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To see the future of the internet, look East

If Westerners could shake off their prejudices about ‘copycat’ Asians with ‘small hands’, they might just see the wonders of Asian web innovation.

Norman Lewis

Topics Science & Tech

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Have you ever heard of QQ, Tudou, Mixi or CyWorld? No? But I bet you’ve heard of MySpace, Facebook and YouTube. It’s not surprising. The former social networking websites are all based in Asia – China, Japan and South Korea – while the latter three are in the Western media ad nauseam.

What you don’t know is that QQ in China, with over 300million active user accounts, is the largest instant messaging social network in the world – bigger than the population of the United States of America! Tudou, also based in China, is a video-sharing site, which streamed over 15billion minutes of video last year – almost five times more than YouTube (1). Mixi and CyWorld – social networking sites based in Japan and South Korea with 14million and 20million users respectively – have been at the global forefront of the social networking phenomenon. Indeed, CyWorld was the first – and thus remains the oldest – social networking site in the world having been established in 1999. Around 90 per cent of all Koreans aged between 20-29 spend most of their time online today at CyWorld.

It is not well known nor accepted that the social networking phenomenon we all gush about in the West was actually invented in Asia. This sounds counter-intuitive and unsettlingly unfamiliar. Innovation is assumed to be a prized Western asset, something the culturally compliant and uniform Asians cannot emulate.

Since the Second World War, Asia has been characterised by Western stereotypes. The Japanese, for example, were held to be good at copying not innovating – remember the transistor radio? And when such prejudices were proven to be wrong – witness the growth of Sony and the phenomenal development of the Japanese mobile industry – these have been dismissed with equally arrogant stereotyped cultural explanations that ascribe Japan’s love of mobiles and texting to the fact that Asians have small fingers. Innovations like personalised ring-back tones, a huge business across Asia and pioneered in South Korea in 2002, are dismissed with ‘deep insights’, which ascribe such behaviour to Asians’ love of karaoke.

Missing the plot

It is remarkable that so little has been written about the social networking phenomenon in Asia in the Western media. South Korea and Japan, with China and India rapidly closing the gap, are the most advanced internet markets in the world. User behaviours in these markets represent the greatest test bed in history for what we can expect as the rest of the world comes online and develops high-speed broadband infrastructures. However, Western contempt for Asia reveals a more worrying trend: namely, how closed the Western imagination has become to the question of innovation itself. Antipathy towards Asia reflects a disturbing impulse for self-flattery and myopia in the West.

One example illustrates this clearly. Earlier this year, The Economist published an article on social networking and boldly concluded that while these sites will become a ubiquitous feature of online life, ‘this did not mean it is a business’ (2). It concluded this after examining Facebook, MySpace and Bebo (all based in the West), whose business models all revolve around advertising. No mention was made of any of the leading social networking sites in Asia, despite the fact that the most cursory glance at these (particularly CyWorld and QQ) would reveal the very opposite: namely, that they are massively profitable and little of their revenues are generated from advertising.

In 2007, QQ reported annual revenues of $523million. This was close to four times the revenues of Facebook. Their operating profits, however, were $240million while Facebook recorded a $50million loss in the same year (3). While Facebook’s results might justify The Economist’s pessimism, QQ’s certainly do not. While QQ has over 300million active accounts (which is 50 per cent more than the total number of people online in China which means people have multiple accounts) the remarkable thing is that only 13 per cent of these revenues are generated through advertising. It is users buying and exchanging digital goods with each other that generate the vast majority of QQ’s revenue (4). These digital goods range from background music for their profiles, avatars, fashion items to dress their avatars and personalised spaces to weapons in virtual games. In a similar vein, CyWorld reports that it generates almost $300,000 a day similarly selling digital goods through its site.

The buying and exchanging of digital goods versus advertising can easily be interpreted through a cultural prism. Gift buying and exchanging is certainly a cultural trait in Asia while advertising online remains very underdeveloped. But to explain this online behaviour in these terms is far too simplistic and superficial. After all, the buying and exchanging of gifts is certainly not confined to Asians – there is a whole industry devoted to greetings cards and gifts in the West. This phenomenon needs deeper analysis because it highlights commonalities rather than differences in the behaviours and usage patterns in Asia and the West. It thus also holds important insights for the possible future evolution of these services in the West.

The generational impulse – the same the world over

The internet in Asia is overwhelmingly a young person’s domain. Access into this world, either through PCs and laptops (both personal and in public internet cafés) or mobile devices is very much driven by young people’s desire for communication and entertainment. In China, for example, 51 per cent of internet users are under 25 years old; 80 per cent are below the age of 35. Social networking sites like CyWorld and Mixi in Japan are overwhelmingly populated by young people. It is interesting to note how instant messaging and mobile usage appear to be the overwhelming killer applications across Asia. More interestingly, the situation is similar in the West.

Like their counterparts in the West, young people in Asia are adopting these technologies into their lives because of their lived experience of childhood. While cultural differences do mark some different behaviours (Mixi in Japan for example, is a social network based only upon friends that users actually know), there are common impulses that are driving adoption. In both parts of the world, children’s lives are increasingly controlled and under the gaze of adults. While risk consciousness in the West has resulted in what some have characterised as the rise of bedroom culture and its accompanying decline of street culture, in Asia young people’s lives are equally structured and controlled. The attraction of digital media in both parts of the world is frequently shaped by children’s desire to create their own space and enjoy a measure of independence from adult control.

What children in Asia and the West have in common is their desire to minimise the effects of their isolation and to create outlets for self-expression free from adult supervision. Communications technologies like mobile phones and instant messaging are attractive precisely because they help children to accomplish these goals. This results in the emergence of a distinct peer culture that seeks through technology to gain a measure of independence from adult supervision. There is a steady demand for tools and applications that help children manage their lives to this end. Children seek digital applications that are distinct from those used by adults, that are potentially under their control and that help them to pass time, provide entertainment, connect with peers and evade the adult gaze.

The desire to create autonomous spaces for themselves within which to explore and experiment with identities is the impulse behind the massive growth of social networking across the globe. These technologies (the internet, mobile phones and video games) enable children to develop spaces for themselves, beyond the purview of adults and yet still within the domestic sphere. The popularity of instant messaging among teens is a result of their need to socialise while confined to their homes.

In China, for example, the phenomenal growth of QQ is partly explained by the government’s one child policy, which drives Chinese children to use such services to create peer groups, share their experience and thus overcome their isolation at home. The sudden, albeit unpublicised, embrace of blogging by young people is testimony to the existence of a powerful demand for applications that provide a medium for the self-expression. Again in China, the growth of blogging is equally phenomenal: according to the China Internet Network Information Center (CNNIC), the state network information centre, there are nearly 73million blogs in China and 47million blog writers (5). Applications that allow self-expression and communication to coexist are meeting the demands forged through youth culture across the globe – regardless of being in Asia or the West.

This insight cannot be over-emphasised. The motive of self-expression is not separate or distinct from the aspiration to communicate. Self-expression has become one of the main drivers of young people’s engagement with digital technology. Affirmation, recognition, acknowledgement and acceptance may be its objectives, but young people value and celebrate self-expression as a critically important mode of being in its own right. Self-expression, which is bound up with the imperative of identity construction, works towards the cultivation of a distinct, individualised and personalised online culture. The cultivation of such a personalised account of one’s digital role provides the outlines of an individual’s narrative communication. Personalised applications and tools are in demand across the globe because they are indispensable for the construction of individual stories. Customisation, demarcation and self-expression are the requirements of a generation that regards self-expression as itself a form of communication.

In Asia, in countries like China, Korea and Japan, this takes the form of social networking and the buying and selling of digital goods. The only thing that is distinctly ‘Asian’ about this is the fact that service providers in Asia have developed business models and technologies that can monetise these impulses directly rather than indirectly through advertising. CyWorld and QQ for example, have invested in technologies that cater for micro-transactions that make it easy for young people to pay for and exchange digital goods that fulfil their desire to express themselves or gain status with their peers. As the barriers between the online and offline experiences continue to erode across the globe, the market for virtual goods is set to explode. Far from it being the case that young people ‘will not pay for anything online’ as we are led to believe by the marketing departments of every telecommunications company or mobile operator, young people in Asia are driving new business models, which could be applied in the West as well. Asian business models and investment in systems to enable these are the key differentiator, not Asian culture.

Problem solving and innovation

It is important to acknowledge that Asian entrepreneurs were driven to recognise these opportunities through necessity rather than conscious planning. Asian operators have a lot in common with their Western counterparts. Just as mobile operators never envisaged texting becoming a revenue-generating service in the West, but learned to find ways to make the most of it, Asian operators have been forced to come up with solutions that required some innovation.

The key was developing platforms for micro-payments. Necessity was the mother of invention. The deep-seated behavioural impulses behind young people’s engagement with digital media in Asia were captured and monetised in ways few imagined would work. The fact that a Chinese instant messaging company can show operating profits of $245million a year in a country where 75 per cent of internet users earn less than 2,000 RMB/month (less than $300/month) shows how powerful this desire for self-expression, acknowledgement, status and communication actually is in Asia. If there is a lesson to be learnt here it is that if the user’s needs are placed at the centre of services, and this remains the focus of innovation, viable businesses can be built for the future.

Asian service providers had little choice but to put the experiences of their users at the forefront of their thinking and business models. It has been different in the West. The dominant internet business models have revolved around advertising. There is nothing intrinsically wrong with this. The problem, however, is that advertising relies upon page views to generate revenues – that is, on the number of times an advert will be seen or clicked upon on a website or web page. The goal in this environment is to generate page views. It is not the end user’s experience or needs that dominate how this service will operate. Instead, the advertiser is the real customer. Far from seeking innovative ways to engage with the users of social networks in the West, these services have been driven by corporate short-termism and a culture of risk-aversion. In reality, the expediency of advertising has prevented innovation from taking place in social networking sites in the West. This is the one of the clearest lessons to learn from the Asian experience. This is why The Economist has a legitimate case when examining MySpace, Facebook and Bebo to argue that there is no business future for them as they are currently organised.

But even though Asian service providers stumbled upon their business models and innovations by accident, their experiences are important for the future evolution of such services around the world. The failed attempts to export CyWorld to Europe, for example, shows that SK Telecom suffers similar short-termist approaches to service provision. CyWorld in Europe was a pale imitation of the service in Korea, and more importantly, contained no investment in platforms to enable the buying and exchanging of digital goods. Instead of transporting their innovation into the West, SK Telecom adapted to local prejudices and failed. The lesson is that no part of the world has a monopoly on innovation on the internet. Western prejudices against Asia, however, represent a barrier to globalising innovation which is all the more worrying as Asia, with its advanced internet infrastructure, becomes the hotbed of future user behaviours.

William Gibson, the ‘noir prophet’ of the cyberpunk subgenre of science fiction, was right when he suggested that ‘the future is already here. It’s just not very evenly distributed.’ (6) What he didn’t anticipate – and nor did his Western counterparts – was that this uneven distribution favours Asia, not the West. Look East, young man.

Norman Lewis is chief strategy officer and VP at Wireless Grids Corporation, USA.

Previously on spiked

Norman Lewis discussed innovation in an era of caution. Nathalie Rothschild reported on the launch of a spiked/Pfizer debate on the greatest innovation. Martyn Perks argued that setting legal standards for accessibility would disable innovation. Rob Killick revealed the importance of a private arena. Or read more at spiked issue Innovation.

(1) ‘The Asia Media Revolution’ published by The Tomorrow Company

(2) Online social networks: Everywhere and nowhere, The Economist, 19 March 2008

(3) See Plus Eight Star

(4) ‘The Asia Media Revolution’ published by The Tomorrow Company

(5) ‘The Asia Media Revolution’ published by The Tomorrow Company

(6) See William Gibson, Wikipedia

To enquire about republishing spiked’s content, a right to reply or to request a correction, please contact the managing editor, Viv Regan.

Topics Science & Tech

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