Sir Martin Sorrell, chief executive of the world’s biggest advertising network, WPP, has a warning for technology and media companies: “watch out, the Chinese are coming.”
Speaking at the IAB UK’s annual Engage conference in London today, Sorrell said the days when the West assumes Chinese companies merely “copy” the strategies of established businesses are over. If they do steal at the beginning, they “certainly get to the stage when they don’t,” he added.
People in the West need to wise up to the fact that companies like Alibaba, which has a market cap of $US213 billion (more than Facebook at $US188 billion), and creeping up on Google ($US367 billion), are now “powerful companies on the world stage,” fuelled by the country’s strong recent economic growth.
He also made reference to four-year-old Chinese smartphone manufacturer Xiaomi, which has grown rapidly in the region to overtake Samsung and Apple in terms of market share in the second quarter of this year.
This week, a spotlight was cast on Xiaomi after Apple’s chief designer Jony Ive accused the company of “theft” by copying the design of the iPhone and selling cheaper versions in China.
Sorrell noted the shift in power to China has been highlighted by the news that last year the Xiaomi recently hired high-profile Google executive Hugo Barra to take the brand into India and other regions, who has in turn hired another ex-Googler — Jai Mani — to help lead the push.
However, some observers say Chinese companies’ international growth will be stunted because of their close ties to the Chinese government. Sorrell referenced a Business Insider interview with PayPal co-founder and billionaire investor Peter Thiel, who said Chinese companies “are protected behind the great firewall of China [‘s government], and investment in Alibaba is good as long as Jack Ma stays in the good graces of the Chinese communist party.”
Sorrell retorted that while that might be true to some extent now, “don’t underestimate [Chinese companies’] ability and dedication to moving the model outside of China.”
The influence of the Chinese government over companies entering the region can also be of benefit to companies based in China when it come to warding off rivals.
One of the “two big threats to Google” — which Sorrell also said are now a “more friendly frenemy” than in recent years to WPP — is regulation (the other was that as companies grow in size, so do the number of problems it has to deal with). Sorrell said this threat to Google particularly pointed in China where the government maintains tight control over the internet, nipping in the bud any signs or dissent or challenges to the ruling party’s leadership. As such many of Google’s services – including search, its most lucrative business in terms of revenue – are frequently disrupted and most of the time inaccessible.
YouTube has been blocked in China for several years.
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