| "Kao-Ya", as they say it in Chinese, or "Peking Duck", is | | | | a lot of changes in top management and no clear |
| a beautiful and delicious dish, a roasted duck with | | | | direction at the moment. |
| especially tender and crispy skin. The legends trace its | | | | - Hurray: moving up the music value chain by |
| history to the Qing Dynasty in China. To prepare | | | | purchasing record labels. Its strategy might pay off if |
| "Kao-Ya" you need a full duck with its head attached. | | | | they don't damage those companies and integrate |
| Then, if you are strong enough, you need to inflate it | | | | with mobile VAS for monetization. |
| through a straw (that's how they did it centuries ago) | | | | - Sina: leading Internet portal. Makes money also |
| or use a pump to separate the duck skin from the | | | | through mobile services. |
| body. After that you have to pour some boiled water | | | | -Sohu: #2 Internet portal. Official partner for Beijing |
| and brush it on with some sweet substance, like | | | | Olympics 2008. Not clear yet what kind of results it will |
| molasses, honey, or plum syrup depending on your | | | | bring. |
| preferences. That allows the duck skin to acquire the | | | | - Tencent: leading IM service in China called QQ. |
| light caramel taste. After drying it for about 12 hours, | | | | Hundreds of millions of registered users. Monetizes |
| place it in a large oven to roast it over apple wood | | | | through a healthy personalization model and casual |
| charcoal (the best choice!) for a couple of hours, and | | | | games. A very good and healthy company that is |
| finally you will have a crispy and tasty Chinese | | | | almost a new media by itself. |
| delicacy. (Now don't try to do it in your home oven, you | | | | - Netease: dropped most of its VAS activities to |
| will need to build a special traditional oven for that!) | | | | concentrate on online RPG and casual games. Doing |
| While wrapping finely sliced duck pieces into pancake, | | | | pretty well since then and its top management |
| and mixing them with a plum sauce, I want to introduce | | | | probably sleeps much better. Most VAS companies |
| you to Ben Joffe, CEO of Plus Eight Star Ltd. ( who | | | | do not manage to differentiate or monetize properly |
| invited me to the "Kao-Ya" feast in one of the central | | | | yet. |
| Beijing restaurants. This French guy with a shy smile | | | | AG: China Mobile and VAS: what are some examples |
| created a very interesting company that in his words is | | | | of interesting VAS campaigns? |
| "engaged in helping Western companies to understand | | | | Ben: China Mobile do not really focus much of its |
| the technology innovation process in Asia, and how | | | | marketing on VAS. We are still in a fairly |
| these innovations can be applied in their home | | | | unsophisticated market where people buy hardware... |
| countries". In other words he will even make "kao-ya" | | | | AG: China Unicom: how does it BREW its stuff? |
| work in your steak recipe, just watch! | | | | Ben: China Unicom has difficulties getting traction with |
| With seven years of Asian experience and fluent in | | | | BREW. Also, the future of CDMA as a whole is a bit |
| Mandarin and Japanese, Ben is very confident about | | | | unclear in China. SK Telecom (Korea's leading |
| his company's future. When I asked him if he was | | | | operator) invested 1 billion USD in bonds and is building |
| interested in new clients, he quickly said "sorry, not for | | | | some cooperation, but overall the market creation |
| a few months, we are completely booked with a | | | | effort around mobile services is insufficient. |
| number of projects". Nevertheless, he still finds time in | | | | AG: Internet market in China: major trends |
| his busy schedule to organize highly popular "Mobile | | | | Ben: Internet in China is still a lot about page views and |
| Monday" ( events in Beijing, which gather enormous | | | | number of subscribers. Most of the US-based services |
| crowds of "mo-co" people, operators, software | | | | have been adapted to China ('Copy-to-China' or C2C) |
| developers, journalists and bloggers. If you are in | | | | but very few actually deliver the same results as the |
| Beijing, don't miss the next "Mobile Monday" as you | | | | online advertising market is still small. |
| might well meet your future business partner there! | | | | There is a web 2.0 and online communities fever, and |
| Over the dinner we discussed some peculiarities of | | | | a lot of venture capital fueling it, but I don't see so |
| doing business in the mobile content sector in China, | | | | many profitable companies around. Some interesting |
| the secret life of Chinese content providers and many | | | | sectors such as online travel or online real estate are |
| fruitless attempts to enter this market by some | | | | doing well, though. |
| Western companies. My "whys" and "hows" were | | | | Online video you-tube-like services are still largely a |
| answered with patience and good humor, while | | | | money-wasting area. Last, the user-generated content |
| "Kao-Ya" quickly disappeared just to be replaced by a | | | | trend is definitely here to stay: from online karaoke to |
| nice Chinese ice cream. Finally I asked Ben to respond | | | | video creations, a few artists actually came out from |
| to some of my questions regarding the VAS market in | | | | the Internet in the past 2 years. |
| China, and you can find his answers below. In short, his | | | | AG: What is so unique about your company? How |
| recipe for success is working with a local partner and | | | | can you help Russian CPs or techno companies in |
| tuning in to the local culture and preferences. | | | | China and Asia? |
| Current state of the VAS market in China. What are | | | | Ben: We do 'Innovation arbitrage', meaning we help |
| the hottest trends? | | | | companies operating in foreign markets to understand |
| AG: Ben, what are some innovative technologies that | | | | why and how leaders in Japan, Korea and China |
| Chinese CPs use to engage new subscribers? | | | | became successful. Especially, we go beyond the |
| Ben: The current state of the VAS market in China is | | | | cultural layer to highlight fundamentally good ideas and |
| both great and terrible: Great because it's growing | | | | the way to implement them in other markets. As of |
| overall at a fast pace: 20% of China Mobile's ARPU | | | | today, there is little room for foreign CPs in China and |
| comes from data, also the mobile content market was | | | | Korea, but top-notch technology companies might |
| estimated close to 1 billion USD in 2006 and keeps | | | | stand a chance. In Japan, high quality content also has |
| growing. | | | | opportunities and the market is much more |
| Now, it's terrible because the market is very opaque: | | | | transparent. |
| operators' regulations keep changing and rocking the | | | | Unfortunately, starting cost is much higher. I believe |
| life of the thousands of VAS service providers in | | | | however we bring a lot of value to our customers |
| China. Also, most of the offer is rather commoditized | | | | when we bring them ideas that work from Japan, |
| (ringtones, screensavers, ringback tones, SMS jokes) | | | | Korea or China, to improve their business in their home |
| so it is very hard for them to differentiate. Also, | | | | market. |
| operators tend to develop their own service every | | | | AG: What is the secret of your success? |
| time they see a service is picking up: mobile music, | | | | Ben: I spent over 7 years in Asia. First in Japan, then |
| mobile IM, etc. So life for local mobile entrepreneurs | | | | Korea and now China. |
| can be fairly depressing as China Mobile reaps the | | | | What I noticed is that: |
| rewards of SP's market building efforts. Very few | | | | (1) Very little of what happens in those countries, |
| foreign companies dared to enter the market (only 6 | | | | including their most incredible successes, is known |
| officially have a VAS license) and apart from major | | | | outside; |
| record companies, none is really making money in | | | | (2) Most reporting about those countries will tell you |
| China. | | | | maybe the result but not the process and will often |
| All hope is not lost, as many companies now | | | | explain them with cultural reasons. The problem is that |
| concentrate on the off-portal market, with advertising | | | | if you say "it works because they are [whatever |
| models or cross-media cooperation. In China, | | | | country]" you stop thinking and will likely fail to see how |
| technology is not the key. Smart combination of ideas | | | | a good idea could be adapted to your own market. |
| and proper execution are way more critical. | | | | This has happened repeatedly over time: from text |
| AG: What are the top Chinese CPs? What are their | | | | messaging to camera phones, to flip-phones, to |
| strengths? | | | | ringtones, etc. The West eventually 'rediscovers' those |
| Ben: Top 8 ones are easy to list as they are also listed | | | | ideas much later and then forgets the whole cultural |
| on NASDAQ or HKSE: | | | | debate. Such attitude cost Nokia a lot of market share |
| - Tom Online: leading VAS SP, they entered JVs with | | | | as they could not see the good idea behind flip-phone |
| Skype and eBay. None is really delivering much, though. | | | | design and stuck to their 'candybar' for too long. |
| - KongZhong: top WAP provider. Trying hard to push | | | | Eventually, I think the key of our work - aside from our |
| its independent mobile portal, Kong.net via offline | | | | talented multicultural team - is our cross-cultural and |
| advertising (on bus, billboards, etc.). Not much result yet. | | | | cross-market expertise. Something that takes quite a |
| - Linktone: partners with record labels and brands. Had | | | | bit of time to develop. |