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Find here the China paradigm episode 23. Learn more about Dmitry Shkylar’s story in China and find all the details and additional links below.

Full transcript below:

Matthieu David:   Hi, everyone. I’m Matthieu David, the founder of Daxue Consulting and its China business podcast, China Paradigm. Today I am meeting with Dmitry Shklyar.

For some reason, you have implemented in China, and one of my clients was interested in better solutions, so the reason why we met was when I looked at your LinkedIn profile I found actually I didn’t know that you had been in contact with them for so long. You have the Learning  2007 and 2009 which was back when Learning was becoming to become more international and during the Olympic games in China, so it was a big time for sports brand, so you have been what we say, a China veteran.

You have been an entrepreneur in China for a long time; more than 12 years now. You have observed the Chinese market and been involved with China and the rest of the world especially, I still by your LinkedIn profile when we talked about in preparation that Sofya made on paper a lot with Russia as well; between Russia, China and also Israel.

So, you are currently monitoring Eastidea as we can see on the logo behind you and you are representing different companies, including SCREEMO and And reality. As I understood, Eastidea is representing those companies, and generally speaking, is representing tech companies in China. In China, some things are okay. They have big partnerships and tech companies especially in AI and also for SCREEMO; out of door advertising, OTO – I don’t happen to know which one it is; if it’s online or offline. So, the first question is what I said correct?

Dmitry Shklyar: Yes, 100% of what you said is correct. It is true. The first time that I come to work with China was I think was around 2006 and that time I was still a student at university, but I got the chance to work for the Olympic committee and different federations in Russia at that time. When I was starting with the Chinese, I had a degree in the Chinese economy, and I think it was my first approach to China when actually I reached the labeling company for that time I was dealing of course with sportswear. I like the profession, I like sports, and I dealt with sports and lots of other things as well. In Shanghai, we played volleyball in the Shanghai tournament league, etc. We had the team as well.

Actually, we had like now, we are gathering again, and we like sports so much; very much and it was the first approach to China where actually Learning was the first stage when we could actually start with the product. I mean, I started from there with the product and working for the people who were introducing their interest of the Olympic committee, and we started as entrepreneurs in China with the Learning Company. It was really tough; it was really long-term relations with them. I think maybe we dealt with them for like three years and at that time for the journeys to go outside of China. It was kind of staff; not a lot of people understood why we were doing that, but we saw a lot of potential in the product even if it took 12 years, 13 years to a topic, that time the quality already was really satisfying. The design and everything was good. I mean not as good as maybe the most famous brands where you can tell them by their fingers, but we found out that it had really great potential.  It was a great connection made with Shaquille O’Neil and so on.  

I don’t want to do like too much at a time, but this was the first step, and I mean after maybe… I had some several years of coming back to China, and I was studying, developing myself in terms of sales, commercials, learning a lot about how to do digital marketing in China and many other things and then at the end of 2013 I actually came back to China while raising in investment funds and starting to do the new business here in China-related stuff, without going into detail and this was my second step here in China where I actually opened retail stores in Shanghai because it was related to the high-end profession and during my operational; during my time when I was acting as the CEO of this company I realized that the retailers are actually facing a lot of difficulties out to increase the turn-out of our customers inside the stores.

I mean you can do a lot of digital marketing in China, a lot of digital activities where the other channels reach. You think it might be a profit for a business, but when you start a business in China and especially in retail and not on a big scale; like, opening a few channels or chain stores, etc. those journeys become to be really heavy in terms of how to get the lead, the cost of the leads are super high and then realize that in order to focus on how to do the online digital marketing in China for a channel which is actually a huge role then you have to understand how to deal with all those channels; how to create multi-channel networks etc.

And you have your own burn rate and you understand that, okay you have this limited amount of money; you have to hire people, you have to find the place to import, and you have to move a lot of things around, and then there are people sitting here who are telling you, “Look, you have three months to reach an agreement so you start to think absolutely different and you say okay, “You know, instead of interacting online, let’s interact with the customers on site” and that time I figure out for myself that all the interactive things lead to indoor digital signage and for the technologists for the digital signage in China might be the appropriate key for success and in spite of the day by day business in stores, and it is going to be great channels for the indoor advertising and starting this advertising, I actually start to dig more and more deeper into the subject where technologies can really change the future of retail and the future of advertising because one, this is my personal point of view; I mean some people can accept that somebody and say, “Okay, it’s not true”, but for me content is always the king.

It doesn’t matter what kind of technologies you will do, or the companies do. The important thing about how branding for the customers is really important. What do we offer and how we would follow up with the results that we are getting through the advertising and through the activity in the stores?

So, usually a lot we see daily is like either the static and nice picture with a lot of co-direction messages, “Come and scan the store and you will get something” and blah, blah, blah or you have some ladies dancing on the beach, and that’s okay. Well, you do some [inaudible 08:30], but it’s not something that will help you follow up with the results and at this point actually one of my good friends from high school, Luke Zimmerman; the founder of SCREAMO from where I was actually advertising in the country got in touch with him, and we realized that there are a big potential and marketing challenger doing the co-interaction and marketing solutions between screens and mobiles inside the stores and the first time that we… we took actually what we got from China with this product and us also Barcelona; MWC, where we did a nice presentation of the product, and the CCN wrote back and who was a very famous guy, he did some little bit about the story that we were doing and immediately after 2 days we got a phone call from the people from a Bank who were interested in the implementation of this in China.

So it was a lot of like; a big chain from like different things which happened let’s say in the really few… a short time of 3 or 4 months we brought it back to China with the solution. So, in 2015 when we started the way with our tech solution in China, we understood that was a huge demand for the technologies related to the communication, but the thing is that nobody knows how to actually follow up and instead… it will not be enough only to have this tech solution in China, but as well need to give a lot of push and support for the customers actually how to create the right content and it was quite challenging because we didn’t at that time we didn’t understand and even now sometimes, we don’t really understand what features or design or what animation or let them cut some kind of a [inaudible 10:26] will be eye-catching for the Chinese customers because from province to province some features in design or communication can be… and customers need to be considerate and considerate based on the holidays, vacation – I don’t know, local trends, so it is huge, huge work behind not only just providing this tech solution in China and saying, “Okay done and done.”

So, yes we have done a lot of… not a lot, but many successful cases here and if you are talking about the business; on the business side with the technology we have got SCREAMO, and we put our solution to Shanghai, Coca-Cola; a laboratory for Coca-Cola, the location in Shanghai when actually all that they can come from Coca-Cola and learn about different technologies. We have done some marketing for example, in terms of solutions for their brand.

Moreover we established great relations with the Shanghai media group where it was about just to implement our solutions within SCREAMO and going on this direction I decided to follow up with my… to establish my company by name is Eastidea Solutions where at the beginning the first focus was actually on taking to be a like kind of a business integrator where technologies or software developers from overseas who want to reach the Chinese markets, but they want to do this in a way a bit different than just going for some information period or looking for the BC on the Chinese markets because we find out that after meeting a lot of investors, private investors or even their big brands and actually what everyone is looking for and this is like from our experience, this is where we see the most results is given the fact that first of all, the companies who want to – I mean especially the start-up’s. Let’s say the early days; this is the early focus where we are working with those companies and when they start to be faced with a lot of difficulties, so they are starting from the location of… let’s say they are the core of the company to develop the Chinese markets or the product for the Chinese markets and it’s becoming to be very cost effective and let’s say time-consuming and three months difference is not enough for private companies to do let’s say the breakthrough and to get the right position in the Chinese markets in terms of technology.

So what is our policy and for today, if we after doing some research and understanding the market needs and understanding the company, there is a great mesh between the customers and the partner’s pipeline and in China, if you see in this product, there might be let’s say we will have a positive result and within a very short time, we can get in a [inaudible 14:00] to sign with customers in the long term and providing technologies we will start to bring those companies into the Chinese market.                    

Matthieu David:   What I am trying to understand with this company is; did you sign the contract with… you have an extra activity on the Chinese market, and you use them exclusively, and then you sell for them, and you invoice with your own company for them, or it’s a retainer; how do you work with them? What is your typical contract? 

Dmitry Shklyar: Okay, so the typical business approach is we found your product is interesting for the market. We know what to do with your product, and basically, we will focus on let’s say major industries is like indoor/outdoor media and retail and all the interactive things for the inter-businesses even for the bank, for the smart regimes, retailer, etc. If you see those technologies really have a scalable mode; you can really scale it easy. It is easy to deploy, and we say to the guys, “Okay guys, you don’t have to relocate your team to China.

Actually, if China becomes to be your expansion with our team on board, usually we can dedicate up to 2 or 3 people to the company needs and the company at a start-up has to pay us the monthly basis let’s say the market pay for the service we provide them in a bundle. It would be digital marketing in China, the legal part, sales of what is important and we say like this, “Okay for the first year following our relations we start to generate revenues for your business and this revenue will actually come to our company in China. After we evaluate all the KPI’s which was done, you can take a decision and say okay, from the next year I would like to take maybe your team to my company because they already know the product and so on and so actually either we can actually to move our people because you are hiring to work for this company directly.” If the company has decided to move to China, and we have the ways for the company to set up all the necessary things or they say, “Okay guys. I see that everything works perfectly.

Now let’s move to the model of let’s say of articulated partnership or revenue share model or something like that. You continue to sell our product on the side and we just support you, the product itself and the piece” and then we are developing the markets together. So we don’t take equity. We just do business to business. We say, “Okay, we help you to get into the market. You pay us for this. We don’t take any commissions or any interest or whatever. After a month we are sitting down with all the CEO’s and when all the KPI’s are done, you decide either can move by yourself or with the team.      

Matthieu David: After one month?

Dmitry Shklyar: No, after one year. Yeah, one year. For some countries, 1 and other companies, 1 and a half. So the idea is, and this is where we started to develop the company which the name is Eastidea and we found out that after let’s say after years of operation we started to get more and more requests from our customers for additional technologies like if you are talking about the VR technologies or let’s say the AI technologies etc. so we brought in other companies. One of them is a company Addreality as AI based digital signage in China.

Matthieu David: Can you give us some examples?

Dmitry Shklyar: Yes, absolutely. So, what is actually digital signage in China? Digital signage is all the indoor and outdoor media, digital screens which are operated by some digital content systems. I mean you go to any retail stores. You see all the screens inside the subway or airports; those are the digital media spaces which are operated by different software providers. So, some of them are just doing a simple job when you can just upload some video or features onto the platform.

Let’s say the content management platform, and that’s it so, what they do…. People are earning money like a business. So, you own your own digital media spaces, and you have your sales team, and okay, we have different locations, but they are in Shanghai, and this is the price for time grouping and so on so let’s do the money.  We found out that these conditions are really let’s say – I am trying to find a good word – I don’t like the word opportunity. I like the word attached to it so here in our case, the digital signage in China becomes to be a great platform where we can collect a lot of Chinese data from the consumers behavior so inside the stores, on the streets, let’s say subways and then marketers who are placing the content on the screens. They would like to understand the pressure for the retail business and what people really like; how do they like the content with this screen and how this advertising really influences on their let’s say choices inside the stores and they want to understand as well the media content, and they want to understand how many people saw this advertising and what was the conversion rate, let’s somebody played on the screen or I don’t know, walked directly to things that were advertised. They would just come in and check something or let’s say for their own life so actually; we converted the screen; just a regular screen on the screen and let’s say you have… we are using mobile phones, right?

So a mobile phone is an interaction between let’s say you like the person and let’s say the platform so right now they know almost everything about what do you prefer, what was your last product etc. So what we are doing; we are actually doing the screening, but for the big screen we can interact with many people at the same time. We can take the estimated numbers of visitors in different locations and provide it to the marketers and data on the behaviour of customers inside the store by let’s say special technology like face recognition and we can actually see how and sorry, and based on this selective Chinese data information we actually deliver the content on the screen based on what actually our let’s say through our frameworks, we see who respond to the screen; if it’s men, women or kids – who coincide with our advertising. This is what we do.  

Matthieu David: Simple question about this targeted advertisement; you may not have only one person. You may have a man, woman, young person or young guy; how can you harmonize and absolutely to show them in common when you have different faces on your screen?

Dmitry Shklyar: Okay this is a good question so we develop and this is where we come in with technology. We develop our own engine, which actually works with simulation. Let’s say even the system will see let’s say… people usually need to understand that the camera, let’s say if you get talking about the technology, the simple camera has an angle; the viewing angle, right?

So in front of the viewing angle based on the many tests that we have done already and this is what we see; the reaction of people and usual cameras can catch up to at a maximum of 8 people, then at the same time and in front of all the screens or front of the big screen, for example. Some people consider that if you put a camera in the shopping mall and you put a big screen, the family will go, but no, usually it doesn’t work like this, but if you are talking about the smaller spaces like retail stores or even the subway usually in front of each big screen it should be usually 8 people watching the screen and let’s say bam, you’re watching 8 people.

So, based on this and the assumption of this number what we say is if it recognized among those 8 people who are watching the screen right now and if the cover is 200 milliseconds, it’s just you can imagine I do like this or just look on the screen. It has already caught up on all the features and based on that building up of the campaign so with the 8 persons who are standing in front of the screen what the system will recognize, and we will set up a rule with marketers of this advertising and we will say, “Okay, if an amount of 8 people will be male, then we will deliver the product for the male and if among those 8 let’s say 5 ladies and 3 of them will be under the age of 30 we will deliver the content which we will specify as the content for the young generation and if it is the older generation, we will deliver the content for the older generation” and this is what we call the computer vision and a lot of algorithms behind.

So, in that case, marketers; they just need to set up a plan let’s say they say, “Okay guys, on those locations” or let’s say right now we have over 25 000 stores operated on our platform already.

Only in China, we connected plus minus only over 1 year over 7 platforms with our tech solution in China so right now what we actually can see is that this market; they are interested in. This is the best interest that we would like to have and to understand what is going on in the stores because, for many of the time, marketers let’s say it’s like a lot of non-understanding of how to interact with the customers. Let’s say we know a lot about the online, but with the offline, it’s totally let’s say… companies invest billions of dollars just if you are talking about the software and the digital signage in China based on PWC the latest report and I think the size of the market is around 20+ billion dollars and only the software; the market side is about 4 billion dollars.

So, China is developing rapidly. You can find as well a solution for what our Chinese developers are doing right now. You already have the digital family, and this is the future that we really like. Imagine, let’s say I want to greet my wife for our anniversary. We are walking on the street, I just take out my widget, I see the empty screen and we are on the street, and I just want to extend her a very nice picture message of the street by just say by seconds to deliver a message on the street, on the big screen. When I press time, I just can set up a time and then while I am pressing, I say, “Happy anniversary” or “Happy birthday” no the screen.          

Matthieu David: Or the address on the corner so it could tell you, “Here’s the address. Come to meet with me,” which would make it easier to be found and seen. There is certainly a lot of potential in that. On the opposite, how come we don’t see that everywhere? I mean, it is very rare, so far. I see some interacting screens in some places in Shanghai. One is Hong Kong Plaza. There is a street where people interact, play with the screen.

Dmitry Shklyar: This is where we started, yes.

Matthieu David: So my question is, are we talking about the future or are we talking the present? Are we talking about something which is implementing now where we find models that are really a momentum on it and companies have found a way of interacting, and in this case, I would be interested to know some specific cases? You mentioned Coca-Cola, Shanghai media Group or are we still talking about something experimental; something which is in the making and we haven’t found a very, very duplicable model where we can find it anymore? What is your feedback because so far, I have seen it, but I have seen it rarely?

Dmitry Shklyar: First of all, I do agree with you. So, about interactive technologies like for example what we offer with SCREAMO; those solutions were not precisely scalable as we wanted it to be in China because of the different technologies and the lack of let’s say arrangements on the technical side with our customers so then it became to be for us a product which is based on event marketing for the customers at the point of sale.

This is the one approach, and what we are doing let’s say with the reality is actually on a daily mode, a system operated screen and the usual visitor or let’s say the shopper; when he goes inside the mall he will never understand, and this is a very good thing here – he will never understand that somebody is trying to push him hard on the irrelevant content on the screen.  He will just see the screen, and he will understand that there might be something interesting for him, but marketers; they know it that there is the potential audience. We have to push this content. You won’t see any big cameras watching at you and say, “Hey, stay for a while. Look on the screen. Tell us what you are interested in.” It is generic. It is always going to be like this, and it happens backstage on the software so even now, for some locations we are talking about big players; they like this technology and investing a lot of research, time and money.

Why? It is better to monetize the advertising and all the digital content, and this is why all these technologies for the face recognition; we are now it has even become more important to the customers want to buy and not by how many loops you place in the content, but how many people saw the advertisement or the content of the screen and those technologies become more and more relevant especially in the targeted advertising so what you will see everywhere right now mostly 80% will be direct advertising where people just buy the space or marketers and the head of digital; they will install the screens inside the store and say, Okay we have a marketing plan to broadcast different brands. I don’t know visuals like video clicks or something related to the sales, and this is done, but more and more companies, especially in the cosmetic industry. For them, it’s much more interesting and this is where they have the really great success so far that when they are pushing the targeted advertising on the screens because in the mostly branded stores or other substitutes or with different names; for the, it is very important because they  

Matthieu David: Is it what you call problematical advertising?

Dmitry Shklyar: Yeah, it is a part of problematic advertising, exactly, but there is a slight difference here for different industries, yeah.

Matthieu David: For those who are listening to us and don’t know what problematic advertising is, it is when you display an advertisement which is targeted at the audience which is around it. It could be online, it could be offline, but what is new is that it’s also now out of the door and so also some way offline even if it’s to be     

Dmitry Shklyar: You are right. You know that let’s say the definition. In some case and not in some cases, but this is where it actually is problematic advertising to indoor and outdoor media is actually that all advertising will become to be not just to pay in advance let’s say for one week or two weeks to place some content on the screen, but the next step to be the bidding system. When the big players like Google, they are speaking for those solutions, but the one we think is missing right now is the providers; meaning that the screens need to be connected to one network when all the screens via online deliver to you all the necessary Chinese data they actually start to sell the screen advertising for the big people through online, and this is what we are actually setting up right now with all the big companies here right now including the pre-manufacturers and including the big corporates who are in the business like media companies.

Not only in China, but as well as in Hong Kong and sooner or later we will hit those markets with those technologies, but that is like you, me and all our clients who are not I this industry are mostly home. The advertising is part… they really understand for what I was looking for, and I was sitting up during the night looking for some nice – I don’t know – digital, or a new model or for other brands and then I discovered I was searching later on the phone so it becomes to be like this and what is important to highlight here, and this is where you come for the next step. We do not do any personalization. We do not collect any personal data, so we are really focusing on DDPR standards where we do not provide any personal Chinese data information, and this is what is important to understand.       

Matthieu David: So, we see that it’s not in the mainstream, so those screens are not mainstream. They are not everywhere. Would you have some cases that have been successful in terms of monitoring? Not necessarily the case from SCREAMO, but the case where O2O; interaction with the screen has been successful, and I understand from a business tech perspective what you increase by those screens is engagement. Its how much time they spent engaging with the screen so they can engage more, remember better and spend more time in front of the screen. We have seen some trials with WeChat; using WeChat; the shake from WeChat.  

Dmitry Shklyar: Back to the future I mean…

Matthieu David: So tell me a bit more.

Dmitry Shklyar: Yeah, yeah, absolutely. So, probably about the cases; yes, we do have the cases and first of all right now as well we have big cases in terms of the product that we are involved in, but one of the projects is related – you will be surprised, but not too much to the retail side, but it is related to the tech technology, okay so right now together with the Israeli and the Chinese parts of the big companies. I am not allowed to say the names because we are under NDA, but actually, right now, we are finishing to build up a future, okay. It is going to be a huge location in China/Israel. It is going to be a terrific place when the people can come with their families and enjoy the nature, to enjoy the greenhouses and to go and understand how the nature and in the new technology environment, how the crops are developing and so on.

So this is where we do implement as well digital signage in China based on face recognition functions when we actually can predict in advance which content we would like to show to different categories of visitors in store inside those centers; in the innovation town that number one and number two is that we have done already successful or we are doing [inaudible 37:07] where we are running projects with supermarkets. Right now those supermarkets in China let’s say they are Moscow, but the main idea of this product is that we actually we are helping brands to increase their sales or their revenue within the time when using this AR based technology inside the stores; digital signage in China, by almost 2.6% on the terms of sales.

It is a really huge number without putting too much investment on the marketing side and how does this work; easily. When you have the cashier area where you are coming to pay the bill, and we think I mean together with the marketers for the supermarkets, most people would like to purchase, and they hate to wait, and usually it will be either to go to buy some tea because like to drink black tea, for example, and like cognac or whiskey under way discounted sales. So what we will do, or let’s say lady all this small accessories for daily use let’s say like this, what we will do actually is we will put a little space in front of there, where you put all the products on the trail, and the lady takes it. There is a 21-inch screen with a camera which recognizes who are the visitors that are going to pay right now in the same area. The system, by itself, will offer them a great discount offer with a message, “Hello. You were starting with our special offer. You have a large chance let’s say to get one bottle and get one for free right now; if you do it right now” and then you will see over the counter. Like 15 seconds and then you click, and somebody will bring you a special offer.             

Matthieu David: You said it’s not very costly so I don’t want to miss it. You say it is not very costly and it’s increasing by 2.4%. Could you tell us…? If I am running a coffee shop I am like 4 or 5 coffee shops in Shanghai, and I interviewed an entrepreneur in China who will have 5 coffee shops in China, and I go back to her and tell her this solution where you can retain the client, you can target them and so on. What kind of amounts do we talk about to implement your solution?    

Dmitry Shklyar: Yeah, I mean, you know this is a good thing that you have to [inaudible 40:03]. They have to understand. Otherwise there is friction. I will tell you exactly. The main cost here is to be mainly by the screen. This one, I mean you can convert the normal screen to the tech screen. The screen is so they like you know it’s like a toy; you can do with it whatever you want, but not the TV screen. Not the screen that you put at home because those screens are not usually appropriate for the indoor activities when you need to run them at let’s say 12.7 or no, they are rarely used, but let’s say 12.7 and the screen is usually I mean let’s say the assumption is the screen you can buy within the $1000, okay? I will talk numbers [inaudible 40:55] understand.

Then this screen has to be supported either by the under box or the windows. It depends on the complexity of the content; if the people want to put it on the screen. Usually, people choose Android or Windows, so this is most common.   Some companies still use Windows, but it has become more and more complicated in terms of scalability of the business.

Matthieu David: About Android; is it easy to implement in China? Do you have any limitations on Android in China?

Dmitry Shklyar: Absolutely not because there are usually those screens that come already with the Android on board, okay and manufacturers already have licenses for the Android that they are sending together with the software. What we will do from our side on Android operation system or Windows we will just install our own media player with all the features on board and the camera; you don’t need to buy a personal camera. The camera is coming together with the screen already, so let’s say hardware always will be over 80 or 85% from the cost of one location. Yeah, because of software… this is the true number. If somebody will tell you that you pay for software much more than you pay for the hardware, it is not true.

Usually, the hardware takes the biggest budget, okay? The rest you will do… we will support. This is where we come to help with these kinds of technologies. For our customers in China, we do the system integrator support as well meaning that we will help the brand purchase the screens because we understand the technology, we understand the pricing of the market and we can bundle the solution even in terms of design because today it’s not an object to buy the screen. It has to come with a nice solution. This is what you will see. It’s an amazing job. I am still learning about, and the companies that are coming to us is [inaudible 43:12], but I must tell you that designers for these brands are doing a super good job.

Do you see how they are trying to build up all this – the reality and feeling and this is how they do the promotions for the new brand’s, and it’s really exciting, and it’s beautiful. So, for those kinds of things, of course, they will pay a lot more for the design and features, but they will use the cheaper screen, but if you are talking about let’s say coffee shops or a cosmetic beauty boutiques etc. so usually the price for one should not exceed let’s say $1 500, and this will be sure high if I tell you already.             

Matthieu David: So one will be 1500 US. Do you have the screen and the solution itself?

Dmitry Shklyar: Exactly and so if you do, I mean they really need to understand how this screen works, how much it generates for them in revenue and imagine this that you don’t have the big space, but you have a lot of STU. Screens are a good place to sell your stock on the best sites, and that is how you can bring them online as well.       

Matthieu David: Technology-wise, the first one is maybe I am going to ask this other question at the same time; the first one is doing you only use the voice recognition or do you use the Bluetooth, the Wi-Fi, Chinese data you can collect with a phone because everyone has a phone and secondly, you mentioned at the beginning when we were talking that one of the difficulties with China is technological. It is not about the market, it’s not about the regulations which actually I am a bit surprised because I thought regulation would be a slow one, but you said it is about technology so I would like to understand a bit more about why technology is initial in China which as a fact, it’s a case of why Google would be very [inaudible 45:33]. They are not present here. They have regulation and then after the new standards and technologies that have been developed within a Chinese market which makes it more difficult for them to re-enter or to make bigger China even if they could now, it could be more open. So two questions: do you own your facial recognition and I am talking about [inaudible 45:55] and secondly what are the technological slower with China, and you mentioned this as an area to change markets.    

Dmitry Shklyar: Sure, so let me recap for the first question. Face recognition is not only the figure that we are embedding in our engine solution, number one. We do work with Wi-Fi in order to provide information to marketers. We do that. We do the software, and I mean this system we can connect any kind of devices including the mobile phones, the tablets, the screens even the sound system in the store into the one platform and using the face recognition Wi-Fi technology we actually can make the sound in the store; the music because it is a cloud platform, we can search all over the stores for one brand, and this is what we are doing right now in China. We worked with a guy from the Box Music, and we do with them our relations for two years. They are extending their music license content, and I will be there for the advertising.            

Matthieu David: So may I interrupt? So you say that… Music, depending on who is in the shop, depending on what phone is in the shop, but what kind of data in China do you get from the phone?  Do you get the data on Spotify or music or Apple music, or?

Dmitry Shklyar: The music… the sound or the music content that you hear when you get inside the store. This sound is broadcasted from somewhere. Some people can use a discount key, the USB and this is what we know what [inaudible 48:16] everywhere and most of the people are trying to save money on the licensed content, and they are trying to stream it form like I don’t know, whatever, but it’s not allowed when you do the B2B. You have to provide licensed content music, and this is where those guys; our partners. They are providing licensed content music. They upload it to our platform and the platform is supports because it is a cloud version so you can actually spread it all over the different stores everywhere like let’s say you have the coffee stores which are everywhere and you can play the same music; the same location I guess using our cloud, and just we provide the special tablet or the player for this.

You just connect with a jack to the amplifier and done – it works, but everything you control on the cloud. So for some of the customers if they want to do like special content, let’s say for different events inside the store. Let’s say they want to greet – I don’t know – like CVIP customers or they want to let’s say they want to play some special music when there are more ladies in the store so the face recognition become s to be as well a trigger sop once recognised, remember I told you and mentioned that if we see the number of people standing in front of the real screen life so if more of them are female then what we will do is just change the music to whatever is relevant for the females and we can play like let’s say Frank Sinatra; nice music.

Something I don’t know, “Only You” or whatever. If it’s going to be men, then we can change it immediately to make people feel like more like okay or something more relevant. So it works through the triggers, so we use a lot of triggers on the platform and this is like our own developed platform where we connect all kinds of devices, and they will be communicated in between meaning you can use it inside the store or your phone and in real time we can change the environment by making several places on the mobile because everything is in the cloud so you can do whatever you want. So, face recognition, yes. Wi-Fi yes. Also, when we have an interaction between the Wi-Fi and all these kinds of devices. Everything is doable.         

Matthieu David: That is a reason to ask that we may not be conscious when you mentioned the small device which is now [inaudible 51:03] public areas where there is business to transportation and train stations and all department stores which is actually trying to connect with the Bluetooth of each phone to note where you are so it is geological sign your phone, not much more, but it adds to the traffic and to where you go.

It knows how much time you spend in each location and the thing is that because now you have more and more of what I am at now which is a Bluetooth headphone, people have their Bluetooth open, so more and more people have their Bluetooth open so now it’s more and more trackable and I think 4 or 5 years ago it was more digital so that beacon is that you are using to see where people are and how many people are I in front of the shop.

Dmitry Shklyar: Yeah, I mean, you are amazing.  You know everything. About the beacon system, about beacons in China, I agree with you; 3-5 years ago the technology was kind of a hit, but nobody wanted to use it too much because when you have so many beacons to my location, you are lost.

Now, beacons in China have been upgraded to the new version which is, of course, more expensive. People are not using them so much, but again, I think there is much more important issues with Google because where they want to be connected together because a lot of – I remember it was a big story that Google wants to implement more and more beacons in their daily life because this is how they would get all the Google news as worldwide to be connected better, but I  think in China for the beacon technologies; I didn’t see too much really because everywhere when people want to implement beacons in China especially in a private area, it is definitely used, but Wi-Fi is really working because this information you can use immediately. It is not personalized with data in China because each one has its own… perhaps you want to be connected to Wi-Fi, but marketers need to understand what advertising is shown on the screen and we see what makes it around the screen, we can put some nice advertising on the browsers to the same method as the owners and then when they are online they can see something they already saw on the screen.

It’s like we are trying to keep it open, and this is where we come to the challenges in China, with this question. The technology is like this: so, you know there is assaying – I don’t know if the saying is acceptable by all the people, but if you are talking about – you know, everybody knows Alibaba, and everybody says okay you call there and they will find everything that they need and so on. Yes, it is true. Amazing platforms and a wide variety of different products, but there is a very important thing to understand. When you do business its business meaning that the product; the package will look very nice and perfect, but when it comes to the technology and attention to the hardware and if the customers really don’t get into the details about what to use and what is the – I don’t know – the provider and so on. Usually the manufacturers that make the production cost cheaper and to sell them products on the higher price so if a customer does not really care about all the internal parts he will get what he will get, but if he needs it for the professional use and it is standard, and you don’t want to drop them down you have to negotiate with all those manufacturers or the providers and as well the factories and plead your needs and test it.

It’s not like you bypass something and you just implement so this is where the hardware has to meet the software needs, and this is where in China we are trying to for all our existing customers and the future customers… we are doing the perfect match. We check something before it will be shaped or transformed within the stores.       

Matthieu David: Why is it more difficult in China? You said that China was a bit more difficult in terms of technology, and you had some technological areas to enter the Chinese market. My understanding of what you were saying initially was that we don’t use may be the same language of coding; we don’t use may be the same for instance there is a Google API inside there, you can use it. You are more talking about hardware, and why is it more difficult in China? 

Dmitry Shklyar: Okay, so yeah, it’s okay. I will explain to you why. We don’t see the problem here in China with the coding or developing the software. The guys here are really doing a good job so the software in China. We know the good parts, and we know about the bad stories of developers in China. I mean they are open, and you will find all the relevant stories even related to Google, for example.

We do see the problem even here in China is about the final quality or let’s say the delivery of the final point of delivery. I mean everyone, including you and me; every entrepreneur in China,  if you want to buy some final products, you will expect that this product will have a long lifetime. You don’t want to change this product after 1 month or 1 year or a few months because you have already paid for this and now the products even in China are not as cheap because people think that if you buy it in China, it will be cheap. I mean all the professional equipment still has its cost even for China, and the installation cost and the maintaining cost is not even in China anymore. I mean, I can tell you that if something is happening to say on my side on location and I have to go to my support technical guy, I might pay him for one visit in this location, it doesn’t matter what he will do. I have to pay him at least 600.

Matthieu David: It’s about $87.00 or $80.00.

Dmitry Shklyar: A month, so think about that. Okay I have hardware and software and everything runs, but then you have to compound everything a little harder because everything in this industry we have to combine software and hardware all the time together, and then I guarantee you, it doesn’t matter how good it is; 3-4 months something happens to this product even in a professional situation, so this is what I am trying to say.

The terms of when we meet the technology with the software, I mean on my side the technology is the hardware and the software, and when we meet them together we have to specify, and we have to high standards and the quality of the delivery; what people will get at the end and this is let’s say and so far, we are winning this competition in China everywhere so forget about the space events and everybody who talks about technology and so on. Look at the delivery. Deliveries are always the best face of your product in China. So this is where we are coming into the picture, and we satisfy our customers with the delivery, and this is very important.       

Matthieu David: All the countries?

Dmitry Shklyar: More or less so it’s something like that.

Matthieu David: Would be not to wrong, not too bad, not too wrong.

Dmitry Shklyar: In this case even the Chinese so this is where right now we start to have much more let’s say not only international customers, but local customers because they understand that when we talk to them we make them see and they know that the [inaudible 01:00:26] version is not going to work with us because right now it’s because all this politics and economics; people even in China they are trying  all the time and I mean this is one of the most of the economy in China; if they do a very good product meaning that it will never be changed within 3 years so they have to change them as a product, and this is where the difference of mentality comes from.

Matthieu David: So you don’t see difficulties with something like regulations, different types of developing software, but this is not a big difficulty for you. It doesn’t seem to be a big barrier.   

Dmitry Shklyar: it’s like this: in order to avoid any difficulties in regulations in terms of the software developers, this is what we say, “Guys, we are new to the company in China. Follow the rules as to applications under it what you allowed to do and what you are not allowed to do, if there is something with the company related to the personal data in China, working and so on so it starts at the industry where the customers want to get into the Chinese market, but if you come with the company here; the regulations and what you have to do and all the relevant information and you are done, but of course, with all due respect with the Chinese regulations which are coming outside of China and they don’t want to obey the local rules, it’s going to be troublesome so definitely need to understand if let’s say the company solution would not interfere with the local regulations.

So far, I didn’t meet any of these cases where the customers say, “Okay, we have come here to try to do the business, but I am not allowed doing it because of it.” Well, the bureaucracy is the instrument of controlling the whole country with 1.3 billion people, so this is the instrument when you have to follow up with the rules. That’s it. I mean          

Matthieu David: We talked about the device. We talked about the software. We talked about infrastructure. I feel there is one brick we haven’t talked about which is a missing brick which is the companies that are going to design the campaign which is going to design the engagement where they are. Do you feel its natural enough or do you know some companies which are naturally specializing in that? What’s the development stage of this industry on the service side; the ones designing?  

Dmitry Shklyar: Thank you very much for this question. So, I think this is where actually this industry is coming to be interesting even for our company because when it comes to the terms of the content creation, of course, let’s say production; video production, advertising production, video agencies or yeah ; both of the companies who are working with the big brands if you are talking about the international brands – I don’t know – like, let’s say Coca-Cola; they do cooperate with the 4A companies like – I don’t know – public and all the rest.

Those guys are taking care of all the events, activities, the content development and so on and they are setting all the budgets for the different – for the right locations, and they are delivering the right results, but more and more companies and those companies actually becomes to be the sole providers or the companies who are providing those for manager software, for providing the screens so it’s closing so actually the brand itself either provides the content  because some of the big ones; they are not allowed to or are not certified to develop their or any kind of, because it is billion dollars business or either the guy says, “Okay you are the professional. You know how it works. You know we trust them…” You know, many companies do also outsourcing. They will say, Okay in terms you know how the system operates and why shouldn’t we recommend you agencies from your side who will prepare for us based on our provided media material special content like gaming content – I don’t know – visual content, etc.” So yes, absolutely so we are comfortable as well, and kind of you know connecting different companies to one project, and it becomes to be, because the company wants to see the final deliveries of the solution. It is complicated. It is not an easy business.

Many people will ask why the business is so difficult, but I don’t… when you like what you do, and the people understand that you are a professional for each part of this chain, it is not difficult at all because all the brands are actually working like this and this is their motto, actually. This is how they are creating the experiences for the retail spaces, for the digital museums and even subways, airports; everywhere so this is where come to the visual solutions and the AR.        

Matthieu David: I see. We have come to an end; already 1 hour. Thank you very much for your time, Dmitri. Thanks for your participation in this new episode of our China podcast, China paradigm. Congrats on what you do. I think it is very, very important for tech companies in China to have someone in the country because opportunities go fast, the market is changing very fast, and China is very different from the rest of the world and really need some people to represent them and to work with them. Thank you very much, Dmitiri. Wait; Dmitri or Demetri?  

Dmitry Shklyar: I tell you actually Dmitri is a Greek name. It comes from the innocent Greek, so when you spell the name because like I was born in Greece, I have like a long story. So usually when you say the name in Russian, it looks like, Dimitri. So yeah, but when you write it, you just write DM. So this is why when you read it in English it is Dimitri because to use the correct fragment so yeah. Sorry about that.

Matthieu David: I can say Dmitri then. Okay. Thank you very much for having participated in this new episode of our China podcast, China Paradigm. Have a good day. Bye-bye.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.