@rmack Agrees: Obama’s Outreach to China Should be Social

Jingmi Road, Outbound

Dodging pyrotechnics

1344 hrs.

Former CNN Beijing bureau-chief turned eChina scholar Rebecca MacKinnon published an open letter to U.S. President Barack Obama on the Huffington Post earlier this week, echoing my essay on Obama, China, and Public Diplomacy published in AdAgeChina last November (which I revised and posted here).

Longtime readers of this blog know that while Ms. MacKinnon and I frequently agree on principle, we usually disagree on our approaches to addressing some of China’s more vexing issues, in particular on the matter of Internet censorship.

But on this issue we agree: the new US administration needs to extend its diplomatic outreach to China beyond the nation’s leadership, its foreign affairs apparatus, and elites by reaching out to the Chinese people, and social media is a way to do it.

Beyond the VOA

I recently had an opportunity to listen to a panel of distinguished speakers at George Washington University School of Media and Public Affairs bemoan the decline of the foreign correspondent in news today. The keynote speaker was D. Jeffrey Hirschberg of the Broadcast Board of Governors (the U.S. government agency responsible for Voice of America and all government-funded non-military broadcasting.)

While the BBG’s component broadcasters have been trying to figure out how to use social media tools in its outreach, they have clearly been struggling for effectiveness. I realized halfway through the talk that their efforts to date were either halfhearted (which I think unlikely) or that the shift in thinking required to capture the potential of new media was simply too large for journalist-bureaucrats steeped in an old-media tradition. In fact, I was struck by the similarities between the words and frustrations of the government media leaders and those of their commercial counterparts.

So as much as it might seem to make sense on paper to leave the government’s international social media outreach to the VOA or Radio Free Asia, doing so misses the point. Turning a conversation over to an agency that is seen as the de-facto propaganda arm of the government undermines their credibility and thus their ability to conduct conversations, but more important it limits the scope and effectiveness of the online public diplomacy effort.

Socialize the Aparatchiks!

EVERY office and agency of the federal government needs to be using these tools, and for international outreach that means every section of the State, Commerce, and Defense departments, plus dozens of independent agencies like the BBG. If public diplomacy is to be conducted over social media, we need hundreds, thousands, even tens of thousands of participants on both sides.

In each of those offices, the best approach is to hand responsibility over to people who genuinely understand how to use those tools, and give them the organizational authority to make them effective.

Ten days into the new administration, the White House itself is already setting an example. Not only have they brought in a new, sharp, and young site administrator and completely overhauled the site, they’re also got a Twitter feed, and there is clearly more in the works. We do not as yet have a Blogger-in-Chief per se, but given his agenda, I think we can cut POTUS a little slack on that one.

That said, the site is as yet only available in English (the Spanish language site is a stub, really) and as such is not yet a tool for global outreach.

So the goal must not only be to make the government more accessible to the people, but to make the US government more accessible to the peoples of the world.

And we need to be doing this soon. Because if recent revelations that China is investing US$7 billion in an effort to expand and enhance its global media presence indicate anything, it is that influencing the people of the world – and America – is certainly on Beijing’s mind. Who will win the global contest for hearts and minds depends on more than just media, but America cannot assume it will win that contest without an effort.

Al-Jazeera should be enough to prove that.

A Final Thought

Over the last few days, there have been several comments online remarking how strange it is that Ms. MacKinnon is apparently not yet tenured at the University of Hong Kong, where she is on the faculty of the Journalism and Media Studies Center . Those voices, while well meaning, should keep in mind that at least in the United States, Ms. MacKinnon would normally need 5-6 years as an assistant professor before being able to apply for a tenured position. I would imagine standards are not much different in Hong Kong, and Ms. MacKinnonhas only been at HKU for two.

Nonetheless, the point is well-taken. Again, I disagree with Ms. MacKinnon’s opinions and recommendations far more often than I agree with them, but she plays in essential role in the debate about media in China. While university tenure might be a challenge for someone who has much practical experience but no degrees beyond a B.A., it would reflect badly on the quality of education in Hong Kong and on the independence of the SAR if she were to be denied tenure solely or primarily because her research and public positions cause discomfort in Zhongnanhai.

Catch Christine Lu’s Intersection

Jingmi Road, Inbound

Mellow New Year

1139 hrs

A quick tip of the hat and thank you to Christine Lu for having me as her guest on the inaugural installment of her new blog radio show, Intersection.

If you missed it, we had a fun and wide-ranging chat about China-US relations, the evolving role of social media in diplomacy, and the state of business in China. We also had questions from callers and people on Twitter from Boulder, Colorado to Mumbai India, and the hour was over before we realized it.

Blogradio matches the real-time immediacy of broadcast talk radio while offering the scope and variety of podcasting. Christine’s show, Intersection, looks at how different fields and industries are touched – and are being changed by – social media.

Make sure you catch the future installments of the show here, and follow Christine on Twitter at @christinelu.

The Peking Review Electronic Library

Jingmi Road, Inbound

0956 hrs.

In the pre-CNY slowdown

As many readers of Silicon Hutong know, I am an avid collector of books, and not just of the pulp-paper-fabric-leather variety.

As of this writing, I have something like 2,160 electronic books in my library, 95% or more of which are in .pdf format. What is even better, most of these were legitimately downloaded and were available free of charge, and on an average week I add around 10 books to that total.

I’ve decided it’s time to start sharing the wealth, so I’m going to be posting links to each of those books – and the new ones I find – on twitter under the @pekingreview account.

If you have Twitter, you can go to http://twitter.com/pekingreview and add this feed. I’ll keep it to a maximum of 10 posts a day to keep from overwhelming anyone, and that will probably moderate over time as I list all of the books I have and only add new works.

For those of you who don’t have Twitter (or have no interest in following a constant stream of links), every couple of weeks I will post a “Peking Review Picks” list of the five best titles of the past fortnight here on Silicon Hutong under the Peking Review category. I will give priority listing to those titles that deal with China or with issues that are important to China (international relations, intellectual property, defense, etc), business, and fiction, but I will list everything.

Why am I doing this?

There are a lot of interesting, insightful, quirky, fun, and/or strange works out there that have been created at great cost by talented people. The fact that we are not seeing them is the result of a traditional book publishing system that is broken. These books need promoters and that’s part of what we are going to do.

Let me know your thoughts.

And Happy New Year of the Ox.

3G in China: ARPU as a Measure Doesn’t Measure Up

Jingmi Expressway, Inbound

Cold, but not like you’d expect

1010 hrs

Now that the Year of the Golden Calf Ox is shaping up to be the year when all three of China’s mobile operators – China Mobile, China Unicom, and China Telecom – will deploy third generation mobile networks, or 3G, it is useful to explore the extent to which 3G networks elsewhere in Asia are living up to 3G’s promise to raise average revenues per user (ARPU).

The short answer is “pretty good.” As the operators find ways to deliver new services for which users are willing to pay, the revenues are going up.

Nice revenue. Where’s the profit?

The problem is that for some operators, particularly those in competitive markets, those increases are not translating to profits. To give but a single example, one well-run operator in Singapore has watched average revenue per user rise 41%, from $41 to $58 as a result of adding 3G services. Leaving aside the sunk cost in the network, profits should have risen accordingly.

Not so, according to an executive of the Singapore operator speaking at a recent industry conference. That growth in ARPU is not coming with an attendant growth in profits, because so much of the increase in revenues is being offset by the cost of acquiring content.

Given that the executive was speaking to a room filled in party by content providers, I would bet he assigns an unfair portion of the problem to content. I would wager that increased marketing and management costs that come with building awareness and usage of the new systems are also digging into profits, along with other fun things like amortization of network cost.

Regardless of source of the costs, however, the issue is clear. If executives, investors, and analysts are using ARPU as a measure of success for 3G networks, we are all looking at the wrong number. Revenue only tells half the story.

Building a Better Yardstick

What we really need is a metric that captures both the additional revenue and additional costs attributable to 3G services, and that still describes the additional net gain for an operator from 3G.

Two measures would provide a more accurate – and more telling – yardstick. We can either look at average margin per user (AMPU) or average profit per user (APPU.)

AMPU would subtract the costs of acquiring the user, providing service to the user, and keeping the user from switching to another network from revenue. As such, it would be a better indicator of whether 3G services were living up to their promise to the overall operator business. APPU, which would subtract all operator costs, would help determine whether the health of the enterprise was improving or declining as a result of 3G adoption. The measure takes into account such things as investments in network and business development that margin does not take into account.

I like APPU somewhat less than AMPU, but I think the former is still useful because it would account for the different ways each carrier accounts for the different costs involved in the network and in service delivery. Either would be better than ARPU, and the use of both AMPU and APPU in some combination would give a much better snapshot of the business.

If tracked over time (as adoption grows, technology matures, and competition drives down the costs of services and content), the two measures would give an indicator of how the fundamentals are improving.

More than Accounting

Okay, I’ll grant that this seems like an esoteric question best left to accountants and others. In truth, though, this has a significance that goes beyond the ken of analysts and investors.
If we start using our two new metrics even alongside ARPU, we start getting a feel for how much the carriers are spending in order to get each additional dollar or revenue. While this sounds even wonkier, this little measure is going to be especially critical for China.

Chinese carriers tend to be more focused on revenues (for whatever reason) than on either profits or marginal costs. This revenue focus gets operator executives thinking “if I can keep a higher percentage of the revenue of a value-added service delivered on its network, I would rather squeeze out the outside provider and offer the service itself, even we have to bear the full costs of the service. That way I keep the larger share of revenue, and, after all, that’s how my success is measured.”

If, on the other hand, the operators were judged not only on ARPU but on AMPU or APPU, the pressure to deliver more services at a lower cost could force the carriers to evaluate whether offering a service themselves would deliver a higher profit, rather than whether it would increase revenues in exchange for even higher costs.

Once you start looking at the costs of delivering a service, rather than just the revenue, the best service provider is the one who can deliver the most dollars with the least cost.

In other words, you go with the guy who makes you money while you spend nothing.

Service Providers, Listen Up

What I suspect is that this kind of business analysis would be a good thing for independent value-added service providers (VASPs). It would enable them to make a business case for long term partnership, even when the service provider starts making a lot of money, to make the case that it is better to have a cash-cow than a cost-center, especially because network operators have enough cost centers as it is.

I also suspect that the operators will not come to these conclusions on their own, but will only be compelled in that direction when the investor and analyst community starts demanding it.

And that means that once VASPs have their business cases perfected, it behooves them to start making the case, individually and collectively, to change the way operator revenues are evaluated. If investors and analysts can see the wisdom of doing it the VASPs way, they can be a powerful ally in getting China’s carriers to stop steamrolling the VASPs out of business.
China needs efficient carriers, not just massive carriers. It serves everyone if we start measuring them accordingly. Otherwise the benefits of the government’s mix-and-match game with the nation’s telecom assets will produce little more than price wars and mutually-assured value destruction.