Shanghai Execs Push Tech Deals

Ad execs, investors, and entrepreneurs converged on Shanghai to attend AdTech, a two-day interactive marketing conference in China’s largest city that ran for its second consecutive year.

 Topics winning mind share with the marketing digerati Wednesday included: mobile ads, word-of-mouth marketing, and tapping the potential of web 2.0.

 China is the world’s largest mobile market and fastest-growing Internet market, as conference-goers were repeatedly—and for the most part needlessly—reminded.

 Marketing Mobile in the Middle Kingdom

The conference kicked off with a case study of Motorola’s recent China campaign. The campaign centered on music and aimed, said keynote speaker Ian Chapman Banks, North Asia general manager for Motorola’s marketing and business development, at driving everyone online??? to Motorola’s Chinese music site, Motomusic.com.cn.

 On the site, Taiwanese hip-hop megastar Jay Chou—animated via slick Flash technology, courtesy of OgilvyOne’s China team—plugged Motorola’s digital rights management-protected downloadable tracks and ringtones.

Ebullient about the Chinese economy, Mr. Banks summed up some of the idiosyncrasies in the handset marketplace that have forced Motorola to take a radically different approach to selling phones in China.

 Chiefly, he said, it’s an entirely open retail market, where phones are sold separately from service.

 In China, Motorola has points of presence in about 37,000 retail outlets,??? said Mr. Banks. There’s a whole different marketing approach in China,??? he said. We look more like a Pepsi, an Adidas, a P&G, or a Gillette.???

He called China’s economy the boom that keeps on booming.???

 The company still lags behind Nokia in China’s handset market, with a 21.4 percent market share in the first five months of 2005 compared with Nokia’s 30.3 percent, according to China Market Monitoring.

 But Motorola anticipates hitting 25 percent market share for the year, and Mr. Banks estimates an uplift in phone sales attributable to the MotoMusic campaign of 25 to 30 percent, he said.

 Yahoo China Tough on Alibaba Founder

Jack Ma, chairman, president, CEO, and founder of China’s biggest B2B portal, Alibaba.com, wrapped up the first day’s round of presentations with a characteristically energetic talk tracing his decade in the Internet.

 Over the course of a decade, Mr. Ma went from being a school teacher to head of a Chinese Internet empire that includes Alibaba.com, leading auction site Taobao.com, payment system Alipay, and—for just under a year now—Yahoo China.

 Yahoo China has been much more difficult than I thought it would be,??? admitted Mr. Ma.

 But it would have been unrealistic, he suggested, to expect a miraculous turnaround for the portal, which languished behind domestic Internet plays like Sina, Sohu, Netease, and Tencent for close to nine years.

 We set a goal for Yahoo China in the first year of just surviving, and we’ve done that,??? said Mr. Ma. In the second year, we hope to make the company healthy, and in the third year, to make it strong.???

 Mr. Ma explained his decision to jettison Yahoo China’s wireless value-added services (WVAS) offerings after he took the helm, despite the revenue they were bringing in.

 There was too much to the business that was dirty??? and unhealthy,??? said Mr. Ma—a reference to the overly aggressive customer acquisition tactics and unethical billing practices that have landed so many WVAS providers in hot water with China Mobile and the Ministry of Information Industries (MII) in recent years.

 But in the wake of a concerted clean-up effort in the WVAS sector by regulators and operators—a crackdown that began early this summer and has slammed companies in the industry hard—it may be time for Yahoo and Alibaba to get back into the business, Mr. Ma said. He indicated that he planned to restart Yahoo’s WVAS services in the near future.

 While moral indignation compelled him to kill off Yahoo China’s WVAS business, Mr. Ma elected to keep the Chinese-language browser toolbar 3721, which had been acquired by Yahoo in 2004, alive.

 That decision came despite a growing chorus of user complaints that 3721—renamed Yahoo Assistant—was a browser hijacker that stubbornly resisted uninstalling.

 I hated it because it did use many methods of ‘hooligan ware,’??? said Mr. Ma. But he continued to push the controversial toolbar, he said, because we had two- and three-year contracts with many customers, and I had to honor those contracts.???

 Mr. Ma is now embroiled in a suit-countersuit with former Yahoo China President Zhou Hongyi—the man who created 3721, and who recently released an anti-malware program that targets the browser bar (see China’s Malware Wars Get Personal).

 Oak Pacific on a Buying Spree

We’ve spent $20 million since March acquiring companies,??? said Joseph Chen, CEO of Oak Pacific Interactive, at a panel on VC and M&A activity in digital marketing moderated by Deutsche Bank China Internet analyst William Bao Bean.

 We’ve got the FaceBook space locked for China,??? added Mr. Chen, without offering any details but promising an announcement soon.

 Oak Pacific operates MySpace-clone-cum-entertainment portal Mop.com, news site DoNews.com, and YouTube-style podcasting site UUMe.com. The company raised $48.1 million in March in a round led by General Atlantic Partners.

 But while he may be leveraging some areas of web 2.0, Mr. Chen is pessimistic about the podcasting landscape. At AdTech he confirmed earlier Chinese press reports that he had dramatically cut back the staff of UUMe, now running on a skeleton crew of seven or eight employees.

 There’s just too much competition in that space,??? he said.

 Indeed, a raft of YouTube clones—6rooms, Toodou, Biku, Yoqoo, UUSee, and 51show, to name just a few of the better-known sites—are jostling for attention and additional financing, especially in the aftermath of the Google YouTube acquisition.

 The companies are optimistic that a major search player, like Google or Baidu, will be shopping for a good user-generated video site.

 Joe Chen may be backing off from the space, but other panelists were less pessimistic about the chances that China’s YouTube clones can make money.

 The short, Flash-based clips featured on the sites are ideal fare for mobile devices. China’s love affair with mobile data could present opportunities for podcasting sites with the foresight to repurpose user-generated video content for mobile.

 Americans will pay an extra dollar for a little extra convenience,??? said Rocky Lee, who heads the venture and private equity group for law firm DLA Piper Rudnick Gray Cary in Beijing.

 But Chinese people will endure a little inconvenience to save a dollar,??? he added, explaining why Chinese mobile subscribers may prove willing to sit cheerfully through mobile ads to watch Flash animation shorts on their handsets.

 Telecom Rumor Mill

At Microsoft’s Digital Leaders party Wednesday evening, Microsoft took the wraps off its new multi-platform Digital Advertising Solutions brand at the Shanghai confab.

 Industry VIPs gathered at the Jade Bar on the 36th floor of the Shangri-La Hotel, and took in a fabulous view of Shanghai’s fabled Bund from across the Huangpu River. By the bar, a knot of insiders talked about opportunities to pick up Chinese WVAS companies on the cheap.

 The MII/China Mobile smack-down of errant WVAS providers, expected to continue unabated through the winter, has created good M&A opportunities, said one partygoer.

 He was involved in the acquisition of a fully loaded value-added service provider, licensed for all the basic services and online with both China Mobile and China Unicom. The company was snapped up for only $1.2 million, he said, and he knew of other comparable fire sales.

 Across the Huangpu River, at the tony Glamour Bar where the party continued, rumors were also flying around about the long-awaited issuance of China’s 3G licenses, with some insiders insisting that an October surprise is around the corner. The MII, some said, is set to announce which operators get what licenses before the end of the month.

 But another industry insider, who declined to be named, said he had it on good authority that a major reshuffling of China’s four major operators’ top leadership, very similar to what happened in November of 2004, will go down in the next three or four months.

 The game of musical chairs is expected to coincide with the resolution of the fate of China Unicom. The Beijing telecommunications rumor mill has, over the last year, offered up every conceivable permutation of a Unicom scenario.

 Those possibilities have ranged from death and dismemberment for the No. 2 wireless carrier—its network assets (a nationwide GSM network, municipal ATM networks, and a nationwide CDMA network) parceled out to the others—to its triumphant ascent as acquirer of fixed-line operator China Netcom.

Source- http://www.redherring.com