[MUSIC] 0:00 Well good afternoon. 0:02 It's been a really good day. 0:09 There's been some really good talks today. 0:16 I'm actually somewhat gutted that I won't be around tomorrow unfortunately. 0:21 so, I am going to press on because I am keenly aware 0:25 that I am sitting between you and some bear and I am going 0:28 talking about as Paul introduced, the, the, the bits of the Internet that 0:31 maybe you are not familiar with because they are, they are not here. 0:35 So I, I am going to start by talking about what's been 0:40 in the news, I guess, the last week and a half or so 0:43 was the, you know, the anniversary of the, the creation of the 0:46 web or the conception of the web was 'bout 25 years ago today. 0:49 And, as we all know, obviously the web was created by 0:53 an Englishman now of course, he didn't do this completely by himself. 0:57 The, the initial concept was revised with the help 1:02 of a Belgian computer scientist that he was working with. 1:05 And the first website, when it was 1:09 finally conceived that was actually built in France. 1:11 He was working at CERN at the time, but he was on the French side 1:15 of the border of the building that CERN had that kind of overlaps the border. 1:17 So he actually did it in France. 1:21 The computer he hosted it on was designed in California. 1:23 And the research institute he worked for was Swiss, so we've got 1:27 this kind of European, North American theme, which has kind of continued 1:31 ever since, you know a lot of the web standards groups, WC3 1:35 and so on based in Europe, based in North America and so on. 1:38 So that was then. 1:43 Now, 15 years on, if you start to look at the .com era, 1:44 we've got this point in time where the .coms were just going bust. 1:48 And you had all these big companies that all of a sudden were, were collapsing. 1:54 And the web at that point was still pretty much it was pretty, pretty 1:58 much Western on the whole, and on the whole, if you had to categorize it, 2:02 it was the Internet users were coming 2:07 from developed economies, primarily North America, Europe Japan, 2:09 Korea was kind of the only kind of Asian group that had a large demographic. 2:14 Little wee bit of Australia there at the top. 2:19 And, and, and that was it, you know, everybody else 2:21 was kinda squished into this, this remaining percentage, whatever that was. 2:23 I mean, it's less than 25% from the looks of it. 2:27 And, and that was 15 years ago. 2:29 And if you look at even the traffic and in 2:31 terms of the companies that were succesful at the time, right? 2:34 The Alexa top ten was entirely dominated by companies in developed economies. 2:37 And that you know again, Korea and Japan were some of the Asian versions. 2:42 But even then it was a lot of American 2:47 sites really just being more successful around the world. 2:48 If you think of the situation today, 2:53 things have actually started to shift quite considerably. 2:54 In developed economies where we 2:59 live, Internet penetration is nearing saturation. 3:00 Basically the, the darker blobs on the map are areas where. 3:04 Internet penetration is quite high, so the red ones 3:07 are 80%, 60 to 80% is kind of the orangey. 3:10 And as you see there's a large parts of 3:13 the world where the Internet penetration is still remarkably low. 3:14 Some of them you, you can barely see them because it's so low at this point. 3:17 What's changed though as well is that, the traffic 3:20 from these fast growing, emerging economies such as China, 3:24 Russia, India, that is actually starting to creep into 3:27 the Alexa Top 20, this time quite a bit, right? 3:30 So we've got, we've got two in the top ten, which is Baidu and QQ in China. 3:33 And then in the top 20 there's quite a few. 3:38 I mean actually number ten is, is Chinese as well. 3:40 So strikingly different picture from what we had 15, well I guess 3:43 it would have been about 15, not even 15 years ago really. 3:47 Yeah, I mean it, it has gone really quite quickly to actually kind of reverse it. 3:50 So, right now, we have close to three billion of 3:54 us that have yet to use the Internet at all. 3:57 And, really at the moment, it's generally 4:00 cha, characterized by people with lower incomes. 4:02 Again, if you look at the map, the, the blue areas are our high income groups. 4:04 And then, basically, everything else goes from upper middle to lower middle. 4:09 This giant group of people, four billion. 4:12 The bigger blob there is, incomes that are quite a bit lower than ours. 4:15 And so, all these people are the same 4:19 people who, in many ways, haven't come online yet. 4:21 Now, that is changing though and it's changing really, really quickly. 4:25 And, a lot of it has to do with devices like this, right? 4:28 This is a Chinese made Android device. 4:31 It's a customized version of Andriod for the 4:34 Chinese market, although it's, it's now expanding into 4:36 parts of Southeast Asia, India, and it will, 4:39 it is coming to North America and Europe. 4:41 And at the moment as it stands it's 83 Pounds for this device. 4:44 Now, I bought one of these two weeks ago 4:47 when we where in China, and it's really, really nice. 4:49 I don't have it with me today simply because I haven't gotten around to 4:52 put my SIM card in and yet decide that I am using it everyday. 4:56 But, I mean, this is a really nice phone, right? 4:59 And within a year or two the price will have dropped further. 5:01 I mean the idea of the sub-hundred dollar smartphone, which 5:04 everyone keeps talking about, in some ways it's kind of already 5:07 here, is at the sub-hundred dollar level is already pretty 5:10 good and is just getting better and better all the time. 5:13 So this is how a lot of people are going 5:16 to be coming online fairly rapidly over the next few years. 5:18 And certainly if you even look at the 5:22 sub-fifty dollar smartphones that are starting to be produced. 5:23 They are actually really quite good. 5:26 So, the thing is that the, the Internet that this next billion or 5:29 next three billion, on the whole once everybody's made it on the Internet 5:32 that they're going to discover isn't quite like our Internet, the, the one 5:37 that we're used to here or in the UK or, or, or the US. 5:41 And so that's what I'm going to talk about today. 5:45 And so I will start by talking about sheep. 5:49 And, the reason I'm going to talk about sheep is that 5:52 there's a whole bunch of sheep right now for sale on Instagram. 5:56 This is a website out of Kuwait and this gentleman is selling sheep. 6:01 He's got almost 25 hundred followers who are following his sheep feed on Instagram. 6:05 And you know, in, in Kuwait, this 6:12 is actually something that's become fairly popular there 6:14 was an article from a magazine from the region recently, that said if you have an 6:18 Instagram account, you can basically slap a tag on anything, take a picture of it, 6:22 and you sell it right, you put stuff online, put a price, and that's it, right? 6:26 And the lady goes on to say, you 6:31 know, even her grandmother has an Instagram business. 6:33 They call them Instagram businesses in some ways. 6:35 She's selling dried fruit. 6:37 So a friend's cousin is selling these 6:39 weird potted plant things that she's making. 6:40 So people are making these kind of hacked businesses. 6:43 And they're using Instagram as a platform. 6:45 Very ad hoc platform. 6:47 Really there's no shopping cart, there's no structure to it other 6:49 than, you know, the platform is there so people use it. 6:52 Now, Instagram in particular is really popular 6:56 in Kuwait, they even had a conference last 6:59 year for people to come and learn how to set up an Instagram based business. 7:00 But you know, there's similarities in, in other products around the world. 7:04 In Thailand, we've got about 10 7:08 thousand businesses doing something similar on Facebook. 7:10 And again, here, you know, just to, to be clear, again, there's no shopping 7:14 card, there's no Facebook API being used, or anything fancy, to do this, right? 7:18 It's just products being marketed, and in many ways, 7:22 sold entirely through Facebook as opposed to building a 7:25 website, and getting all organized the way, you know, 7:28 people sometimes do, and having an official business online. 7:30 So, what these business are kind of providing 7:34 us with is a glimpse of ki, a new 7:37 kind of, well it's very digital, it's very mobile 7:39 fueled, and mobile first in a lot of cases. 7:41 And it's, it's very much part of the informal 7:44 economy and you know, if you travel to any emerging 7:47 economy at all you, you often see people such 7:49 as this who have little you know, it's called the 7:52 informal economy and in the sense that people just 7:54 start businesses in a much more informal way than if 7:57 you were here, we would have to rent a shop, 7:59 and you would have to get permits and so on. 8:01 Not they're aren't sometimes permits involved, but it's a lot more ad hoc. 8:04 And that is what, you know, business in general has 8:09 looked like for the last thousand years in many ways before 8:11 the industrial revolution, and still persists in other areas and now 8:14 you've got the same thing except it's suddenly digitizing really quick. 8:18 So, these businesses, they're still very much ad hoc, I 8:22 mean when you see, if you see how she wants to 8:25 be contacted, I'm sure there's an email address here somewhere 8:27 but what she's mostly saying is contact me via instant messaging. 8:30 In here case she's got a line account, line is 8:34 one of the insatant messaging services out of Korea, I believe. 8:36 And that's what she uses as her point of contact. 8:40 On the other hand though, there's some really modern aspects, 8:43 some kinda more sophisticated aspects I mean, you know, every 8:46 day she posts the tracking numbers for the stuff that 8:50 she shipped right, and so she could be using DHL, UPS, 8:52 I mean the thing is that you've got this mixture 8:55 of really, really ad hoc, and then slightly more sophisticated, 8:58 and if you look back to Mr., Mr. Sheep Man, 9:01 I mean, again, he's got an Instagram account that he's posted. 9:03 He's got a phone number. 9:07 He has a WhatsApp number, and if you want to contact him on WhatsApp, 9:08 which is that popular app that Facebook 9:11 really, Facebook just purchased a few weeks ago. 9:13 He's using hash tags. 9:17 I mean, you know, the QA animals hash tag, is, 9:18 is, is a pretty kind of creative way to do it. 9:21 And he's got lots of fans. 9:24 So again I mean is this a, is this a business? 9:25 Is this not a business school? 9:27 In some ways of course it is because he's selling sheep. 9:28 And so these services they don't offer the traditional kind of, you know, 9:32 great user experience in quotes that we always talk about when we build products. 9:36 But they very much are good enough. 9:40 You know, they, they've got this really good balance 9:42 of offering the functionality that people need without too 9:44 much effort, or the level of effort that people 9:47 are comfortable with at that point, and they're really adaptable. 9:49 You can adapt them in many ways to your local circumstance. 9:53 And when they don't suit anymore, you just kind of move on to something else. 9:55 The other thing they do is in a lot 9:59 of emerging economies, they're filling some really interesting gaps. 10:01 So the stores in Thailand for, in particular, most of the traffic 10:04 from some of these sites is actually coming from the countryside, right? 10:09 So, these are people who don't have access to, 10:13 they don't go to Bangkok to shop everyday, they 10:16 don't have access to shopping malls and so, they're 10:18 kind of being under served both by brick and mortar. 10:21 But then potentially even by your regular 10:23 e-commerce, in the sense that the larger brands 10:25 might not ship out to the countryside as easily maybe it's a bit more complicated. 10:28 So they, they fill a gap from that point of view as well. 10:32 Now, reaching underserved communities, on the one hand you think of the countryside. 10:37 And you think of people in villages, and 10:42 but actually sometimes that's actually completely the opposite, right? 10:43 There are, it actually applies to other people, as well. 10:46 In the case of China, right? 10:50 So, China, China is huge. 10:51 China has 14 cities with populations over five million, which is pretty big. 10:54 And then it has another 41 cities with more than 2 million inhabitants, right? 10:59 I mean, it's just absolutely massive, right? 11:03 And the middle class in China is growing at 11:06 a rate of 80 thousand people per day, right? 11:09 So, these are people basically who are probably have, have a smart 11:11 phone, are starting to use e-commerce, 80 thousand new people a day. 11:14 So, reaching the people in the countryside, the 600 million that are in 11:19 the countryside is already enough of a problem that is a big problem. 11:22 But in some ways just as a big a problem as the flip side, right? 11:26 Is opening enough actual physical stores, to serve the urban population. 11:29 You know, it's, it's expensive, it's, it's ridiculously expensive in some 11:33 ways, to spread you know, flagship stores like this one absolutely everywhere. 11:37 So it's almost impossible in many ways, right? 11:42 To even just build the networks, whether 11:44 you're Apple, or whether you're Wal-Mart, or so 11:45 on, it takes a considerable amount of 11:47 effort, and maybe the return isn't necessarily there. 11:49 So, to many Chinese, shopping online isn't so much the electronic version 11:52 of the retail, the brick and mortar retail that they've always had, right? 11:58 I mean, in some ways, it is becoming the new commerce in 12:01 a lot of contexts, and consequently using their mobile, isn't just kind of 12:05 a modern alternative to using the PC again it, it's becoming the primary 12:09 and in a lot of cases the only means of using the Internet. 12:13 So there are other differences about 12:18 Chinese e-commerce that are, that're quite significant. 12:20 The first is basically what these stores 12:24 are actually selling and how they're organized. 12:26 So, if you look at the United States, and the UK is basically the 12:29 same, I think most of New York in many ways is, is basically the same. 12:32 I don't, just couldn't find any stats for it. 12:35 So you got almost 80% of online retail that involves individual merchants, right? 12:37 So you go to John Lewis, you might go to M and S, Curry's and so on. 12:41 In China, it's completely different. 12:45 90% of retail is sold through giant online marketplaces. 12:48 The individual retailers haven't even hit the market yet from that point of view. 12:51 And in some way, they, they never may, if things keep going the way they do. 12:54 So what these market places are, they're basically kind 12:59 of the virtual version of a traditional, again if 13:01 you look back to traditional markets from the last 13:04 1,000 years, you take those and you digitize them. 13:06 So you got lots of small vendors or 13:09 sometimes large vendors, but they're all grouped together, right? 13:10 So they enable basically customers and vendors to find each other. 13:14 But, that's, that's basically their role. 13:18 S,o the largest market place of its kind in China and probably globally 13:21 at this point in, in this category is, is T Mobile, by Alibaba. 13:26 Alibaba is a giant Chinese company with a lot of different interests. 13:30 So it's got about 180 million customers at the moment, and there's products 13:34 from about 150 thousand merchants and also 20 thousand well known brands. 13:40 And so T Mobile, what it does, is 13:46 it actually aggregates, very much slightly much larger brands. 13:48 So for an example the brands will actually pay 13:51 an entry fee and it will charge a commission. 13:54 And instead of the brands having set up their own store, so you have you 13:57 know, I think you've got Nestles, kind of 14:00 featuring there, you've got Coca-Cola and so on. 14:03 So, instead of really tiny merchants T Mobile is actually for much larger brands. 14:06 They pay the commission, they entered into the 14:10 store but then they get huge exposure, huge traffic. 14:12 There's APIs that they can tap into. 14:15 There's social media built in. 14:17 It's all mobile optimized. 14:19 It all works absolutely everywhere. 14:20 So it's just this giant platform that you can just basically plug right into. 14:22 And so, for major brands, including Apple they just set up 14:27 a store on T Mobile about three or four months ago. 14:30 her, hosting the virtual storefronts on T Mobile makes a lot of sense, right? 14:33 It's a really good alternative to having to open lots and lots of branches. 14:37 Of course they will still open branches in some of the larger cities in, in China. 14:41 There's a lot of large cities but in this case 14:44 you get access to a much larger audience much more quickly. 14:47 And it's still a legitimate well respected storefront, right? 14:50 I mean it's considered the place to go if you want to shop for official 14:53 Apple goods, you won't go to the Apple Store, you'll go to the store on T-Mobile. 14:57 Alibaba, again, a huge company. 15:02 So they also have a second product called Taobao. 15:04 Now Taobao is consumer to consumer, so it's 15:07 a little bit more like ebay in many ways. 15:09 And here you have smaller merchants. 15:12 It could be actual companies or it can be individuals. 15:15 And they sell products. 15:18 again, very similar to eBay. 15:19 They put their products online, there's a social aspect, you can follow 15:21 people that you like, you can get news feeds and so on. 15:24 But the vendors aren't limited to selling actual things. 15:29 And this is again where it starts to differentiate. 15:31 They're not simply selling, you know, books or electronics and so on. 15:33 You can also sell services. 15:36 In some ways, I don't think Taobao really cares 15:38 [LAUGH] what you're selling, as long as it's legal. 15:40 So for example, this is a travel agent on Taobao, 15:42 a fairly large travel agent from the looks of it. 15:45 And again, instead of having their own store, this is a store 15:47 that they've created using the API and the platform services on Taobao. 15:50 And they sell trips they also do things like arranging travel visas, right? 15:55 So the services that they offer are actually quite broad. 15:59 They can sell you SIM cards for your trip, they can sell you a Wi-Fi dongle, a subway 16:03 pass, basically anything that they could conceivably sell you 16:07 to make your trip more enjoyable, they will sell. 16:09 And they will do it entirely online through this platform. 16:13 So, a nice quote that I ran into awhile ago is that in some ways, is that all of 16:17 this, it's a mix of Amazon, eBay, and PayPal with a dash of Google, right? 16:22 So, you've got the commission based aspect, which is kind of like Amazon. 16:27 You've got the combination of C to C and B to C which is like eBay. 16:30 The PayPal bit we'll talk about in a moment. 16:35 And the Google is the advertising aspect. 16:38 In the case of Taobao there is no entry fee to 16:41 get in like you would charge Apple or Nestle and so on. 16:43 Instead, me, merchants can just post for free. 16:47 But then they, kind of, have to compete for your eyeballs. 16:49 And so they have to buy advertising to actually get you to find their stuff. 16:51 So there's all sorts of different models coexisting. 16:55 But in some ways there's something for absolutely 16:57 everyone, and it all kind of works together. 16:59 And so what you have is this whole family of sites. 17:02 And what it enables people to do is shop for this 17:05 huge range of products that they would otherwise never find, right? 17:07 And, you know, as an example you can buy cars. 17:10 You can buy a Lamborghini, you can buy 17:13 a Puget, there's entire car dealerships on TMobile. 17:15 So these sites are so successful these days that, certainly from an individual 17:19 perspective, running one of these shops is almost kinda like a national pastime. 17:22 Like a second job or a hobby. 17:26 People, you know, tens of thousands of people 17:28 from all walks of life just have these shops. 17:30 And, and they run them, and they manage them in different ways. 17:32 Then of course you also have 17:36 completely legitimate businesses or, or traditional businesses 17:37 that all of a sudden have entirely new audiences that they didn't have, right? 17:40 So you've got millions of jobs that are enabled through these platforms. 17:44 People in small town and rural communities, or they have 17:48 audiences that they would never have been able to reach. 17:51 So, just a couple of statistics, so by example by the end of 2012, 17:54 you have one million T-Mobile and Taobao 17:57 stores that were registered in rural areas. 17:59 Again this this are people who traditionally couldn't have 18:01 traded with you know, the whole entire county this way. 18:03 And the traffic from these sites accounted for more than, 18:07 [LAUGH] than one half of all parcel deliveries in China. 18:10 I mean, some of these numbers are just fantastically large. 18:13 So, this is China mostly that I've been 18:16 talking about, but the model is actually extending 18:18 around the world, and you know, it's working 18:20 because the circumstances are similar in other countries. 18:22 One example but not the only one is, is Jumia out of Africa. 18:25 Again, similar circumstances, people have phones but there are three 18:30 malls per 20 million inhabitants in some of these countries. 18:33 So in their way they're, they're looking at it as a 18:36 unique time to leapfrog over the whole idea of offline, right? 18:39 The whole idea of offline retail that we're so used 18:42 to, that's kind of fundamental to how we run our business. 18:44 They're just, popping right over it. 18:47 I mean, they can't put in 18:49 the infrastructure fast enough right now anyways. 18:50 But, they can put it up online. 18:52 The other thing that's really interesting that's happening 18:54 is that things are starting to cross pollinate, right? 18:56 So, this is just one example that I've been able to find. 18:58 But this is a retailer in the United 19:01 States, she's a lady who lives in California. 19:03 She has a beat business on Etsy. 19:05 She sells cake decorating stuff. 19:07 And she sources all of her stuff from tap, from Alibaba in in China, right? 19:10 So she sourcing all her raw material from China, getting it shipped over. 19:14 She finds it through these market places 19:18 in Asia, and then, she assembles products in 19:20 the US and she sells them back to Americans or, or whoever goes to Etsy. 19:22 You also have the other kind of way around, right? 19:26 This a small business out of Gandro just off 19:28 on the other side of Hong Kong on the mainland. 19:31 It's a family business, four or five people. 19:34 There's a tailor, a designer, kind of like a marketing person. 19:36 And they make Besboke clothing. 19:39 They put you know, nice photography 19:42 online, you can send your your measurements. 19:44 And they will make Bespoke fashion for you basically, 19:46 and they'll send it over by DHL or UPS. 19:50 And they're selling it on Etsy as well, right? 19:52 So using an American platform in this case to reach the entire world. 19:53 Because in some ways the, the Chinese 19:58 marketplaces aren't reaching quite that far yet. 20:00 And, and they are certainly coming our way. 20:02 So, the other thing that's happening. 20:06 I mean, again, you got lots of cross pollination happening right now. 20:07 Chinese consumers are really, really interested 20:10 in products from all around the world. 20:13 Matter of fact, all consumers in emerging economies are 20:14 very interested in, in, in buying stuff from everywhere. 20:17 So, as certainly in the case of China, what's happening 20:20 is you're also finding middlemen who are basically shipping stuff over. 20:22 So if a given brand, like I don't know, I've got a smoothie from Eat. 20:25 Well imagine this weren't food, but it were 20:29 something that people could actually ship over to China, 20:30 if there was enough of a demand, someone would find a way to get it over there. 20:32 They'd put it on TelBel or, well not Tmall cuz that's for official companies. 20:36 They put it on TelBel, and if there's 20:40 an audience, you know, they would keep doing it. 20:41 So you've got stuff going in all sorts of directions. 20:44 So what this is creating in some ways, is this very 20:48 fast growing group of these 20:51 highly globalized, digital first consumers, right? 20:52 So they live in one region, but they're actively 20:56 shopping and seeking out products from all over the world. 20:58 And in many, ways more so than we are. 21:01 I mean I, you know, I, I used to live in Thailand. 21:02 I love Thai music. 21:04 I can't find it over here. 21:06 It's really hard to. 21:07 In some ways I have less access to stuff from around the world, than 21:08 a lot of people from some of the emerging economies have the other way around. 21:11 Because of some of these ecosystems that are developing. 21:15 Now, of course one of the problems that 21:19 happens when you have this giant marketplaces again. 21:21 Some people have to advertize, for people to find them. 21:23 The social media plays a huge part, but still, 21:26 you know, how do you find stuff that you 21:28 like when you've got this store with, you know, 21:30 you got 50, 150 thousand stores in this big platform? 21:33 So, yet another thing that's developing. 21:36 So, This is a little bit of storytelling that I found from a company in China. 21:38 The source is underneath. 21:43 I've got sources for everything in all of this, and the 21:44 presentation is on SlideShare so, please check it out if you're interested. 21:47 So this is, this is Jing. 21:51 She's an affluent young Chinese girl who started blogging about her 21:52 life, and her style, while she was studying in the UK. 21:55 Right, now, she is now your competition. 21:58 Now, this is speaking outwards to British brands for 22:00 example who might want to market things in China. 22:02 All right, so, your competition isn't just 22:04 Chinese brands, it's even just individual consumers. 22:06 All right, so Jing is a marketer, she's got a micro 22:09 blog on Weibo, which is basically the Twitter equivalent in China. 22:12 It has 28,000 followers. 22:15 She blogs about her life, her style, beauty tips, and so on. 22:17 But, the, the catch really, is that she's also a retailer. 22:20 She has a Taobao shop, because anyone can set one 22:23 up, and she offers copies of luxury products that she 22:26 wears on her blogs, so she dresses up and then 22:29 takes photos, talks about them, and then she sells them back. 22:31 They're all limited edition, and it usually takes 22:34 her a couple of hours to sell out right. 22:36 So, what she does, is she promotes products on her 22:38 blog, on social media, on Instagram, anywhere she can find. 22:41 But, Taobao is where she transacts, because 22:44 the platform is available, and it's easy. 22:46 now, she is someone who sounds like 22:51 she's actually created a little business around this. 22:52 There's lots of other people who don't have the time or the energy to 22:55 actually do that much, but might still 22:57 want to participate in this type of environment. 22:59 So, what has developed in China is something that 23:01 they're, they're calling kind of an officially online shopping neighborhoods. 23:03 Again, this are platforms kinda like WordPress, anybody 23:07 can go and sign up, and, what online 23:09 shopping neighborhoods do, is they kinda do what 23:11 she's doing, but again as a platform, right? 23:13 So, they're online destinations, they're created by 23:16 social media, and they're fed by social media. 23:18 And where consumers can explore a curated section of choices of stuff. 23:21 So, basically it looks like Pinterest, in many ways it is Pinterest, but 23:26 with an entire transactional and, you know, 23:29 monetization endine, engine built underneath, which you 23:31 know, Pinterest hasn't necessarily done, and these 23:34 sites, there's quite a few of them 23:36 in China, and they're all category specific, 23:38 which is another reason why they work. 23:40 So, there'll be some entirely about 23:42 fashion, other ones about other things, right? 23:44 And so, as an example this is one of the most popular ones. 23:46 And I will probably butcher the way this is phrased. 23:50 it's, it's called Meilishuo. 23:53 If I'm pronouncing it even remotely correctly. 23:54 It's got 32 million users. 23:57 And just to get an idea, okay, maybe 23:59 so far this doesn't sound probably too exciting. 24:00 You've got, you know, girls posting pictures of sweaters. 24:02 You know, how big can this possibly be, right? 24:04 So, the company gets an, a cut from each outbound transaction. 24:06 It's like a, an online travel agent, right, you go to, 24:11 like, places like Sky Scanner, for example, and you look for flights. 24:13 And if you click through and you actually buy 24:16 a flight you, they'll get a cut from that, right? 24:18 So, they, this site generates five to six 24:20 million clicks for online merchants per day, right? 24:22 These are inbound links to actual merchants that are 24:25 selling things and they get a cut for it. 24:27 And in 20 mil, in 2012 they generated about 300 million 24:30 in revenue 300 million pounds in revenue, for these downstream merchants, right? 24:33 So these is, are, these are viable, useful parts of the ecosystem. 24:37 And, again, they are helping with the discovery. 24:41 The way you have the flight comparison 24:42 and, and so on insurance comparison sites, right? 24:44 And again, if it sounds a little bit, you know, wonky because 24:47 it's about fashion, I mean you could apply this to anything, right? 24:49 Geeks talking about gadgets, fans talking about books, the, the idea is 24:53 really, really sound, it's just not really being applied to other areas. 24:56 So, part of the reason that this all works so well, is that these 25:02 services, they feed into this kind of 25:05 virtuous circle, with mobile adoption and social media. 25:07 And when you look at, you know developed 25:11 economies, and places where there's higher internet penetration, over 25:13 on the right there, there's high internet penetration countries 25:16 like Australia, and Germany, and France, and so on. 25:20 Here you've emerging economies on the other side. 25:23 The emerging economies basically, they go, you know 25:25 as I've said, they go straight to social. 25:27 As soon as people are online, they start using social media. 25:29 So, there's this huge virtual circle that developed, where people instantly 25:32 start using these social technologies, which we don't necessarily get here. 25:36 We have a lot of people who are 25:39 very gradually coming to them, you know, proportionally speaking. 25:40 And China, in particular is completely crazy about social media, 25:44 there's a lot of cultural reasons for that as well. 25:47 But the ecosystems are quite substantial. 25:49 The difference, again, there's all these little subtle differences. 25:52 The social media services in China, a lot of them are actually full blown platforms. 25:55 Again, Facebook likes to call itself a platform. 26:00 Some of the Chinese ones are starting to exceed this quite considerably. 26:02 So, one of the most popular ones lately, and again there's ebbs and flows, 26:06 but at the moment, one of the, the hot ones really is called WeChat. 26:10 It's called Weixin in China. 26:13 This is a different version for the Chinese mainland, with a lot 26:15 more functionality than you can get with the outside of China version. 26:18 And it's mobile only. 26:22 They have a, a Mac client, which is kinda like 26:23 this token thing that allows you to connect your device. 26:25 But basically, 99% of the functionality is mobile entirely. 26:27 It's three years old, it has about 500 million users, 26:32 and it has become basically an overwhelming force in China. 26:35 This was a recent interview there's a link to 26:39 it, it was at the LeWeb conference, and [UNKNOWN] interviewed. 26:42 Hugo Barra, who is ex VP of Android product at Google, and 26:47 recently moved to China to work for one of the Chinese handset manufacturers. 26:50 And he basically talks about China quite a bit. 26:54 And he, you know, he says every single person he knows is on WeChat. 26:56 They don't use email anymore. 26:59 They don't use the phone. 27:00 They don't use SMS. 27:01 Everybody basically does everything through WeChat. 27:02 They talk. 27:05 They do business. 27:05 They do everything. 27:06 And, really the distinction with WeChat, is that 27:08 although it has kind of the normal messaging services. 27:10 You know, it's got text chat. 27:13 It's got group chat. 27:14 Video. 27:15 I mean, it's kinda trying to do all sorts of stuff. 27:16 It's got subscription content, photo blogging, and so on. 27:19 But the big bit is kind of the bit at the begi, at the bottom. 27:21 Which is it's got a super-customizable API, 27:24 a payment platform, and a virtual wallet. 27:27 So, there's a lot more you can do now, this is one of the slides 27:29 you hopefully you can, you can kind of see it, but again, it's all online. 27:33 What WeChat actually does, is it's kind of 27:39 created basically a platform inside of a platform, right? 27:40 So when you subscribe to brands you get 27:43 their lovely little icon, this is again within WeChat. 27:46 And then, what you're seeing all on the right, is 27:49 basically the, the whole experience created for these brands, right? 27:51 So the middle there for Uniqlo. 27:55 I don't know if you can see it. 27:56 But at the bottom here, there's a whole menu structure. 27:58 And, I've got a little sub-menu open. 28:00 I mean, you're basically creating a website, 28:02 inside of the app through the API. 28:04 And you can embed all sorts of services in there. 28:06 You can link to your website through it in a web view. 28:09 The other thing you can do is, you've 28:12 got this kind of interactive voice response type system 28:13 where, you know, for example, you can go to 28:16 Starbucks and you say I wanna know about coffee. 28:18 And so, they'll return to you, a little blurb with, 28:21 you know, other things that you can ask about coffee. 28:23 And then you can say okay, I wanna know about cappuccinos. 28:25 So, you can do support, customer support, and 28:27 all sorts of things through it that way. 28:29 So it's, again, it's a pretty robust platform inside of a platform. 28:31 And so again, if you're [LAUGH] if you're looking for any fragment 28:35 whatsoever of a one web idea in this [INAUDIBLE] it's completely not there. 28:38 I think, you know, in some ways, they're trying to own the entire 28:42 experience, and so far people are, you 28:45 know, liking it quite a bit, unfortunately. 28:46 But you know, part of it is the, the payments and the wallet platform 28:49 that's within it, all of this stuff is actually really useful to people, right? 28:52 So, as an example, that, at the 28:56 moment they're trying to grow the wallet platform, 28:58 they're trying to get people to sign 29:00 up their bank accounts into the wallet platform, 29:02 and so, they had a promotion for 29:04 Chinese New Year traditionally Chinese people give these 29:06 little red envelopes, physical envelopes with money 29:08 as gifts as Chinese, at Chinese New Year. 29:11 And they did a virtual version with a bit of a gamification aspect. 29:13 And in the space of 24 hours, you know, 29:16 they had five million people link their bank accounts to 29:18 WeChat, so that they could buy these envelopes, and 29:21 sent 20 million of them to friends all around China. 29:23 So, the scale is quite substantial. 29:26 hm, whoops. 29:29 So, the whole idea of virtual wallets, mobile payments, virtual finance it's 29:31 particularly also well in line with what a lot of emerging economies actually need. 29:36 There's a whole lot of local kind of challenges that we've, we've gone past. 29:42 I mean we've, we've had formal banking structures for many years. 29:45 People, the credit card penetration in the US 29:49 and the, you know, in Europe is quite high. 29:51 A lot of that is still coming into place in a lot of these countries. 29:53 Places like Indonesia, for example, where credit card penetration is as low as 15%. 29:56 So, obviously when you're talking about 30:00 e-commerce, you've got these crazy challenges. 30:02 Cuz everything's normally dependant on, well, for one things, 30:04 credit cards is, is a large part of it. 30:07 So, all these structures are developing instead, right? 30:09 Some of them are completely leapfrogging. 30:12 And other ones are just adapting differently. 30:13 A lot of you may have heard potentially 30:17 about this already, but in countries such as Kenya, 30:18 India, the Philippines, there are entirely virtual banks that 30:21 have been set up, that run entirely on phones. 30:24 As, as low as really tiny little feature phones, 30:27 all the way up to whatever someone would have. 30:29 And you can deposit money, you can send and receive money, you 30:31 can pay for stuff, you can pay for online and offline purchases. 30:34 You could go to the shop and pay for something with it, but you 30:37 could also make a purchase online and you could link it through this virtual 30:40 account, and you do it all through your mobile phone, and it doesn't matter 30:43 if you have some horrible, little Motorola from 15 years ago, you, it still works. 30:47 So, that's one of the strategies that they've got. 30:51 Another thing is that cash on delivery is still very, very, very popular in a lot of 30:54 southeast Asia, a lot of Africa, in China as well and just as an alternative. 30:59 Because you can't actually pay by credit card and then there's also all sorts 31:04 of ways to pay by bank, but pay after the fank, fact by bank. 31:08 Another problem people have again, if you've got all these big marketplaces. 31:12 Tons and tons of vendors how do you know that you're gonna get something legit? 31:17 You know, right? 31:21 How do you know you're not gonna get a counterfeit item of 31:22 some sort, and how do you, how do you trust the these vendors? 31:24 So, in the case of China, in particular, because these marketplaces are so huge. 31:27 Alibaba has set up Alipay, which is its, its kind of 31:32 virtual wallet and payment platform that goes with Taobao and Tmall. 31:35 So, Alipay is kind of linked in, and, what 31:40 it does, is it doubles as an escrow service. 31:42 So, it doesn't actually re, rec It doesn't actually release the payments to 31:44 the vendors, until people have received the goods, and the goods are okay. 31:50 So, it kind of has established trust that way 31:53 and it [UNKNOWN] acts, you know, even more than PayPal 31:55 where you can basically say oh, i got my thing 31:58 but I don't like it or it didn't work out. 31:59 In the case of Alibaba, the money doesn't even get released. 32:02 So, what's happened with a lot of these 32:05 platforms is, because their so useful they've become. 32:07 In some ways, the started as one thing, and then they become something 32:11 else, so Alipay in particular has 800 32:14 million registered users, so it's slowly kind 32:16 of seeped out into everything, and you can now use it, again, to 32:19 pay for things offline and online, kind of like the virtual banks in Africa. 32:22 You can pay for school fees you can, you 32:26 can pay for loans mobile phone bills, hospital charges. 32:29 They even have investment products now, especially if you're a vendor on Alibaba, 32:33 and you already have, you have money that's stored there on a regular basis. 32:36 You can actually stick it in an investment fund, while it sits there. 32:39 Basically, anything they can do to keep your money in the system. 32:42 but, you know, it, it's actually valuable to people. 32:45 The other thing that's kind of interesting is that, 32:49 you know, some of these are brand new platforms, right? 32:52 They haven't been around for very long. 32:53 But the prior generation of emerging economies, and even some of the current 32:55 ones, there are platforms like this that have been in place now for decades. 32:59 in, in Korea and in Hong Kong there are services that started as very 33:03 similar to our Octopus card here in the UK oh, sorry, our Oyster card. 33:08 I always mix them up. 33:12 The oyster card in the UK to pay for the tube. 33:14 But just imagine if ten years later, the oyster card 33:16 were used to pay for Starbucks and your restaurant bill. 33:18 And you could use it as an entry card to get into your hotel room. 33:22 And you could use it to pay for almost anything. 33:26 You could use it even for online payment, right? 33:28 So, a lot of these started with one kind of 33:30 technology, which might have been RFID and a little card. 33:32 And they keep adding new technologies along the way. 33:35 Almost all of them are mobile, which is why it's worked so well. 33:38 And so, they just become, they keep getting more and more useful and relevant. 33:43 okay, not too much time left so, now all of this have 33:47 all been kind of you know, very kind of serious things, right? 33:51 You're shopping for stuff and you're paying for hospital bills and so on. 33:57 But because people are used to having 34:00 all these virtual currencies, you know, instead of 34:02 paying for real stuff, why not just make new stuff up to pay for, right? 34:05 So one of the interesting platforms in China right now is called YY. 34:08 It's kind of like a giant Google hangout, it does streaming video. 34:13 300 million users, about 11 million channels. 34:17 Lot's of karaoke, there's talk radio. 34:20 There's people doing educational stuff on it. 34:22 All right, so it sounds pretty much like a lot of the platforms we have. 34:25 The big difference again, is that everything is monetized, right? 34:28 So, it has its own virtual currency. 34:31 So, what people do, is they'll set up a channel, and they might have 34:33 a news program or whatever they do every night, or they might sing every night. 34:36 There's an awful lot of singing. 34:39 And they develop an audience, and the audience 34:41 will send them virtual gifts, and they cost as 34:43 much as a P or 2P or so, you know, it's really easy to send virtual gifts. 34:45 There are roses and lollipops and things. 34:49 Some of the gifts are much more expensive. 34:51 And again, it's the scale that makes it really interesting. 34:53 Some people are making substantial amounts of money on this thing As, you 34:57 know, as far people can tell anyways from the various articles that I've read. 35:01 As much as, you know, 15,000 pounds a month in virtual gifts that are being 35:04 received by people doing things like, you know, 35:08 doing Photoshop lessons, streaming Photoshop lessons every night. 35:11 In Korea there's even this lovely gentlemen who apparently kind of sings 35:15 and dances while eating noodles every 35:19 night and has a ridiculously large following. 35:21 [LAUGH] and you know again, it's all virtual gifts. 35:24 It's, I,I mean, I don't know what you would call this, right? 35:28 But it's a new kind of, type of, a new type of kind of business and monetization. 35:31 so, mobile devices are the glue in all of this. 35:36 I mean, most of this would just not work without mobile. 35:39 It kind of binds everything together. 35:41 Even to the point where some of 35:44 these platforms are, you know, completely linked. 35:45 To things that here we don't consider particularly useful. 35:48 So, WeChat, for example, is, all 35:50 the functionality's built around QR codes, right? 35:52 Every single WeChat user has their own code. 35:55 It comes in the app. 35:58 You can even customize the way it looks. 35:58 And so, if you want to follow a brand, a person, if you want 36:00 to check into some place, all you have to do is scan the QR code. 36:03 And it does a lot of this for you. 36:06 And, the reason why this works, again you get this virtual circle happening, is that 36:08 in China in particular, but certainly in other 36:12 parts of Asia, QR code readers are everywhere. 36:15 You don't have to download one. 36:17 You don't have to worry about whether your phone will have one. 36:18 Most of the apps you have will have one, right? 36:21 So on the right over there is the Baidu web 36:23 browser, which is one of the really popular ones in China. 36:24 If you look up a the very top there, there's a QR code reader built in. 36:27 It's there, it's always there. 36:30 You don't have to think about it. 36:31 The one in the middle is just a random travel app. 36:32 It's a well popular brand, but it's a travel app. 36:34 You know, why would it need a QR code? 36:37 Well, why not in some ways? 36:38 So once absolutely everyone has one, then everyone starts to use them. 36:40 They're even being built right into the camera, which they should 36:45 of been all along, and they have been in Japan since forever. 36:48 But some of the brands have actually built them in. 36:51 And, and some of them even have put WeChat recognition in the QR code itself. 36:53 So, it kinda fast tracks we cat, WeChat adoption through the camera. 36:57 So, interacting with WeChat or, or interacting with QR codes is 37:02 kind of mundane, and transacting with QR codes is kind of mundane. 37:06 Everybody does it. 37:09 And so, what's starting to happen now, is 37:11 that again, all of these things is developed as 37:13 mobile, but these companies are so big, they're starting 37:15 to think, okay, well how do we take the. 37:17 Online, mobile thing offline, so they're all starting to partner with department 37:20 stores, you know, any brand that has brick and mortar that they can tie into. 37:25 To start to create an ecosystem where basically, you can pay for 37:31 anything anywhere with one of these platforms, with one of these apps. 37:34 A lot of it scanning QR codes, kind of like this example 37:38 that Barclay Card is trialing with John Lewis where you, you scan this. 37:41 And then, you know, somebody will deliver the 37:45 suitcase to you, except the scale is fundamentally larger. 37:46 These, there's just so many people who can do this compared, to, for example, in the 37:49 UK, I don't know, there might be a 37:53 few million who could actually take advantage of this. 37:54 So, these brands and consumers, they're not 37:57 just kind leapfrogging the desktop or the. 37:59 For finance, or physical retail. 38:01 They're almost kinda living in this giant rapid prototype, right? 38:03 And it's the numbers, right? 38:06 PayPal, 25 billion in mobile transactions in 2013. 38:08 Alipay, 150 billion. 38:12 So, when you experiment at that scale, it, 38:14 well you, you're experimenting at a much larger scale. 38:16 You can, you can figure out what's working. 38:19 You can do A, B testing. 38:21 You can do all sorts of stuff that. 38:22 At a level that, at, at the moment, we're, we're not yet capable of doing. 38:24 And so, the people who live in, in a lot 38:28 of these countries, they're almost, you know, living in a 38:29 world where offline, online, mobile, all these words are rapidly 38:32 becoming irrelevant and certainly, in the future, they probably will be. 38:35 And part of it is they have, they don't have the baggage that we have. 38:40 They don't have the structures that they need to then, you 38:42 know, tear down so they can put these new ones in. 38:44 They don't have to worry about what's normal 38:46 and, you know, they can just take, okay, 38:48 we've got these opportunities we've got these constraints, 38:50 we can kinda turn one into the other. 38:52 And the cool thing is, that they can 38:55 also really experiment with kind of weird stuff, right? 38:56 Even if it's crazy, in some ways, why not at this point, right? 38:59 So, one or two last little examples there's 39:02 a Russian e-commerce brands e-commerce brand called Lamoda. 39:05 So, in Russia there's really poor postal infrastructure. 39:10 You can't get stuff to places in time. 39:13 You can't track it, there's all sorts of problems. 39:15 So, they're like, okay, well why don't we just completely turn this around. 39:17 We wanna sell people stuff online. 39:20 We've got bad postage infrastructure. 39:21 Okay, so what do you do? 39:22 So, what they've done, is they've hired a fleet of delivery people. 39:24 They deliver stuff as you normally would to a person's home. 39:27 But they bring extra stuff. 39:31 They bring stuff to up-sell. 39:32 They bring accessories that might come with the thing that you've just bought. 39:33 They give you 15 minutes to try it on. 39:36 If you don't like it, they'll handle the. 39:38 Taking it back for you. 39:40 If you like more stuff, they'll let you pay for the more, the more stuff. 39:41 [LAUGH] And it's cash on delivery, a lot of it, because they, they 39:44 have similar problems with credit cards, and 39:47 other issues with credit cards in Russia. 39:49 And so, you know, they've basically taken all these weird constraints, and 39:51 turned them into an opportunity to 39:54 actually make people, in some ways, happier. 39:56 Apparently, this is working quite well, 39:58 even though it appears completely unscalable. 39:59 In Korea, you've got stuff like this, and 40:02 you've probably seen this before, cuz it was 40:04 actually started by Tesco but a lot of the subway systems in APAC are very, very new. 40:07 So they're all completely enclosed, you can't see the 40:12 tracks the way you can still in the tube here. 40:14 So, you've got these big walls that ,you 40:16 know, have nothing on them except advertising usually. 40:18 So, they setup virtual stores on the 40:21 walls, there's QR codes all over there, and 40:22 as you're waiting for the subway to get in, you can scan and you can 40:24 click, and then you probably have a wallet platform somewhere on there, and you can 40:27 buy stuff and it'll be delivered to your house by the time you get home. 40:30 Other little crazy virtual stunt that has happened recently. 40:35 There's a grocery store chain, again, entirely off online. 40:39 Right? 40:42 So again, a lot of these are kind 40:43 of online people moving offline or vice versa. 40:44 So this online grocery chain, they set up. 40:46 A thousand virtual reality branches. 40:49 So, it's, it's almost like geocaching, but with grocery shopping. 40:51 So, you know, if you walk to a certain spot in London, 40:54 you could open your app, and you would be able to shop. 40:57 But then if you leave the spot, you wouldn't. 40:59 I mean, it was a complete stunt. 41:01 But at the same time, all of a sudden, they had a thousand new 41:02 stores that they didn't have yesterday, and it created a lot of publicity, right? 41:05 And, you know, one last example, there was an article in 41:09 I think it was just in Wired just a few weeks ago. 41:12 You know, talking about Africa, you know, so why build expensive roads in 41:15 remote rural locations, when you can get drones to deliver stuff for you? 41:18 So you know, I mean, on the one hand, 41:22 it sounds completely crazy, but you know, why not? 41:24 Again, the infrastructure isn't there, what can you do instead? 41:26 And if you start thinking about the Lamoda example, with the up-selling at the door. 41:29 Well, if you got the drones to deliver it, and they could 41:33 deliver more stuff and then they could even order stuff for you. 41:34 When you start thinking about ecosystems where 41:37 there's nothing there, and you can put stuff 41:39 in, and you can experiment with stuff, you can come up with some really crazy ideas. 41:41 So, the rise of mobile and the 41:46 internet, it's already changed our world beyond recognition. 41:47 So we really don't know what's going to happen next. 41:51 What we do know however, is that the future the 41:54 opportunities will be so much more global than they've ever been. 41:57 And if you want to be able to meet 42:02 the challenges, and, and compete in this new market place. 42:04 The one thing that's really important to remember. 42:07 Is that things might seem futuristic to us in many ways, they 42:10 might just simply feel kind of new and practical to other people. 42:14 And this is a great quote just from a few weeks ago from the 42:18 Economist, to wes, to Westerners, mobile banking is a new way to do something old. 42:20 But to many Africans, it's simply the obvious way to do something new. 42:24 And that's it. 42:29 Thank you very much. 42:29 [SOUND] 42:30