What the CCTV Building Really Means

In the Hutong

And back in the proverbial saddle

1136 hrs.

Beyond its visually stunning architecture, Rem Koolhaasnew headquarters for China Central Television (CCTV) is provoking commentary for a range of reasons, not least being the curiosity of an old-media giant spending so much money on an iconic building.

As tempting as it might be to suggest that hubris combined with a sense of monumentalism compelled CCTV to burst into Beijing’s central business district in such a spectacular way, but I think there is actually more to it.

I think we’re seeing the beginnings of a new attitude over at CCTV, one that recognizes the massive challenges the state broadcaster faces as it struggles to sustain growth, and I think the new building is neatly symbolic of that. Check out “The Bowing Tower” at Media’s website and let me know what you think.

Advertising 2009: The Flight to Value

In the Hutong

Dreaming of a White Chanukah

1554 hrs.

The advertising business is no less worried about 2009 than any other industry, and the malaise pouring out of Madison Avenue has found its way to Beijing and Shanghai. I think the gloomy prognostications of “blood on the walls” and an industry that craters rather than dips are all a bit overdone.

The other meme that has found its way into the minds of the industry here in China is that the economic downturn will compel advertising agencies, clients, and media buyers to become more disciplined about where the ad spend goes, looking for greater returns on the advertising dollar invested than before. Many think this will mean a shift to digital.

Ian McGuinn, who heads up sector research at JLM Pacific Epoch, notes that Matt Roberts at About.com China agrees. Matt believes that 2009 will not see a flight to digital per se, but a flight to value across all media.

I agree with Matt, and not just because (full disclosure) he’s a client. It starts with the fact that different clients in China understand value in significantly different ways. I explain why in a post here.

The Case for a New Public Diplomacy

Starbuck Pacific Place

A quieter, cozier coffee house

1457 hrs.

(Note: I wrote about Obama, China and Public Diplomacy in a Viewpoint piece on November 12 for AdAgeChina. The article is behind a subscription firewall, so I have expanded on, updated and revised it below for the benefit of Silicon Hutong readers.)

Now that Barack Obama has made his key foreign policy appointments, speculation and punditry is now turning to the shape that U.S. foreign policy will take after January 20th. When Barack and Hillary sit down to compare notes, I suspect that getting out of Iraq, staying out of Iran, fixing Afghanistan and North Korea, engineering a new Bretton Woods, and repairing ties across the Atlantic will probably top their lists.

Somewhat further down that list will be America’s relationship with China. Given a full slate of issues, I am sure the President-Elect will be tempted to maintain the status quo, even if that may cause him some ideological discomfort.

I hope he resists that temptation, but not for the reason others might give.

A Different Audience

Since Henry Kissinger’s first secret trip to Beijing in July 1971, the modern history of Sino-American relations has been conducted between U.S. diplomats and political leaders and a relatively small elite in the Chinese government. That same small elite, spread across the Party and the bureaucracy, has directed national policy, editorial bias, and public attitudes toward the United States.

When President-elect Obama is sworn into office, he and his foreign policy team will face a China that is different in subtle but fundamental ways from the China that each of the four past U.S. presidents faced upon entering office.

First, while the government and party remain in control, the means by which decisions are reached is evolving. China is increasingly governed through a process by which consensus is reached among groups and policy makers, or as I like to say “one party, many factions.”

Second, this change has opened a window for groups outside of the government to exert more regular influence on policy making. While China’s leaders and bureaucrats still operate in a system where they are free to ignore public opinion when they forge policy, they are (for a variety of reasons) seeking more input from business leaders, academics, foreign experts, and even the public itself.

Third, this is all taking place in an environment where the role of the web is growing in China, and the permissible scope of discourse is wider than most non-Chinese appreciate.

That all of the above has implications for the way companies do business in China should by now be axiomatic. What has not been explored is its importance to diplomacy. Because what this means is that the cauldron in which perceptions, attitudes, and policies are formed now includes a growing helping of public discourse.

Obama’s China Challenge

This has critical implications for the approach the Obama administration needs to undertake in order strengthen U.S. ties with China, especially as many of the new administration’s actions to address the daunting challenges it faces will be seen as running counter to Chinese interests. The Bush-Paulson Strategic Economic Dialogue was not without value, but it has shown its limitations in the wake of recent events. If Obama is to keep his hard choices from backfiring with China, he must make his case to both the Chinese government and the Chinese people.

And to be sure, Obama will need China. To see how much he will need to forge a true trans-Pacific partnership requires only a quick glance at the list of issues he faces. At the very least, China will be essential in forging a global energy and environmental regime, bringing security to Central Asia, ensuring that Russia remains integrated in the global system, midwifing North Korea’s return to that system (and perhaps its peaceful re-unification with South Korea), and, of course, resolving the current global financial crisis and forming new system to both nurture and regulate international finance.

Speaking to the Chinese People

Conventional diplomacy will form a part of the Obama administration’s effort to enlist that support, as it should. But in the current environment in China and the world, it will not be enough. Once in office, the President-elect and his team will need to undertake an unparalleled effort of public diplomacy to engage China’s wider policy environment. This effort must shun the neo-propagandist tools and tactics of the Cold War, creating instead strategies, approaches, and messages more appropriate to a world rendered naked by the Internet.

That effort needs to be built on a foundation that includes, as a minimum, four fundamental steps that should be implemented by July 2009:

First, the administration must begin the effort to create (simplified) Chinese-language versions of nearly every public-facing U.S. website on an agency-by-agency basis. Some, like the Department of Defense, will and should be limited in their international friendliness. But others, like the Departments of State, Commerce, Treasury, Agriculture, and Transportation have immediate value and applicability in delivering US messages abroad, as does the White House site itself. This effort alone will open channels of communication that have been heretofore closed for no good reason. Meiguo.gov, maybe?

Next, the administration needs to learn how to listen to China’s public voices. While this begins with engaging businesspeople, academics, editors, and other influential types, it has to delve far beyond the elites and find ways to listen to the people of China. Polling won’t work. Far better to find a way to listen to what they are saying to each other, and China’s blogs and online forums are an excellent place to begin. In lieu (or in advance of) creating an office in government to do that, independent contractors could be brought to begin delivering this information quickly and efficiently to every section of government.

Third, as the administration builds the capability to conduct its public diplomacy, it would do well to draw from the toolkit it created to win the election. Banished should be the United States Information Agency (USIA,) the Voice of America, and the feeble attempts to date by the U.S. government to use the Internet as a diplomatic tool. Any government can conduct propaganda. Given our tarnished credibility, America needs to win hearts and minds through engagement, not pronouncement.

This means learning how to make appropriate use of all of the online tools available to the administration that are popular among China’s people. Trying to use tactics that worked in the U.S. would miss the point. Public diplomats must learn how to use the channels frequented by China’s netizens in a way that will seem appropriate to those netizens and to China’s leaders. That means treading lightly.

Finally, the administration must realize that to be effective, American public diplomacy must incorporate a substantial P2P element. Obama’s efforts to enlist the help of all Americans in the changes he advocates would be well directed to an effort to rebuild our frayed reputation. In the long run, it will be the relationships between individual Americans and Chinese that will form the basis for grass-roots support for America in the homes and on the streets of China.

Walk First, then Run

The one impression I do not want to leave is that the administration should rush into this effort with great fanfare, with oversized expectations for near-term wins, or with the desire to create a massive new diplomatic bureaucracy. The art of diplomacy was not created overnight, and the Cold War public diplomacy I refer to above was itself a constantly evolving effort. It will be no different with the new public diplomacy with its new tools, new approaches, and new audiences.

What must happen quickly, though, is to recognize the challenge the U.S. faces in the reconstruction of a badly-damaged global reputation, to understand the value of the Internet and its myriad media in repairing America’s image, to focus on China as perhaps the single most important focus of that campaign (aside, perhaps, from our erstwhile Atlantic allies), and to begin the effort at once on a modest scale.

I have no doubt that this idea will cause discomfort in some of the offices at the new U.S. Embassy on Nu Ren Jie and in the corridors and break rooms of State Department in Foggy Bottom. All the more reason to begin soon, while the new President still basks in the glow of his historic victory.

Speak, Baidu, Speak

High School Library, ISB

Misspending my virtual youth

0928 hrs.

Lonnie Hodge, who I would fairly say is something of a fan of Baidu, takes the search company’s CEO Robin Li to task over his failure to show up to do his keynote at last month’s ad:tech confab in Shanghai, ostensibly for a “sore throat.” Most of the attendees to whom I spoke shared varying degrees of pique that Li didn’t show up, and Hodge in particular sees this as emblematic of Baidu’s disdain for Cluetrain-style engagement:

Baidu, or any company, would do well to join the party (not that one…) and join in on the many conversations, those that honor AND those that harangue, which can only make us better business people, more responsible netizens, and decent global citizens.

The Credibility Problem

Baidu has had its share of problems of late, extending from allegations about driving traffic through – and cashing in on – illegal music downloads to growing questions about the validity of its organic search results (given Baidu’s apparent willingness to hawk those results to the highest bidder.)

These problems are not purely academic or legal. There is a small but growing negative buzz about Baidu among Chinese users and in the local media, some of it focusing on non-issues, but a growing amount questioning the value of a search engine that compromises its organic search results by prioritizing paid listings.

The Search Problem

That’s not going to help things with advertisers. I am starting to hear from companies who have until now devoted their search advertising budgets to Baidu that Google has made huge strides in its search algorithms, and that search ad results on Google were improving quickly. One advertiser I spoke to said that at the end of 2007 Baidu had 100% of their search ad budget. They now have 90%, and that will drop precipitously in 2009.

None of that would be too worrisome if we could believe that Baidu was totally focused on improving its core product. Unfortunately, Baidu has chosen this moment to focus time, attention, and resources on becoming a diversified online conglomerate, venturing into e-commerce, e-payments, and other resource-intensive business in an effort to keep users on its site once they land there.

Leave aside the fact that they are creating enemies where they could be creating partners – or friendly acquisition targets. To diversify into businesses that are so far from your core, that are less brand extensions than leaps into completely new industries, all when you are facing fundamental issues running your core business looks less like wisdom than hubris.

(Unless, of course, this is the first phase of an effort for Baidu to abandon search over the long term. Hmm.

But we digress.)

Unless Baidu can demonstrate to advertisers that it is improving its search product faster that Google is, that it continues to deliver better and more meaningful search results, and that the company can do all of this while pursuing credible efforts in online TV, e-commerce, and whatever else it wants to do, the advertising cash from the big spenders is going to start to leak away.

The Communication Problem

What this all comes down to is a failure to communicate.

Whether comfortable admitting it or not, Baidu has always been seen as “Google with Chinese Characteristics.” What Baidu needs to recognize is that China’s characteristics – and specifically her Internet users – are evolving.

More of the nation’s online populace is turning to online search as a pathway to seek truth from facts, not find stealth ads from snake-oil salesmen hidden among – or above – genuinely helpful information. Wall Street may be pushing for monetization, but the demand from Chinese consumers is for credibility, trust, and results they can believe in. Sincere testaments of devotion to such ideals and a few sackings are a good start, but it will not be enough: Baidu has to do more to balance the disparate demands of investors, advertisers, and users.

The history of the Internet is littered with the corpses of great search engines that were popular, then failed, and with dominant players that were challenged by Google and then imploded.

Baidu has had a dominant position in China, but to this observer it is starting to look like all Baidu has is its dominant position. It does not appear credible, it does not appear focused, and it does not look like a particularly good partner for for other online companies and a partner of declining value for advertisers.

Yet I give Baidu the benefit of the doubt. I assume it is a good company, just slightly unguided. As such, they need to prove they are on track.

  • They need to engage with advertisers and their agencies at every opportunity, both collectively and individually.
  • They need to focus on search, and if they want to get into e-commerce, for heaven’s sakes go out and buy something, don’t try to build it.
  • And finally, they need to remember that consumer loyalty in China is ephemeral, and that if they do not engage, their user base can evaporate as quickly as it was built.

I have to believe that this is what their PR agency is telling them. But I also suspect that the lawyers are saying something else.

The lawyers are wrong. This is one of those times when silence is not golden, it is poison.

UPDATE: Check Paul Denlinger’s excellent post on the matter at China Vortex. Paul looks at the BIDU’s problems from an ad sales perspective. Not pretty.