The tipping point for new media

Tech specialist Larry Rinaldi

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With traditional marketing practices disintegrating around the world from the U.S. to Japan, one has to wonder when and how it will happen in China.

There are many reasons why marketing in China is still disproportionately traditional, but the key one is money. China’s state-owned television stations reap enormous profits by buying cheap content and selling very expensive commercial time, so why should they let new forms of media--and non-Chinese companies--kill the goose?

Multinational ad agencies are comfortable with the state of things too. Aging managers trapped in business models that run off of traditional media and schedules are equally uncomfortable rocking the boat.

Or maybe it’s just the clients’ fault, with marketing departments that play it safe with media plans that are largely a holy trinity of TV spots, retail promotions and outdoor ads.

Even so, “the change” is inevitable. There are several signs that the tipping point is not far off and once again, the driver of change is money. The country is awash with venture capital funding and that money is chasing digital media with a vengeance. Virtually every permutation of “new media” in the U.S. and Europe has a counterpart in China, with big VC’s behind them, including pirate sites, peer-to-peer (P2P) networks, blogs, social networks and consumer-generated media.

If a successful overseas digital media concept isn’t here now, it will be a matter of weeks, if not days, before it appears, thanks to Chinese internet companies who specialize in fast duplication of Silicon Valley’s latest and greatest creations the way American suburbanites flip real estate.

There is simply too much VC money chasing digital media to ignore, and their investments all have one thing in common--their only revenue source is advertising. Each one will have to attack the traditional advertising dollar to make money.

The goose is going to get plucked, slowly but surely, and savvy Chinese entrepreneurs already smell blood. Around the complex mosaic of the country’s highly-regulated and protected media industry, several Chinese companies are exploiting the situation and positioning themselves for the future.

Interestingly, though, they aren’t the usual suspects, but rather independent producers from the content side of the business and technology veterans like UiTV, Beijing Broadcasting Group, Pegasus and Joy Media Group.

All three are evolving their businesses into mini-media conglomerates by experimenting with new and old media, virtual networks and aggressive advertising sales. They are also learning to attack the traditional ad spend pools with combinations of web, mobile and TV content.

Joy, run by Jacky Tung, is particularly interesting. Reputed to be the largest independent producer of reality, drama and variety programming in China, it currently has over 17 shows on air. It also syndicates content it acquires to China’s 200+ TV stations, one-by-one.

By working in partnership with the stations, and consistently providing top-rated shows, the stations are akin to network affiliates in the U.S. model, covering more than 120 cities in 30 provinces and over 300 million viewers. Now it is putting that “virtual network” to work with advertisers as well, similar to News Corp. or NBC in Europe and the U.S.

Joy also owns Rongshuxia, China’s premier social network and portal for writers, literary types and fandoms, subcultures of like-minded fans who share the same interest, making it a little like MySpace and Facebook. With over 70 communities and averaging 3,700 literary submissions per day, it has over 4.5 million regular registered users.

Together, its virtual TV network and popular social network represent an elegant combination of reach and participation and they are learning to package them. It recently secured a permit to be a wireless service provider for text messages (SMS), multimedia messages (MMS) and wireless application protocols (WAP), and invested in Letdoo, a Chinese clone of YouTube it wants to turn into a web TV property with P2P streaming.

This means they can create and distribute content and measure and sell advertising across every platform--TV, cable, satellite, web and mobile, which should sound warning bells for companies like Viacom, Disney and Fox.

James Ding, the “father of the internet” in China and former CEO of AsiaInfo, is another entrepreneur who is mastering cross-media platforms. In a sense, he has imitated Ted Turner, who used satellite and cable technology to disrupt the cozy world of American network television more than 20 years ago.

Mr. Ding’s company, UiTV, is an “intelligent” turn-key, IPTV, web TV and mobile content distribution platform. Its vision is to be a content distribution alternative to television with two-way capability and data intelligence. They view themselves as an “enabler” giving marketers, content providers and wannabe producers distribution across mobile, web and cable--quickly.

With high-speed broadband connections growing rapidly (77 million connections at last count), it will not be too long before they are a force in the marketplace. Already, they are actively reaching out to producers and advertisers not so much for advertising but for branded content to fill their “pipes.”

Sadly, China’s ad industry today is still about cash flow, earnings per share and playing it safe, not innovation. But change is coming, and innovative companies like Joy Media and UiTv warrant interest for companies who would want to follow the money into a new marketing world.


Larry Rinaldi is managing director of O.N.A. in Beijing, which specializes in branded content and trans-media marketing. Previously, he oversaw marketing for Motorola's mobile phone division in Asia/Pacific and before that, he was vice chairman, Greater China of Ogilvy & Mather. He has lived in Asia for 12 years, including six in Beijing.
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