pay for services.
Customers of these approved banks have to download digital wallets and see if they have been approved to try out the new digital currency. There are still many details to be determined but the Chinese government announced their intention to host a widespread test during the 2022 Beijing Winter Olympics.
Zoom Restricts Sales in China 🤳
Given all the controversy between the US and China, the video-chat technology company Zoom has made the decision to suspend direct sales in China. At the end of August, Zoom will stop services, sales, and updates for users with a billing address in Mainland China. Previously, Zoom operated in China through direct sales, online subscription, and partner sales. Mainland Chinese users can still join Zoom calls as participants but users can now only buy Zoom products through authorised local Chinese partners. The company has said in a recent statement that these localised partners should be able to provide better localised services.
Zoom was founded by Chinese-born Eric Yuan, but was built and is currently headquartered in the US. The company was temporarily blocked in China last year and earlier this year, Zoom admitted that some calls had been “mistakenly” routed through Chinese data centers, leading some people to believe Zoom was sharing user data with the Chinese government. Given this track record, it’s likely that Zoom has preemptively made these recent announcements to calm some fears from their users and the US government.
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I was sitting in the audience at San Francisco’s Moscone Center, the biggest conference venue in the city. It was 2017 and I was attending my fourth annual Facebook sales conference.
Mark Zuckerberg had just given us a rousing talk about the future of Facebook. Each year, ‘Uncle Zuck’ comes to our annual GMS (Global Marketing Solutions) conference to answer questions directly from Facebook’s global sales and marketing organisation.
That year, around five thousand people had flown into California from every single office—from Facebook Colombia to Facebook Ireland to Facebook Thailand.
Towards the end of his speech, it was time to open up for an audience Q&A. I got up from my seat and started making my way to the microphone. I was walking through a crowd of thousands, but felt completely alone.
Despite being a relatively seasoned Facebook veteran at that point, I still felt the lump in my throat and the heaviness in my legs as I mustered up the courage to ask Mark Zuckerberg a question.
I was 26 years old and filled with imposter syndrome. Despite having worked at Facebook for four years, it still felt like a dream and I always joked about having snuck through the application process.
I was the youngest person on Facebook’s Global Partnerships team and often thought I didn’t deserve to be there.
Step by step getting closer to the microphone, that voice in my head kept saying, “What the hell do you know? What kind of valuable question do you even think you’re capable of asking Mark Zuckerberg? You should turn around and sit back in your seat.”
I pushed those doubts away and finally got in line for the microphone. After hearing two other people ask their questions, it was finally my turn.
I felt like I was about to black out. The nerves turned into adrenaline and I finally managed to say it:
“Hi Zuck, my name is Anthony. I used to work in the New York office but am now on the Global Accounts team in London—”
Some people in the audience started cheering and whooping. I paused for a second, let out an awkward chuckle, and then continued.
“Considering that an increasingly large percentage of our user base is outside of America, don’t you think we should have more engineering offices outside the US. Shouldn’t Facebook be building more product teams in places like APAC (Asia-Pacific) in order to have better empathy for our global users?”
Zuck tilted his head to the left, looked away into the distance for a brief moment, and then replied,
“That’s a great question. I think it’s definitely true for the sake of our users that we need to make sure products are not only built in MPK [our California Headquarters]. And if a team is being stubborn about this, we will make sure to move them to get them out of that mindset. For example, I know a team that we moved to Seattle despite them wanting to be in MPK.”
I don’t know if he misunderstood my question, but I felt disappointed with his answer. I thanked him for the response, turned my back and started walking away from the microphone.
I felt frustrated that Zuck’s answer was a cop out. I felt that something was missing.
I remembered my friends at Facebook Dubai, who told me how overstretched they were covering clients literally across all of Middle East and North Africa.
I remembered my friends at Facebook Japan, who would have to be on team calls at 10PM because it was 9AM in New York.
I remembered my friends at Facebook Singapore, who cynically joked around at dinner saying how the biggest part of their job was fighting for attention from California.
I remembered colleagues from New York who were turning down job offers to transfer to a “remote” foreign office, fearing the move would harm their career progression by being even further from headquarters.
Facebook’s world-class executive leadership team consisted of Americans living on the West Coast. Clearly, they have succeeded beyond their wildest imagination and are very very good at their jobs.
But how much can they really develop a sense of empathy for someone in India or Brazil or Nigeria?
I’ve always had this nagging feeling that Silicon Valley is too culturally complacent and ignorant about what is happening around the world, especially in Asia.
Facebook started off as an app for American college students that was being built by American college students.
Now Facebook is a truly international platform, with the vast majority of its user base in emerging markets. Even Facebook’s marketing materials constantly emphasise stories about small business owners in places like Indonesia or India using the app.
Facebook builds products at the bleeding edge of technology, hires some of the world’s best people and fosters an incredibly progressive culture. But after working there for several years, I still felt that Facebook had a cultural blind spot around Asia.
So I thought…if even Facebook has an Asian blind spot, maybe other companies and other people do as well.
Twenty years ago, Silicon Valley honestly didn’t need to care about a place like India or China. In 2020, the most consequential issues for Silicon Valley companies usually come from places like India or China.
But what could I do about that..?
Two months ago, a friend reached out to me and said she really liked what I was writing in my other newsletter Venn Diagrams.
She asked me to write more about what’s happening in Asia, because she had no idea about the stuff going on there. I took note when she said that, because about a dozen other people had told me the same thing over the last six months.
I thought back to when Mark Zuckerberg answered my question in 2017, and I wished I could send him and all my friends some kind of overview explaining why I’m so excited about Asia.
Then it hit me…
Why don’t I translate my feverish rants about emerging markets, my obsessive reading about Asia, and my bold claims about underestimated companies…into an actual newsletter about Asian tech, media, and business?
And so this newsletter, East West Hurricane, was built out of the feelings that stirred when Mark Zuckerberg disappointed me three years ago and the realisations that crystallised when a friend asked me to write more about Asia two months ago.
Through creating this newsletter over the past 50 days, I’ve learned a lot about Asia. And I hope by reading East West Hurricane, you have also learned a lot.
Several people who have reached out to me giving positive feedback have been Asian-Americans.
They have told me how much they have learned and also even reconnected with a part of the world where they have ties. Whether or not you fit into that category, I hope this newsletter provides you with value.
I don’t know everything about Asian tech, but I am committed to this lifelong journey of learning.
I especially look forward to learning more from people like Andrew Baisley, whose career already resembles an East West Hurricane.
I have several more interviews planned for the weeks ahead from people whose careers in tech have swirled from East to West. Please let me know if you can think of other people who would be great to interview!
For about a million different reasons, it’s a scary time in the world right now.
To single one out specifically, I’m scared that people will hate and fear what they don’t know.
If we can highlight some of the cool, interesting things we can learn from Asia, and then make the world more international—in even just the smallest way—I would call this a success.
So please, share this post with a friend you think will benefit from learning more about Asian tech, media, and business.
Let’s share these stories that you and I have been reading. Let’s find others to go on this adventure with us together.
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We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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President Trump Escalates Chinese Bans 👀
President Trump made a new announcement yesterday affecting the use of TikTok and WeChat within the US. Trump issued an executive order giving a 45-day deadline for TikTok to be acquired by Microsoft. If a deal is not confirmed, TikTok will be banned from the US. Trump also issued a similar order for (Tencent-owned) WeChat, China’s largest messaging app that he accuses of threatening US national security. The implication is that WeChat will also need to be sold within 45 days. Tencent shares went down 5% in the aftermath of the announcement.
The TikTok news is nothing new, just another layer of official government emphasis on top of an already ongoing acquisition process. The announcement regarding WeChat comes more as a surprise. While WeChat is one of the most consequential and influential Chinese mobile apps, they have managed to hide from most US controversy and don’t even have a large number of US users. Most analysts predict that Chinese government will soon issue some kind of retaliation and the political theatre on both sides will continue.
China’s Largest Gaming Conference Resumes 🕹
ChinaJoy is China’s biggest annual gaming and digital entertainment conference, which usually features headlining companies such as Tencent, Microsoft, and Blizzard. Amidst concerns around the coronavirus, the conference organisers still decided to go ahead and physically hosted the event in Shanghai last week. Gaming and entertainment are two industries that have excelled over the last few months, so companies were still able to celebrate their recent successes at ChinaJoy. Chinese video game revenue from January to July increased 23% year-on-year.
To enter the conference, attendees needed to scan their face, national ID card, and digital health codes. Guests had to have their Alipay mobile app checked to ensure they had the “green” health codes that indicated the person had not traveled to high-risk parts of the country. Last year, 365,000 people attended ChinaJoy in person and this year, people could also attend virtually through online livestreams that ended up reaching 600 million viewers over the four-day event. ChinaJoy is an example of a huge annual conference that has been able to adapt in the world of Covid and might be a peek into the future of conferences more broadly.
Cloud Kitchens from Singapore 👩🍳
In 2019, Singaporean billionaire R. K. Kishin launched Tiffin Labs, a virtual food & beverage brand. They recently announced major plans to expand to 1,000 cloud kitchens worldwide amidst the coronavirus opportunity. Cloud kitchens are a concept where a restaurant brand has an online presence, but no physical restaurant location. Customers usually order from a virtual restaurant online and the actual food is made in a commercial kitchen. Cloud kitchen companies usually operate several restaurant brands simultaneously from the same commercial kitchen location. Each Tiffin Labs kitchen can serve eight virtual restaurants from a 16 square metre kitchen area. The company uses data to analyse customer demand and then a delivery partner like Grab, Foodpanda, or Deliveroo to bring the food to the customer.
Cloud kitchens are a trend that has accelerated because of the coronavirus. Research firm Euromonitor predicts that the global cloud kitchen market will reach $1 Trillion by 2030. Market research firm DataSpring reported that the online food delivery market in Asia has accelerated by 10 years because of the coronavirus.
Many cloud kitchen companies around the world have raised huge multi-million dollar funding rounds over the last few months and former Uber CEO Travis Kalanick’s latest venture is a cloud kitchen. Restaurant is one of the world’s most disrupted industries right now. Cloud kitchens provides a new, potentially more efficient structure that cuts out many traditional costs to bring you a delivery-only model.
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India’s Ban of Chinese Apps Goes One Step Further
After banning 59 Chinese Mobile apps last month, the Indian government has gone one step further by announcing a new list of Chinese mobile apps to be banned. This week, China’s largest search engine Baidu and social media platform Weibo were blocked and removed from app stores in India. This brings the total number of banned Chinese apps to 106.
The first list of 59 banned Chinese apps came out on June 29, then a second list of 47 Chinese apps came out on July 27. The actual delisting and blocking of apps has been staggered over the last two months. We can expect this kind of government policy to continue so long as political tensions remain high between China and India.
East West Trends = Mukbang 🍲
Have you heard of Mukbang? It’s a popular online trend where people record videos of themselves eating large quantities of food. Mukbang first began in Korea, where the word translates into ‘eating broadcast’ and has grown into a huge global phenomenon over the last few years. The most viewed ‘Mukbang’ video on Youtube has over 400 Million views and is of two young Korean girls eating a variety of food dishes.
Mukbang performers are a new type of food influencer. They’re geared towards a modern need - the videos generally target young, single people who live alone and are looking for companionship. Mukbangers use livestreams to showcase their eating and often promote food products during their shows. This mini-documentary from Technode shows the life of a professional Mukbang influencer in China who has ten million fans and several partnerships with major food brands.
While Mukbang is now more widespread in the West amongst food influencers, the trend was definitely born in the East. And whenever you have a type of content that generates an audience of millions, people can always find ways to monetise the millions of eyeballs.
Tencent to Create New Streaming Giant Through Merger 🎞
Tencent is leading discussions to merge Huya and Douyu, two of China’s largest video game streaming platforms. Tencent currently owns a 37% stake in Huya and 38% of Douyu. Combining Huya and Douyu would create a streaming company with 300 million combined users and $10 Billion in market value. So having a Huya-Douyu merger, which is the equivalent of creating a Chinese Twitch, would allow Tencent to strengthen their position in the world of video.
Tencent is the leading Chinese company when it comes to entertainment, with the largest investment in gaming (Riot Games, Epic Games, Supercell, etc.), social media (WeChat), and music (Warner, Universal, Spotify, etc.). One of their biggest competitors is Bytedance, the company that owns Douyin (TikTok’s Chinese equivalent). In the quest for the attention of Chinese consumers looking for entertainment, Bytedance apps are Tencent’s biggest competitor. A merger to create a streaming giant between Huya and Douyu would be a chance for Tencent to fight back against their rival Bytedance.
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Jack Ma, Founder of Alibaba, Summoned to Indian Court 👩⚖️
A former Indian employee of Chinese company UC Browser has filed a lawsuit against Alibaba, UC Browser’s parent company. He claims that he was wrongfully fired after bringing up issues of censorship and fake news on the company’s apps. The employee, Pushpandra Singh Parmar, alleges that UC Browser censored content unfavorable to China and promoted fake news that caused “social and political turmoil.” As a result, an Indian court has summoned Alibaba and specifically founder Jack Ma to appear before an Indian judge.
UC Browser is a web browser that was the second most popular browser in India with over 130 million users. The Indian government banned UC Browser last month, along with 58 other Chinese mobile apps. The allegations made by the employee will add to the current political tensions between the two countries. While Jack Ma was the face of Alibaba for many years, he has been retired since 2018. At this point, summoning him to court is more a symbolic gesture.
Burberry + Tencent Launch World’s First ‘Social Retail’ Store in China 🧣
Luxury fashion brand Burberry has worked with Chinese tech giant Tencent to launch what they are calling the world’s first ‘social retail’ store in Shenzhen, China. What makes this store unique?
Every single product has an associated QR code you can scan with your mobile phone to learn more information about the product. When you enter the store, there’s an interactive window that mimics a runway and displays a shape resembling your body movement. Pretty much every element of the store is interactive, doubles as a social space, or is part art-installation. If you use Burberry’s WeChat mini-program, you can unlock exclusive content and receive personalised offers. This includes a type of Burberry special ‘social currency,’ a kind of next generation rewards program. The store delivers an exciting new way to look at physical + digital retail innovation in China. By testing this new concept, Burberry and Tencent should learn a lot about what works or what doesn’t work in the future of retail.
Bilibili’s Push for Exclusive League of Legends Rights 🥇
League of Legends (LoL) is one of the biggest e-sports on the globe. The 2019 LoL World Championship drew 100 million viewers and the 2020 World Championship is still scheduled to take place in Shanghai in September.
Riot Games, the developer behind League of Legends, just announced a three-year deal granting the exclusive streaming rights of LoL events to Chinese video platform Bilibili. Bilibili is one of these Chinese Youtube-ish equivalents, but it has the youngest audience out of all the major video platforms and is focused on the Anime-Comics-Gaming (ACG) sub-culture. In a press release, Bilibili COO Carly Lee said that the number of views of esports videos on Bilibili reached 44 Billion in 2019.
This is a really big move for Bilibili. It’s the equivalent of getting exclusive rights to broadcast the Super Bowl of E-Sports. In traditional sports, these rights deals are usually the most lucrative revenue for a league and the rights are usually granted for multiple years. With these rights, Bilibili is also creating more content around League of Legends like documentaries and other commentary videos. There are plenty of other ways they can monetise these rights. If there’s an industry that is growing, it’s E-sports. By buying the exclusive rights now, Bilibili is making a shrewd bet on what’s the fastest growing sports industry.
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Real Names Required 🗣
The Chinese government has created a new regulation that will require anyone playing a video game to log in with their real name, part of a state-run authentication system that will be ready by September. Tencent and Netease have already put in advanced verification programs, including facial recognition technology. In 2019, the Chinese government put restrictions on minors, limiting how much time and money people under 18 can spend on video games. There are also regulations on the level of violence and controversial content allowed in video game content. Despite these new actions by the government, I’m sure there will be loopholes or ways kids can get around the rules. There are many well-documented tactics that Chinese gamer kids already use — like fake ids, using parent’s accounts, and impersonating grandparents.
The way your identity is represented on online platforms directly impacts your behaviour. Using a pseudonym on a platform like Reddit or Discord vs. your real name on a platform like Facebook can change user authenticity, civility of discourse, and more. Generally speaking, having people use their real names encourages more positive behaviour. Back in 2012, Youtube started to encourage users to use their real names to improve behaviour on the platform, especially within the often toxic comments section of a video. So even if minors can get around this new Chinese regulation, an added consequence of real names might be a more positive social environment for gamers.
Southeast Asian Startup Funding 💰
Despite challenges from the coronavirus, startups in Southeast Asia saw an increase in funding in Q2 between April to June. DealStreetAsia compiled data showing that the total value of startup fundraising deals has gone up 91% this year to $2.7 Billion. The number of transactions is also up year-on-year from 116 in Q2 2019 to 184 in Q2 2020. The biggest three startup verticals to receive funding were e-commerce, logistics, and fintech and the biggest deal was $500 Million invested into Indonesian e-commerce startup Tokopedia.
This should paint an optimistic picture for startups in Southeast Asia. It’s been a tough year for everyone, and I’ve spoken to several founders across the US, Europe, and Asia who have struggled to fundraise in the current environment. Some of these successful fundraises in Southeast Asia could also be attributed to deals that were already being discussed before Covid. You can also see where people are betting on growth because of the coronavirus: e-commerce, logistics and fintech. This latest data from DealStreetAsia is encouraging, but there’s still a lot of economic uncertainty and pain we will likely experience in Q3/Q4.
The Story of Secretlab 🕹
In case you missed my interview with Andrew Baisley of Tech in Asia Studios, he mentioned an interesting Singaporean startup called Secretlab. This KrAsia profile explains their incredible story. Ian Ang and Alaric Choo were both professional e-sports athletes and became close friends after playing many games together like Starcraft. In 2014, they founded Secretlab to scratch their own itch. As professional gamers, they spent hours sitting in a chair playing games and never found appropriate ergonomic support. So they decided to build their own high-quality chair for professional gamers.
Since then, their chair has been used in some of the world’s biggest gaming championships, their partners include Warner Bros, HBO, and Blizzard, and their company is worth over $200 Million. They manufacture over 500,000 chairs a year and over 50% of their sales comes from North America. With coronavirus forcing a larger percentage of the world’s population to work from home, Secretlab also saw a huge increase in demand for their chairs. It’s a great Singaporean success story that has found international success.
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TikTok’s Latest Buyer…Microsoft 🤝
The buzz around TikTok has been the world’s most dramatic technology story over the past few months. As I have written before, it’s one of the most visible examples of a metaphorical East West Hurricane, with Chinese-owned TikTok facing major challenges with doing business in the West. I don’t want to write about it everyday but the TikTok news over the last few days is worth bringing up.
Microsoft has released official statements about their intention to acquire TikTok, with the goal to complete acquisition discussions no later than September 15, 2020. This includes TikTok’s operations in several Western countries including the US, Canada, Australia, and New Zealand. Microsoft is primarily a B2B company that makes money by selling enterprise software. They own B2C products like Xbox and Minecraft, but acquiring TikTok would be the biggest, most drastic move to own something consumer-facing.
Donald Trump will have some level of involvement in these talks, which could influence everything from the sale price to conditions of the deal. There is still a chance that major events could change TikTok’s future over the coming weeks. Tech M&A can be very slippery. In 2014, Tencent was about to acquire WhatsApp but Facebook swooped in while Tencent’s CEO Pony Ma was having back surgery. Mark Zuckerberg doubled Tencent’s offer and acquired WhatsApp for $19 Billion. I think TikTok does have a future in the West, but many more details need to be worked out.
Korean Reality TV for Gamers 🏅
There is a new show coming out on Korean TV called “LoL The Next.” LoL refers to League of Legends, one of the world’s biggest video games used in e-sports competitions. Last year, the League of Legends World Championship reached 100 million viewers, the biggest broadcast ever for any e-sports event. This new TV series is a creative, e-sports spin on musical audition franchises like the X-Factor, Got Talent, and Idol series. The program serves as an audition show for aspiring e-sports athletes to break into a professional League of Legends team.
This is the first show of its kind in the world, and it makes sense that it comes from Korea as the country has historically been the global leader in e-sports. I remember going to Seoul on vacation back in 2009. Our hotel had a TV channel completely dedicated to gaming that would broadcast shows like competitive Starcraft matches. As e-sports (and gaming more broadly) continues to grow, more adjacent product and content categories will be created, like e-sports reality TV shows.
The Asian Market for Luxury 👜
I have written previously about the importance of the Chinese market to the global Luxury industry. Chinese consumers make up one-third of all luxury sales and are growing. In the time of coronavirus and worldwide economic downturn, however, buying luxury goods is probably not your number one priority. Several luxury fashion brands like LVMH, Prada, and Hermès recently reported their earnings and overall revenue fell by double-digits for every single brand.
Was there any silver lining to these results? Yes—China. Despite the fact that overall revenue is down, sales in Mainland China are recovering at a much faster pace than the rest of the world. Prada’s net revenue has fallen 40 percent year-on-year, but China sales have had grown at high double-digits over the last three months. The situation is similar for LVMH, Hermès, and Burberry who have also found growth in other Asian markets like South Korea. The state of the overall global luxury industry is still dire, but economic bright spots in China might be a trend for all international retail brands.
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TikTok’s Latest Moves 👀
TikTok’s executive leadership and investors are exploring many options to deal with the intense scrutiny they are facing. To avoid the most damaging scenario of being completely banned from the US, a group of US investors are looking into acquiring a stake in TikTok to make the company more ‘American-owned’. This should hopefully satisfy the Committee on Foreign Investment in the United States (CFIUS), which reviews business deals that pose potential national security risks involving foreign entities.
Reuters reports that TikTok is looking to be sold at a price that values the company at $50 Billion. This places TikTok as significantly more valuable than Snap, which is a publicly traded company currently at a $33 Billion market cap. Twitter has a market cap of $28 Billion and Pinterest has a market cap of $15 Billion. As a reminder, TikTok is owned by the Chinese tech holding company Bytedance. Several major US investors like Sequoia and General Atlantic already own major shares in Bytedance.
Satisfying the US Government should also satisfy other governments, as TikTok is also facing a potential ban in Japan. Kevin Mayer, the new American CEO of TikTok, has been making more public announcements defending TikTok, revealing more transparency around the algorithm, and encouraging more dialogue. As a public relations strategy, it’s important for Kevin Mayer to become more friendly with Western legislators who have the power to ban TikTok. Right now, Bytedance’s Chinese CEO Zhang Yiming is a less familiar person to Western media, which makes him and the company an easier target.
Huawei is the World’s Number One ☝️
For the first time ever, Huawei has been named the number one smartphone maker in the world, measured by number of smartphones shipped in Q2 2020. For the last nine years, Samsung and Apple have dominated that number one spot. Many analysts point to China’s strong domestic market for smartphones as the reason behind Huawei’s success. While the coronavirus has hit Samsung and Apple’s revenue, Huawei has benefitted from China’s economy recovering at a faster pace than most other countries in the world. Compared to Samsung and Apple, 70% of Huawei’s sales are concentrated in the Chinese market.
Whatever your thoughts on the company, this is still very impressive considering all the recent controversy surrounding Huawei, including recently getting banned from the UK and US. You could think of Huawei’s struggles and success as a metaphor for Chinese resilience and inevitable growth in spite of major challenges. To me, it’s also a crazy reminder that the Chinese market is literally so damn big that you could only serve Chinese customers and still be the best-selling brand in the world. Fun fact—another example of this is Kweichow Moutai, which is the word’s biggest alcohol brand and does less than 10% of sales outside of China.
International Students ‘Go Local’ 🎓
A couple of weeks ago, the US government revoked an order that would have forced international students to leave the country if their school hosted only virtual classes because of the coronavirus. While this allowed many international students to breathe a sigh of relief, they still have to deal with travel restrictions that create a potentially downgraded university experience.
New York University (NYU) has created a new ‘Go Local’ program that allows students to attend classes at NYU’s satellite campuses in either Abu Dhabi or Shanghai. Thousands of students who would otherwise be at NYU’s campus in New York will now have to change their plans and decide whether the Go Local option works for them. Or alternatively, students can still take virtual classes from the main NYU campus.
Other big schools like Duke, Cornell, Rutgers and Tulane are creating similar programs with their own respective Chinese partner universities. Some Chinese students at smaller schools like Bates and Mount Holyoke have petitioned to create these kinds of programs but the school administration has been unwilling (or maybe unable) to make this happen. It’s too early to tell the long-term effects on international student enrolment in American universities, but these early experiments should provide us with real data very soon.
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New Chinese Listings and Delistings 💵
Earlier this year, the US government proposed legislation on new auditing standards for publicly listed foreign firms, which was largely aimed at delisting Chinese companies from the NYSE and Nasdaq. While this was just one part of a broader US-China trade war, the last few months have been full of announcements of Chinese companies either planning to delist in the US or have a separate listing on the Hong Kong Stock Exchange.
A few weeks ago, Chinese news and social media firm Sina publicly discussed a potential delisting after 20 years of trading on the Nasdaq. Sina is best known for creating Weibo, which is roughly the Chinese equivalent of Twitter. Sina was exploring an acquisition offer that valued the company at $2.7 Billion and moving the company to a new legal structure outside the US.
This week, another major Chinese company Ctrip announced similar plans to delist from the Nasdaq and take in new investment. Ctrip is the largest online travel company in China, kind of like a Chinese version of Booking.com, and owns major European travel company Skyscanner. Ctrip has been listed on the Nasdaq since 2003 and will likely be exploring a listing on the Hong Kong Stock Exchange.
And finally, China’s second-largest search engine Sogou has received a buyout proposal from Tencent that would take the company off the New York Stock Exchange. The delistings keep on coming.
India Explores More Bans of Foreign Entities 🛑
The Indian government banned 59 Chinese mobile apps a couple of weeks ago. Now the government is exploring a new list of 275 Chinese apps that may potentially violate user privacy or national security. While the recent ban of 59 mobile apps included some very high profile companies like TikTok, there are still many other major Chinese companies that could be victims of this new potential ban.
Some companies are of Chinese origin (AliExpress) and others have major Chinese ownership stakes (PUBG), which leaves a relatively wide definition of country that fits under the potential ban. Whether this next round of banning goes ahead or not, operating under this level of uncertainty provides huge challenges for any Chinese company in India.
Victoria Beckham Looks to China 🇨🇳
Victoria Beckham is the latest Western celebrity to dive into Chinese e-commerce. Victoria Beckham is a former member of the 1990s pop group the Spice Girls and is married to world famous football player David Beckham. She is best known today as a fashion designer and recently launched a new brand called Victoria Beckham Beauty.
Victoria Beckham Beauty just launched on Alibaba’s Tmall Global e-commerce site. Victoria Beckham hosted a launch event that included a livestream with Viya, one of China’s biggest livestreamers, and a set of specific skincare products exclusive to the Chinese market. This market entry playbook should work well for any Western celebrity with clout and a brand to sell. Dive into Tmall, partner with a local Chinese KOL for a livestream, and invest in managing your online community of Chinese fans.
“It’s an amazing, blow-your-mind trend. The livestreaming phenomenon is indicative of the pace of development and innovation coming out of China. It’s absolutely brilliant. On the practical side, it promotes education and gives brands a way to inform consumers about products. At the same time, it’s riveting entertainment that creates a great deal of engagement and excitement about products.” - Sarah Creal, CEO of Victoria Beckham Beauty
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Convenience Stores in South East Asia 🏪
South East Asia (SEA) is an incredibly exciting and dynamic part of Asia. But when it comes to convenience stores, they are behind their counterparts in places like China and Japan, as outlined in this KrAsia article. In China, convenience stores widely accept digital payments (through Alipay and WeChat Pay), are incorporating more automation, and use sophisticated algorithms to deal with inventory. Some of these new concepts, like the three-year-old Chinese automated convenience store chain Bianlifeng and JD.com’s X-Mart, are a striking contrast to SEA.
In SEA, 47% of people don’t have a bank account and a recent Nielsen study found that SEA countries do not associate online shopping and digital payments with convenience as much as people in other Asian countries. It’s hard to have digital payments when so much of society still relies on cash. Some specific countries are seeing increases in mobile payments, as Vietnamese consumers using mobile payments went from 37% to 69% in 2019. JD.com is trialing their first X-Mart outside of China by opening an automated retail concept store in Jakarta. There is also a cashless offline store startup in Indonesia called Blibli who have launched something similar. It’s important to realise how different regions in Asia approach retail based on both technology infrastructure and local culture.
Food Delivery Companies Cope With New Reality 🍳
Food delivery companies are figuring out new ways to deal with the constantly evolving coronavirus situation, both in terms of what their customers want and what the law permits. In Hong Kong, the government has announced the banning of dine-in service at restaurants from July 29. Food delivery company Deliveroo has responded by allowing customers to order breakfast, expanding the selection of available delivery and pickup food locations, and introducing new customer discounts to encourage purchases.
One of Deliveroo’s rivals is GrabFood—which is part of the ride hailing company Grab. GrabFood launched a new cashback program this week. When users place orders from their favourite restaurants, they will receive an 8% cashback if they are new users or a 2% cashback if they are existing users. This should encourage more usage of Grabfood, especially in an economically turbulent time where people are looking for value and discounts in anything they purchase.
Apple’s New iPhone Assembly in India 🇮🇳
While operating in a country that has just banned dozens of Chinese apps, Apple is doing a good job of demonstrating added value to India. Foxconn, Apple’s iPhone manufacturer, has started assembling iPhone 11s at a plant in Chennai, India. Historically, iPhones have been almost exclusively assembled in China, while Apple’s other smartphone rivals like Xiaomi, Samsung, and Oppo are already assembling phones locally in India.
Tim Cook, Apple CEO, has also said that Apple plans to open up their first retail store in India next year. Part of the reason behind these developments is also to navigate India’s already complex regulation regarding foreign companies, whether Chinese or otherwise. Under current Indian regulation, foreign direct investment in retail must include a percentage of products locally produced in India. So by assembling iPhones in India, Apple is able to avoid a 20% import duty on imported electronics and qualify to open Apple retail stores.
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Trends in the Male Beauty Industry 💆♂️
The Male Beauty industry is getting more and more prominent every year, with some reporting that the men’s personal care market will reach $166 Billion globally by 2022. China is one of the world’s leaders in male beauty and actually is the biggest market in the world for men’s facial moisturiser use, with 65% of consumers using the product regularly. 96% of Chinese men have purchased cosmetics over the previous year and sales volume of men’s skincare products have doubled over the same time period.
Classic stereotypes around what beauty means for men and women is changing. Many Chinese brands have adjusted their marketing to break traditional cultural taboos about male personal care and several startup brands have carved out market share in the male beauty niche. On social media like Weibo, Douyin, and Kuaishou, male beauty tutorials and videos about skincare routines are becoming more popular. This growing consumer category in China is following other Asian countries like South Korea and Japan, where male beauty products are an even bigger part of society.
The Latest Developments from Huawei India 📱
Huawei is one of the many Chinese companies that will suffer from the recent tensions between China and India. This week, Huawei announced that they would be laying off 60-70% of their staff in India and cutting their 2020 revenue targets by 50%. Their revenue projection is going from $700-800 Million this year to $350-500 Million. Huawei’s peak revenue in India was $1.2 Billion in 2017.
This situation is relevant to the other Chinese smartphone makers who are also heavily invested in India such as Oppo, Vivo, and Xiaomi. They are also suffering from the China-India political tensions and this leaves room for other companies to capture market share, like Samsung or Ericsson. The Indian government has also banned both Huawei and ZTE from supplying telecoms infrastructure for the country. ZTE has also announced a series of recent layoffs. While this isn’t the first time Chinese companies have had to deal with political tension, it still might be the most dire situation for them if you include additional consequences from the coronavirus.
Amazon Showcases Contribution to Indian Exports 🇮🇳
Amazon India launched its export business in 2015 to allow SMEs to sell e-commerce exports, with the goal to reach $10 Billion in export revenue by 2025. A lot of these sales come from major sales holidays in the US like Black Friday or Cyber Monday. Given the current political climate, it’s in the best interests of any foreign company to emphasise all the contributions they are making to the Indian economy.
While India actually showed negative growth in exports in Q1 of this year, many government officials are describing e-commerce marketplaces as a way to boost India’s ability to export goods globally. The export business has also been a priority for Flipkart, Amazon’s primary rival in India. Last week, Amazon said that their export program has allowed 60,000 Indian exporters to sell $2 Billion worth of Indian products to international customers over the previous two years. And I’m sure they will be highlighting even more progress as time goes on.
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Kuaishou and Tencent are Latest Livestreaming Darlings 👾
Kuaishou, the Chinese short-form mobile video app, has revealed their latest data around active users and engagement. They announced that they gained 70 Million more daily active users in the first half of 2020. At the end of last year, Kauishou only had 100 Million users, meaning the company has grown 70% over six months. One of the main reasons people use Kuaishou is for livestreaming, which furthers the narrative that livestreaming is truly exploding this year because of the coronavirus. Kuaishou’s biggest rival is likely Douyin, the Chinese equivalent of TikTok owned by same parent company Bytedance. Douyin and other rivals like Douyu, Huya, and Joyy also experienced strong growth this year.
Tencent, the Chinese tech giant that is technically the world’s largest gaming company, has been beta testing a gaming livestreaming platform called Trovo Live. This is seen as a direct competitor to the Amazon-owned livestreaming platform Twitch. Trovo also announced a $30 Million partnership fund this month to help support creators on their platform. It’s an interesting investment for Tencent, as they are also investors in Douyu and Huya. In recent weeks, Microsoft has shut down their gaming livestreaming platform Mixer and Twitch has been hit by several sexual harassment allegations. Facebook Gaming has benefitted the most from these developments with creators migrating to their platform instead. So Livestreaming, whether for e-commerce, gaming or anything else, continues to grow.
Premier League Matches Taken Down in China ⚽️
The final match of the English Premier League on July 22 between Liverpool and Chelsea was taken off CCTV, China’s largest state-run broadcaster. The match was demoted to a lesser known channel and it’s unclear whether future Premier League matches will still be shown on CCTV. This likely results from the UK government’s recent decision to ban Huawei from building 5G infrastructure as part of the ongoing trade war.
In terms of media rights, China is the Premier League’s second largest international market and a major strategic priority. The deal between the Premier League and their Chinese broadcast partner is worth $700 Million over a three-year period. There is a lot of hype for all sports leagues, especially European football leagues, to see China as their most valuable, under-tapped market. While foreign leagues can put together detailed and ambitious plans for China, political machination always have to be considered. Just ask the NBA.
The Opportunity for Indian Family Offices 🏦
After the Indian government’s recent bans of Chinese apps and new regulations on foreign investment, many Chinese investors are unsure how to proceed in the Indian market. In this vacuum, Indian family offices will play a key role. A report found that India had 150,000 ultra-high net worth (UHNW) families in 2018 with a cumulative net worth of $2 Trillion. That number is expected to rise to 400,000 families with a cumulative net worth of $5 Trillion by 2025. Family offices are usually professionally run investment funds set up to manage a family’s wealth.
Across the world, family offices have been getting more interested in tech startup investments and this KrAsia article interviews several Indian investors for their first hand perspective on the topic. Family offices have historically stuck to more traditional investments like real estate until a 2012 regulation allowed Indian private equity and venture capital to raise funds more easily from Indian investors. This paired with the maturing Indian tech ecosystem and now the tensions with China leaves a major opportunity for family offices to make more direct investments into the new high-risk/high-reward ‘asset class’ of tech startups. No matter where the money is coming from, this is good news for any Indian startup knowing that their pool of potential investors is increasing.
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Earlier this week, my friend Simon Andrews and I hosted a webinar on how brands should be approaching TikTok as a marketing channel.
We were fortunate to have David Hoctor (Brand Partnerships EMEA, TikTok) and Pankaj Duhan (Marketing Director, RB South Asia) join us and provide their perspective on TikTok.
Pankaj was responsible for orchestrating the biggest ever TikTok ad campaign, a multi-market campaign across Asia by the disinfectant/cleaning supply brand Dettol. Pankaj spent a lot of time telling us how they came up with the big idea and how he was very satisfied with the campaign results.
Dettol worked with a handful of local TikTok creators to do a ‘branded hashtag challenge,’ which was a song and dance routine that encouraged healthy hand washing behaviour. The TikTok creators first did their own videos of the #HandWashChallenge and then encouraged users to create and share their own versions.
Even though the campaign happened in March, you can still look up the #HandWashChallenge page on TikTok and see that the challenge has accumulated 124 Billion Views.
Can you please say that to yourself out loud? 124 BILLION views. The scale is insane.
While many of us on the webinar were reflecting in awe at the results, what happened next completely changed the tone of the discussion.
Inevitably, someone then asked David about the “Chinese elephant in the room;” TikTok being banned in India and what might happen in other markets like the US.
If this was a real-life workshop and not a Zoom webinar, I’m sure the attendees would have heard my heart start beating faster and my palms begin to sweat. The last thing I wanted to do was create an unnecessarily political discussion or make anyone attending the webinar feel uncomfortable.
Thankfully, all my fears were assuaged by what happened next…
David answered the question with exceptional professionalism. His answer was incredibly comprehensive, pragmatic and in my opinion very impressive.
The underlying message we all understood was that whatever happens next is in the hands of government and no one in our webinar could change that.
Pre-emptive disclosure: David (from TikTok) and I actually used to work together on the same team at Facebook.
Putting aside politically-driven decisions around technology, it’s important to point out that this example of TikTok creative excellence came from Asia. We’ve come to a point where Asia is the place to see not only some of the most innovative technology (like TikTok/Bytedance) but some of the most forward-thinking marketing.
When I worked at Facebook, I managed relationships with clients at a global level. A large part of my job was assessing which countries did the best or worst job for the global brand. For example, when my client was Heineken I would run data analysis, create reports, and present to global executives on how well each country was doing.
Was Heineken Mexico selling more beers through Facebook ads versus Heineken Nigeria? Which Heineken country in Europe had the most creative, award-winning ads over the last quarter? How well was each country around the world using the quantifiable best practices around how to buy and optimise Facebook ads?
One major insight from my five years doing this job was that innovation comes from the most unlikely places.
It usually wasn’t Heineken USA that was most creative, it was a market like Vietnam. When my client was Ford Motor Company, the most creative European markets were usually smaller ones like Portugal or Belgium. When I worked with Procter & Gamble, we looked to markets in Asia-Pacific as having the most sophisticated marketing.
And when Simon and I scoured through dozens of TikTok case studies, we found Dettol’s multi-market campaign across Asia as the perfect example.
So whatever happens to TikTok or any tech platform, the people in Asia like RB’s Pankaj Duhan will be the ones who ensure Asia remains at the frontier of marketing.
Most popular East West Hurricane post this week:
Update #32 - Pakistan’s Bans, NBA’s Masks, and China’s Luxury Market
Good media I have consumed recently:
CNBC is reporting that TikTok is poaching many Facebook and Google employees. To me, that’s one of the most important signs related to the future health of a company. A mass exodus of Google employees to start working at Facebook preceded one of the company’s greatest periods of growth.
Scott Galloway’s latest No Mercy/No Malice article ‘Fire & Fawning’ has him posing hypothetical questions to the CEOs of Amazon, Apple, Google, and Facebook who are set to testify in front of US House Judiciary Antitrust Subcommittee. The questions are tough and some of the best framing I’ve ever heard for tech executives.
TikTok launches 200 million dollar fund for US creators and US investors allegedly looking to buy TikTok - both are strong examples of TikTok playing offence and defence against the recent scrutiny.
Lauren Hallanan, an American former livestreamer in China, shares her experiences with Chinese livestreaming and if/how it could work in the West.
My friend Simon Andrews’ newsletter is Mobile Fix. I’ve read so many tech newsletters and can honestly say this is one of the best and most underrated.
P.S. If you are interested in watching our full TikTok webinar, you can find it here at this link. Please do not share this widely and please reach out first if you would like to play this for any public audience.
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Ant Group Launches New Blockchain Solution 🐜
Ant Group, the company that runs the online payments platform for e-commerce giant Alibaba, announced the creation of a new blockchain solution this week. The product and brand is called AntChain, which is the overarching name for their blockchain software, programs, and a new workstation. The company says that over 100 million digital assets such as transaction records, copyright certificates, and property certificates are uploaded onto AntChain every day. Ant’s blockchain is an innovative decentralised, distributed database that should be able to “support digital transactions” and “reduce costs,” as per the words of Li Jieli, general manager of blockchain solutions at Ant.
I got pretty deep into blockchain startups in 2018, perhaps too deep. While it’s fair to think that the blockchain industry has been overhyped in the last two years, the technology and benefits are real. China has the third biggest number of blockchain patents of any country in the world, behind only the U.S. and South Korea. Alipay, which is owned by Alibaba, has the most blockchain patents out of any Chinese company and the second most out of any country. So this latest AntChain initiative helps confirm that China’s blockchain industry is still making progress and still very bullish on the technology.
The New Report on China’s Movie Market 🎬
Maoyan and iQiyi, two of China’s biggest entertainment companies in ticketing, streaming, film and more, have worked together with social media app Weibo to release a report on the state of China’s Movie Market in 2020. Their findings shed light on what has probably been the toughest six months in the history of China’s movie industry. I wrote about this struggle in an update last month, as 13,000 Chinese film and TV companies have gone out of business this year.
This Maoyan-iQiyi-Weibo report reflects the new Chinese consumer behaviour. The percentage of people who said they are eager to return to physical cinemas has increased from 54% in February to 88% in May. More than 60% of respondents said they are willing to pay to watch movies online. Something interesting I haven’t seen before — the monthly active users (MAUs) of every online streaming service increased during Covid, but then went down in May as people in China resumed more normal working lives.
These trends will likely be the new realities for any entertainment company, whether in the East or West. People will eventually return to cinemas and likely decrease streaming consumption from Covid-level heights, but not at the same levels pre-Covid. And this research data is specific to China, which has gone back to more ‘normal’ working life faster than most other countries in the world.
Alibaba’s New Influencer Strategy = Europe 🇪🇺
Chinese e-commerce giant Alibaba has a specific unit called Ali Express that is targeted for international buyers and sellers. The Financial Times reports that Ali Express’s latest goal is to recruit 100,000 new content creators for e-commerce livestreaming by April of next year. The company is specifically looking to recruit people outside of China as they plan to expand their international business, especially in Europe. Right now, international sales make up only 7% of Alibaba’s total revenue and founder Jack Ma has set a goal to have international sales make up half of Alibaba’s total revenue by 2025.
While e-commerce livestreaming has seen an unprecedented explosion of growth in China over the last year and especially during Covid, the Western world has not really embraced this new sales & marketing channel at the same level. Amazon has tried some live shopping and Instagram has created new live shopping features, so there is at least burgeoning enthusiasm from US tech companies.
In China’s super competitive e-commerce market, Alibaba faces off against rivals like JD, Pinduoduo, Kuaishou, and Douyin for e-commerce livestreaming. If Alibaba can successfully recruit that critical mass of 100,000 foreign livestreamers, the company would be more geographically diversified than their competitors. And maybe they would bring more livestreaming to the West.
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Missfresh Raises Record-Breaking $495 Million 🛒
Missfresh, a Chinese grocery delivery startup, has just announced a fundraising round of $495 Million, which is the single largest fundraise in China’s grocery delivery industry. The company was founded in 2014 and had received $1 Billion in funding prior to this latest round. Missfresh has 1,500 warehouses across China and 25 Million monthly active customers. They have also managed to survive a very competitive industry, with many of their also well-funded competitors collapsing over the last couple of years.
Online groceries are one of the biggest beneficiaries of the coronavirus-enabled changes in consumer behaviour. Grocery delivery companies all around the world are benefitting from more sales with people being confined to their homes. While the funding landscape has tightened for some startups, this news demonstrates that grocery startups might now be one of the hottest targets for investors.
Cracks in Chinese E-Commerce Livestreaming 😧
If you have been following this newsletter for a little while, you will know that I’m a big fan of e-commerce livestreaming in China. I’ve been consistently impressed by the scale of livestreaming (see examples from Austin Li and Viya) and the breadth of livestreamers (see examples from rural farmers). That’s why it’s refreshing to see new examples of livestreaming that have been considered failures.
The Chinese celebrity Angelababy has 40 Million followers on Douyin and 103 Million followers on Weibo. She hosted her very first livestream last week on Douyin for five hours, reaching 26 Million viewers and managing around $1.8 Million in product sales. This was actually considered a failure and an embarrassment for Angelababy because the numbers were so small. Another celebrity, Xiao Shenyang collaborated with a baiju company for a livestream that only sold twenty bottles of alcohol, sixteen of which were returned the next day. Famous author Wu Xiaobo was also embarrassed by a lackluster attempt at livestreaming milk powder.
The reality is that things are complicated. You can’t just assume success whenever trying a livestream because you have a celebrity involved. It’s still a very new concept and we don’t have years of data and best practices. When I worked at Facebook, we always used to get frustrated by clients who said ‘Facebook doesn’t work.’ Usually, the clients or their agencies weren’t running Facebook ads properly and needed more time to learn. With e-commerce livestreaming, like any new marketing channel, being an early adopter requires an agile mind, a willingness to experiment, and an acceptance that not everything will work well all the time.
AsianFashion Weeks Plan to Return Later This Year 👗
After many fashion industry events were postponed or cancelled over the last few months, the upcoming fashion weeks in Shanghai, Tokyo, Seoul and Beijing plan to go ahead as fully physical, real-life events. With the earliest out of those four events being Shanghai Fashion Week on October 8, the organisers feel confident enough right now to confirm the event. Attendees will still be required to go through temperature checks, wear masks, and comply with new features like lower attendance levels at the venue.
Earlier this March, Shanghai hosted the world’s first completely online fashion week, which was done in partnership with Alibaba’s Tmall and relied heavily on livestreaming. While this event wasn’t necessarily an outstanding success, I’m sure future fashion shows will feel more comfortable integrating a mixture of physical and virtual experiences. The same can be said for major events in the West—Cannes Film Festival was completely virtual last month and San Diego Comic Con is happening virtually right now.
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Pakistan Bans Bigo Live and PUBG, Warns TikTok 🇵🇰
The increasingly tense relationship between politics and technology is revealing itself in other countries. Pakistan, a country of over 200 Million people that borders India, China, Afghanistan, and Iran, has recently banned the Singapore-based mobile video livestreaming app Bigo Live. The Pakistani government has accused Bigo Live of hosting “immoral, obscene, and vulgar content” on their app that could have “extremely negative effects on the society in general and youth in particular.” For similar reasons, the Pakistani government has also banned Player Unknown’s Battle Grounds, better known as PUBG, which is one of the most popular games in the world. These moves have faced criticism from internet rights groups in Pakistan.
Before getting banned, Bigo Live was developing a strong following with Pakistan’s youth. Over 60% of Pakistan’s population is under the age of 30, which makes issues of youth content consumption a priority for the country. The Pakistani government has also publicly mentioned that TikTok is another mobile app they are considering banning for offensive content. In 2016, Pakistan’s parliament passed the Pakistan Electronic Crimes Act (PECA) and has since banned hundreds of thousands of websites in the country, including YouTube.
Branded NBA Masks Sold Across Asia 🎭
When the coronavirus started spreading, there was a huge move to manufacture more face masks and other types of personal protective equipment (PPE). Dozens of manufacturers sprung up overnight, especially in Asia, which caused many governments to quickly set up new regulations to deal with these fly-by-night manufacturers. As the global market for face masks has stabilised over the last couple of months, you are starting to see everyone from small startup brands to designer face masks from luxury fashion brands. The sports industry has also started creating their own branded masks.
The NBA has recently launched their officially licensed branded team face masks for the Asia-Pacific region. All proceeds from mask sales will be going to charitable organisations supporting Covid relief efforts. Asia is the fastest growing region for the NBA and is also the region that has the most cultural acceptance of face masks. If the NBA can double down on selling face masks in Asia, their most important international region, it could lead to the expansion of new Asia-specific product lines and initiatives.
‘Trapped’ Chinese Luxury Buyers 💎
Chinese buyers make up around one third of the global luxury market, spending $111 Billion a year on luxury goods. Nearly two-thirds of that luxury shopping happens overseas, however, when Chinese buyers are visiting other countries. So with the coronavirus preventing millions of Chinese people from traveling, not only does the travel industry suffer, but the global luxury industry suffers.
As an alternative, the second-hand luxury market in China has been increasing, while also coping with challenges around counterfeit goods. At their annual 618 sales festival this year, JD.com saw a 138% increase in year-over-year second-hand luxury sales.
Big luxury brands are also planning to expand their range of domestic physical stores in China. Bain & Co. estimates that the percentage of Chinese luxury buying that happens domestically will increase from 30% in 2019 to 50% in 2025. Another trend has also been spotted by the luxury industry - brands like Louis Vuitton, Prada, and Balenciaga are leveraging the rise of Chinese e-commerce livestreaming and creating their own virtual storefronts and first ever livestreams this year. While the coronavirus is forcing retail to move from offline to online, perhaps luxury buying around Asia will be forced to move from international to domestic.
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Pinduoduo’s Latest Adventures in Livestreaming, Real Estate 🏘
E-Commerce livestreaming in China is a wild beast that has been growing steadily over the past couple of years and accelerating because of the coronavirus. Many people don’t realise that the realm of products that are sold over livestreams in China is incredibly broad. Let’s take a look at some of the latest things sold on Chinese social commerce platform Pinduoduo.
On July 13, 600 apartments in the Chinese city of Zhongshan were sold over a four hour livestream, marking Pinduoduo’s first venture into selling real estate on their e-commerce platform. The event got 720,000 views and featured special discounts that viewers could claim if they made the purchase during the livestream. Viewers were able to place refundable deposits and then have two weeks after the livestream to visit the apartments in person. Real estate agents and property developers have been using Chinese livestreaming platforms to sell apartments since the beginning of this year and this will likely continue.
Indian Fantasy Sports Startup Dream11 Restarts $200 Million Fundraise 🏏
Dream 11, an Indian Fantasy Sports Startup, has announced their intention to raise $200 Million on a $2 Billion valuation. The company had initially suspended the fundraise for a few weeks due to the coronavirus but has now found a new set of investors to reach their target. Dream11 is in the final stages of their restarted talks with the original investors and a set of new investors, including US private equity firm TPG, Indian private equity firm Kedaara Capital, and James Murdoch’s Lupa Systems.
Many people are speculating how the coronavirus will change the startup funding landscape in both the short and medium term. This latest investment, after a period of pause, should inspire more confidence in the startups currently looking for investors. Also—fantasy sports, compared to many other verticals, is something that will benefit from the changes in consumer behaviour thanks to the coronavirus. The Indian online gaming industry, under which fantasy sports would be categorised, is expected to nearly triple in size over the next four years.
Positive Updates for China’s Film Industry 🎬
The film industry has been hit pretty hard by the coronavirus. As I wrote in a previous update, 13,000 Chinese film and TV companies have gone out of business this year. Cinemas were briefly reopened in March, but then shut down again when cases started rising. There may be a silver lining, however. The China Film Association has just announced that cinemas in “low-risk” areas could now begin reopening as of this week.
Under the “low-risk” definition, the vast majority of cities in China would qualify as fitting within this criteria. There are additional requirements to the reopening, as theatres can only operate at around 30% seating capacity. Customers will have their temperatures taken before entering and wearing masks will be mandatory for anyone in the theatre. Perhaps the most devastating new rule is that food and drink is not allowed to be served.
Charging people for concessions is the highest margin, most profitable part of a theatre. It’s not an exaggeration to say that this would drastically change the entire business model of a movie theatre. We should look out to see how Chinese cinemas are able to adapt and figure out other ways to monetise their customer base. What the Chinese cinemas experiment with may end up being adopted by other traditional theatre chains across the world.
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Liquor Brand Kweichow Moutai Hurt by Corruption 🍶
A few weeks ago, I wrote about how Chinese liquor brand Kweichow Moutai has become the most valuable alcohol company in the world with a market cap of $260 Billion. The company experienced significant growth in the first half of 2020 and served as a good illustration of the size of the Chinese market!
Since that article, Kweichow Moutai has not been doing so well. Last week, the company lost $25 Billion in market cap after Chinese state publication People’s Daily wrote an article accusing Moutai of benefitting from corruption.
The article referenced comments from Moutai’s former chairman Yuan Renguo, who acknowledged that liquor sales related to corruption are part of business. Yuan was since removed as chairman in May 2018 and arrested on corruption charges. In the past few weeks, several senior executives have also faced investigations relating to corruption. Moutai is still one of the top ten biggest companies in China, making this a major issue for the business community.
AirAsia Rehires Workers For Agriculture E-Commerce 🌽
AirAsia is one of the most successful low-cost carriers in Asia, owned by famous Malaysian entrepreneur Tony Fernandes. The Kuala Lumpur-headquartered company laid off 300 employees in June due to coronavirus-related financial difficulties. While this has been a rough situation for the company, AirAsia has been both creative and compassionate with their recently laid off employees.
AirAsia has also launched an agriculture e-commerce platform called Ourfarm delivering fresh produce to Food & Beverage businesses. Many of the new employees at Ourfarm were former AirAsia employees who have now been rehired. This is an interesting pivot for an airline to get into agriculture e-commerce, which is definitely an industry growing more than airlines right now.
AirAsia also benefits from being part of the Tune Group, the broader holding company founded by Tony Fernandes. Whether this new agri-business works for AirAsia or not, it required true determination and creativity.
New Regulation for Young Online Fans 🚸
The Cyberspace Administration of China is launching a new campaign to monitor the online activity of minors in China. This includes prohibitions against pornography, violence, and “inappropriate cartoons.” The campaign also targets young fans of virtual idols and influencers from engaging in certain behaviours.
Internet culture in China can have some pretty intense, passionate young fans. Huge groups of fans under the age of 18 often purchase mass quantities of merchandise without having their own stable income or with aggressive influence from fan groups. Social media platform Weibo has started implementing new rules around fan management, after controversial examples of exploitation such as the fanbase of actor/singer Xiao Zhan using high-pressure sales tactics to mass purchase products and encourage users to file complaints.
If you understand internet culture, you might see some parallels with the West. Internet watchdogs, especially in Europe, are looking at ways to regulate the behaviour of young people on the internet, who are often vulnerable to things like buying loot boxes for video games. No matter the regulation, people will always be able to influence, young impressionable internet users.
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WeChat’s New E-Commerce Feature 🛍
WeChat has launched new features that allow individuals and brands to open up their own online stores. WeChat is primarily a messaging app, but also has many other features including payments, 3rd-party ticketing, and a social media newsfeed equivalent. With the new e-store feature however, this is an upgrade of their current mini-program functionality and is WeChat’s biggest and clearest move into e-commerce.
This new online store product includes features like payments, livestreaming, translation, order management and more. All business are able to test this new product, and there will be a full rollout for all users at a later date. This makes WeChat compete more directly with other Chinese tech companies like Pinduoduo, Douyin, Kuaishou, who are social commerce apps that use features like livestreaming to directly sell products in-app.
With all the varied functionality and scale (over 1 billion users), Wechat is already considered the prime example of what’s known as a “SuperApp.” This new e-commerce feature is an important product development because it’s like the first step in creating a ‘Shopify’ within WeChat. This means that users can increasingly have the tools to sell products within WeChat, not other apps.
JD Creates Augmented Reality Shoe Offering 👟
Footwear is a very big industry in China and Sneakers are especially hot for younger demographics. The Chinese sneaker market is expected to reach $10 Billion by 2025. JD.com, China’s second largest e-commerce platform, is adding more fire to the market with their introduction of augmented reality (AR) shoe-fitting.
JD will soon be launching an app that allows customers to use AR to take their shoe measurements using their phone. This was created in partnership with Sony, using their Time of Flight distance measuring technology. Nike created something similar last year, adding AR functionality to their app that measures a person’s shoe size within a certain margin of error. With our lives becoming more digital and our shopping experiences becoming more virtual, a mobile app using AR to measure foot size seems like the logical next step in the wild world of e-commerce.
iQiyi’s Latest Announcements at iJoy Conference 📺
iQiyi is one of China’s largest video streaming platforms and they hosted their annual conference in Shanghai last week. Much like major conferences hosted by tech companies like Apple or Facebook, or media companies like the major TV channels in the US, iQiyi’s iJoy Conference was their opportunity to announce their next steps in online entertainment.
iQiyi focused on 60 new drama series and variety shows they will be launching over the coming months. The company also wants to nurture new young idols and create what they call “celebrity/KOL + settings + brand incubator.” Reading between the corporate buzzwords, iQiyi wants to create their own IP, better utilise influencers (known in China as KOLs), and create both online and offline brand experiences to monetise their audience. iQiyi also announced the launch of a brand called BKStore, a sort of street culture hub that focuses on collaborations between brands and graffiti artists, musicians, and designers. They’ll also create Fourtry Space, which is an actual offline store based on the reality show “Fourtry,” where these celebrities were supposed to create a trendy fashion boutique in Tokyo. Another really successful Chinese reality show was “The Rap of China,” kind of like a Chinese Hip-Hop talent show.
If you contrast this with supposed Western streaming equivalents like Netflix, iQiyi seems to take a more vertically integrated approach to content. For iQiyi, it’s not just about creating intellectual property and acquiring content. It’s also about investing in young talent/influencers, and actively creating partnerships with the right brands to sell more products.
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US Reverses Policy on International Student Visas 🔀
The US government has now revoked an order that would have forced international students to leave the country if their school hosted only virtual classes because of the coronavirus. The order was initially announced last week on July 6, so the reversal announced earlier this week has come very quickly. The new law would have affected over one million international students currently studying in the US.
Harvard and MIT were joined by several other universities in filing a lawsuit in Boston federal court seeking to prevent US Immigration and Customs Enforcement (ICE) from enforcing the law and they have now come to a settlement. The lawsuit also received widespread support from many major US tech companies.
For many international students, you really can’t imagine the level of psychological relief they must feel after a two-week emotional rollercoaster. While many students and universities might now worry less about ICE, there are still many open questions around the logistics, costs, and implications of universities going completely virtual for the upcoming semester.
Indonesia Introduces New Tax for Tech Companies 💰
Indonesia has just announced a new 10% value-added tax (VAT) on sales by tech firms like Amazon, Netflix, Google, and Spotify. With the coronavirus having an impact on government revenue, Indonesia is expected to triple its 2020 budget deficit. Many people are pointing to the government’s financial situation as motivating this tax on the highest earning foreign tech companies. The new VAT rule applies to any foreign company selling digital products in Indonesia above a certain revenue threshold or with a certain number of active users in the country.
Out of South East Asia, Indonesia has usually been the most attractive country for Western tech companies. Indonesia has a population of 260 million and the most mature startup ecosystem apart from Singapore. If the pandemic causes governments in South East Asia to increase taxes on foreign businesses, the cost of doing business will increase for Western companies. While Indonesia is such a big and important market that this likely won’t change the plans of foreign firms, a 10% sales tax in other smaller countries in SEA might cause western companies to consider alternatives.
E-Commerce in India Reaches Pre-Covid Levels 🛒
In April, only essential goods in India were allowed to be sold online, and there was an 80-90% fall in overall online retail. However, the most recent data indicate that now Indian consumers are buying online at volumes even higher than pre-Covid levels. Daily shipment volumes are back to 3 million per day and e-commerce companies like Amazon India and Flipkart are seeing ~120% growth. Amazon has reported a 50% increase in new sellers since Covid began and almost all online retailers are hiring new staff to keep up with increased consumer demand.
This new data from India is similar to data in China, where new online sales records are being broken in a post-Covid world. The e-commerce data we’re seeing across many Asian countries also indicates a decrease in customer acquisition costs, increase in overall online penetration, and more online shopping from older age groups. It often sounds obvious, but the vast majority of shopping still occurs offline. Even in China, the world’s largest e-commerce market, online shopping made up only 20% of total retail in 2019. With Covid, that percentage of online retail in every Asian country will dramatically increase.
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Singapore Now In Recession, Q2 GDP Dips 41% 📉
The Singapore Ministry of Trade and Industry released some important data earlier this week. Singapore’s Gross Domestic Product (GDP) is down 41% between April to June on a quarter-on-quarter annualised basis. Many economists predicted the decline would be 37.4%, so it’s turned out to be slightly worse than expected. And now Singapore is officially in a recession. The reported numbers also indicate that construction is the country’s hardest hit industry, which faced a 95% quarter-on-quarter decrease. Other hard hit industries include services and tourism. More data will be coming out next month and the government expects full-year GDP to contract between 7% to 4%.
This is an example of how the coronavirus has affected a major economy. Singapore is a small country and very reliant on trade, but Singapore is also a historically strong economy, has a strong social safety net, and has above average success in containing the coronavirus vs. other developed nations. Singapore was able to provide a recent $72 Billion stimulus and expects Q3 2021 to be the quarter when the economy reaches pre-Covid levels. Let’s wait and see how other countries begin reporting their own macroeconomic data, as many economists predict that similar GDP declines will occur around the world.
India’s Paytm Expands to Mini-Programs 🛍
Paytm is currently the largest fintech company in India. 7 Million merchants across the country use Paytm to process digital payments, connect with 140 million monthly active users, and explore a host of other financial services. They just announced the creation of Paytm mini-programs, which gives businesses a deep integration to connect their currently existing mobile websites or web apps into Paytm. So a small business can then track payments, review analytics, issue refunds from their Paytm app. By subscribing to a Paytm mini-program offered by a retailer, users can also receive push notifications. This all takes huge inspiration from WeChat’s mini-programs in China.
In China, a major innovation from WeChat’s product comes from mini-programs. Companies can build mini-programs to have more immersive, interactive experiences with their customers. They are not fully fledged apps but more light-weight mini-apps that are built on top of the WeChat platform. It worked really well for WeChat, with users spending $119 Billion through mini-programs in 2019. With this move, PayTM is evolving into more of a platform, which increases the future revenue potential of the company.
Alibaba’s New Growth Market = Russia 🇷🇺
Alibaba is looking to Russia as a market that will drive $10 Billion in annual revenue by 2022-2023. Alibaba currently operates in Russia under a joint venture with local Russian partners called AliExpress Russia. Russia’s e-commerce market is worth $28 Billion and around 90% of foreign shipments to Russia come from China. During the coronavirus, AliExpress Russia has seen significant growth and even lowered their transaction commissions to incentivise more merchants onto the platform.
For Alibaba, Russia is turning out to be one of their strongest markets, and the AliExpress Russia CEO Dmitry Sergeev has publicly said that the company could consider an IPO in three to four years. Russia is a huge market with a population of 144 Million. Noticeably, e-commerce giant Amazon does not have a presence in Russia. Instead, there is a local equivalent called Ozon, who has been the rumoured acquisition target of SoftBank and Amazon. If Alibaba continues to press their advantage in Russia, the company could develop a competitive moat.
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UK Bans Huawei 5G Technology 🗼
The British government has now banned Chinese company Huawei from participating in building equipment for the UK’s 5G networks. Without a doubt, part of this decision will have direct influence from the UK’s political allies in the United States, who already have a hard-line policy of banning Huawei from the US. In the UK, Huawei currently has over 1,600 employees and sponsors research at universities around the country.
5G is critical communications infrastructure for every country in the world. There are high stakes in governments deciding who can work on 5G for security reasons, but there are also major considerations in ensuring the high technological quality of 5G networks. Without Huawei, who has already built part of the UK’s 3G and 4G infrastructure, the UK will have to look elsewhere.
Prior to Boris Johnson, former Prime Minister David Cameron was considered one of the most ‘China-friendly’ leaders in the West, encouraging major increases in both bilateral trade and diplomatic relations. With this latest move by Prime Minister Johnson, the relationship between China and the UK will enter a new phase. Whether it’s right or wrong, Boris Johnson has made the assessment that the UK’s current relationship with China needs to change.
Bilibili Launches Matchmaking Platform For Influencers ✨
Bilibili is the Chinese video platform similar(ish) to Youtube, focused on a younger audience and the ACG sub-culture (Anime, Comics, Gaming). They just announced the new launch of a matchmaking platform for brands and content creators called Sparkle. Bilibili has 1.8 million active creators and the number of content creators with 10,000 fans or more has doubled over the last year.
Rival platforms such as Douyin (the TikTok of China) already have a similar platform to Sparkle and TikTok has their own equivalent called Creator Marketplace. Linking creators with brands is a critical business model for all stakeholders, including the platform hosting the content.
Bilibili is a publicly listed company with around 170 Million monthly active users and ad revenue coming from brands makes up around 10% of their total revenue. Sparkle should help increase Bilibili’s ad revenue by making it easier for brands to connect with creators and access data on creator engagement, reach, and other metrics. In a broader context, Bilibili is also looking at a secondary listing on the Hong Kong Stock Exchange. Currently the company is listed on the Nasdaq with a market cap around $16 Billion.
Jio’s Latest Investor, Google 🚀
Over the last few days, Google announced both a $10 Billion investment in India and a potential $4 Billion investment in Indian company Jio. Jio is owned by Reliance, which is one of India’s largest companies and owned by the richest man in Asia, Mukesh Ambani. When I wrote about Jio on June 10, the company had received $13 Billion in investment from Facebook, Paypal, private equity firms, and sovereign wealth funds. Since then, the company has also received $600 Million from TPG, $250 Million from L Catterton, $1.5 Billion from Saudi Arabia’s PIF, $253 Million from Intel, and $97 Million from Qualcomm.
It seems that Jio has become the default beneficiary of the Chinese-US trade war. Jio is a 13-year-old company and has received more investment in a shorter time period than any other company in the world. Jio’s telecommunications/digital services have 388 Million subscribers, providing a gateway to Indian consumers. That is an attractive investment to all international companies, with the latest being Google. And considering what has happened over the last few weeks, Google surely will not be the last. There’s likely more to come.
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AI Influencers Open Up World Artificial Intelligence Conference 🤖
Last week, the World Artificial Intelligence Conference began in Shanghai on July 9. The two and a half hour opening ceremony included features from Elon Musk, Jack Ma, Pony Ma, and more. There was also a special performance by four AI-generated virtual influencers: Xiaoice from Microsoft, DuerOS by Baidu, Mi Ai from Mi, and Lingyuan from Bilibili.
For each of these companies who created virtual idols, the WAIC opening ceremony was a chance to showcase their level of AI expertise. Microsoft’s Xiaoci’s learned music with input from human students at the Shanghai Conservatory of Music. Bilibili’s virtual idols Lingyuan and Yousa are just two examples of the company’s own virtual idol business division. The technology behind the development of virtual influencers has been progressing over the years and the challenges posed by the coronavirus will accelerate their adoption as marketing tools.
Pinduoduo Helps Embassies Increase Tourism 🗺
Pinduoduo, the premier Chinese social commerce platform home to over 600 million customers, has been partnering with foreign embassies and consulates to help promote their country’s products. By using tools like livestreaming, Pinduoduo is helping these countries sell their unique national products to the huge Chinese market.
As an example, on June 23 the Thai Consulate based in Beijing hosted a four-hour livestream showcasing Thai fruit products like durians, coconuts, and mangosteens. More than 330,000 viewers watched the event and it was directly endorsed by Thailand’s Consul General. Thailand’s durian exports have increased 26% year-over-year and 67% of those go directly to China.
Other embassies have also done live broadcasts on Pinduoduo across the month of June, including Serbia, Poland, Hungary, and Bulgaria. In another example, the Danish Embassy hosted a livestream on June 20 promoting a Danish cookie brand, jewellery maker, and outdoor clothing brand.
This is a brilliant marketing tactic by the countries who have embraced this, as livestreaming is probably the single best way to reach China’s customers today and the demand for international goods is increasing. Pinduoduo reported that the “global purchase” merchandise category has grown 470% year-over-year during last month’s shopping festival.
Indian E-Commerce Companies Face New Labelling Regulation 💌
By August 1st, every single Indian e-commerce company will have to specify ‘country of origin’ for their products. With this new rule, all products listed online will have to now include this information. Prior to this regulation, e-commerce companies like Flipkart, Amazon, and Jio had no obligation to state where their products came from. Now they are aiming to extend the deadline by a few months to deal with the logistical challenges of applying this to their entire product catalog, which can often amount to tens of millions of different items.
This is part of a broader economic decoupling encouraged by the Indian government, who wants to decrease imports and increase locally produced goods. Given the recent political and economic tensions between India and China, this move by the Indian Ministry of Trade is in line with Prime Minister Narendra’s Modi’s movement towards building a more self-sufficient nation. People have also been calling for boycotts of Chinese products, so these new labels will likely decrease the amount of Chinese goods bought by Indians. And yet, things could always go even further with restrictions on trade and commerce.
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PUBG Hits $3 Billion Revenue Milestone 🎯
Player Unknown’s Battle Grounds (PUBG) was released in 2017 and has been one of the most successful mobile games in the world, a direct peer to Fortnite, another huge gaming success. It was created by South Korean company Bluehole, which is partially owned by Chinese tech giant Tencent. Over the last seven months, the game has doubled its lifetime revenue to reach $3 Billion.
A recent report from Sensor Tower outlined some of the game’s key stats, including the data point that PUBG made $270 Million in month of March alone. PUBG’s success is a good temperature check for the overall gaming market, which is doing really well in the time of coronavirus. Like most gaming apps, PUBG makes most of its money from players making in-app purchases.
South East Asia’s Streaming Platforms 📺
South East Asia (SEA) is a complicated region, composed of eleven countries that make up a combined population of 680 Million people. Between January to April, online viewing time has increased by 150% across the largest South East Asian countries. In SEA, the market for online streaming platforms is complex, with both global players like Netflix and local players like iFlix.
Malaysia’s iFlix has 25 Million active users across SEA and was bought out by Tencent after financial troubles earlier this year. A rival platform, Singapore-based Hooq had 80 million active users but shut down in April after struggling to overcome their massive losses. The coronavirus has caused ad revenue to drop, and the model of a streaming platform paying lots of money to acquire content upfront has been challenging in South East Asia where customers usually have free alternatives. Hong Kong’s Viu uses a freemium model where their content is free but their 41 Million users can pay to remove ads.
There are also many new entrants into the market. China’s Tencent is using their iFlix acquisition as a cornerstone for their SEA strategy. China’s iQiyi is also planning to launch their streaming service in the region. Disney+ announced recently that they are opening a Singapore office this year and likely launching very soon. And ride-hailing app Gojek, Indonesia’s first unicorn, is also launching their own video service called GoPlay.
Ant Financial Plans IPO 🐜
Ant Financial is the fintech spin-off of Chinese e-commerce giant Alibaba. Ant has become on its own one of the world’s biggest companies and is planning to float on the Hong Kong Stock Exchange later this year, at a potential valuation of $200 Billion. Depending on your definition, this would make Ant Financial the biggest privately-held startup unicorn in the world and the biggest public stock listing of the year.
Ant Financial is not always a well known player on the world tech scene, but it’s likely one of the most underrated. Alibaba spun out Ant Financial in 2014, initially created as the payment processing system for Taobao, Alibaba’s e-commerce platform. Alipay, which is the primary product of Ant Financial, is the world’s mobile and online payments platform. On top of mobile payments, Ant Financial runs the world’s largest money-market fund and offers a diverse set of financial services. Alipay currently has 1.2 Billion users globally and Alibaba still holds a 33% ownership stake in Ant Financial.
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The Strength of Indian-Chinese Business Relationships 🤝
We are all wondering how business will continue in the aftermath of India’s banning of 59 Chinese mobile apps last week, including TikTok, and the new restrictions on foreign investment targeted primarily at China. While some Indian video apps are thriving because of the ban, several TikTok clones actually scamming users have also appeared, and other Western tech companies like Facebook and Youtube are also stepping up their efforts. It’s a battleground for India, home to 1.3 Billion people.
This KrAsia article outlines the many many ways that India and China are linked to each other through interdependent business relationships. Chinese investors allocated $4.1 Billion in funds to Indian companies in 2019, an increase from only $300 Million in 2018. The US is still the largest provider of foreign direct investment in India, allocating $46 Billion in 2019. For many Chinese mobile apps, like TikTok, India is often their biggest international market. Chinese smartphone companies make up 70% of the total Indian smartphone market and employ tens of thousands of Indian employees. China is India’s largest trade partner behind the US, providing 12% of raw materials, commodities, and components. Whatever the next steps for the Indian government, economic decoupling from China, if that’s even the desired end goal, will be a long and complicated process.
China’s 2020 Internet Report 📊
For the last three years, The South China Morning Post has released a detailed document outlining the major trends in China’s technological transformation. This is like a Chinese version of Mary Meeker’s Internet Trends, which is probably the most famous annual report of data & insights for the global tech industry. The 2020 version came out earlier this week and is packed with great content on post-Covid China, startups, 5G, livestreaming and more.
It’s honestly worth reading through the whole (free) report yourself but here are some great takeaways compiled by a mixture of SCMP reporters. Overall time spent online is up by 30% year-on-year, with the biggest growth from audiences over 40. Online education is expected to grow 62 percent this year to have 420 million online students. Chinese smartphones like Xiaomi and Oppo are gaining global market share. China is aggressively building out 5G infrastructure this year to encourage mass adoption of the technology. And livestreaming is entering a new phase of ubiquity where traditional industries such as luxury goods, real estate, and automotive are now using livestreaming as a standard marketing channel. These data represent already existing trends that the coronavirus has accelerated.
The Death of Stanley Ho, Asia’s Gambling Tycoon 🎲
This week, over 100 politicians and celebrities will be attending the Hong Kong funeral of Stanley Ho, a billionaire gambling tycoon who owned the biggest gaming empire in Asia. Stanley passed away in May at the age of 98 and was largely responsible for turning Macau into the world’s largest gambling destination through his company SJM Holdings, which currently owns nineteen Macau casinos.
Stanley Ho has left a huge legacy. Stanley fled Hong Kong when the Japanese invaded in 1941 and ended up in Macau, which at the time was under Portuguese rule. In 1962, he won the rights to to run a government-granted monopoly of all of Macau’s gambling operations until 2001. He branched out into a set of diversified investments across Asia including real estate, tourism, shipping, banking, and more. After several years of inheritance disputes around Stanley’s fortune, his numerous children are now in leadership roles scattered around the family’s Macau casinos and assorted businesses.
What is something interesting you have read about Asia recently? Let me know in the comments or reply directly to this e-mail!
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Chinese Students Feel Anxiety from New U.S. Rules 🎓
The U.S. Immigration and Customs Enforcement agency announced that foreign students taking fully online classes in the fall semester will face consequences including having to leave the country. Many universities announced their intention to go completely virtual in the upcoming semester to ensure appropriate protections against Covid. Also, many international students might currently be in their home countries because of the coronavirus and thought they could dial-in through online classes. Some US universities like Cornell have allowed their foreign students to “study away,” meaning the student can attend a local university in their home country while still being officially registered as a student at Cornell. But under the new ICE regulation, this might not be allowed and disqualify foreign students from holding US visas.
China is the single largest source of international students for U.S. universities, with around 370,000 currently studying in the US. Right now, Chinese social media is blowing up with students freaking out about how their plans are going to be disrupted. This new regulation might cause a decrease in Chinese students both in the short and medium term, similar to what I wrote about Korean students a few days ago. I was an international student on an F1 Student Visa in the U.S. for seven years and know the process intimately, excruciatingly well. Regardless of the inefficiencies or incompetencies with the current process, I doubt any foreign student or US university wants this new ICE rule to happen.
British Museum Hosts Livestream During Lockdown 🖼
The British Museum partnered with Chinese companies Fliggy and Taobao to host a two-hour livestream on June 30. Around 370,000 Chinese fans tuned in to watch an curated virtual tour around the museum. Viewers were able to see real-time Chinese translations and interact with other viewers through comments. They were able to purchase British Museum merchandise through pop-up links directly within the app.
The museum has been pretty forward thinking when it comes to social media and focusing on Asian audiences. They were cultivating followers on Weibo and WeChat all throughout the 2010s and were the first international museum to launch on Tmall, Alibaba’s online retail platform. The museum made $51 Million in their first year selling products like jewellery, stationery, and art to Chinese audiences.
The coronavirus has forced cultural institutions to explore new marketing strategies, communications tools and business models. The Fliggy app already partnered with tourism boards across Finland, France, Germany, Serbia, and the UK to host a five-day travel-themed livestream earlier in May. There is still strong demand for pairing Chinese viewers with Western cultural destinations, even in this moment of restricted travel.
The Gaokao Hopes and Dreams 👩🎓
When I took the SATs back in high school in the US, it seemed like a pretty big deal at the time. But for Chinese high schoolers, the pressure to perform on the Gaokao is magnified. The Gaokao (formally known as the National College Entrance Examination) is the single most important college entrance exam in China, which currently 10 million students are taking across three days between July 7-9.
The coronavirus has disrupted the traditional school schedules, test preparation structures, and general mental health of China’s student population. The Gaokao was delayed by one month this year and Chinese authorities have created additional health and safety measures around the actual testing locations. No matter what is going on in the rest of the world, as you read this there are ten million Chinese high school students furiously taking the Gaokao, powered by their hopes and dreams.
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TikTok Begins Move Out of Hong Kong 🇭🇰
Many tech companies have responded to the Chinese government’s imposition of a new, controversial national security law in Hong Kong that officially came into effect last week. Facebook, Google, Twitter, and Zoom have all stated that they will refuse processing user data requests for the Hong Kong police, pending a deeper review on the new law. But the most notable news has come from TikTok, who publicly announced that Hong Kong users will no longer be able to access the app within a few days.
This is a complicated situation that needs unpacking. TikTok is owned by a Chinese company called Bytedance, with its global headquarters in Beijing. Bytedance owns another mobile app Douyin, that is ‘essentially’ a Chinese version of TikTok. Or depending how you look at it, TikTok is the international version of Douyin since it is a younger app and was the result of Bytedance acquiring the app Musical.ly in 2017. People in Hong Kong use both TikTok and Douyin and Hong Kong users should still be able to access Douyin from now on.
It’s unclear to me how exactly this all works, but Bytedance finds itself in a very nuanced position owning both Douyin and TikTok. The parent company has made efforts to separate the two entities and hiring an American CEO for TikTok, Kevin Mayer, has been a big move to indicate their seriousness. With the overall movement towards regulation of social media by governments around the world, it’s in the best interests of Bytedance to ensure Douyin and TikTok are separate.
Netflix to Launch First Chinese Production 🎬
Netflix is working with China’s Pearl Studio to release an animated Chinese musical film later this year called “Over the Moon.” It will tell the story of a young girl who dreams of traveling to the moon to meet the Chinese goddess of the moon. Pearl Studio co-produced Kung Fu Panda 3 and was created as a Chinese-American joint venture in 2012 with Dreamworks. This is Netflix’s very first big Chinese production, even though Netflix is not available in China.
Netflix has been making significant efforts to internationalise their content in order to better appeal to their international audiences, particularly around Asia. Another example is their major push into India last year that included aggressive discounts and local Indian content like Sacred Games. In following the eyeballs of their audience, Netflix is realising that their biggest growth opportunity comes from Asia.
Indian Startup Zomato is Cut Off From Chinese Investors 🏦
Zomato is a $3 Billion Indian food delivery startup that raised $150 Million in funding earlier this year from Ant Financial, the Chinese digital payments company. However, thanks to increasing tensions between China and India, the Indian government has imposed new laws on foreign investment. One of these laws was announced in April, requiring official approval for investments from countries that share a land border with India. And so around $100 Million out of the $150 Million is currently going through government approval before actually hitting Zomato’s bank account.
Historically, Chinese institutional investors have been one of the biggest sources of startup capital for India’s young tech companies, including funds affiliated with Tencent and Alibaba. Ant Financial (owned by Alibaba) has invested around $560 Million in Zomato, which gives it a 25% ownership stake in the company. And Zomato’s biggest rival Swiggy has received major investment from Tencent and Meituan-Dianping. This dynamic has played out for a while and 60% of India’s tech unicorns (startups with a valuation about $1 Billion) have received Chinese funding. If the political tension between the two countries lead to laws that make it more difficult for Chinese investors, that leaves a huge funding gap for Indian companies.
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Luckin Coffee’s Chairman is Out ☕️
Luckin Coffee was previously one of the hottest companies in China. The coffee brand was considered a serious competitor to Starbucks and completed an initial public offering on the NASDAQ in 2019. The rosy picture came crashing down when a $300 Million accounting fraud was revealed in April of this year.
Charles Lu, the current chairman of Luckin, survived a vote of no confidence last week. Despite this victory for Lu, it was announced today that he was ousted from the board in another emergency board meeting that happened on Sunday that also removed three other board members. And there is still significant speculation that he will soon be facing serious criminal charges, including seizure of his family’s assets. Luckin is the most high profile case of fraud in public Chinese business over the last year, and has hurt the levels of trust investors have in Chinese companies.
Chinese Film Studios Look to More Online Releases 🎬
Earlier this year, many Chinese production companies began releasing their films directly on digital platforms because physical movie theaters had shut down due to the coronavirus. I wrote an article about Bytedance being one of the main players involved by hosting the Chinese film ‘Lost in Russia’ a few months ago, and since then many other major films have been released through Bytedance.
This has angered many Chinese movie theater chains, whose entire financial model is put in jeopardy by direct-to-digital releases on top of the coronavirus. But since the very first experiments at the beginning of the year, the film studios are seeing even more financial benefits to this approach. Tencent, iQiyi, Xigua, and other video-streaming platforms have released dozens of Chinese films and a recent report by Endata has shown huge increases in users and time spent.
This trend has been replicated in the West, most notably with Disney releasing major films direct to Disney+ and Universal Pictures releasing films like “Trolls World Tour” direct to digital download. Pretty much the same scenario played out in both China and the US. It just happened earlier in China by a few months because of the coronavirus.
Korean Students Leaving the US ✈
This article in the Korean Herald talks about the dilemma faced by many Korean students who have to make decisions about studying abroad in the time of coronavirus. Given the current financial, health, and visa challenges in higher education, especially in countries like the US, some Korean students are opting to come back home to Korea to pursue their studies. This has also affected local businesses in Korea that provide related services like US college admission prep companies and study abroad agencies.
Behind China and India, South Korea is the country that sends the largest number of foreign students to universities in the United States, making 6.5% of all foreign enrolment in the US. A few days ago, I wrote about the effect new US work visa restrictions will have on the Indian labour market. With fewer Indians and Koreans able to either study or work in the US, it’s likely that these countries (like many other countries around Asia) will have a more full, but competitive labour market in the short term. Flows of human capital are changing.
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TikTok’s Losses from the India Ban ⛈
The biggest story of this week has been the Indian ban of 59 Chinese Mobile Apps. But how much does that actually cause in losses for the newly banned companies? For TikTok specifically, we might have an idea. Sources close to Bytedance (TikTok’s parent company) have described that the Indian government’s decision to ban TikTok could lead to a revenue loss of $6 Billion for the company.
TikTok currently employs 2,000 staff in India, has 200 Million Indian users, and was temporarily banned in India back in April 2019. At the time, TikTok was accused of exposing children to pornography, cyberbullying, and predators. A report by Sensor Tower around that time estimated the ban made TikTok lose 15 million users and court documents revealed Bytedance lost up to $500,000 a day during the week-long 2019 ban. Given the importance of India and the controversy around their presence, last year TikTok announced a $1 Billion investment plan for India and plans to create a local Indian data center.
There’s another potential, more positive scenario for Bytedance. Just like the 2019 ban, there’s a chance this latest ban could be temporary. Kevin Mayer, the newly hired CEO of TikTok/COO of Bytedance and former Disney executive, posted this public letter of support to TikTok’s employees in India. He surely has one of the most rewarding, high-profile, and incredible challenging roles of any tech executive in the world. What a wild first month in the job.
Pinduoduo’s Founder/CEO Steps Down 🌄
Pinduoduo is one of the great Chinese e-commerce success stories over the last five years. The company provides a social commerce model for online shopping - allowing users to unlock great discounts by making group purchases, incorporating lots of gamification, and focusing on lower-tier cities as their target audience. Colin Huang, the 40-year-old billionaire founder/CEO of Pinduoduo announced this week that he is stepping down from his current role.
I think Pinduoduo is one of the most interesting companies in China tech. In their IPO documents, Pinduoduo literally described their aspirations to be a combination of Costco and Disneyland. The company has 480 Million users and despite being only five years old, it’s the third biggest e-commerce company in China after Alibaba and JD .
Whenever a major tech CEO changes, there’s usually a story behind it. And after Pinduoduo’s success at last month’s 618 festival, Colin Huang actually became the second richest man in China, overtaking Jack Ma from Alibaba. While Colin will still be involved in the company, he has stepped away from day-to-day operations and named his CTO Chen Lei to be the new CEO of Pinduoduo.
Gojek Unifies Brand Across South East Asia 🛵
Indonesia’s most valuable startup, Gojek, has just changed the name of their Thai and Vietnamese local brands to unify under a single international Gojek brand. Previously, Gojek’s Thai and Vietnamese brands were called GoViet and Get. Many people attribute this change as a way for Gojek to better compete with their biggest rival, Grab. Grab currently has the same brand name across all eight of the South East Asian countries where they operate.
What GoJek faces is a classic challenge of localisation vs. standardisation for international business. Major CPG brands like Procter & Gamble, Unilever, and Nestle have the exact same products operate under different names in different countries to better appeal to the local market. This applies across many other industries but Gojek has now decided to follow the standardisation of Grab and Uber. Gojek’s leadership has described the new unified brand as a way to scale the company across new markets and products. And with the investment Gojek received last month from Facebook and Paypal, the company now has even more firepower to take on their international rivals at Grab.
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The Big Moment for Indian Tech 📱
India’s expulsion of 59 Chinese apps earlier this week is a watershed moment in Indian tech, depending on how long the ban lasts and what happens next. This op-ed by Vivek Wadhwa in the Hindustan Times describes some of the potential tech opportunities this gives to India, framing this positively. At the same time, other opinion pieces like this one from Apar Gupta in The Hindu criticise the ban. The closest thing to this ban is how China banned Western tech companies like Facebook and Instagram. You could argue that China’s own consumer tech companies (WeChat, Weibo, QQ, etc.) were able to thrive because they didn’t have as much competition from Western tech alternatives. Could India now execute on a similar strategy, creating natively Indian versions of these banned Chinese mobile apps?
Another angle to this is looking at what else is currently affecting India’s labour market—US Visas. Donald Trump recently announced that several US work visas will have their approval processes suspended until the end of the year, including the H-1B visas most commonly used by the US tech industry. Putting aside the cultural, social, and psychological consequences of this decision on the US’s ability to attract foreign talent, it has a significant impact on India specifically. India accounts for 70% of the 85,000 total H-1B visas issued annually, so thousands of Indian employees and American tech companies have had their 2020 plans disrupted.
Now suddenly India’s tech landscape has less competition, because of banned Chinese apps. At the same time, India’s highly skilled tech workers who would have moved to the US for job opportunities suddenly cannot, because of restrictions in US work visa policy. What could this mean for India?
AngelList launches EquityList for India 💸
AngelList is one of Silicon Valley’s best known companies, a marketplace/job listings site that connects startup founders with angel investors. They have just announced the launch of a new product specifically for the Indian market called EquityList. EquityList is a tool that allows founders to manage their equity stakes, issue equity to employees, and perform a host of other equity-related functions. This takes out many of the operational and fiscal burdens that comes with distribution and tracking of equity in a startup.
This is just the latest in a series of new investments made by AngelList specifically targeting India. They also launched an Indian micro-VC fund called iSeed in May. AngelList India itself was launched in 2018. Things are heating up in the Indian tech market—there are surely many more announcements to come.
Exporting Korean Culture 🇰🇷
This week, the Korean Academic Society for Public Relations hosted an event in Seoul discussing how to promote Korean Culture in a post-Covid world. The event was sponsored by the Korean Culture and Information Service, and supported by several government officials. The attendees discussed how to frame the positive messaging of Korea given the country’s relative success in stopping Covid and how to choose the right medium to deliver these messages.
Promoting your country’s ‘brand’ has always been a thing, whether done by national tourism boards or other government agencies. Putting aside Covid, Korea’s ‘brand’ has been rising rapidly over the last five years and seeing these types of events makes me realise that the Korean government takes this seriously. I’m currently in New Zealand, and there have been similar discussions raised by certain government officials on how to capitalise on New Zealand’s ‘brand’ in a post-Covid world. Although my opinion is that New Zealand takes this less seriously than Korea, I’m bullish on the commercial and social opportunities afforded to the Asia-Pacific countries who have dealt with Covid effectively.
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Covid’s Effect on Chinese Smartphones 📱
Three of the world’s top five smartphone companies are Chinese, making up one-third of global sales. This KrAsia article summarises how these major brands are dealing with the coronavirus. As an overall global industry, smartphones are struggling and Q1 saw an 11% year-on-year decline in shipments, which is the largest decline ever recorded.
The biggest Chinese smartphone companies are Huawei, Xiaomi, and Vivo. Over the last couple of years, their growth has mainly come from emerging markets in places like India, South East Asia, and Africa. Their current challenges don’t just come from the coronavirus, but are compounded by government regulation. Huawei has been the subject of bans by the US government, and this week the Indian government banned 59 Chinese mobile apps.
Huawei is the second biggest smartphone maker by number of shipments, and 50% of their sales come from the Chinese domestic market. They recently opened a huge new flagship store in Shanghai right next to the Apple store. Xiaomi is a weaker player in China, with most of their growth coming from India, Europe, and South America. This leaves them in a more vulnerable position given both public health and policy challenges in each of those regions. Vivo has even more reliance on the Indian market for growth—earlier this year before Covid, they announced an aggressive marketing plan to launch hundreds of new stores around India, which is likely no longer possible to pull off. It’s not an easy time to be a Chinese smartphone maker.
Taobao - From E-Commerce to Online Education 🎓
Taobao, one of China’s largest e-commerce platforms, is owned by Alibaba and has over 800 million users. Last week, they announced a new initiative called a “One Million New Students Plan” to “help more than 1,000 education organisations to gain at least 100,000 new students each in the next three years.” So that’s a goal to get 100 million new students in total within three years. This includes new product features, marketing, content, and partnerships.
In 2013, Taobao had launched their first version of an online education spinoff called Tongxue, which means ‘classmates’ in English. It’s always been available on Taobao, but this latest announcement is more topical and takes advantage of recent trends. Since the beginning of this year, edtech and online classes have grown rapidly in China. Given the size of China’s population, the stakes are even higher for education. With 230 million Chinese students currently in K-12 education, it’s more than any other country in the world.
The Financial Times reported on this education boom earlier in the year, which is happening not only in China, but throughout Asia. Online education apps like Ding Talk became widely used teaching tools for almost all students thanks to the coronavirus. Ding Talk specifically got so big that Chinese students from around the country kept giving the app a one-star rating, with the hopes that the app would get kicked off the App Store and they wouldn’t have to do their homework. And now it’s Taobao’s turn to try to win over students and get a slice of the growing education pie.
KKR Raises New Asia Fund, Their Biggest Ever 💴
KKR (Kohlberg, Kravis, Roberts) is in the process of closing a $12.5 Billion buyout fund this month, focused specifically on investments in Asia. This is said to be the biggest ever Asia-focused fund raised by a U.S. company. KKR is one of the oldest and most respected companies in private equity. And given the financial toll the coronavirus has taken on the world economy, this provides KKR with more potential companies as investment targets.
Just this year, KKR has already spent $3.3 Billion acquiring companies in Asia-Pacific, including $1.1 Billion in the Indian-based Reliance Industries and $650 Million in Vietnam’s largest real estate developer. Clearly KKR sees major opportunity in Asia, but it’s not the case for all investors. The PR fallout from Luckin Coffee’s scandal has still cast doubt on investing in Asia and a recent study by Bain indicates that Asia-Pacific private equity activity has declined over the last year. There’s room for many different opinions on the future of Asia.
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Indian Government Bans 59 Chinese Mobile Apps 🚫
The Indian government announced yesterday that it has banned 59 Chinese Mobile Apps, citing concerns that the apps engaged in activity “prejudicial to sovereignty and integrity of India, defence of India, security of state and public order.” There are also allegations that these apps, such as TikTok, are sharing Indian user data with the Chinese government, which has been publicly denied by the companies.
This comes against the backdrop of military skirmishes between India and China earlier this month in a disputed Himalayan border, which resulted in the deaths of 20 Indian troops. Prior to this ban, there were many calls to boycott Chinese goods and stop Chinese imports, which will have a huge effect on the $90 Billion in bilateral trade between the two countries each year.
Among the affected apps — two of the most notable are TikTok and WeChat. India is TikTok’s largest market outside of China and it’s estimated that there are over 120 Million Indian TikTok users. Is this the death of TikTok India? While there are many people in India who support the ban, the combined users of these total apps is around 300 Million. And these people could be using apps for pure entertainment (Clash of Kings, Helo, TikTok) or business reasons (ShareIT, WeChat, UC Browser). Depending on how long this ban lasts, there’s now a major opportunity for local Indian companies to take advantage of the ban and provide domestic alternatives.
Korean Fund Set Up to Promote Local Media 🇰🇷
The Korean government has announced the creation of a new 1 trillion won (USD $825 Million) fund to invest in local media companies. There are also plans to decrease regulation in order to allow local media tech startups to compete with players like Netflix and Youtube. This also comes on top of several government investments in private sector infrastructure, such as an announcement earlier this year of $15 Billion in new infrastructure funds.
A trend I believe we will start seeing more is the decentralisation of popular culture, away from the dominance of Hollywood throughout the second half of the twentieth century. Korea already punches above its weight when it comes to global cultural influence, but could we start seeing a renaissance in Korean pop culture? Korea arguably had the most advanced professional gaming industry earlier than any other country. K-pop has taken over the world over the last few years. In February of this year, Korean film Parasite became the very first foreign language film to win the Best Picture Oscar. And K-Dramas have been dominating Asia for years. What’s next for Korea?
Chinese K.O.L.s vs. Western Influencers 📊
Daxue Consulting wrote an article comparing Chinese influencers (KOLs - Key Opinion Leaders) with Western Influencers. It was a fascinating look at the similarities and differences between the Eastern and Western worlds of social media and influence. The biggest tool Chinese influencers use differently to monetise is livestreaming, which is the number one focus for KOLs like Austin Li and Viya. For Li and Viya, their livestreams can average up to $250,000 USD in revenue per minute over the course of a several hour long livestream.
In one case study, they focus on comparing Jeffree Star (one of the biggest American beauty influencers) and Austin Li (one of the biggest Chinese beauty influencers). Jeffree Star’s annual income is estimated to be $100 Million and Austin Li’s is estimated to be $140 Million. Jeffree Star is notable for having own brand of cosmetics and products, a model more common in America, while Li does not have his own ‘vertical business line’ and instead uses his influence to market products from other brands. We should watch closely to see how the East-West influencer strategies evolve.
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Livestreaming E-Commerce in a Post-Covid World 🤳
There has been a lot of hype around e-commerce livestreaming in China. Since around 2017, people have been using live video apps to directly sell products. The most successful livestreaming influencers or Key Opinion Leaders (KOLs) are perceived as genuine and have built a trusted relationship with their fanbase. The closest thing resembling this in the West is TV infomercials or QVC; but in China, social media platforms like Taobao, Douyin, and Kuaishou allow users to buy products directly in-app during a livestream.
But Covid has triggered a dramatic mass adoption of livestreaming. The Chinese livestreaming industry is now expected to reach $129 Billion by the end of the year (double the amount from 2019); demand for livestreaming hosts has gone up 50% over the last six months; and 62% of the total Chinese internet population is expected to participate in livestreams in 2020. CEOs of several major companies in China have started using livestreaming as a tool to sell products and services. Government agencies have provided subsidies to livestreamers to encourage the local economy, including direct endorsements from President Xi Jingping.
And with this growth, the products sold on livestreams now encompass peaches from rural farmers to real estate from major urban developers to $5.6 Million rocket launch services from famous influencers. I’ve been a huge fan of livestreaming for a while, and you may have seen me writing about this in previous updates or my other newsletter Venn Diagrams. We’re going to see more and more Asian influence in our business, tech, media, and culture (TikTok is a good example of this), and I think e-commerce livestreaming could be the next big marketing channel for your brand.
A Chinese Liquor Brand Bigger than Coca-Cola 🍶
Moutai is China’s most popular alcoholic beverage, a liquor brand named after the town of Moutai, in Guizhou province. Kweichow Moutai, the company that produces the drink, is now larger than Disney, Coca-Cola, and Verizon. With a market cap of $260 Billion, it’s also bigger than the biggest alcohol brands like Diageo, Heineken, SAB Miller, and AB InBev. While many stocks have taken a hit because of the coronavirus, Moutai is an interesting exception that sheds insight on China’s consumer market.
The type of liquor of Moutai is called baijiu, which is a harsh, strong liquor that I have personally had the pleasure of tasting—it’s closely tied to Chinese culture. 95% of Moutai’s sales are from the domestic Chinese market and as China’s economy looks like it’s recovering from the coronavirus at some degree more quickly than the rest of the world, many people have been investing in Moutai as a bellwether for economic recovery. At the same time, major Western alcohol brands are dealing with the lockdown of bars, restaurants, and venues.
China is the world’s biggest consumer population and one of the fastest growing. In terms of practical application, that means a huge ‘domestic’ brand in China can have orders of magnitude more sales than a well known international brand. If you are an Italian shampoo company, an American clothing company, a Brazilian drinks company; from a numbers perspective—your biggest potential customer base is China.
Snapchat Announces Singapore Office 👻
Snap Inc., the official name of the parent company that created Snapchat, has announced that they will be opening up a Singapore office later this year. The person leading the office is Anubhav Nayyar, the former head of Asia-Pacific for messaging app Viber. This signals the increased importance of the Asian market, and perhaps a strategic move considering challenges from the coronavirus.
This really marks a shift in Snap’s Asia strategy. Just a few years ago, a lot of press was criticising Snap for not focusing on Asia early enough. At the same time, Snap has previously faced fierce competition from local Asian apps, including Korean clone Snow. And there has always been a classic chicken or egg problem of whether a Western tech company should invest in Asia to increase its user base, or wait until the user base reaches a certain size before deciding to invest. There must be something new that triggered the Snap leadership to think that now is the right time. We can also look to the fact that Asia is becoming an even more attractive growth market for everyone. For example, Disney+ is already moving quickly to open up a Singapore office this year.
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Apple Removes Thousands of Apps with New Chinese App Store Policy 🍎
Starting July, Apple will begin removing thousands of mobile apps from the Chinese App Store. This is a new policy to require all paid games to have approval from Chinese regulators before getting listed. Prior to this decision, game developers were able to still submit their apps to the App store while their government approvals were still processing. This was used by everyone from indie developers to major companies like Rockstar Games, the creators of the Grand Theft Auto series, to be able to make money technically without government approval.
It’s expected that one third of all games on the Chinese App Store will be removed next month because of this policy. Anything that makes it harder for game developers to make money will have effects on the software community. And developing games for the huge Chinese market has always had additional challenges because of the government’s strict approval process, especially as the overall gaming industry continues to grow massively. In China, the mobile gaming industry last year reached a size close to $30 Billion.
China’s Sports Are Reopening 🏀
Last weekend, after five months of hiatus, the Chinese Basketball Association (CBA) played their first set of games. While many things are back to normal, not every team’s roster has stayed the same. Some international players are actually stranded outside of China since the border is still currently closed to foreigners, and for the Beijing Ducks, their foreign head coach is stuck outside of China.
The next question many fans are asking is — what about other sports? The Chinese Super League, the country’s biggest football league, plans to restart some time next month in July. If you look to the rest of the world, it’s been quite a mixed bag — some European football leagues like the Premier League and Bundesliga have already resumed, without fans in stadiums. On the other end of the spectrum, the Belarus national football league has actually kept playing all of their matches over the last few months during the coronavirus crisis.
In motorsport, the Shanghai Grand Prix was supposed to happen in April but was cancelled. There is some talk that Formula One will be potentially rescheduling races in Asia for the second half of this year, and Shanghai is actually lobbying to host two races if the reopening happens. A Formula One Grand Prix generally brings a lot of press and economic benefits to the host city—one good example of this is the Grand Prix that has taken place in Baku, Azerbaijan since 2017. One PWC study calculated the city has received half a billion dollars in economic benefit because of the Grand Prix. So it’s a very attractive event for many cities, including Shanghai.
Steam’s Chinese Expansion Comes With Strings Attached 🎮
Steam is a digital distribution platform, one of the world’s biggest for selling video games. The platform has 95 Million active users and sells billions of dollars worth of games every year. Currently, 30 million users access the platform from China, where you can only use Steam by going through a VPN. The company has operated in this grey zone for a long time, until an official Steam partnership with local Chinese company Perfect World was announced in 2018.
Earlier this year, an early beta version of the new ‘Steam China’ has appeared to include censorship features, restricted times to play games, and fewer titles. Once again, issues of government regulation are a hugely important factor for anything related to gaming in China. The Chinese PC Gaming market was worth $15 Billion last year and there are a reported 321 Million PC gamers in China. By creating a new Steam China, Steam might be hoping to legitimise their huge business in China, but they might also end up annoying gamers and developers.
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Latest NASDAQ Delisting Notice for Luckin Coffee ☕️
Luckin Coffee was previously heralded as one of China’s biggest business successes over the last year, a serious competitor to Starbucks and one of the fastest growing companies in the country. This was all before a $310 Million financial reporting fraud was revealed in April, leading to a series of investigations and still ongoing controversy.
This week, Luckin disclosed that it has received a second notice from the NASDAQ asking the company to delist from the exchange. Their first delisting notice came on May 19 for “public interest concerns” and “fabricated” records. This second one is because Luckin has failed to file their annual report for the fiscal period ending December 31, 2019. The current share price of Luckin is hovering around $2.70, a significantly lower price than their high of $50 a share in mid-January.
Luckin had their IPO on the NASDAQ in May 2019, with a lot of fanfare characterising the company as the next Starbucks of China. Luckin was such a high profile company with a large percentage of their investors coming from the West, specifically the US. So the impact of Luckin’s fraud and impending decline can be traced all the way to the recent US legislation introduced to delist Chinese companies and a broader sense of mistrust between the investment communities of the two countries.
Challenge for India’s Wedding Industry 💒
In India, weddings are a big business—a $50 Billion industry. With a population of 1.3 billion people (and half under the age of 30), the industry was expecting double digit growth going into this year. Unfortunately, the Coronavirus has created new challenges to prevent this growth from happening.
This Vogue Business article outlines some of the ways businesses are adapting, including virtual appointments, increased e-commerce, and augmented reality. Many people have also had to postpone or completely rethink their approach to getting married. Personally, I’ve had several friends get married over Zoom the last few months, which cuts into what people would have spent for a traditional wedding. A large part of a wedding’s cost is spent on luxury goods, which could mean anything from the actual bridal wear to jewellery.
What’s happening in India’s wedding industry is something many countries are experiencing, but India’s size means it’s more susceptible to this corona-induced downturn. The US is the world’s largest wedding market valued at $70 Billion, with India coming in second at $50 Billion and growing more quickly. 29% of global jewellery spending also currently comes from India. The challenges of this wedding industry will have ripple effects across the broader Indian economy.
Gucci and Other Fashion Brands Need Work On Their Chinese Socials 👜
The idea of a brand rushing into social media or “digital” is a playbook I’m very familiar with. When I worked at Facebook, social media was too often seen as a blunt marketing instrument rather than a nuanced tool. It’s not easy. This article from Jing Daily outlines Gucci’s struggle to find success on short video app Douyin, the Chinese version of TikTok owned by parent company Bytedance.
Gucci launched on Douyin on April 29 earlier this year, in an attempt to better connect with younger Chinese audiences like Millennials and Gen-Z. Since then, the account has received lots of negative feedback from fans, primarily criticising the aesthetic and quality of Gucci’s videos. For Gucci and many similar brands, China is often their most important market, as the country accounts for two-thirds of growth in the global luxury market. So being successful on Chinese social media is not a luxury, but a necessity.
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Mr. Bean Impersonator Becomes Chinese Celebrity During Lockdown 🕶
Nigel Dixon, a 52-year-old British impersonator of the comedic character Mr. Bean, has suddenly become a viral sensation in China. Dixon was visiting friends in Wuhan a few months ago and ended up stranded in the city for the entire period of lockdown, from January 5 to May 29. He started posting short funny educational videos of his life in lockdown and ended up getting nearly 400 Million followers across Chinese social media.
What’s fascinating to me is the scale of his fandom. For comparison, Cristiano Ronaldo is the most followed person on Instagram and his account has 226 Million followers. So if a Mr. Bean impersonator can get 400 Million followers (n.b. I saw several news publications mention this number but couldn’t officially verify it myself), it’s mind blowing. And for reference, the official Mr. Bean account has 6.8 Million followers on Instagram.
This idea of cultural arbitrage - taking your brand from one country and bringing it to another, can be pretty lucrative. But THE most lucrative place to bring your brand from a scale perspective is China.
Jay Chou’s Viral Mojito Song, A Lesson in Chinese Internet Culture 🍹
On June 12, Chinese pop star Jay Chou released his new single “Mojito” on the streaming platform QQ Music. The company’s servers collapsed due to heavy traffic from people trying to listen to the song and digital sales reached $1.4 Million in just a few hours. The song is about the drink, the Mojito, but the music video takes place in Cuba as we can see Jay Chou driving around the country in classic cars. People have been imitating the music video across the Chinese internet, including the Hainan police force, who created a parody of the song with an anti-drug message that went viral.
What’s interesting is the knock-on cultural and economic effects of this music. After the song’s release, tons of articles were written in Chinese media about Mojito culture. Bars and restaurants around the country started offering Mojito drink specials, and sales of the drink went up. And it’s reported that online search traffic for the word “Cuba” and associated keywords went up 1,113% after the song was released.
I don’t know if Cuba’s tourism board actually knows Jay Chou, but they probably should be paying or at least thanking him. The Cuban Embassy to China actually gave a shoutout to Jay Chou on social media. In today’s world, songs become memes that become actual economic forces.
Pokémon Smile, A Game Encouraging Good Behaviour 👼
The latest mobile game in the Pokémon series is Pokémon Smile, an app created to gamify the process of brushing your teeth. To play Pokémon Smile, your goal is to rescue captured Pokémon by properly brushing your teeth. The game is aimed at kids and uses augmented reality to measure how well kids are brushing their teeth. As a society, we are becoming more familiar with the different ways that games can positively influence behaviour.
Pokémon is the world’s highest grossing media franchise. The Pokémon Smile app is free on both iOS and Android, and is also translated into Chinese. That’s particularly notable because a previous game/worldwide blockbuster Pokémon Go was actually banned in China and deemed a ‘social risk’. From a business perspective, I’m sure The Pokémon Company is doing their very best to make sure they can have different ways to re-enter the Chinese market.
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