If you live in one of the compounds on the outskirts of Shanghai, this is probably no news to you. Many of the owners of villa’s in suburban Shanghai are digging their own wells to save on water costs. Construction companies only charge RMB 300-RMB 1000 to provide you with your private well, so the money can be earned back relatively quickly. But the result be may less desirable: not only does the ground water level go down, but if too much water is pumped out (not unlikely with 1000’s of people doing this), there may be structural damage to the houses if the land subsides. According to the Shanghai Daily the government is not doing much: the Land Resource Administration Bureau only takes action if an illegal well is reported, it does not send out inspector to do checks.

Most taxi’s in Shanghai are Volkswagen Santana’s, with an occasional Passat thrown in. But since early 2005 Dazhong taxi also introduced light blue Mercedes-Benz E-class taxi’s. They are quite popular, because they are the same price as the old Santana’s. But that low price may mean that soon the Mercedes taxi era will be over in Shanghai. Yesterday the Shanghai Daily already mentioned that there were rumours among taxi drivers that Dazhong taxi would discontinue its Mercedes-Benz taxi fleet. And today they write that this is indeed true: out of 100 MB taxi’s 45 will be discarded soon.

The reason? Mainly the fact that the company is not allowed to charge higher fees for luxury cabs. The operating costs of a Mercedes is of course much higher than a Santana (not only the depreciation, but also gas, repair and spare parts). I would not mind to pay double or triple the price for a decent taxi, but it is just not allowed in China. Therefore many MB taxi drivers refuse to take people on short rides (they earn less on those), and try to get rides to the airport or other cities for fixed prices.

According to the article another reason is that it is quite difficult to get spare parts on time, because they have to be imported from Germany. I wonder if this is really true. I am quite sure many spart parts are on stock at dealers, especially because the E-class is now produced in Beijing as well.

Taxi’s in China normally have anti-robbery plastic boards, roof taxi lights and seat covers. But many customers asked the drivers to take these off, so it looks like they are not using a cab, but their own luxury car! Because drivers are not allowed to do this this often led to disputes and complaints. As all the taxi’s are light blue and there are no other light blue Mercedes E-class cars in Shanghai, it is quite obvious that these customers are riding a taxi. But they seem to forget that in their efforts to gain face by showing off.

So what will happen to these 45 discarded taxi’s? Nobody knows yet. But if you are looking for a well-maintained, but heavily used, second-hand Mercedes-Benz you might want to give Dazhong taxi a call.

(See also an earlier blog post about a similar problem in Hangzhou, where Mercedes taxi drivers literally kidnapped their taxi’s because they lost money on them)

Temperatures in Shanghai are around 37 degrees at the moment, and some of the older metro trains do not have sufficient cooling equipment to cope with the heat. Over the past days reports emerged in local media that passengers attacked train drivers, who they suspected of turning off airconditioning systems in the trains.

But now the operating company became inventive: they put buckets of ice in the trains. I don’t know if this really helps, but at least they are trying. But what will happen during rush hour? Normally trains are so full (you have to literally fight your way in) that I would not be surprised that people are pushed into the buckets by the crowd. At least they will cool off quickly 🙂
(picture from today’s Shanghai Daily)

This week I went to the Online Gaming China 2006 conference in the Renaissance Pudong hotel in Shanghai. It was a small but high-level conference, with executives from mainly the US, Japan, Korea and China. The event gave a good overview of the current state of the online gaming market in China and its future trends.

Gaming started in China around 10 years ago: the first PC game studio was opened in 1995, and the first foreign studio (Ubisoft) opened its doors a year later. At that time not many people had access to computers, but already in 1998 the first casual game portal started (ourgame.com). Three years later China created its first MMO (Stone Age), followed in 2003 by the first foreign MMO. This MMO, Everquest, was not a big success, leading people to say that foreign games do not work in China. But the huge success of World of Warcraft in China proved these people wrong.

The demographics of China’s players show that most players are still quite young. 75% is younger than 25, and 83% of them is male. And of these players 75% plays at least 3 hours a day!

According to Julien Le Bigot from Ubisoft, the trend in China will be from MMO’s to casual games. The main reason is that a good MMO is so expensive to make (around 30 million USD) that the risk is too high that it won’t work. Cheaper MMO’s (say 2-3 million) can also be produced, but now that most gamers are used to high-quality games such as WoW it will be difficult for these games to become successful.

The president of Tose Software (the world’s largest outsourcing game developer, with 220 staff in China in 2 locations), Mr. Shigeru Chigusa, sees a trend towards offline-zation of online games (basically, creating version for consoles with online capabilities) and online-zation of console games (publishing existing titles as online games, with new features such as item sales and in-game advertising). These strategies can continue and expand the franchise of games that companies put a lot of money into already.

Consoles are still not used a lot in China, almost everybody uses PC’s to play games. But the console will be coming, and there were even rumours of the Xbox 360 moving into this field with localized and online games (MMO’s?).

John Lee, managing director global publishing of NCsoft, discussed some of the common mistakes in localization. According to him a lot of localization is based on people reading every book and article about China, but that is not enough. You have to be on the ground in order to understand the market. Furthermore, there is no specific Asia friendly graphic template. You have to be creative instead of copying existing characters. By copying you won’t create a winning game.

Monte Singman, CEO of Radiance Digital Entertainment, also touched upon this. He talked about the “me too, but better” titles. There are too many of these games that build on existing games ideas and add some more features. These titles might do well in the beginning, but will level off very soon. The problem is that many game developers are afraid of innovation, they feel innovation will be punished. In that case a good strategy could be to license well-known characters (Disney, Ronald McDonald) or use licenses with a buzz (e.g. movie titles).

Mr. Singman then showed a chart of Chinese players’ behaviour, which I found very interesting. The question was what the main attraction of a game was for gamers. Surprisingly the most important (16.4%) was to meet new friends! After that several game-related answers followed (15.6% wants to get special game items, 11.5% wants to accomplish missions), but there were two other things that stood out for me. About 8% sees the main attraction of a game to chat with others, and another 8% wants to form groups in a game. Some games (e.g. by Shanda) follow this trend by giving people the option to get married and adopt a kid in their game. So 1/3 of all gamers choose a game or game platform mainly because they can socialize in it.

In a speech by Travis Beaven of UIEvolution, he discussed among others the trend for Web 2.0 features in games. Basically, user-generated content such as in virtual worlds like Second Life, but then for online games. He argues to give users the tools to make new levels in games, or to create new missions. Why? Gamers know much better what they want to see in games than the developers.

Most discussions during the 2-day event also touched upon mobile games. The audience agreed that mobile gaming will be big in China, the question is only: when? China Mobile just implemented stricter rules for distributing mobile games, which does not necessarily help the market. Likely it will be at least 2-3 more years before the mobile gaming boom will start (3G has to be implemented first, and people should have 3G phones). So what should you do, invest now and be among the first, but not earn much over the next 2-3 years? Or take a wait-and-see approach and only enter the market once it takes off? The first ones will certainly have the best chances, but many people would rather wait a bit.

China Online Gaming 2006 was the first conference in Shanghai specifically about online gaming, and depending on the feedback of the visitors there will be a China Online Gaming 2007. The conference coincides nicely with ChinaJoy 2006, the gaming exhibition that starts tomorrow. ChinaJoy is now already the world’s third largest gaming exhibition (after E3 and Tokyo) and keeps on growing. Of course I will be going there over the next few days.

(cross-posted on marketingfacts.nl in Dutch)

A couple of days ago I took a picture from the building where the new Spill Group Asia office will be located (we plan to move in about 10 days). Suddenly I realized that I had taken a similar picture in March this year, and that the view was quite different then. What happened? Because the residential buildings were so old and dirty, the government painted all of them and put a (fake) red roof on top. See the result for yourself, look at the buildings on the left side of the picture (first old, then new):

I was doing some research on a trip to Tibet for friends that plan to travel there in August. But it seems that this is not the best time to go there. The reason: the newly-opened Qinghai-Tibet railway (the highest altitude trainride) encouraged a lot of Chinese to make the trip to Lhasa, and tickets are sold out long in advance. Not that my friends wanted to travel by train, but the problem with all these additional tourists is that also all hotels in the city are fully booked (occupancy rate is 97%, which in reality means that you cannot get a room). And even if you have a room you might still not be able to see the tourist attractions. The famous Potala palace only allows 2300 people per day inside its walls. No problem in the past with just a few flights per day, but now that trainloads of tourists are arriving this is not enough.

The Shanghai Daily had an interesting article about some of these tourists. It turned out that many booked sleepers with travel agencies (the overnight trip from Xining is 27 hours), but ended up getting hard seat tickets. Some cancelled the trip upon hearing this. Several travel agencies are now canceling their package tours, because they cannot guarantee train tickets. Tourists also do not realize that Lhasa is located over 4000 meters high, and that this can cause altitude sickness. According to the newspaper, tourists that unexpectedly got sick then tried to claim money from their accident insurance company, but of course they were turned down.

Likely the surge in travel to Tibet will reduce once the summer holiday is over (and once this kind of article appears in more newspapers), but for the next couple of weeks I would stay away from a trip there. A good alternative could be Western Sichuan, the area to the west of Chengdu, which is quite similar with a very wild landscape and many Tibetan monesteries. Maybe not exactly the same, but at least much easier to reach (you can rent a 4WD from Chengdu, or even bike there if you are adventurous), and certainly much quieter!

Yesterday CNNIC (China Internet Network Information Center) presented its half-yearly report about internet usage in China. Again the amount of users has grown significantly, and according to this report China now counts 123 million internet users. This is an increase of 19.4% compared to last year. Last year the growth was 18.4%, so even the growth speed is still going up. China is the second country world-wide based on internet users (number 1 is the US with 147 million users).

Because China’s population is 1.3 billion people, 123 million is not that much yet: 90% of the population is still offline. This leads to huge growth chances for internet companies. Because 82% of all internet users is younger than 35 years, entertainment is still the most important internet activity. Online gaming and watching video’s take a bigger share of the time people spend online. This is also helped by the fact that the broadband penetration increased from 45 million users last year to 77 million this year. The average Chinese spends 16.5 hours per week online (as a comparison, in Holland this is less than 5 hours per week).

Next to entertainment people also buy more products online. Of the 123 million internet users 30 million purchase goods on the internet, an increase of 50% in comparison to last year. Also internet education is getting more popular, at this moment 15 million people are doing courses online.

The report (in Chinese) can be found here.

(cross-posted in Dutch on marketingfacts.nl)

Saturday’s Toodou party (to avoid confusion I stopped using the name Tudou -with u instead of oo- until the site officially changes its name) was a huge success. Several hundred people came to take a look at the new office, to enjoy the BBQ and to drink free beers. And of course to show their painting talents on the walls (and even on some of the floors…). Most people started on the ground floor that is not in use yet, but soon they moved on to the second floor that had been completely renovated already. And they only stopped when the paint ran out! The office was completely transformed in less than 3 hours, amazing.

It was an enjoyable night, even though I did not get to paint. Luckily the wind and showers from the typhoon had stopped in time for the party, so even the roof terraces could be used. Because the office is so big, some people told me they did not even make it to the roof, because they could not find the entrance. Many of my friends and colleagues showed up, and it was good to meet lots people that I had not seen in a while. Film director David Verbeek was there (I only seem to meet him at the Toodou parties), Rolf Becker from the Shanghai Jazz Orchestra, and even Lei showed up (he was recruited away from Toodou by McKinsey – not a smart move, but that’s his decision).

I also met many new people, among others two Dutch guys living and working in Shanghai. One of them studied in Maastricht just like me, and he is behind the weblog China Snippets. Also the marketing director for Wall’s ice cream was among the guests, he came with Kenny Bloom (who set up Warner Music in China, and is now running Asiavision). Of course the guys from Shanghaiist were present, and as I read on their blog they discovered a new beer at the party.

Pictures of the party can be found here, or do a search on the tag Toodou on www.flickr.com, where you’ll find pictures from other people as well.