Social Tech in China

A short take on why everything will become social... eventually!

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One of the things I’ve been struck by since coming back to China is the extent to which social interactions are embedded in the most successful of consumer platforms, both in terms of social features embedded in apps, the rise (and rise!) of socially driven super apps and the increasingly decreasing returns to behaviours that are not socially driven in nature.

So what do I mean by that:

Lately, I’ve been spending a lot of time searching for kindergartens for my 👶 daughter. The last time I lived in China (about 8-9 years ago), I would have gone to Baidu (the Google of China) and basically only relied on the search algorithm surfacing (hopefully) relevant information. This time, however, things were very different! Baidu yielded rubbish results 😡.

So where did I go? WeChat of course! For those of you new to China, WeChat has morphed from a basic chatting app into a mega platform that allows you to live your entire life in its ecosystem. That includes acting as a platform on top of which business can create ‘mini apps’, basic mobile apps that do not need to be downloaded. In this particular case, I was able to search on WeChat to find the mini apps of kindergartens, interesting articles on kindergartens and importantly, join various groups to get real people’s personal recommendations for kindergartens.

The reality is that a lot of small businesses (like kindergartens) do not have a basic web presence like a website. In the West, they either have a basic website or a Facebook page, which can get indexed by a search engine like Google or highlighted by an aggregator, making information accessible through a central, all pervasive intermediary like Google. In China, that paradigm has been almost completely upended by ‘super-app’ ecosystems like WeChat, Alibaba/Alipay and Meituan. Each of these has a strong social element to it. In fact, I saw more reviews of kindergartens on Meituan (known for food delivery and restaurants) than on Baidu! 🤯

This is critical because at this point in the evolution of the internet and the way people are interacting with it, discovery of relevant content is the critical factor that helps maintain the flywheel necessary for ongoing success (and the ability to branch out into adjacent product lines).

At the same time, it’s important to recognise that the basis of business success in China has historically been the concepts of 关系 (guanxi - personal networks) and 信任 (xinren - deep trust). Most people have probably heard of the basic concept of guanxi but probably don’t realise that networks and trust operate across different vectors of relationships in China.

“In Chinese markets it becomes evident that guanxi is a good door opener but it is xinren that determines what’s to become of you once you are in.”

People tend to trust people they know, and other people around them, and are often willing to overlook other, potentially more objective factors in their rationalisation of a transaction. That hasn’t changed since time immemorial and certainly plays a role online as well as offline.

Furthermore, a large number of (predominantly younger) people in China tend to find solace, companionship and conduits for self expression online given the (still) relatively conservative expectations society places on them; something that doesn’t seem to have changed for a very long time.

In fact, the best illustration of the power of social dynamics in a technology context is illustrated by Pinduoduo. Pinduoduo was founded in 2015 as a mobile first e-commerce platform with social engagement at its core. Late 2019 / earlier this year, it achieved more than RMB 1tn (trillion) of GMV, a result that took Alibaba more than 10 years to achieve. Even if you take into account the amount of discounting that has to be done to drive that sort of volume, that is still tremendously fast. 💸💸💸

Alibaba had the unenviable task of trying to build reputation as an intermediary and change consumer behaviour in the earliest days of the internet in China. Other companies, like JD, needed to resolve other aspects of the e-commerce value chain like logistics / last mile delivery. And others, like Tencent or NetEase, in completely different verticals like gaming have allowed general consumers to become used to the idea of casual mobile and PC based gaming.

Basically, the overriding sense I get is that the basic building blocks of most verticals migrating online are firmly in place now. There isn’t a huge amount of optimization left to do on that front. The next phase of evolution is going to have a huge component of increasing the scope of human interactions and the additional value that can bring.