#3 The impregnable data walled gardens of the big boys in China
Unique challenges and opportunities in China's professional intelligence industry - Part 2
Welcome to the 3rd issue of Paid Sub, the only newsletter about China’s professional intelligence or Data-as-a-Service industry right now.
In the last issue, I discussed the most prominent challenge in this industry in China, which is that despite a highly digitalized society, most of the data exist in separate silos/islands and are thus under-monetized for professional intelligence. With challenge always comes opportunities, and the biggest opportunity here is the chance for companies to play a “super-connector” role for all of these data silos.
In this issue, I will also explain the second “challenge-opportunity” pair unique to our industry here in China.
Challenge-opportunity #2: The impregnable “data walled gardens” of the big boys
There is a special type of data silo in China.
China’s early adoption of digitalization also gave birth to gigantic data organizations, the most prominent among which are China’s world-famous internet companies, including Tencent, Alibaba, ByteDance, Meituan, RedNote, JD, Pinduoduo, and so on. Each of those players controls a massive internal database of highly detailed user and business behaviors. They are so big that perhaps the term “data silos” or “data islands” are not accurate in describing their databases anymore. They are “data continents,” or, as many people will put it, “data walled gardens.”
And it’s not just internet players. Commercial banks with nationwide networks, three state-owned telecom operators, and many other corporate giants also stand vigilant above their own garden walls against prying eyes.
Compounding the problem for our industry is that, unlike in the West, when you think of e-commerce, you think of Amazon, search = Google, social media = Facebook, video = YouTube; but here in China, most of the players are vertically integrated, so that for each industry vertical, there are usually several players competing there. The e-commerce space is crowded with Alibaba, JD, Pinduoduo, Douyin, Kuaishou, RedNote, and even Tencent’s WeChat. Although Tencent’s WeChat dominates instant messaging, in the broader social media space, it has to share space with Douyin and RedNote. In videos, there are Douyin, Kuaishou, Bilibilli, and WeChat. For “search”, Tencent, RedNote, and Douyin have been eating away at Baidu’s expense for a very long time.
Within someone’s own vertically integrated garden, they know everything, everywhere, all at once. Just a few clicks away will give you access to every detail about each click of each user.
But by contrast, each walled garden knows next to nothing about what is going on in other walled gardens. There are no channels connecting those big walled gardens to each other.
Why aren’t those walled gardens sharing more data with each other? Cutthroat competition is one thing. Lack of trust in business culture (which I will elaborate a bit more later) is another. For now, it’s sufficient to just remember that they are not connected with each other, which also makes it extremely difficult for third-party players to access those data. 1
But the opportunity here is also obvious: whoever can break open the walls of some of these wall gardens, by gaining garden owners’ trust, they can unlock a vast body of previously unrealized value.
An example is this data company called ChanMaMa, a leading provider of data analytics tools serving merchants in the ecosystem of Douyin, the Chinese precursor to TikTok, also under ByteDance Group. Rumor has it that Douyin has opened at least some data APIs for ChanMaMa, which offers relatively smooth access to data so that ChanMaMa does not need to web-scrape Douyin’s data like most other players. This access gives ChanMaMa’s data great advantage in terms of accuracy as well as speed, and now it has become the go-to option for analytical tools for anyone who wants to sell stuff on Douyin’s platform, and is rumored to boast an ARR of ~$30m, which is very sizable in China’s fledging professional intelligence industry.
A bigger potential breakthrough is not just by working closely with one of the walled gardens, but trying to link them together.
This is similar to what Travis May of Datavant and LiveRamp fame dubbed the “Give-to-Get Model”. As defined by Travis, in this model:
companies have to share data, and in return, they get access to data that has been shared with them.
NielsenIQ is a great example. It is the leading provider of FMCG data. It gets data from the voluntary sharing of sales data by supermarket chains. In return, Nielsen gives aggregated data back to contributing supermarket chains. Then, Nielsen monetizes the data it collects, for free, by selling those data to consumer brand companies, who need reliable intelligence of their competitors and make strategic adjustments accordingly. It’s a beautiful business model, where supply is essentially free, while demand is also inelastic, creating incredible moat. Many intelligence firms, such as Visible Alpha, Tegus, and Beauté Research, run on this model.
Just imagine what will happen if such a model applies to China’s big data walled gardens. For instance, if someone could persuade China’s e-commerce giants to trustingly share data with them in exchange for returning aggregated industry data, how much value could this generate? Garden walls will be torn down. Everyone—the contributing e-commerce platforms, merchants, and even government agencies—will gain insights about the complete picture of consumer journeys, unencumbered by each platform's sample biases.
I think we are far, far away from this future, but the optimist in me believes that, as our industry grows and our industry leaders become more widely known, this future will come sooner or later.
In the next issue, I will discuss two other challenge-opportunity sets, including a lack of trust in our business culture and the fact that generations of business models and technologies are crammed into the same starting line. Stay tuned!
I guess “data walled garden” is a problem common to all the world. But in more developed markets, those walled gardens allow at least more open data APIs (such as that of Reddit and Twitter/X.) And it’s compounded by the fact that China’s players are more vertically integrated, making them less willing to share data.
This is great. Very helpful in illustrating China data and digital ecosystems...nice little graphic.
Good insight 😌 Can i translate part of this article into Spanish with links to you and a description of your newsletter?