Ties That Bind - Bay Area Council Economic Institute

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Ties That Bind
San Francisco-based Dae Advertising was formed in 1990 by a group of friends to serve what
1990 U.S. Census Bureau figures revealed to be a burgeoning Asian-American consumer market
defined by relatively high disposable incomes, education and consumer expenditures. Dae
worked with clients ranging from Miller Brewing to Wells Fargo Bank to Albertson’s, tailoring
campaigns to Asian-American tastes, aesthetics and aspirations.
Dae co-founder Wei-Tai Kwok notes that more than a third of the 12.5 million Asian-Americans
in the U.S. are in California. Roughly 22% of the Bay Area’s population is of Asia-Pacific origin,
and about 8% are ethnic Chinese, according to U.S. Census Bureau 2005 data. That, he says, has
led to a cross-cultural understanding here that aids businesses in tapping markets on either side
of the Pacific.
Dae’s first major Chinese client was 999 Pharmaceutical, a maker of powdered ginseng, echinacea
and other herbal medicines owned by the People’s Liberation Army. 999 hoped to establish a
retail brand presence in the U.S. in 1996, and Kwok bought space on a huge billboard in Times
Square promoting the company. Eventually 999 became a listed company and a supplier to
health food store chains and pharmacies, and the sign remained prominent in Times Square for
several years.
Dae also helped Hong Kong-based Vitasoy market its soy milk products in the U.S., by first
selling to an Asian-American customer base. Kwok sees opportunity in large Chinese manufacturers
trying to build global brand identity in the U.S., as Lenovo has done by purchasing the PC
unit of IBM and as appliance-maker Haier attempted in its bid to acquire Whirlpool. Another
such company in Dae’s sights, Konka, is among the largest television manufacturers in the world
and a supplier to Sharp, Toshiba and other brands, but remains unknown outside China. It is not
lost on these firms that most of the end user value is not in the physical production of their
goods but in design, marketing, advertising and branding. It is inevitable, Kwok believes, that
those firms will be looking to go beyond a supplier role and raise their profiles globally.
Silicon Valley played an important part in the “rollup”—M&A expansion, to achieve industry
scale—of Focus Media Holdings. Focus was begun in January 2003 by Jason Jiang, a 33-year old
ad executive, who had noticed while waiting in a Shanghai office building for an elevator and
staring at a print movie poster, that workers waiting for and riding in China’s slow office building
elevators are a captive audience and might like to watch more interesting video advertising.
Jiang arranged successful six-month trials to install 17-inch screens in 50 buildings in Shanghai,
showing ads from Hennessy cognac, Fujifilm, China Netcom and others. He next raised an initial
$500,000 from Softbank China Venture Capital to set up offices and a company structure. That
in turn attracted $42.5 million in 2004 from additional venture investors, among them Draper
Fisher Jurvetson. Focus shifted its attention to Beijing, Shenzhen and Guangzhou, and office
and high-rise condominium buildings, supermarkets and airport shuttles serving affluent Chinese
workers, residents and travelers. The list of advertisers grew to include Samsung, Nokia, General
Motors Corp., Ford Motor Co., Motorola, HSBC, Haier, Unilever and MacDonald’s. The number
of screens grew to 35,000 in 52 cities by late 2005.