The Coronavirus Quarantine Economy Supercharged Taobao Live and the China Digital Consumer Network (Tech Strategy – Podcast 19)

In this class, I talk about how live-streaming and KOLs (especially Taobao Live) are activating the China Digital Consumer Network (CDCN). And how the quarantine economy is supercharging this.

Correction. I mistakenly said Scott Gottlieb was former CDC head. I meant FDA.

You can listen here or at iTunes, Google Podcasts and Himalaya.

China’s #1 live-streamer Viya is shown above. 🙂

I wrote more about this subject here (Why the #1 Business Solution to Coronavirus in China Is Live Streaming, Especially Taobao Live)

Learning Goal for this class:
  • #11 the Basics of CDCN, Social Media and KOLs

Concepts for this class:

  • China Digital Consumer Network
  • Networks and Ecosystems
  • Digital Platforms: Marketplaces
  • Social Media, Influencers and KOLs

Companies for this class:

  • JD / JD Live
  • Alibaba / Taobao Live


I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.

Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.

——transcription below

Welcome, welcome everybody. My name is Jeff Towson and this is Tech Strategy. Now the subject for this week’s class is coronavirus, which is a huge issue, but we’re gonna look at it a little differently than how it’s being discussed. And our take is gonna be how the coronavirus quarantine economy is supercharging both Taobao Live and also China’s digital consumer network. So But first, if you haven’t subscribed, please do so. I would greatly appreciate it. You can go over to and sign up there. There’s a 30 day free trial and that would be great. Please join the class. There’s a lot more content that’s behind the paywall now and that’s gonna actually increase. So if this is interesting to you, come on board, join the team, it would be great. Okay, let’s get into the subject. Now obviously coronavirus began as a China story, phenomenon and it is now obviously spreading outside of China, South Korea, we’re seeing in Japan popping up in Italy, United States a little bit. So how far this thing goes, we don’t know. If you are curious about that, I mean I do kind of come from a medical background so I feel reasonably comfortable in this area. The person I follow on this, if you go on to CNBC every day, they will have a guy named Dr. Scott Gottlieb. who is actually an old colleague of mine from medical school. And he went on to, he’s a doctor, and he went on to be the head of the CDC of the United States, and he’s also on the board of Pfizer. And he’s on CNBC every day just about this week. He really does, like, that’s the person I listen to. He knows what’s going on, what it means, what it doesn’t. So anyways, I’m not gonna talk about the medical aspects. I’m gonna come at all of this from, you know, the frameworks I use, which are digital and competition and things like that. and hopefully that will be helpful. And it also feeds very nicely into the next learning goal. So that’s, I don’t know, that’s coincidental helpful. All right, so let’s talk about what people are saying about coronavirus and digital China. Now, the typical news stories you’ve seen in the last month are this is amazing for, not amazing, but let’s say very powerful. for sort of B2B and SaaS companies, enterprise software. The fact that, look, the digital story of China has overwhelmingly been a consumer story. That’s where the real power is. That’s the e-commerce companies. That’s WeChat. That’s all of that. Once you move to B2B, it’s pretty much a laggard. Stuff is not nearly as good as what you see in the United States in particular. There’s a lot of good reasons for that, less developed companies, a lot of smaller companies, not many ERP systems in place, a lot of lack of trust of moving your data somewhere else. The adoption just wasn’t really there unless the B2B side was directly linked with B2C. So if you were a merchant on Taobao, okay, they were actually doing some pretty good digital stuff because they were kind of linked with digital consumer activity. Payments things like that, but if you move just to factories Not a lot going on digitally yet, even though in theory it should be Okay, so what we heard this this last month was a lot of b2b SAS adoption because everyone not everyone Like half the country had to go home and work from home right now as I’m recording this about 60% of the country’s back to work People in Hubei and such are you know still pretty much quarantined? But there was a period of time where all the companies had to figure out, do we just close the doors and not do anything, or do we start to have people work from home? So they did a lot of experimentation with moving their businesses online. Companies like Zoom did very, very well. A lot of video conferencing, collaboration tools. The stuff we see all over the US, but we don’t see in China. We saw a big spike in adoption. And we started to see some innovation. Companies if you’re curious at this space look at we chat work look at ding talk which is alibaba Huawei’s we link was doing well bite dance also has a collaboration platform Okay Interesting. I I don’t think it’s the biggest story another one people have been talking about is is What I call omo education. There’s there’s sort of education has been a big Idea in China for a long time digital education hasn’t really happened, but people look at the spending because Chinese families spend an enormous amount on private education, biggest market in the world. So everyone thought EdTech was being a big idea. A lot of venture capitalists went into it years ago. It didn’t really play out. There’s some good reasons for that. I’ve kind of written about this in the past. I’m not gonna go into it too much, but my argument has been. It’s gonna be OMO, online merge offline schools with digital tools that the schools, the students, the parents and the teachers use. That’s the future, not we’re gonna replace schools and not have them. It’s gonna be a online merge offline scenario. And it was that took a big jump in the last month because all the students were at home. So the education bureaus, the ministries, all of them started signing contracts with these companies to start offering video conferencing. homework tools, all of that. So there was a lot going on there. So EdTech, OMO education got a boost. And then the third area people talk about is public health. It turns out that public health is always problematic because it’s a system-wide phenomenon and hospitals and clinics and doctors and government agencies don’t operate system-wide, they operate locally. Healthcare is overwhelmingly a local business. Well, it turns out digital tools, surveillance, cameras, temperatures, sensors, all of that, big data, AI, tracking of people who they’ve interacted with, turns out digital stuff is pretty good at that. So we’re seeing a lot of interesting stuff on the public health side. And that was kind of the story that we’ve been hearing thus far. I think that’s all interesting. I don’t think it, again, is the big story. Now, The big story in my opinion is two ideas. And one of these is the key lesson for today. But the first one is just kind of quirky, which is what people are calling the coronavirus quarantine economy, which I think is a spot on description of what’s going on where business is continuing, life is continuing. People are trying to make money. There was a bit of a break while the economy kind of shut down, but everyone knew that was going to be a short-term phenomenon. The economy had to start back up. People had to keep buying and shopping and working and all of that. So it raises the question, how do you work, shop, eat, play, learn, if your goal is to avoid in-person interactions with people? I mean, that’s a really big question. And to me, that’s the definition of the quarantine economy. How do you do all of those things we do in life? Chat, communicate, work, be entertained, spend time, leisure, exercise, eat, travel, culture, all of those things that we do in life, in business, society, life, all of it. How do you do those things when your goal is to minimize in-person interactions, which is really what’s going on? And, you know, the, you’re. The answer to that question is you try and switch all of those interactions to a digital platform. You try and replace in-person interactions with digital interactions. And you try and workshop, eat, play, learn, and everything else by your smartphone. And that’s pretty much what’s happening. Every problem you hear about in China because of this situation, you know, we can’t get to work, we don’t wanna… You know, we don’t want to sit down in meetings. We don’t want to go to concerts. We don’t want to go to the movie theater. I don’t want to go to my gym. The answer to every one of those problems is, let’s try and do it online. Digital is, all roads lead to digital in terms of connectivity. So that’s what we’re seeing is the quarantine economy is shifting a huge volume of in-person interactions to digital interactions. And what have I been talking about for the last three months when we talk about like digital platforms? that these things, these business models, the Alibaba, they’re designed to facilitate connections and interactions between user groups digitally. I mean, it’s a tailor-made, well, not tailor-made, but it’s a very powerful tool that a lot of companies are doing it. So what we’re seeing is a couple interesting things is we’re seeing this, you know, all these stories about. people watching their classes online, people downloading health apps, and people having virtual dinner parties where they watch online, or people having cooking shows online, and all the celebrities and people used to try to get you to come to the movie theater to watch their movies. Now they’re all streaming from their home saying, hey, watch me from home. Like, fears are funny. Popcorn is being sold by movie theaters online because no one’s going to the movie theater. So all these cinemas are selling their popcorn online and at least trying to make some money that way. So everything’s a shift. So there’s this idea of the quarantine economy, which I’ll talk a little bit more, but it tees up the other idea, and this is the big concept for today, is that I describe China as the world’s first one billion person digital first consumer network. I mean, I’ve been giving this talk for a year. Think about Chinese consumers as a connected network. Stop thinking about them as, oh, it’s a lot of people. It is a lot of people. If a billion people, 1.4 billion people go to KFC, they buy a lot of chicken. They in fact buy four times as much chicken as Americans because there’s four times as many of them. Fine. The number of people goes up by a factor of four when you compare the US to China. But the connections between the people go up by a factor of 17. Because when you have 10 people and you add the 11th person, it doesn’t just go up, it goes up by one in terms of people. The network nodes go up by one. But the number of connections goes up by 10. Because that person now connects with everybody else. Is it 10 or 11? Yeah, one of the two. So connections in a network grow. dramatically faster than the number of people in a network. So if China has a network that is four times bigger than the US, the connections are 17 times bigger. That’s a much more powerful network in theory. Now that’s not exactly true. What I just gave you is what they call Metcalfe’s Law, which was something come up. It’s not really a law. I don’t know why people call it a law. It’s not like Newton’s laws and things. It’s a business idea. It’s not scientifically rigorous. And actually I don’t think it’s mostly true. But it’s basically that idea that the number of connections increases dramatically faster than the number of nodes in a network. Fine. And it argues therefore a bigger network is more valuable. That’s not true. Because it turns out there’s some problems with this idea which is that the connections are not as important as the interactions on the connection. I can call anyone on the planet with my smartphone. It doesn’t mean. all those 7.5 billion people are valuable to me. Now what’s valuable to me is the number of interactions I do on the network. So if I call my friends, that’s valuable. If I’m sending photographs to them, that’s more valuable. If I’m exchanging work ideas and we’re doing collaboration through these connections, those interactions are more valuable. It’s the number and types of interactions on the network, not the number of theoretical connections the network has. You know, Facebook has a billion, I forget how many, 2.7 billion users, but most people have 300 friends. That’s what’s valuable to each individual user. It’s not 2.7 billion. Now, if you’re publishing and things are a little different. Okay, so why I think China’s becoming a network? Because everyone got on the smartphones, 2009, 2010, 2011, that basically digitized people. and they all became connected for the first time, which before that, if you wanted to reach a lot of people, you gotta go get them to come into your store, you gotta send them mail, you gotta do a lot of things, but they weren’t connected. Smartphones plus mobile payment effectively digitized and connected almost all Chinese consumers, about a billion of them in theory, there’s more, but it’s about a billion. So the connections are there. in a scale we’ve never seen before, because if you go to any other country like the US, or even India, which has a large population, people don’t speak the same language. There’s not 1.4 billion people anywhere in the world that speak the same language, as far as I know, that have the same regulatory platform, that have the same payment mechanism, that are all supported by standardized tools that lets them interact very easily. In this, in India, if you go to India, you have a big population. but people don’t speak the same language. I mean, there’s how many languages are in the, it’s crazy. You have US and maybe you have Latin America and Spanish speakers, you have a lot, but they have different political economic systems. They have different payment mechanisms. What we have in China is a massive population that is standardized and connected such that they can all interact with each other, chatting, sharing photos, sharing videos, buying and selling things, sending payments. writing reviews about trips they took to Paris, all of that can move in this network. And it’s very, very powerful. So that’s the first part of the, what I call the China Digital Consumer Network. The second part is Chinese consumers are surprisingly digital first in their behavior. They’re the first group that I’ve really seen this large that has almost got a digital lifestyle, that everything begins on the smartphone, absolutely everything. and new tools are adopted so quickly that new apps pop up all the time, people see what their friends are doing, they adapt very quickly. They basically spend more time online than pretty much any country, given weekly basis, like 19 hours to 21 hours per week. Several hours more than say the US or Europe. They create more content per capita than other consumers almost anywhere. There are some exceptions, but that’s broadly true. They participate more. They’re just super active online. And I think this surprised almost everyone how digitally enthusiastic they are. You can launch new stuff and get huge uptake very, very quickly. So that’s kind of my first argument here is that look, there is a network here. And if you think about Chinese consumers as a digital network, things make a lot more sense because any business that taps into this network can take off like wildfire, like TikTok, like WeChat. You know, these companies that were network-based businesses and, you know, we’ve talked quite a lot about digital platforms. Digital platforms are business models designed to facilitate types of interactions between users. They are about the interaction first, as opposed to selling chicken, where you’re mostly about the product. So these digital platforms are doing very well in this digital network. Now, a bit of clarification on that. It’s easy to mix up these ideas of platforms, networks, and ecosystems. I consider digital platforms, multi-sided platforms, as business models. And I consider ecosystems just the things that exist out in the world. Cities, streets, consumers, people, friendships, families. And some of these things are about humans, like families. Some of these things are about nature, ski resorts, I don’t know, islands. And some of these aspects of the ecosystems are manmade, human made, like industries. So networks, I consider part of the ecosystem, even though they are typically created by businesses. Now you could say a social network is a naturally occurring network. People know each other in life. That wasn’t created by a business, it exists. But you could say railroad tracks are a network. that connect locations that was created long ago by a business. Phone lines, that’s a network that exists. So you could do something like Netflix which comes in over the top of cable companies and phone lines which are networks and builds a digital platform on top of an existing network. And you see this play a lot like PayPal built on top of eBay. Netflix, these over-the-top streaming, are building on top of the cable companies, the carriers, the telco companies, which they don’t like. So there’s a bit of a mix there, but generally I consider networks to think these things that exist out in the world or something you create. A business model be a platform. So the consumer network to me is something that exists out in the world. The Chinese consumers are digitized and connected and that exists in the world the same way the streets and the roads exist. and you can build business models on that, which are platforms. Now that’s a little bit of semantics, but I don’t know, these are the things I think about. Okay, so I’ve just given you sort of two ideas. One is this idea of the quarantine economy, the coronavirus quarantine economy, where we wanna shift in-person interactions to digital interactions as much as we can. And then there’s this idea of the China Digital Consumer Network. which I think is incredibly powerful. I spent a lot of time looking at businesses this way. Okay, that’s why the coronavirus is different than SARS. When SARS happened in 2002, 2003, it was really end of 2002 into 2003, you’ll hear stories about how JD did very, very well there. Well, they didn’t do well, but they were a physical retailer that decided to go online for the first time because they couldn’t. You don’t get their people into their stores they became an online e-commerce company for the first time during stars and then they close their stores later. Alibaba was more or less a b2b business back then they were selling between. Mostly chinese manufacturers and japanese asian and europe american companies that were buying goods. Sars didn’t really actually stars kind of help them into ways. Number one business people from japan. wherever US, Europe didn’t want to fly to China to inspect a factory or to look at goods anymore. So they shifted online to do that, which made sense. And it also got them moving in the B2C direction around the same time. Taobao started shortly around then. So that was interesting, but it’s nothing like today because back in 2002 and three, we didn’t have… the China digital network back then. It didn’t exist. This was a good eight years before Chinese consumers got cell phones. It was before they had a lot of capital and spending. They didn’t have a lot of spending back then. It was before mobile payment. It was before everything. So combining that quarantine economy with JD and such back then was interesting. It was a bit of a pivot point. It’s nothing like combining the coronavirus quarantine economy. with the digital network that now exists. It’s a huge combination of factors happening right now. Okay, let me give you a couple more examples here because that was a bit of theory. Okay, so how are people trying to move their interactions from in-person to digital? Well, there’s, I mean, there’s just, every day there’s news articles about this. Students are watching their classes online, live streaming, digital tools. People are trying to eat in. Like instead of eating out, dining, eating in. So, you know, people are cooking at home, they’re buying goods online, they’re delivered in, the logistics system is actually also being upgraded, but I’m gonna talk about that in a separate talk. Things are being delivered downstairs to their apartments, they go get them, they cook online. Hot pot restaurants are doing sort of live streaming sessions where you can eat with other people virtually. or people can watch you eat, I don’t really understand that, but it’s happening. Lots of sort of stuff happening with Oliman, Meituan, a lot of interest in home cooking. Everyone’s basically watching cooking classes and doing other things, because everyone’s cooking at home. Staying active, fitness, obviously a lot of sales of home fitness equipment. On e-commerce, we’re looking at… The phrase looking slim was trending as a key search phrase in Taobao over the last couple weeks. People are watching other people exercise and you can do it virtually. You can take online classes, fitness apps are surging because no one wants to go to the gym, culture and leisure activities. You can watch remote concerts now instead of going to the stadium or the concert hall. You can watch online at your house. They’re doing that now. Tours of museums, travel KOLs, people who usually are Chinese who are living in Paris and places are doing sort of live tours where you can travel with them around Europe and places so you know tourism, all of that stuff. I’ve even heard of night clubs, live streaming. You know since you can’t go to the club anymore I guess they’re live streaming those. I don’t know, I read it, I haven’t seen it. What else? I mean there’s just a lot of interesting stuff as people are trying stuff. A lot of it’s not going to work and some of it will. Most of it won’t but that’s alright. Okay, and that’s going to bring us to our second topic which is within all of this the word you keep hearing me say over and over is live streaming. And particularly for businesses. School teachers are learning to live stream their classes. sales associates at department stores are all starting to live stream their classes because their customers aren’t coming in. Live streaming is probably at the center of this so that will bring us to the next part which is about Taobao Live and you know, why is live streaming KOL social media, why is this so powerful in China? And there’s really two key ideas for this this class. Number one is what I just talked about, which is the China Digital Consumer Network. And that fits under, you know, our learning goal number 11 about this idea of networks and how this, you know, how interactions are incredibly powerful. All right, the second idea for today is basically an introduction to social media, KOLs and live streaming. And this is a huge deal in China. And I mean, what is a KOL, like an influencer? Key opinion leader, KOL stands for key opinion leader. An influencer, what is that? I mean, it’s a weirdo phrase. Well, think about it in terms of the China digital consumer network. What does an influencer do? An influencer influences the network. That’s what you do. I mean, literally Huawei and Alibaba introduced me as an influencer because they think I, to some degree, influence this connected network. of a specific connected network of people. And that’s what these influencers do. It’s about the network. It’s not about I have a, or let’s say someone has a great brand and people show up at your store. No, influencers create things that are shared. And there’s interesting reasons. Why do individuals do this and businesses don’t? Because a consumer network is, there’s a lot of reasons, but the way I always view it is, A consumer network is personal. You walk into a shopping mall, you know what that is. If a company sends you a brochure or an email, you know it’s a company approaching you. But if it’s someone you know, maybe personally or maybe online, or it’s another person, it’s an individual who’s authentic, that’s the type of interaction that matters to you. It’s far more powerful, it’s far more authentic, and it gets shared. And so, you know, influencers are kinda like They’re almost like super popular friends or quasi friends to a lot of people, but they’re definitely not businesses. Businesses who try and influence the network directly themselves don’t usually do very well because people don’t go for it. It feels like a corporate thing. If you’re gonna influence the network, it helps if you’re a person. And so now Chinese influencers are super important. and I would argue they’re super important because of the network I just described. The network was there first, influencers then jumped into it and realized they could have a big impact and that was noticed by companies who then started hiring these influencers to do marketing for them. Now, it’s actually been around for a long time. If you can go back and you can find Chinese influencers, sort of rough conclusions about it that influencing is much more powerful in China than it is in the West. It just is. KOLs in China are more powerful than, I don’t want to say powerful, that’s not the right word, I guess influential is the right word, than celebrities. And it’s not about information, it’s about opinions, influence, what products should you buy, how should you think about it, where should you go on vacation, where do you have fun? You know, you don’t have to have… They don’t have to have huge followings. In fact, the ones with huge followings are usually not the most significant ones. If you have a huge, super big following, maybe you’re good looking, maybe you’re quirky. That kind of fame comes and goes. The influencers that I really pay attention to are those that are deep within a certain subject. That is the person. If you want to know about Thai cooking, that woman in Hunan is the Thai cooking guru of China. 15,000 people who love Thai food who follow her. I mean, it’s sort of deep specialization in a content plus a really good connection with a subset of people. Now, it helps if the subset of people you’re relating to have a certain economic value. If you’re influencing people who like Thai cooking, okay, probably not a huge economic opportunity. If you’re talking about digital China, yeah, I mean, it’s kind of… That’s a huge subject for a lot of executives around the world. That’s a pretty good niche to be in. Fashion tends to be a very good one as well. So these influencers have been around for a long time and they just sort of jump from platform to platform as the platforms emerge. So it started out with blogging. These companies like NetEase and and people were basically blogging. And there wasn’t a huge amount of sharing back then. You had to kind of go to the website and look at it. Or, you know, it wasn’t huge. It wasn’t massively exciting. The one that, you know, kind of was the big change was Weibo. I mean, Weibo was the first like social network, you know, where it was directly about connecting people. And that’s when we saw KOLs become really pretty big, like a lot bigger. So the famous one everyone talks about is Poppy Jang, who was 2015, 2016, really quirky, quirky young woman. You know, she does these like, well, this is years ago, she did these like original sort of short videos that were kind of comedic, and she would do funny characters and voices, and had a weird voice, and it was weird. And you know, she went from nothing to like 200, 300 million followers. five months, six months. That’s the power of this. When I say the China digital network is powerful, that’s the power of the network. When one quirky vlogger can go to 300 million users in months, point to me one other country in the world that happens. And then shortly after Weibo comes WeChat. And that’s mostly where the KOLs were for a long time. They were between WeChat and Weibo. Those were the two social networks connecting people. The next kind of interesting iteration that showed up was short video. It tends to follow content type, that when you go from writing articles to making videos to making short videos, you often get a new surge of KOLs. So short video takes off, I mean that was, that was douin, but you also had a couple others, but everyone talks about douin TikTok. So, you know, suddenly douin TikTok, you get people doing these 15 second dance videos and you know, they get 10 million fans, 20 million fans immediately. Very powerful. So all these are all various types of influencers. Interesting, powerful. It’s really, they’re creatures of the. of the digital network. That’s really what they are. And brands became very interested in them. Marketing became very interested in them. Okay, now I get to the point. The point is live streaming. Live streaming is a type of influencer activity. You can be an influencer and you can live stream, you can post, you can vlog, whatever. But the platforms usually have to be set up to do live streaming. Live streaming really takes this game to the next level. Because it offered two really… great things to influencers very quickly. If you wanted to make money as an influencer, you know, you’re Papi Jiang, you have to get a lot of followers before anyone cares. And then maybe you get some advertising, you get some sponsorships, who knows. But you gotta break out of the sea of people who wanna do this to become famous, and then if you become famous, then you can make money. Live streaming, you don’t have to be famous to make money. you can go up, live streaming is basically like a home shopping network. When the e-commerce version of live streaming, there’s also a gaming version, there’s some other versions. The e-commerce version is, you know, you set up a desk, you put a camera on, and then you start talking about makeup. And here’s the makeup, and I put it on, and here’s what I’m learning about makeup, and then if you wanna buy this makeup, click now. And people, you know, you watch these live streamers, they’re sitting in a desk talking close to the camera. And as they talk about things, other people hold the items up behind them and then they sell things. So you can monetize from minute one of being a live streamer. That was very powerful. And they want to get famous. So, you know, you didn’t have to become famous to become make some money. You could kind of start making money immediately and you can sell stuff, e-commerce, and then you can also get gifting. That’s kind of how the gaming side works. If people are watching you live stream your ability to play a game, which people are very popular. That’s a lot of gifting. People give you a dollar here, a dollar there. So either way, you were able to monetize very, very quickly. E-commerce loved this because suddenly you could sell tens of millions of dollars worth of items, which the top live streamers like Via and Taobao, I mean, she can sell like, I think her record was $40 million worth of one product in something like three or four hours. I mean, it’s crazy. And then she gets a cut of that. So live streaming, huge deal. I was over at the Alibaba campus two months ago. No, this was singles day. This was three or four months ago. And they had live streaming booths set up everywhere. One we got to see Via, who’s technically China’s number one live streamer. We got to see her record, which was fun. And I put up some photos of that. But then around campus, there were just these little, really glass cubicles, like. You know, not very big, like 20 feet by 10 feet by 10 feet, you know, very, almost these cubes that are just sitting out on the walkways where people walk on campus and within each one, there’s a camera and people are live streaming. And there’s just tons of them all over the place. So live streaming took off and it’s everything from fashion to makeup, to guys who have little farms up in the hills of Yunnan and maybe they make green tea, Pu’er Cha. where it comes from Yunnan in the south west of China. Those folks have a little iPhone or camera and they start live streaming and selling their tea. I mean, it’s everywhere. Housewives sitting making dinner start selling whatever they’re baking and farmers, everybody. I mean, it was a very democratic activity. Okay, and that brings us to the company I wanna talk about today, which is Taobao Live. Well, it’s not a company, but it’s. It’s part of Taobao, part of Alibaba. And Taobao is the C2C-ish marketplace platform. You connect individuals or small companies with other consumers as opposed to T Mall, which stands for Taobao Mall, which is more about the big brands. One is the bar, the bazaar, the marketplace, downtown, full of tiny little shops, and the other one is the nice shopping mall. Okay, so Taobao Live, which is the live streaming, capability of Taobao. It gets launched in March 2016 based in Taobao and obviously Taobao is the largest e-commerce site in China. When it was, let’s say it gets launched in 2016, it really starts to take off in 2018. At that point Taobao’s got about 425 million active users. So this thing becomes a big deal. Now who’s doing it? Okay it’s 70% women. I mean, when we talk about e-commerce, keep in mind, it’s usually mostly women who are the consumers. Guides too, if you go on JD, there’s a lot of consumer electronics, but generally speaking, it tends to be shifted that way. The categories that take off on live streaming, Taobao Live, clothing, cosmetics, maternity, when you get into the live streaming, it’s probably close to 80% or more of the users on live streaming on Taobao are women. And the funny thing is, it happens at night. It’s not, when do people watch someone talking about makeup or fashion or a handbag? Well, they don’t watch during the day. They watch when they get home. They sit in bed, they open up Taobao, and they start watching maybe five or ten people that they really like that they’ve watched for probably a while talk about the latest cosmetics from whatever. And then maybe they click and they buy some stuff. And it becomes part of your routine and people like it. I mean, people really enjoy it. Men probably 30% electronics sportswear tend to be popular tends to be younger folks 20 24 25 30 that range and You know averages people access this about four to five times per day so it’s it’s a big activity and people like it and it’s fun and it embeds in there and You know now if you’re doing that as a a live streamer This is what you want to do. That’s interesting. So you’re an influencer and you’re speaking with consumers and they follow you and you start to have a relationship. You know, this activity is of the network, of the digital network. Now, the retailers and the brands of course notice this and they start to say, hey, this is a way for us to access the digital network. Because if they try and access it themselves, it’s very hard. They’ll do stuff like they’ll create content. and videos and hope people will share them. But generally influencers have a much more authentic and real relationship with consumers. So they’re much more nested in the network as opposed to brands which tend to be outside the network. And so they start to engage and hire influencers and you start to get this sort of interesting combination of KOLs who live stream in e-commerce and they hire them and maybe they hire them to sell some items for them. We were talking to a couple of these brands who hire KOLs and they say, you know, a lot of what we do is we just give them information. We can’t go to them and say, hey, say our, you know, L’Oreal, like this was a comment from L’Oreal China. They said, you know, we don’t just give them products and say, hey, go tell us the product and tell your followers the product’s great because people don’t like that. It becomes fake. What they do is they just give them information. We have some new chemistry going on with this type of makeup. This is what it does to the skin. And they just give it the information. They sort of give them almost education. And then that person knows more and talks about it. That’s kind of what I get. I get emails from most of the major digital China companies where I get phone calls fairly regularly. And they’re not trying to get me to push anything. They’re not saying, hey, would you write? They never say, hey, would you write about this? They just say, hey, let me tell you what we’re doing. And here’s some fun, interesting things we’re doing we think it’s important and they’re basically giving you information and it’s a nice relationship. I appreciate it. I learn a lot. I get to go visit their facilities. It’s very interesting. But it’s not a dishonest thing. Okay, so we get sort of Taobao Live as one of the big ones and second to that we have others. We have Xiao Hongxu Little Red Book. And then we have companies like JD Live, which has live streaming as well. And you know, this is just a powerful activity. Now we’ve probably peaked. You know, we probably will look back and say 2019 was sort of peak live streaming because everyone went a little crazy. And that is not uncommon in China. That people kind of, when something new comes along, people really do get really excited about it and you know, like bike sharing. Everyone was on those bikes for a year, it was like the thing. And then it fades, it just becomes a normal part of life, but it’s not so crazy. So that’s kind of the other idea for today, is to think about influencers as creatures of the digital network, and then live streaming is a particularly valuable activity for them, very effective. And we’ll talk about one last thing for today, which will bring us full circle. We’ll come back to coronavirus and the quarantine economy. Now let’s say you’re a business and what are you doing this week? You’re a shopping mall. You are in time, which is Alibaba’s department store. Several years ago, Alibaba bought a chain of department stores and they wanted to sort of turn these into online merge offline. I’ve written about this in my visit there and okay, you’re a department store. Nobody’s coming in. I mean, what do you do? And the B2B aspect. this idea of hey people are learning to work online but look we know people are going to go back to work they may work a little differently in the office but everyone’s not going to stay at home we know that was a short-term thing what makes people think anyone’s going to shopping malls anytime soon what if consumers now that they’ve shifted from in-person interactions in a shopping mall to digital interactions what makes anyone think they’re coming back? Maybe no one’s going to the movie theaters or shopping malls for six months. So these businesses are in a panic. Certain businesses like businesses that have depended on on-premise or in-person interactions like movie theaters, travel agencies, tourist stuff, trains not as much, definitely department stores, shopping centers. They all have to grapple with the idea. that people may not be coming back to in-person interactions anytime soon. What are we gonna do? Well, their answer is we have to engage the network. We have to go digital. We have to replace the in-person interactions with digital interactions. So we have just seen a surge of businesses jumping into social media and in particular, here’s the point, jumping into live stream. I mean, live streaming has been the go-to thing for business after business after business. So InTime, this department store, you know, they have hundreds, you know, a typical department store like InTime, you’re talking about, I think 300 employees, something like that. I don’t have that quite right, but it’s in the hundreds. Their sales associates, what are they doing? Their sales staff, they’re sitting in the stores, nothing’s happening. So InTime is getting all of them to go online and start live streaming. and they’re doing it from their homes. And they’re trying to reengage their customers who aren’t coming into the department store. Another example is there’s a cosmetics brand called Forest Cabin, which closed about half of its 300 plus stores in China because of this. And so what do you do? Well, they started training their people to do live streaming. And they trained 1600 shop attendants on how to host a live stream on Taobao Live. And they were adding about, this is according to press report, I think from Alibaba, they were adding about 3000 new loyalty members, i.e. customers per day. I mean, that’s kind of amazing. So department store, smaller retail store, what about, what if you sell cars for a living? What if you work at an auto dealership? What do you do? People probably aren’t coming in, they’re probably delaying that purchase. So we’re seeing auto dealers and we’re seeing real estate dealers, people selling apartments and whatever, jumping into live streaming. and other things as well, but live streaming seems to be the first place everyone goes. Furniture retail, Easy Home, which is a pretty cool company in China. They had said that staff from 232 of its stores have broadcast 4,800 live streaming sessions in the last week alone. They’re jumping in. So I mean, we’re just seeing it across the board and live streaming is kind of the first one, I would put it a little more broadly. What we’re seeing them do is sort of the point I began with is as you try and avoid in-person interactions, you have to replace them with digital ones so they’re all going to the digital consumer network. And live streaming is kind of the first tool in the kit. That’s basically it. Okay, I think that’s pretty good for today. Just to recap. This is mostly about learning goal of 11. So for those of you who are subscribers, this is gonna be under learning goal 11, which is about the basics of the digital China network about social media and KOLs. We’re gonna start going into that more with the first 10 learning goals are there already, this is gonna be 11. So we’re gonna add another 10. As I’ve kind of said, there’s probably 30 to 40 really important ideas and we’re still building towards that. And then we’ll end up going deeper and deeper into all of them. But this is number 11. The two main ideas for today to take away, if you forget everything about this, China Digital Consumer Network. Think about it like a network. Everything makes a lot more sense. Concept two, within that network, social media, KOLs, and particularly live streaming right now are a really powerful way to sort of engage and activate the network. Okay, and that’s it for today. It is Sunday night here in Bangkok, and I think I’m gonna start getting back on a plane again shortly. I’ve been here almost a month, which is absolutely crazy for me. I’m actually waiting on a visa, so that was good timing as well, because I had to give up my passport for a couple weeks for that to be done. But yeah, I’m getting a little crazy. So anyways, I hope everyone’s doing well. I hope everyone is staying safe. If… That name I mentioned before was Scott Gottlieb, G-O-T-T-L-I-E-B. I think he’s a great person to follow for the medical situation going on. For those of you who are subscribers, we’re going to have a decent amount of content going up this week that sort of builds out on both of these ideas, KOLs, social media, and the digital consumer network. So there’ll be more of that. But that’s it. And I hope everyone is doing well. And I will talk to you next week.

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