Reason #472 Why Advertising is a Bad Investment in China

Grand Hyatt Hong Kong
1110 hrs.

Fons has once again demonstrated the scope of his issue-scanner in China, recalling a very good piece in EWSN about how Neilsen uses a sample size of 300 households to judge the TV watching habits of 350 million households. He also points us to a Danwei piece containing Neilsen’s pledge to up their coverage to 17,000 households nationwide. Fons quite correctly points out that it’s going to take a lot more than that to gain any kind of statistically significant sample.

The whole issue of advertising ROI is a squishy one at best, even in developed nations like the U.S. For years, Neilsen, Arbitron, and companies like them have managed to add some kind of quasi-scientific fig-leaf to the problem, essentially saying “look, we can’t tell you how effective your ads are, but at least we can tell you how many impressions they’re making.”

Ignoring for now the fact that the value of those impressions is falling toward some very sharp rocks at terminal velocity, Neilsen’s issue strips away the last fig leaf on the presumption that advertising IN AND OF ITSELF has innate value – in China at least.

Piracy: Is It Going to Get A Lot Worse Before It Gets Better?

Beijing
In the Hutong

In a widely reported story released last week the Motion Picture Association of America (MPA) has finally released the data from an extensive third-party study it commissioned two years ago on piracy. Apparently, the moguls on the MPAA board held back the study – seems they weren’t too hot on what it had to say.

Feeding us the Appetizers…

The summary of the data, available here from the MPA, points to some interesting facts.

• One surprise was that leading the rogues gallery of countries in total piracy – and in piracy of MPA members (the big studios) was none other than the Good Ol’ USA, a fact that was partially obscured by the way the data was presented. Indeed, the U.S. accounts for nearly $2.6 billion in losses to studios due to piracy.

• Another surprising fact was that the MPA membership – again, the largest studios – lose more in the U.S., Mexico, Britain, France, and Russia each year than they lose in China. Interesting that these issues are not as publicly addressed with Messers. Fox, Blair, Chirac, and Putin as they are with Mr. Hu. But let’s leave that for a bit.

• China allegedly does far more damage to its own industry (and, presumably, independent filmmakers) than it does to the MPA, causing an estimated $2.1 billion in loses to non-MPA member companies and its own local industry.

…but holding back the meal

All of these numbers are interesting little factoids, but before a case can be made to advocate specific policies to address the implied problems, we need to know more. To date, however, the MPA has only released 4 pages of charts and tables and 3 pages explaining MPA people do with their work days, with no promise of when – or if – more is to come. What the MPA has produced, frankly, poses more questions than it answers.

For example, how is piracy is conducted in China versus how it is conducted in the U.S. and some of these other countries? Is downloading a substitute for bootlegging, or does it actually increase the level of piracy in a given country/market?

How was the data collected? Is it possible that developed countries, with superior statistical systems and a different cultural approach to research, are giving better data? Could we be underestimating – or overestimating – piracy in some countries?

Where are some of the trends? All we see in the data presented are snapshots – we need to see which problems are getting worse, and which are getting better (i.e., downloading getting worse, bootlegging getting better.)

What are some of the “best practices?” What is working? What isn’t?

If the MPA is genuinely interested in serving the its members, the industry, and the public at large, we all need an opportunity to parse some of this data, allowing the information to stand on its own in the face of public scrutiny, and indeed to allow the report to make an independent case for change.

Don’t Make This “Hollywood vs. The World,” Because Hollywood Cannot Win That Battle

Being selective and slow with the release of information like this damages the credibility of the report, the MPA, and its membership. For a problem of this size and importance both to the industry and to Sino-U.S. relations, if the MPA expects to continue to play a role in the process, nothing short of public honesty is acceptable. Otherwise, the studios and their captive association lose legitimacy as honest brokers in this process.

At that point, the MPA becomes nothing more than the self-interested voice of a handful of large corporations, a public-relations dinosaur that will be ignored by all sides. That would be a great shame, because involving all of its constituencies in the effort to combat piracy presents the MPA with an opportunity to demonstrate that what is good for Hollywood is indeed good for the world.

Oh, Gee. Are You Guys MAD?

My takeaway from the outrage coming out of the Holy See around China’s appointment of two new bishops is simple: welcome to the table, gentlemen.

A common Chinese negotiating tactic when complex discussions reach an intense stage is some form of demonstration of how little they need you (whether that’s true or not). China clearly intends this as an attempt to demonstrate to the Vatican who has the power in this arrangement.

The reflexive reaction on the part of many western negotiators would be anger. “Bad faith,” we would call this, a demonstration that the other side isn’t really serious.

In reality, it’s something quite different, possibly an effort to hide a weak position. The challenge for the Vatican – and anyone in this position – is to step back, re-assess what the move is saying about the Chinese negotiating position, and then to consider your alternatives.

Which I hope they do – all indicators suggest that not only has progress been made, but that both parties have already planned what some of the next steps are.

No, It Will NOT look like Xintiandi

In the Hutong, ushering in the drywall guys, the electricians, and the painters.
1839 hrs.

As many of you know, I have struggled mightily over the last several years to find a personality and a voice for this blog. Well, I found it, all right.

And that’s the problem.

My original goal with this space was to help identify and correct some of the mistaken thinking about doing business in the media and technology sector in China, something I wind up doing with many of my clients. And I think by identifying some of that misguided thinking, I helped a little bit.

But in the couple of weeks, last weeks, I’ve been increasingly troubled by my own tone, and I spent the past several days rereading the 150-odd posts from the past two years, and really listening to myself talk through this blog.

Apart from discovering I am still far from the kind of writer I want to be, I discovered that my writing persona has become someone I don’t like very much.

The final straw was last Saturday. My rabbi, a Great Soul if there ever was one, came up to me, patted me on his shoulder, and told me he was reading my blog. I froze. And I realized that what was bothering me is that what I have been writing – certainly the way I’ve been writing it – has not been in keeping with the person I’ve been trying to become over the last four years.

Okay, you can stop gagging. I’m finished with the confessional.

Seriously, though, I’ve come to realize that while being Mr. Schadenfreunde here at my desk has been a lot of fun, it’s been more like the fun you have when you’re eating something you’re not supposed to – it’s a guilty pleasure at best, and you know you’re going to pay for it somehow.

This morning, I woke up at 5:30am and realized that while my motives may be good ones, my methods need improvement. As an old chief petty officer once told me “Do you steer a ship by telling the helmsman the 359 courses he shouldn’t take? Of course not. You steer a ship by telling the helm the one direction he should take.”

The sites I find I want to read constantly are the ones that truly serve a need, that offer solutions, that answer a question, consolidate information. That point people in a direction.

The guys at ChinaLawBlog, for example, setting the planet straight on how China’s legal system, such that it is, actually works. Ethan and his partners at ChinaStockBlog, helping punters play China from the safety and comfort of their homes and offices. Jeremy, Dror, and the gang at Danwei, who have provided an unparalleled eye on the media business in China. Danny and his team at ChinaTechNews, still the best single repository of free tech news in China. (Pacific Epoch is very good as well, but they charge and they don’t take my editorials.)

And even sites not focused on China – Tom Barnett , Guy Kawasaki, and Tom Peters, and Merlin Mann at 43 Folders.

And my BlogMentor, Will, over at ImageThief, who provides superbly-written comic relief about China and manages to be funny without being gratuitously caustic.

Taking these people as a general guide, I’ve decided it’s time for a change. It’s time to stop telling people what they shouldn’t do, and catching people making mistakes, and it’s time to start pointing people in the right direction, and catching people and companies doing smart stuff.

So here’s what’s happening.

With the completion of this post, we’re going to shift gears a bit. On Sunday, 7 May, a new site, The Peking Review , will go live. The Peking Review will focus on something I am frequently asked to do (and something I find myself doing even when not asked): recommending resources (books, websites, articles, posts, blogs, movies, television programs, people, services) that will genuinely HELP people figure out how to do business here in China. My role will be to act as a filter, not slamming the “bad” resources, but identifying the good ones and isolating the good that can be pulled out of the others.

Silicon Hutong will continue as an adjunct site to The Peking Review that focuses totally on resources for the technology, media, communications, and entertainment industries.

We’re open for contributors, and if you’re interested, please let me know. I can be reached at siliconhutong(at)mac.com.

I’m grateful to all of you who have been reading this blog. I welcome your comments, and hope you find it’s new form even more worthy of your time and attention.

Best regards,

David

IBM: Did We Overreact?

In the Hutong
Enjoying the first thunderstorm of the season
1800 hrs

Christopher Cassidy of AsiaBizLaw is an outstanding writer and a calm, informative voice about the issues that face business in this region. So when he takes the time to comment on a post on the Hutong, I listen.

Chris brought up an excellent point in a comment on my post about the IBM/EIU report on the status of the digital divide. I was responding to it in comments, but I think his question/constructive criticism is important enough that it should be brought out.

He notes:


I interpreted the quote regarding a “level playing field” as limited to a comparison between developed countries and urban areas of Indian and China, such as Bangalore and Shanghai. The article seems to support this interpretation. If this is the case, the IBM/Economist report does not seem susceptible to the criticism you are leveling against it. Rather, the IBM executive is celebrating the growth that has occurred, allowing such a limited comparison to be feasible. Doesn’t this seem more likely to be the intention of a firm as sophisticated as IBM (or The Economist, for that matter)?
He has a point – IBM and EIU may want to be celebrating progress. But here’s what bothers me.

One of the things you learn very quickly as a business communicator is how quickly a comment can be taken out of context or just plain misinterpreted. For these reasons, when commenting publicly you have to be very careful about what you say.

Granting that in my frustration with the original article I may not have completely followed that advice myself, the article is still misleading to a casual reader who (I posit in this day of information overload, RSS readers, and the like) make up a majority of your audience. Something else you learn in the communications business – journalists write using the inverted-pyramid structure because the vast majority of readers read a headline and the first 34 paragraphs, and that’s it.

That’s why government and corporate spokespeople are trained before they are allowed in front of the media, and why they craft their messages and talking points carefully.

Given this, my three main issues with the article are:

First, Korsten’s quote was emphatic: “This is the first time we see a level playing field between developed and developing nations in terms of connectivity.”

He did not say: “This is the first time that we have seen a level playing field between developed nations and the more advanced regions of developing nations.”

Nor did he say: “This is the first time we see significant progress toward the creation of a level playing field between developed and developing nations in terms of connectivity.”

Either of those would have been much better. What I would have liked to see him say is: “While we see isolated regions in developing nations reaching parity with developed nations, widespread connectivity in India and China remains a challenge to industry and policy-makers.”

That would have been an accurate statement, would have celebrated the progress appropriately, and still made the core point of the report.

Am I being nit-picky?

The first thing I was taught when writing a business report was “words mean things.” When you are speaking to CNN on behalf of your company and a prestigious research institution, care with what you say is essential.

Second, the phrase “level playing field” carries with it a great deal of semantic baggage – it’s one of those catch-phrases that the brain likes to glom onto.

What will most people remember about this report in a week or a month?

“China….India…developed nations…level playing field…”

Given the facts, I think his choice of that phrase was ill-advised.

Third, without getting into the methodology of the report and its metrics, if we assume that Shanghai, Beijing, and Guangzhou have scores of 8 or so on the connectivity index, what must the rest of the country look like to balance out to a 4.02 average? I’d assume it’s 4 or below. As such, the report likely should have noted that China WITHOUT the leading regions (and India without the leading regions) are much closer to Azerbaijan than to the U.S., Europe, or Australia.

(Another reason why average measures applied to China as a whole are meaningless, but I digress.)

Why is this important?

In China and India the problem of the digital divide is a matter of vast differences between regions – often even adjacent regions. The problem of a divide opening WITHIN a country like China or India is the follow-on effects these differences are going to have on incomes. In short, you’re looking at a leading-edge indicator of growing income and opportunity disparities. This is at least as serious a problem as any difference between countries might me, and arguably a far greater danger.

I will grant that IBM and the EIU are smart and respectable institutions who don’t make big mistakes with their reports. I’ll even grant that their numbers are accurate. I’ll grant that their intentions – celebrating progress – were good.

But it is incumbent on these organizations, as credible and prestigious as they are, to convey through their research and their communication about said research a balanced and accurate picture.

Because of their sweeping statements and poorly-chosen phraseology, I submit that only in the case of a careful reader have they succeeded, and that they obscured the nature of the problem that still exists in China.

Thanks, Chris, for your comments. And everyone – when I get worked up about nothing or step out of line, bring it on.