Doug Pearce, CEO of Omnicom Media Group (OMG) Greater China, spoke to eMarketer about digital innovations in China and how the country could one day become a global digital technology leader.
eMarketer: In China, online-to-offline (O2O) commerce, commonly referred to in the US as “on demand,” has become very popular. It has garnered great attention in the media and also attracted big investments from big tech companies such as Baidu, Alibaba and Tencent. Could you describe your experiences with O2O and what you have seen in terms of innovative O2O services?
Doug Pearce: They have really taken off now. Delivery of food is growing very, very rapidly, so you can order McDonald’s online via mobile, have it delivered in a timely manner within 10 to 15 minutes, and pay for it on mobile. The taxi apps, they’re fighting it out. There’s the local player, Didi Chuxing (formerly Didi Dache) that’s got investment from Tencent and Alibaba, battling with Uber. And that’s all done online through technology—you pay online via your credit card, Alipay or your WeChat account. They’re continuing to grow dramatically fast.
And in WeChat, there’s even a “book a taxi” window there—a space where you just push a little icon that links you through to Didi Chuxing and you book the taxi. I think the ecommerce space and mobile and payment are all very, very much connected and will just continue to grow. It’s a fully integrated network.
eMarketer: What are some other examples?
Pearce: If you think of Alibaba, their apps are preinstalled on local Chinese phones. They produce content through Alibaba Pictures. They broadcast advertising on Youku [Tudou], which they’ve now bought. They sell products on Taobao and pay online through Alipay.
“The government is really pushing the use of technology and data to help streamline things.”
They’re very, very connected, and they’re very close to the big Chinese phone manufacturers, Xiaomi and Huawei, and it’s a fully integrated system, much more than probably you would see in the West. And they’re very heavily partnering with each other in this space.
eMarketer: What are Alibaba and other big tech players doing in terms of using big data in their business strategies, and how will that impact people’s day-to-day lives?
Pearce: OMG has entered into data partnerships with Tencent and Alimama, which is the data division of Alibaba, and we’re starting to get access to that sort of data. I would say the government is really pushing the use of technology and data to help streamline things, so it’s now possible to book medical appointments online, for instance. There are quite a few apps that enable you to keep track of all of your health through personal health data and statistics, so these sort of things are coming into play.
eMarketer: These types of services are popular with younger people, but how will older people become accustomed to using digital?
Pearce: I know that the government is very much aware that the older generation that is not digitally savvy, and is perhaps being kept out of some of these new areas. So they’re looking, for instance, at having large screens in compounds and apartment blocks, where the older people can go down and book a taxi through an app on a screen that’s in a compound, and we could be talking big screens like the size of a TV that you can go and book a doctor’s appointment, book a taxi, book a meeting with someone from the local community. And these sort of things are really quite advanced.
“China is really quite good at driving innovation. ... It has two giants that are certainly in the top six or seven digital companies in the world now: Tencent and Alibaba.”
There is a whole generation of Chinese, over 40 or 50, that are not as digitally savvy and connected to the internet as the younger generation, so the government is very careful to make sure that they’re being looked after as well. I think that’s going to create some new opportunities.
But yeah, you can track your health. You can send e-payments for online travel bookings and the boarding pass.
eMarketer: For a long time, the narratives on China in terms of its innovativeness had been mostly limited to it being a copycat nation supplying cheap knockoffs to the world, and that it lacks the capability to innovate. However, this perception has been slowly shifting as some Chinese companies have caught up with or are even beginning to surpass their global counterparts. Where do you think this conversation will be in five to 10 years’ time?
Pearce: I think China is really quite good at driving innovation, particularly in the digital space. It has two giants that are certainly in the top six or seven digital companies in the world now: Tencent and Alibaba. They are multiplatform, more than those in the US, when you look at Alibaba’s breadth of offerings.
There are smart people coming out of the universities. I read the other day that one of the Shanghai universities [Tsinghua University] ranked higher than MIT in engineering research in [a 2015 U.S. News & World Report ranking].
If you go to the Google campus, you can hear Mandarin as much as you hear English. So there are a lot of very clever next generation people coming out of China, and I think they will drive innovation, and if you look at, particularly, WeChat and the areas that they are offering, I think they’re probably ahead of WhatsApp.
I think China is well placed to really be an innovator. I wouldn’t say that they’re such a follower anymore. They are driving innovation, they’re very quick to market and the newer companies in the food-delivery space like Meituan.com, and that sort of thing, they’re moving very, very fast.
“I’ve learned talking to these startup companies that it’s all about speed.”
eMarketer: What are some of the attributes of these new companies?
Pearce: I’ve learned talking to these startup companies that it’s all about speed. Whereas we might have had three weeks to turn around a proposal for maybe a traditional FMCG company, these companies want things done next week. Because of the need for speed, where they’re wanting 100-percent dedicated people. They want people that they can call upon at any day and time or night to help and come and get their things done, and it’s all about speed, so it’s very, very competitive.
If you look at what China’s done on online TV, the money started moving out of mainstream TV into online TV platforms. That started about two to three years ago, and I understand that’s now just happening in the US. These were new platforms, like Youku and iQiyi, and not just like ABC, CBS or NBC running their own site for people to catch up on shows. I think China’s really led the way in online TV.