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Blue-haired Harajuku high schoolers thumb-text distant pals on stickered keitai. Cell phones become cookie brokers, beaming snack requests to vending machines that zap back digital payment demands. Teen girls book illicit "compensation dates" with salarymen, sending snapshots to potential johns via camera-phones.

The popular myth of Japan as a surreal, warp-speed incubator for all things handheld and digital is nothing new.

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But rarely do outsiders have an opportunity to venture beyond iconic anecdotes for a matter-of-fact understanding of how mobile technology shapes that country's culture -- and our own.

Personal, Portable, Pedestrian: Mobile Phones in Japanese Life is touted as the first English-language book to attempt just that, and it succeeds.

Co-edited by University of Southern California research scientist Mizuko Ito, Keio University lecturer Daisuke Okabe and Misa Matsuda of Tokyo's Chuo University, the book debunks popular assumptions about why mobile culture evolved as it did in Japan.

Through a series of real-world case studies, it examines the relationship between mobile technology and Japanese society. In doing so, it sheds light on the way handheld connectivity tends to reshape cultures worldwide.

The book begins by tracing the evolution of mobile media from its roots in the wireless telephones found on '50s-era merchant ships, through '90s pager culture to contemporary smartphones. Then it explores how those devices became a source of pervasive connectedness to friends, family, lovers and co-workers -- a completely different kind of connectivity from the "other-world" internet space experienced through personal computers.

The Japanese word for cell phone -- keitai, meaning "something you carry with you" -- provides a hint about its role within Japanese culture. Over time, mobile devices in Japan have come to be perceived not so much as bundles of technical features, or tools for replicating PC functions from the road, but personal accessories that help users sustain constant social links with others.

In one essay, Ichiyo Habuchi describes that always-on state of wireless closeness as a "telecocoon" -- "a zone of intimacy in which people maintain relationships with others who they have already encountered."

And contributor Kenichi Fujimoto refers to the devices themselves as "territory machines" capable of transforming any space -- a subway train seat, a grocery store aisle, a street corner -- into "(one's) own room and personal paradise."

Apart from the technology's role in sustaining familiar social structures, Personal, Portable, Pedestrian also examines how mobile devices facilitate new links, like that of the "intimate stranger."

Through controversial phone-dating websites or between text-message buddies, mobile media makes it possible for bonds to evolve between individuals who may never meet in real space, but who nonetheless share a vivid experience of disembodied closeness that follows them as they move through the world.

While traditional notions of cyberspace promise to unlock us from the limitations of offline relationships and geographic anchors, keitai space flows in and out of ordinary, everyday activities, nimbly integrating the virtual and physical realms.

The book reaches far back into Japanese history for the origins of that integration, pointing to the legend of Sontoku (Kinjiro) Ninomiya, a Johnny Appleseed-like national folk hero often represented in statues outside bookstores and schools.

Born into a poor family of farmers in the late 18th century, Ninomiya became an educator, entrepreneur and politician through dogged work and self-education. He is most often remembered reading as he walks, burdened with bundles of firewood gathered in daily chores.

The book points to this multitasker ancestor as a precursor of contemporary nagara ("while-doing-something-else") mobility, a concept now embodied in students who wander from home to class and back again, eternally gazing into a palm full of e-mails.

While Personal, Portable, Pedestrian is packed with an abundance of rich, empirically dense vignettes, what makes the book a refreshing read is the unremarkable, familiar tone with which it frames keitai culture in Japan.

As one college student is quoted as explaining to his professor, "A lifestyle with keitai is so natural that one without (it), or one from which (it) is taken away, sounds unreal."

And by understanding how a once-alien technology became such a natural extension of everyday life in Japan, we may yet understand what is in store for the rest of the world.

The automated analysis of "unstructured" data is becoming remarkably agile at giving companies detailed answers to the age-old business question of "How are we doing?"

The tiniest of flaws in a massive forklift truck is crucial information for Ryan McLawhorn, quality improvement manager at NACCO Industries. If his cargo-vehicle division can detect common problems and fix them in the manufacturing process, it can save millions on warranty claims.


That's not easy with 80,000 claims rolling in every year. So McLawhorn turned to data-mining software that examines service reports for precise trends. For years he had software that could alert him, say, to a batch of wiring problems. But now he can be told if a certain wire often comes loose, and under what circumstances.

"It's really almost unlimited," he said.

The technology can be made to work not only on service records and other internal data, but also on the hue and cry of the vast public internet, where products and corporate reputations are obsessively discussed in blogs, message boards and e-commerce sites.

Eastman Kodak uses unstructured-data analysis to spot connections in its own and its competitors' patent filings. Government agents use it to hunt for insider trading or linkages between terrorist groups. Mayo Clinic researchers use it to scan physicians' notes for evidence about the efficacy of treatments.

The breakthrough has been in getting computers to understand the content of the documents they scan.

Often by diagramming sentences as a grammar school student would, text-analysis programs can tell the difference between a blog that says a motorcycle is so fast "it smokes" and one that says the bike's engine emits smoke.

Picking up on such details quickly is vital in an age when fountains of data gush every minute.

"Our technology, on a simple laptop, can read through Moby-Dick and analyze it in nine seconds," said Craig Norris, head of Attensity, the company that supplied NACCO's software.

In hopes of broadening the potential of this kind of software, several companies plan to announce an agreement Monday on a technological standard that will let multiple computing engines for sorting unstructured data work together.

The programming codes that govern the framework, spearheaded by International Business Machines in conjunction with academic researchers and the Defense Advanced Research Projects Agency, will be open source and freely available.

The cooperation is required because so many different kinds of unstructured-data engines have sprung up in recent years, driven in large part by the U.S. government's demand for intelligence analysis. The CIA has funded several unstructured-data management companies, including Attensity.

Another CIA-backed company, Intelliseek, recently partnered with the Factiva information service to offer "reputation insight."

Intelliseek scans 4 million web logs and e-mail list servers, and Factiva -- a joint venture between Dow Jones and Reuters -- combs news stories, radio transcripts and other media. Together they produce for companies a detailed analysis of how the public thinks about them at any given point.

For example, the most popular phrases relating to a company can be determined, and whether those terms are waxing or waning in significance.

Comparisons with competitors can be generated -- as well as to a company's own business results. Who knows? Perhaps a seemingly unrelated bit of geopolitical news tends to boost sales. Or maybe early word can be gleaned about problems with a product that might lead to an expensive recall.

"The world has become more democratic," said Randy Clark, marketing director of ClearForest, a data-analysis company whose customers include Kodak and government agencies. "In the old days the company would issue a message, and the only alternative to that was, people could meet on the street and talk about it. Now those communications are pretty visible."

Seeing Barrett Comiskey lounging in the rooftop beer garden of Shanghai's fabled Peace Hotel at twilight, sipping his cool Tsingtao and gazing down at the hurly-burly street scene below, you may be tempted to call out, "Hey, buddy. You're dreaming." A year ago, Comiskey, 29, came to China to seek his fortune. He brought with him a Stanford MBA and not much else. He speaks some Mandarin, and he has a Taiwanese wife, Jojo Tsai, who is fluent. But for much of the time he's been here, he's hardly had 2 yuan to rub together, and he owes $100,000 on his school loans. His business partner, Andy Mulkerin, seems at first even more out of his depth; he arrived four days ago with a freshly minted Harvard MBA, but he's also deep in grad-school debt and speaks not a word of Mandarin. Weirder still, he just turned down a job at McKinsey that would have paid him more than $100,000 a year. Why? So he could come to China -- the new land of opportunity.

The idea they've come up with as their ticket to riches sounds like a serious stretch, and might even strike some folks back home as vaguely distasteful. They've formed a company that seeks to persuade small U.S. manufacturers -- the kind that may not have thought that outsourcing was right for them -- that they too can shift production jobs to China, just like the big multinationals. "People think everything is made in China already, but many things are still made in America," Comiskey explains. He and Mulkerin plan to profit by brokering deals with Chinese factory operators for American manufacturers of offbeat things like, say, vending machines and hearing aids.

It's quite the scheme, and given Comiskey and Mulkerin's resources and inexperience, it would be tough to pull off anywhere. But in China?

True, the Middle Kingdom has become the global epicenter of wild-and-woolly capitalism. We've all read the stories about how China's exploding economy is now the world's second-largest, behind that of the United States. China is growing so fast, it's expected to be in a league of its own well before midcentury. Yet the place is commonly regarded as a mausoleum for the broken dreams of fresh-faced foreign entrepreneurs like Comiskey and Mulkerin -- people who caught China fever only to be laid low by the country's impenetrable business culture, its barbed-wire bureaucracy, its endemic corruption. Many of America's savviest corporate giants have struggled to cash in on the China boom too. Pepsi (PEP) has never made a profit in China despite 20 years of trying. A big Kraft cheese venture melted down. Even titans of the new economy have been humbled here: Amazon.com (AMZN) bought a Chinese online bookseller last year but recently warned that success is "many years" away. With household names flailing in China, what chance could entrepreneurial greenhorns possibly have?

Quite a good chance, actually. As unlikely as it might seem, Comiskey and Mulkerin now have a modest stable of paying clients, including sizable manufacturers of, yes, vending machines and hearing aids. Their progress bespeaks a little-noticed aspect of China today: The hard-luck stories of failed fortune seekers have done nothing to slow the stream of American entrepreneurs into China, and each wave of new arrivals learns from the mistakes of predecessors. Today there are thousands of Americans who, through pluck, ingenuity, and perseverance, have managed to decode the mysteries of Chinese capitalism. They are creating their own businesses at a furious pace, and some aren't simply surviving: They're getting rich.

How? Their stratagems are numerous, varied, and as full of contradictions as Lao-tzu's Tao Te Ching: Some of the entrepreneurs immerse themselves deeply in Chinese culture and language, while others learn most of what they know from reading Lonely Planet books on the flight over. Some are transplanting American consumer culture, from coffee to hip-hop clubs, while others are inventing entirely new products, like the perfect clothing hanger. Some are getting rich quick, while others have 10-year plans. Taken together, the experiences of today's American entrepreneurs in China provide a sort of guidebook for anyone who dreams of getting in on the phenomenal wealth and opportunity being generated by an epic boom. "To come to a new land, with a new language and a new focus -- that may seem aggressive for an American," Comiskey says. "But this is a buyer's market for what we're after."

Five years ago, as the dotcom boom was peaking in the United States, a platoon of American Internet pioneers descended on China, assuming that with its massive population (1.3 billion at last count), the country would become fertile ground for cutting-edge digital businesses, especially those based on the Web and wireless communications. Those predictions of China's growth came true: Today 350 million people spend an average of $10 a month on cell-phone service. The Web has evolved more slowly, with about 100 million people using it regularly, partly because of China's political restrictions on Internet content.

But many of the early China trailblazers lost their shirts. Derek Sulger didn't -- and how he avoided that fate holds crucial lessons. Sulger started his business in 1999, on his first day in China. He was on the verge of quitting a high-paying job as a Goldman Sachs investment banker in London to pursue his belief that China was about to be swept up in the cell-phone revolution. "Everyone at Goldman thought I'd lost my marbles," he recalls. But Sulger and his American business partner, also a former Goldman banker, did have all their marbles -- and more.

The China Checklist
A cheat sheet for American entrepreneurs.
VISIT BEFOREHAND Do you really want to live in China? Cities are crowded (traffic cops die at about age 40 on average, thanks to bad air), and real estate in Shanghai is as pricey as in some U.S. cities.
LEARN THE LANGUAGE English may be the language of commerce everywhere else, but not in China. You can survive without Mandarin, but negotiating through translators is a major disadvantage.
PARTNER WITH LOCALS Join up with native Chinese who possess the skills you lack. Local partners should serve not as window dressing but as real contributors to your enterprise and its public face.
FOLLOW THE RULES The Chinese government is swift and effective when offended. State officials won't hesitate to shut down a foreign-owned business, especially one owned by an individual, for infractions.
DON'T BRING THE FAMILY AT FIRST Starting a business in China is all-consuming; don't expect to see much of your spouse and children. School-age kids can be especially costly: A top-drawer private elementary school in Shanghai costs more than $20,000 a year.
BE PREPARED FOR A LONG HAUL Most successful American entrepreneurs in China spend years building their businesses. View China as a three- to five-year investment, giving yourself time to deal with setbacks.
They had capital, for starters. Each partner invested $250,000 of his own money to form Linktone, a startup that aimed to sell ringtones and other content to Chinese mobile-phone customers. They also had a good sense of how business works, and set about analyzing China's telecom market, identifying the most powerful players. Their breakthrough, however, was Sulger's idea of immediately stacking his startup with Chinese talent, people who knew how to navigate the murky sloughs of Chinese capitalism, and using them to forge ties to powerful telecoms and other partners. Never mind that Sulger was 27 at the time and didn't speak a word of Chinese. His Wall Street pedigree and the fact that he and former colleagues at Goldman had cash to invest impressed his early hires -- many of them recent graduates of English training as well as Shanghai businessmen -- enough to get them to sign on to his untested venture. "I don't think anyone would have ever come to work for us if I hadn't convinced them that Goldman made me qualified to build a business," Sulger says.

The local team then set its sights on the real power players. Sulger's first target was China Mobile, the country's largest telecom, but his managers persuaded him that he had to win over the company's regional divisions to have any hope of a broad alliance. Deals with Zhejiang Mobile and Shanghai Mobile opened the door, and soon Sulger was hooking up not just with China Mobile's national operations but with dozens of other carriers, content providers, and cell-phone makers, including Nokia. The big players' access to customers assured Linktone an immediate and steady source of revenue. And the startup's growth was meteoric: Sales rose from $1 million in 2001 to $50 million last year. In March 2004 the company became the only American-spawned Chinese high-tech firm to float a public offering, listing its shares on Nasdaq. The IPO brought in $86 million; Sulger's stake was worth about $30 million.

The score, by all accounts, makes Sulger the biggest equity-market winner to date among American entrepreneurs in China. But he's not cashing in his chips. Even before Linktone went public, Sulger founded Smartpay, which enables bill payments over cellular networks. Smartpay already has 175 employees and eight offices, and Sulger, now the company's CFO, says it will thrive if it grabs even a tiny share of the mushrooming number of mobile-phone payment transactions in China. He expects to eventually take Smartpay public too.

Sulger's initial insight -- putting a local face on the company as soon as possible -- also helped counter a problem that undid many other American wireless and Web entrepreneurs. The Chinese are masters at rapidly mimicking almost any newly established service or product and using guanxi -- connections and cronyism -- to basically steal away customers. That problem confronts almost every American in China at some point, regardless of industry or niche. By rapidly converting a foreign startup into a Chinese company, with mostly Chinese managers and employees, Sulger in effect created his own guanxi. He's taking the same approach at Smartpay; Sulger is its only American employee. He feels pretty good about his future in China. "Not a lot of Americans have made it big here," he says. "I did it once, and I can do it again."

GO NATIVE, BUT THINK DIFFERENT

One man has single-handedly produced the three top-grossing native-language films of all time in China. His name is Peter Loehr. He's a New Yorker.

Loehr, 37, has become the unlikely king of China's film industry by essentially turning Chinese. Like a growing number of outsiders, he has mastered the language and absorbed the culture to gain a deep knowledge of the idiosyncratic ways of Chinese business -- and to reduce or eliminate altogether his dependence on local partners.

As a teenager in Brooklyn, Loehr was fascinated by Asia and filmmaking -- particularly the work of the Japanese master Akira Kurosawa. Loehr moved to Japan after college and caught the attention of Japanese media execs impressed with his artistic bent. By the time he arrived in Beijing in 1996, Loehr had already produced television programs in both Japan and Taiwan. He'd also studied Mandarin intensely, ultimately reading entire film scripts in the language. Initially bankrolled by a Taiwanese media company, Loehr formed indie studio Imar Film with the goal of nurturing local talent. He plucked out of obscurity a novice director named Zhang Yang; their first movie, Spicy Love Soup, was made for $362,000 and grossed 10 times that, making it the top domestic release at the box office in 1998. Loehr later broke with his Taiwanese backers and set up his own company, Ming Productions, which has produced two films so far and has three more in the pipeline.

Loehr's success, while inspired by art, is built on a keen grasp of how Chinese business really works. He is widely considered to have been the first of a new generation of moviemakers in China to recognize the importance of distribution in a country where provincial exhibitors tend to run their turf like personal fiefdoms. When China's few national distributors declined to handle Spicy Love Soup, Loehr toured 28 cities by train, lugging along two steel boxes containing his film. He wooed local distributors in all-night drinking and karaoke sessions. "I learned to hold my liquor," he says. He also came away with 40 deals.

Loehr understands Chinese traditions, but he also breaks new ground. In 1997 he became the first to advertise a film on television -- and on radio and bus billboards. Recently he formed a new joint venture, Dragon Studios, to handle the needs of foreign filmmakers who want to use China as a shooting location. In a shrewd move, he's offering Hollywood (with which he has links through dealmaker CAA, where he's a consultant) a turnkey solution: He provides not only technical talent but also local actors. His company has deals to assist on four foreign films this year. Loehr says he regularly turns down seven-figure offers, mostly from Asian investors, for a piece of his empire. "I'd rather go it alone," he says.

TRY TO GET RICH QUICK, BUT PREPARE TO PUT IN THE TIME

The business education of Chris Barclay took 11 years. It started inauspiciously, shortly after Barclay arrived in Beijing in 1994. China wasn't as alien to him as it is to some Americans -- he spoke good Mandarin and had lived in Taiwan. But he didn't have much of a clue about Chinese business, and the stories he heard about it curled his toes. One of his first local acquaintances was an American who wanted to make a speedy killing by becoming the hot dog king of China. The guy got a license from Beijing officials to sell wieners from street carts. He bought 1,000 carts and one morning unleashed an army of hot dog peddlers. Within a few hours, the police had impounded his carts. "I have a permit," the American protested. The police laughed. "You have one permit," a police official told him. "You need one for each cart." The would-be hot dog king was 999 permits short, and the dream died then and there.

Barclay took many lessons from the episode, but one stood out: Don't try to get rich quick in China. Sure, it happens. "But longevity is key," he says. "You've got to survive your failures."

He endured several himself, including an ill-fated attempt to sell basketballs, before arriving at an insight that has proven valuable for many American entrepreneurs. The easiest way to make money in China today, Barclay says, is to serve the thousands of large American and European corporations flooding into the country. In 1995, with $10,000 in cash, Barclay started a company that offers management training for local Chinese employees of Adidas, Coca-Cola, ConocoPhillips, Sun Microsystems, and other multinationals. To enhance his training business, he opened a hotel on a mountainside near the southern city of Guangzhou, where he supplements workshops with outdoor activities like rock climbing and hiking. Together, the ventures bring in about $2 million a year and earned about $400,000 in profit in 2004. Barclay has 30 full-time employees. He's the lone foreigner. He recently received a seven-figure offer from a U.S. consulting firm for his training business alone, and he's considering selling that branch of his business.

But Barclay wants to expand his resort company, which is why on a recent afternoon he stands beneath a leaky umbrella near the famed Simatai section of the Great Wall. He has come to negotiate with a group of farmers over the lease of five acres of idle land on which he hopes to build a 25-room hotel for Wall tourists. "The farmers might not be interested," he says. "They might not even show up."

He is unfazed by the prospect, but the farmers do show eventually. One man steps forward and names his price: $1,200 a year. Five minutes later another farmer arrives and explains that the first farmer is not authorized to negotiate. Barclay rolls with it, and soon a deal is struck: He'll pay $833 a year for five lush acres. But another snag later develops: The farmer doesn't have the government clearance required to take farmland out of circulation. Shades of the hot dog king. Barclay says he'll keep the resort expansion project on low boil until the paperwork comes through. "I won't make any big plans until I can see the documentation," he says.

The Fung brothers likewise believe in patience as a business strategy. Micky Fung, a Chinese American whose home base is Brooklyn, N.Y., has been doing business in China since the 1980s, moving from one niche to another. These days he's leading a pioneering effort to supply every taxicab in the country with a flat-panel TV screen that, controlled by a computer under the front seat, will broadcast advertisements (and potentially other content) to its captive audience of passengers. Shanghai has been chosen for a large-scale trial of the technology. Fung has signed up 10,000 Shanghai taxis and will roll out the system later this year. Heineken, Nokia, and Virgin are already on board as advertisers. Fung's brother has bought an entire fleet of taxis to help exploit the opportunity. "It's a landgrab, pure and simple," says Adam Bornstein, an American financier in China and one of Fung's backers.

Fung says he's never seen as many foreigners looking to get rich quick as there are in China today. But that's the wrong play, he says; he's looking for lasting relationships. "A common mistake made by outsiders is to avoid long-term deals," Fung explains from his Shanghai office. "Then they have a hit product or service that they can't capitalize on because they are vulnerable to simply being replaced." Long-term deals offer a way around this problem. Fung, for instance, is signing 10-year deals with his taxi owners.

"In 10 years, a whole lot can change," including the basic technology behind his company, he says. "But by then I'll have made my money, and I'll have a position worth defending."

FEEL FREE TO CHANGE THE WORLD, BUT DON'T THINK YOU CAN CHANGE CHINA

One tried-and-true way to hit the ground running in China is to enter the country as an employee of a big multinational and then strike out on your own. But it's wise to check your idealism at the door. Terry Rhoads, an Oregon native, was sent to China in 1994 by Nike and ran marketing for the shoe giant before starting his own company, Zou Marketing, with a fellow Nike alum. Today, Zou is the nation's leading sports marketing company, with 33 employees and annual revenue of $5 million. The company advises China's fledgling pro basketball league and runs the National Football League's ambitious program to export the all-American sport to China.

Rhoads says pragmatism is a must to do business in China. For example, the government remains a huge presence in professional sports, which are only now developing, and Rhoads privately questions some of its policies. Top basketball players, for instance, are forced to play meaningless games for the country's Olympic and national teams, often leaving them exhausted. (Houston Rockets center Yao Ming is widely considered a victim of this practice.) But Rhoads isn't about to campaign for better treatment of athletes. That's because he needs the cooperation of China's official sports agencies to land deals. A Chinese star who plays for the NBA's Miami Heat refused to play for the national team at last year's Olympics and is now persona non grata not only to the Chinese government but also to the entire sports marketing establishment. Rhoads empathizes with the player but won't have anything to do with him, fearful of provoking retaliation from the government. "We retain our credibility, our influence, so we can work behind the scenes for the right things," he says.

Simeon Schnapper also had to lose some illusions on the road to entrepreneurial success in China. A 32-year-old American convert to Buddhism who visited the country in 2003 to help a nonprofit that's rebuilding Tibetan monasteries damaged by Chinese attacks in the 1960s, Schnapper eventually decided to relocate permanently to Shanghai. He joined a team of Germans who were trying to build the tallest skyscraper on the planet as the centerpiece of Shanghai's 2010 World's Fair. Despite a year of cultivating guanxi, the Germans didn't get the deal. Schnapper was crushed. "I was wallowing in my own ash heap of disillusion and remorse," he says. But by then he had a spacious high-rise apartment full of Tibetan art, and he didn't want to leave China for good. So he flew to New York and met a friend who now works at the Home Shopping Network. Over a drink they concocted an unlikely mission: figuring out how to supply one of HSN's star housewares brands, Joy Mangano, with a new line of branded hangers. It turns out that every year, consumers buy Joy Mangano Huggable Hangers from HSN by the millions.

Forthwith, Schnapper became a hanger expert. He found several factories outside Shanghai that could produce a strong, cheap plastic hanger with a special felt covering to keep clothes properly situated. Schnapper also learned that the current generation of hangers carry "Made in China" stickers that get caught on clothes, irking customers. Schnapper asked factories to stamp the country of origin into the plastic, eliminating the tag. That innovation clinched the deal: HSN ordered millions of hangers from Schnapper's company. If he meets his production targets this year, he will earn millions of dollars from hangers. Pondering the possibility, Schnapper shakes his head. "Only in China," he observes.

FOCUS NOT ON AMERICA'S CULTURAL VALUES, BUT ON THE VALUE OF ITS CULTURE

As in much of the world, Americans and American culture are often viewed in China with a mixture of repulsion and fascination. Andrew Ballen has ridden the second part of that equation to improbable heights.

Ballen arrived in China four years ago "on a whim," he says. A native of New York, Ballen, now 32, had dropped out of Duke University's law school, angering his father, a high-achieving Jamaican immigrant who is a physician in North Carolina. Ballen wanted to get far away from the scene of his failure, and China seemed about as far away as he could go. He didn't know a soul in China. He didn't speak a word of Chinese.

To cushion his landing, he took a job at one of China's leading for-profit language schools. After a month, he realized two things. First, he'd never earn enough money as an English teacher to live well in China. Second, Chinese youth were mesmerized by hip-hop. "As an American black kid, I knew something about hip-hop," Ballen says.

He'd never done serious performing in America, but Ballen quickly started his own weekly Thursday night hip-hop show in Shanghai, renting out a club, paying a flat fee to the Chinese owner, and keeping the $4 entrance fee and a slice of the bar take. He canvassed top universities, distributing fliers to students to announce his opening night. He did the same in expat neighborhoods, concentrating on women. "Get the hot women, and the hot men follow," Ballen says, summarizing his marketing strategy.

Three hundred people turned out to hear Ballen rap and DJ on opening night, and kids keep coming back, in increasingly large numbers. On a recent Thursday night, Ballen takes in $3,200 from the gate, and the bar soaks up more than $10,000. In the four-year history of the show, Ballen has grossed nearly $2 million.

The rap gig launched a burgeoning multimedia empire. A few months after his debut in the club, Ballen started an English-language radio talk show where he spoke frankly about romance and the anxieties of youth. The talk show led to a deal with Motorola; Ballen became "the voice" for some cell-phone services. Next he started a popular TV travel program, striking an innovative deal with one of Shanghai's leading stations that allowed him to sell advertising and keep the lion's share of the take.

Andrew Ballen is now a star in China. He moves around the country with two Chinese assistants, one of them on hand simply to answer his mobile phone. The endorsement deals keep coming; even his old employer, the language school, pays him more than $1,000 a month to be a pitchman. He is frequently stopped on the street by Chinese who want to shake his hand or buy him a beer.

On a recent Friday, after staying up all night at the hip-hop club, Ballen snatches a few hours of sleep, then goes into a studio to do a radio commercial. Next he grabs a late breakfast and gulps down two cups of coffee before locking himself away to write a script for his next TV episode. Between paragraphs, he ponders how someone who never ran a business in the United States could launch so many, so quickly, in a country he still barely comprehends. "I have nothing," he says, "but my imagination."

A lot of people thought Stuart Eunson had too much imagination when he arrived in China in 1993. Craving his java, he decided to try to trigger an American-style coffee craze. "Don't you know they drink tea in China?" asked one doubter -- his mom. After getting off the ground in 1994, for five years Eunson's company, Arabica Coffee Roasters, barely stayed afloat. "I almost starved," he says. But around 2000, as China became increasingly intrigued by all things Western, the American custom of chugging lattes began to catch on. Now Eunson supplies high-end restaurants and hotels with premium roasted coffees and adds value by teaching clients how to make a good cup of cappuccino.

China's economic transformation may ultimately rank as one of the greatest producers of business opportunity ever. But the process won't last forever. Indeed, some experts think that within a decade, many niches will have been filled, industries will have dominant players, infrastructure will have been built. There will be much less room then for foreign entrepreneurs -- which is another reason young guns like Comiskey and Mulkerin are taking their shot in China now.

In another expat bar on another Shanghai evening, Comiskey and Tsai are raving about the possibilities unfolding all around them. "He's mad for China," says Tsai, who is a third partner in the outsourcing enterprise. She worries that her husband may be overoptimistic, and that the windows of opportunity might snap shut, leaving American entrepreneurs scrambling. But Comiskey seems to thrive on scrambling. And if things fall apart? Comiskey's been traveling around the region a bit lately, scoping things out. If China doesn't work out for him, well, there's always India.

When Bill Gates took the stage at a Microsoft (MSFT) developers conference in Las Vegas in May, he used his keynote speech to showcase one of the most advanced mobile phones ever created. Compact, loaded with cutting-edge features, and capable of surfing the Internet at broadband speeds, the lustworthy handset wasn't built by Motorola (MOT), Nokia (NOK), Samsung, or any of the other usual cell-phone vendors. Instead it came from High Tech Computer, better known as HTC -- an upstart Taiwanese manufacturer that's best known for maintaining a low profile.

Indeed, despite the fanfare, one thing about Microsoft's new phone, code-named the Universal, marked it as a typical HTC product: The HTC logo didn't appear anywhere on the casing. That was no accident; HTC built its business around staying in the background. Though virtually unknown among consumers, HTC designs and manufactures some of the world's most popular portable devices, including Palm's Treo 650, Hewlett-Packard's (HPQ) innovative iPaq PDA, and the vast majority of Windows-based mobile devices. HTC's modest demeanor, coupled with its willingness to build highly customized phone designs in relatively low volumes, has made the company a favorite among wireless carriers such as Cingular, T-Mobile, and Vodafone (VOD).

One of the best-performing companies on the Taiwan Stock Exchange, HTC has doubled its sales since 2001, garnering a profit of $116 million on 2004 revenue of $1.2 billion. Known within the industry as an "original design manufacturer," HTC is on track to ship more than 3 million phones this year, twice as many as last year. And that's just the beginning: JPMorgan Chase (JPM) expects sales of smartphones and wireless PDAs to triple in the next three years as prices come down and new features proliferate. Says JPMorgan analyst Johnny Chan, "HTC has positioned itself to be a smartphone master."

HTC's masterstroke was its decision to pursue wireless operators as its primary customers. Instead of selling its services primarily to device makers (as contract manufacturers Flextronics and Compal Electronics do for Motorola and others), HTC anticipated that carriers would want to nurture their existing relationships with consumers. Though it costs HTC as much as $10 million to design and build a new phone, the company encourages providers like Vodafone and T-Mobile to put their own brands front and center. Operators get to choose everything from the color of their phones to the user interface to the logo that appears on the screen. "Everything from the hardware to the software tells users that they're holding a unique phone," says HTC co-founder and president Peter Chou.

Though vendors like Nokia are typically willing to tweak their phones for different networks, they rarely offer major overhauls, such as changing a handset's user interface. HTC, on the other hand, will add or remove any feature to help carriers target specific markets. When Cingular recently started selling the Audiovox 5600 -- an HTC-produced smartphone for business users -- the carrier asked HTC to develop two versions: one with a built-in camera, and one without for corporate customers concerned about security risks associated with camera phones.

Empowering cellular providers has brought HTC a steady stream of new business. Since 2002, when it created its first smartphone for Orange, the company has attracted nearly 50 carriers looking to create distinctive phones that meet operators' strict network specifications and feature requirements. "Customized phones are one of the only real selling points for wireless operators today," Chou says. "If they all sell the same Samsungs or Nokias, it becomes hard to differentiate."

Founded in 1997, HTC has 3,400 employees, nearly a third of whom now work on research and development. Many were recruited from companies like Texas Instruments (TXN), and most of HTC's senior management team came from microcomputing pioneer Digital Equipment. They're established players with ample consumer-electronics expertise, adding up to decades of experience working with Intel (INTC), Microsoft, and other computing giants to perfect software development and integration techniques. Indeed, HTC's software talent is one of its strongest selling points. When Microsoft began working on a portable operating system to compete with Palm in 1999, HTC was chosen as one of five launch partners for the Pocket PC platform. "We had one goal," says Microsoft mobile media group project manager Jason Gordon, "and that was to make a better PDA than Palm. HTC was a natural fit, since it already had a deep understanding of the Windows operating system."

HTC Rings Up Sales

Smartphone shipments, 2005* 3.3M
Shipment growth, 2004 to 2005* 44%
Share of Windows-based smartphone market 60%
Profits, 2005* $221M
*Estimated. Sources: In-Stat; JPMorgan
Today, HTC is the world's largest producer of Windows-based wireless PDAs and smartphones. But perhaps the greatest testimony to HTC's prowess is that it was also tapped to help design and manufacture the Treo 650, the popular smartphone that runs on the competing Palm operating system. In 2003, HTC began working with Palm to help increase the Treo's battery life and reduce the amount of time it took to get the product to market. This year analysts estimate that HTC will manufacture more than 500,000 of the red-hot devices. "It's been a great match for us," Chou says.

Meanwhile, that slick phone held up by Gates last spring has already been ordered by Orange, T-Mobile, and Vodafone -- each of which plans to customize the phone to highlight the capabilities of its network. With smartphones expected to be one of the big growth drivers of mobile telecommunications, Chou says HTC will partner with any carrier that has a next-generation network and a unique set of mobile Internet services or music download applications to showcase. You may never be aware of it, but you just might carry an HTC as your next phone -- if you don't already.

Twenty years ago Yehuda and Zohar Zisapel ran a tiny startup in Tel Aviv, selling modems. Today they still run the same company, Rad Data Communications, but modems have for years taken a backseat to Rad's longest-running hit product -- new companies. To date, the Zisapel brothers have spun off 23 telecom-related startups. Seven were sold for a total of more than $1 billion. Another six went public on Nasdaq. All are based inside Rad's 1.5 million-square-foot campus, brimming with more than 2,500 employees. Thus, Rad isn't your average holding company or incubator; it's a family of companies that play off one another's strengths. Here's how Rad has succeeded where other startup factories have fallen short.

Build the Team First and the Product Next
"We identify a niche, develop a business plan, hire a CEO, and have them start R&D," Yehuda says. "There's no predetermined product." Take Radvision, a $64 million seller of VOIP gear. In 1992, Yehuda assigned a video expert on his staff, Eli Doron, to identify holes in the nascent videoconferencing market. Within a year Doron had a plan for a video-over-IP product. Outside investors chipped in $8 million, and Radvision hit the market in 1993. The company, which later moved into voice products, now has 380 employees.

Launch Symbiotic Brands
Unlike U.S. incubator Idealab's far-flung creations, Rad companies all operate within the telecom universe. Their products monitor communications hardware, analyze voice and data networks, and perform a rash of other functions. "The Zisapels invest only in businesses they know and can contribute to," says Ami Talmor, a Gartner analyst based in Tel Aviv. That's a big advantage for their startups, which gain access to all of Rad's customers. When Radvision launched, customers "didn't understand what they were buying," Doron says. "But because it was Rad, they bought it, and we started to show revenue."

Keep the Parent Private
By maintaining control of the umbrella company, the Zisapels retain a flexibility that public companies can't match. They invest in or bail on projects when they see fit, and focus on the performance of each firm without worrying about the overall portfolio. Plus, Talmor says, "it's easier to take a startup to IPO than to spin off a division of a big company." And if a startup fails? Rad has shuttered just three in its two decades, but when it happens, Yehuda says, it's quick and painless: "We make sure that one going down doesn't drag down another."

As an attractive Englishwoman in her early 20s wanders the mall with a set of electrodes affixed to her scalp, David Lewis sees the activity of her alpha and beta brain waves -- "the stuff of human thought," he calls it -- splashing across his computer screen in a zigzagging mass of red and green. "She's alert but not engaged," he explains as his subject saunters into an upscale shoe store. Which is true, until she picks up a pair of pink stilettos. Suddenly a colorful explosion of activity cascades across Lewis's screen. "You can see that beta activity on the left side of the brain -- the analytical side -- falls away," he explains. "Look how quickly the purchase decision takes place!" And indeed, a few minutes later, the cash register rings and the woman strides back into the mall with the pair of heels in a bag.
As chief scientist at market research company Neuroco of Weybridge, England, Lewis conducts similar experiments for global players including Bridgestone, Hewlett-Packard (HPQ), and some in the food, beverage, and cosmetics industries. The United Kingdom's first agency built on the nascent science of neuromarketing, Neuroco is at the forefront of a new discipline being touted as the most important breakthrough in marketing research in a generation.

The theory is certainly intriguing: By studying activity in the brain, neuromarketing combines the techniques of neuroscience and clinical psychology to develop insights into how we respond to products, brands, and advertisements. From this, marketers hope to understand the subtle nuances that distinguish a dud pitch from a successful campaign. "There's a lot to learn about consumer behavior by opening up the black box," says Harvard University economics professor David Laibson.

Most neuromarketing researchers today use functional magnetic resonance imaging (fMRI) technology -- hulking machines that generate high-resolution images of the brain as it responds to incoming stimuli. But the heft of fMRI machines (each is the size of an SUV and weighs 32 tons) means they must remain within the sterile confines of a medical lab. Neuroco, however, has figured out how to move neuromarketing into the real world by using electroencephalography, or EEG, technology that's lighter, more mobile, less intimidating, and a third less costly. That allows the company to probe gray matter at locations where consumers are actually found: at shopping malls, in auto dealership lots, or at home in front of the telly.

A self-described embryo in the sprawling $358 billion global advertising industry, privately held Neuroco hopes to parlay its neuromarketing insights into riches. Because neuromarketing is so new -- and so potentially creepy -- Neuroco's brand-name clients are reluctant to talk about the research they've commissioned; none agreed to speak directly with Business 2.0. But Neuroco is off to a promising start; founded in March, the company has already signed up six multinational clients and established relationships with many of Britain's largest advertising agencies.

Untethering the Mind
Lewis works in a cramped Neuroco basement laboratory just outside the English seaside resort of Brighton. Visually, the place doesn't disappoint: Lewis keeps a jar of sheep brains on the desk, alongside a bulky microscope. The mad-scientist decor befits a cutting-edge discipline fraught with unknowns, but Lewis's research is already finding a home in the mainstream.

Take insurance -- an industry not known for running unnecessary risks. Hired by Royal & SunAlliance, the second-largest U.K. insurance company, Lewis evaluated one of Royal's 30-second television spots by wiring 60 volunteers with electrodes. Then, frame by frame, Lewis examined the subjects' EEG readings as they watched the commercial. He discovered that the viewers' brains were most engaged during the ad's dramatic action scene, but interest flagged significantly at the tagline, "You'd better ring the Royal."

"The results suggested that the catchphrase was unlikely to prove memorable," Lewis concluded. Royal pulled the spot shortly after the experiment.

To help avoid such mistakes, Neuroco also works with clients during the planning stages of campaigns. Earlier this year HP hired the company to evaluate which images would give a new digital photography campaign the greatest neurological boost. Lewis presented his subjects with two nearly identical shots of the same smiling woman. During face-to-face interviews, the subjects split their choices between the two photos. Yet EEG analysis showed a strong preference for one image, in which the woman wore a slightly warmer expression. HP marketers chose the EEG-endorsed smile for the campaign. "The Neuroco data was priceless," says Alex Wood of Porter Novelli, the outside marketing agency that commissioned the research on HP's behalf. "It gave us insight that goes beyond normal market research."

To dig out such secrets, Neuroco charges an average of $90,000 per study. And its list of services is growing: The firm will evaluate the subliminal power of colors, logos, or product features. It measures the mental might of music or jingles, the heft of celebrity endorsers, and the most brain-wave-soothing designs for store layouts. The company is even testing neurological reactions to smell and touch, and has worked with U.K. auto dealers to gauge responses to the feel of automobile upholstery and the sound of a car door as it slams.

The Reptile Within
What are researchers learning? For one thing, they're more convinced than ever that feelings matter. "The big breakthrough," says Erik du Plessis, author of The Advertised Mind: Ground-Breaking Insights Into How Our Brains Respond to Advertising, "is understanding the role that emotion plays in rational decision-making."

Until recently, that role was thought to be limited. Economic decisions, and in particular the perception of economic benefits, were assumed to be the realm of the frontal cortex, the section of the brain in which rational thought occurs. Yet this was only partially correct. While scientists have determined that evaluations of long-term economic rewards are indeed processed by the rational brain, perceptions of short-term rewards -- the stuff of impulse purchases -- are actually governed by the limbic system, the "reptilian" sections of the lower brain where emotions are processed. And in the context of a sales pitch, emotions come first. Moreover, the tenor of those feelings exerts a powerful influence over the way we process any factual information that follows. When jolted by an attention-grabbing experience -- a car backfiring, or Paris Hilton squirming for Hardee's -- the reptilian mind automatically snaps to attention. For a few seconds, the regions that control rapid decision-making become energized, and the strength of this reaction influences how much attention consumers give to what they observe.

"If you're transmitting a brand message or delivering a product claim, you don't want to do it during the emotionally aroused phase," explains Stanford University communications professor Byron Reeves. Instead, you might do it right afterward, when the brain is primed to receive new information.

"If you get the emotional impact of the message right, everything else will follow," Lewis says. Even so, he knows that his powers as a consumer soothsayer are limited. "I can measure consumer attentiveness or whether they're attracted or repelled," he says. "But I can't tell you if they're going to buy the blue dress." For this very reason, after collecting neurological data Neuroco also runs test subjects through traditional focus groups. Combining the two techniques remains the most reliable way to understand likely consumer behavior.

Naturally, some are skeptical. Though enthusiastic about neuromarketing's potential, Carnegie Mellon economist George Loewenstein, an expert on the biology of economic decision-making, points out that current technology offers poor spatial and temporal resolution, "so making sense of what's going on involves an element of tea-leaf reading," he says.

Other critics find neuromarketing inherently worrisome. Commercial Alert, a nonprofit consumer advocacy group, has asked the U.S. Senate Committee on Commerce to investigate neuromarketing techniques. "The ill effects of this quest for the 'Buy' button are many, while the potential benefits are few," complains Commercial Alert executive director Gary Ruskin.

Neuroco's Lewis says he's heard it all before. "Brave new world, Orwell, all this stuff about reading minds -- I wish it was true!" he chuckles. "I'd be wealthy indeed."

Besides, for the moment, corporate wariness is the more pressing challenge -- no company wants to be associated with creepy science. Over time, familiarity may do much to ease such worries. More dangerous, perhaps, are unrealistic expectations about what neuromarketing can do. It will never find the "Buy" button; instead, it's merely a tool to help minimize risk and maximize possibilities. As Lewis puts it, "Neuromarketing is the study of how humans choose, and choice is inescapably a biological process."

Now, doesn't that feel better?

By John Heilemann, July 27, 2005
Just as outsourcing was clearly last year's biggest story on the globalization beat, this year's honor indisputably goes to the rise of China. So, to get a bead on the 21st century's ascendant economic titan, I hopped a transpacific flight -- and landed in Tokyo. My destination wasn't quite as incongruous as it seems, for the brain I wanted to pick belongs to the Japanese management guru Kenichi Ohmae. As head of McKinsey's Asia-Pacific operations in the 1990s, Ohmae was a prophet of what he dubbed "the borderless world." Now, as a pundit and all-purpose wheeler-dealer, he's focused on the future of China.
Ohmae, 62, is a small man possessed of large ideas, considerable charm, and mammoth self-regard. The walls of his office are lined with the books he's authored since the mid-1970s -- which he quotes and touts so shamelessly that it's difficult to suppress a giggle. "When I published The China Impact in 2002, it was a best-seller in Japan and also widely read in China," Ohmae says as we sit down to chat. "Before that, the Chinese didn't understand their own success. But after reading my book, they said, 'Oh, my God! Now we see why we are suddenly so prosperous!'"

Full of himself as Ohmae is, he's also brimming with insight. His analysis of China's commercial dynamism defies much conventional wisdom. At its heart is a claim that China is now in effect a decentralized economy, more akin to the United States than to Japan. For Sinophiles and Sinophobes alike -- and everyone in between -- it's a bracing and timely message.

For Ohmae, China is the ultimate exemplar of a theory he's long held: In a global economy where information and capital flow freely from place to place, turning traditional borders into "dotted lines," nation-states are being replaced by regions -- city-centric hubs of 1 million to 10 million people -- as the relevant units of measurement. In his new book, The Next Global Stage, Ohmae writes, "The growth level of China averages around 9 percent per annum. But this is a figure for the whole country. It embraces vibrant region-states such as Dalian and Guangzhou, whose growth rates [are] between 11 and 15 percent … and regions farther west such as Ningxia and Gansu, which are still enmeshed in poverty."

Ohmae's interest, naturally, centers on the burgeoning industrial clusters powering China's economy. Situated mainly along the coast, they have taken off, Ohmae argues, because of the reforms launched in 1998 by then-premier Zhu Rongji -- reforms that granted unprecedented autonomy over economic policy to mayors and other local bosses. "The mayors were told they have to grow by 7 percent a year or they will be fired," he says. "But they were also given freedom to import technology, capital, and corporations from the rest of the world. They were allowed to forget about politics and embrace the global economy."

And so they have -- with abandon. In 2002, for the first time, more direct foreign investment flowed into China than into the United States. On a regular basis, Ohmae says, Chinese mayors lead delegations of businessmen to Tokyo in search of partnerships and cash. And that's nothing compared with how the Chinese court attractive Taiwanese investors: "There's partying, drinking, offers of cheap land," Ohmae explains with a chortle. "Now, politics says China and Taiwan are fighting, missiles pointed and all that stuff. But on the economic level, that means nothing. Taiwan has 90,000 companies operating on the mainland. Japan has 30,000 -- and Taiwan has just one-sixth our population. It's unbelievable!"

To illustrate China's boom at the regional level, Ohmae points to Dalian, which up until 1992 was a sleepy northeastern port city with a large contingent of Japanese-speaking residents. But during the next decade, a pair of reformist mayors (the first of whom, Bo Xilai, is now China's minister of commerce) jacked the city into the global economy. Today, Dalian plays host to Dell (DELL), Hewlett-Packard (HPQ), Microsoft (MSFT), and other American high-tech giants. And also to 3,000 Japanese firms, many of them pioneering the practice of Japan-to-China outsourcing. (Ohmae, in fact, founded one such firm.)

To Ohmae, the essential question facing China is whether it can propagate more Dalians. He has no doubt that it can. He points to the astonishing fact that, from 1990 to 2000, China created 146 new cities with populations exceeding 1 million -- while 800 million people remain in the countryside. Meanwhile, Ohmae notes another trend: "Chinese students who study in America or Japan used to stay. But now one-third of them are coming back, because China is the new frontier. These students are called 'turtles,' because turtles return to the beaches where they were born."

Views of China as bullish as Ohmae's tend to provoke either fear or skepticism in the West. The fear, of course, we see all around us, most notably in the halls of Congress, where various mercantilist measures are being crafted to strike at China's solar plexus. To Ohmae, this reaction has a familiar whiff of the anti-Japanese hysteria that gripped the United States in the 1980s. Acknowledging that many Japanese harbor worries about China too, he notes that Chinese demand has been "like Viagra" for Japanese industry. His message to America, Ohmae says, is the same as to his countrymen: "China should not be seen as a threat but as a customer."

The skeptical reaction to the Chinese boom tends to come from businesspeople and financiers. Let me boil it down: China is in the midst of a megabubble, its economic surge built on bad debts and overinvestment. When I put this to Ohmae, he doesn't disagree: "Chinese companies have gone overboard, and the bursting of the superbubble could kaput quite a few companies."

Yet Ohmae goes on to argue that, in the long run, such a scenario wouldn't hamper China much. Because the government still owns most of the country's land, it could, at any point, decide to sell the property and use the proceeds to pay off bad debts. In the meantime, even with all the talk about a Chinese bubble, foreign investment continues to pour in -- an example is Bank of America's recent announcement that it intends to buy a 9 percent stake in China Construction Bank for $2.5 billion.

China's Gold Coast
These four regions are attracting foreign investment and growing at breakneck speed.
PEARL RIVER DELTA
Growth industries: Automobiles, consumer electronics, PC components
Regional growth rate: 14.3%
YANGTZE RIVER DELTA
Growth industries: Cell phones, laptops, semiconductors
Regional growth rate: 13.6%
QINGDAO
Growth industries: Brewing, home appliances, medical devices
Regional growth rate: 13.7%
DALIAN
Growth industries: Aircraft, business-process outsourcing, software
Regional growth rate: 11.5%
Sources: China Internet Information Center; National Bureau of Statistics of China; "The Next Global Stage"
Personally, I'm neither a fearmonger nor a skeptic regarding the Chinese economy. It's Chinese politics that give me the heebie-jeebies. For two decades now, it's been plain that the People's Republic faces a day of reckoning with democratization -- and the results will range from turbulence to total breakdown. Once again, Ohmae agrees. Once again, he isn't worried. In The Next Global Stage, he writes, "It no longer matters whether [China] is one country.… It is de facto an assembly of many region-states."

This view strikes me as rather too sanguine -- and rather too naive. And it's one that even Ohmae hints he doesn't entirely believe. His hope is that demands for democratization will come gradually. But he knows that there's another plausible scenario. "If democracy is introduced too quickly to China," he tells me, "it is going to be the most violent country that you've ever seen. You give 800 million rural people the right to decide their future and you know what's going to happen? Robbery of the coastal regions."

Businesspeople around the world, I've learned, love to talk about revolution. But they know that actual revolutions are rarely good for business. Lately, China has provided the kind of balance between order and chaos that capitalists thrive on. But should the balance swing to chaos, all bets will be off in China. Even Ohmae's beloved turtles may decide that they can't go home again.

By Elizabeth Esfahani, July 27, 2005
Holograms have been a staple of science fiction since George Lucas strapped a pair of Danishes onto Carrie Fisher's head 28 years ago. Now a Danish startup wants to make them a staple of advertising too.
Vizoo, based in Copenhagen, designs eerily lifelike holograms that let marketers project video ads into thin air. Backed by media conglomerate WPP, the two-year-old firm has already created holographic ads for 15 big brands, including Adidas and Heineken. Wireless carrier Vodafone (VOD) paid Vizoo roughly $80,000 last September to produce video for its concept store in Lisbon, Portugal. The holograms, which featured Portuguese soccer players dribbling balls, drew crowds of thousands.

Vizoo films each ad using a blue-screen-like technique, then projects the images onto a nearly invisible fabric. The result is a life-size illusion that blends into any background. This fall Vizoo is looking to bring the technology to the States, and it's now in talks with several major U.S. clients. Help me, Vizoo, you're my only hope?

With its beaches, golf courses, cuba libres, and rock-solid social-security system, it's no wonder that Costa Rica is luring American executives who want an alternative to Indian outsourcing. After sending thousands of technology and call-center jobs to India and the Philippines, major U.S. companies including Dell (DELL) and Procter & Gamble (PG) are now looking to Latin America to meet their outsourcing -- or rather, "nearsourcing" -- needs. Like India before them, Brazil, Nicaragua, Panama, and especially Costa Rica are embracing the trend with business-friendly policies and aggressive marketing. "Costa Rica is moving up very fast," says Ram Mohan, IT manager for P&G, which operates a 1,000-employee center in San José, Costa Rica, to handle financial and infrastructure systems support.
Currently, 24,500 Costa Ricans work in call-center and IT jobs, doing everything from fielding complaints about shampoo to answering questions about insurance. The number of call-center positions alone is expected to double in the next two years, says Federico Cartín, executive director of the nonprofit Costa Rican Chamber of Information and Communication Technology. In Latin America as a whole, the number of call-center workstations will hit 730,000 in 2008, up from 336,000 in 2004, according to market-research firm Datamonitor. Brazil is expected to get a big slice of that business, thanks to some of the lowest labor costs in South America. Business promotion agency ProNicaragua expects its homeland to create 3,000 new jobs in the next few years, while Dell already employs 2,000 workers at its Panama call center.

It helps that the scenic shores of Central America are just a five-hour flight from the East Coast, but that's not the only appeal. The region also shares two time zones with the United States -- the better for handling phone calls -- and Costa Rica, in particular, is full of well-educated workers, having abolished its army more than 50 years ago and rechanneled the funds into education, including mandatory English training. Though its progressive labor codes translate into relatively high wages, the "Switzerland of Central America" also boasts an extensive social-security system that makes it easy to perform background checks.

Nearsourcing Hot Spots
Here are the countries and companies helping to turn Central and South America into the new hubs of bilingual outsourcing.
BRAZIL
SELLING POINTS Very low labor costs; a five-year suspension on export taxes for IT hardware and software.
COSTA RICA
SELLING POINTS Stable, neutral government; social-security system that enables preemployment background checks.
NICARAGUA
SELLING POINTS Very low overhead; influx of foreign investment.
PANAMA
SELLING POINTS Excellent telecommunications infrastructure; political and economic stability.
Sources: Costa Rican Chamber of Information and Communication Technology; ProNicaragua; listed companies
To counter Costa Rica's image as an underdeveloped banana republic, the Chamber of Information and Communication Technology has a new campaign promoting the country as "green and smart." Intel, which has been manufacturing microchips in Costa Rica since 1998, recently launched a software division there, while call-center operator Sykes Latin America employs Costa Ricans to help its corporate clients do everything from answer tech-support questions to serve customers who've lost their credit cards.

Other burgeoning hubs are also making a concerted effort to attract IT business. Nicaragua, where an influx of foreign investment is helping to pull the country out of its war-torn past, has created an online database to track the bilingual employee pool. When ProNicaragua launched Nicasearch.com last year, more than 4,200 applicants registered online. Medical-services provider Almori is currently the largest bilingual call-center employer, but ProNicaragua expects business to increase rapidly. Meanwhile, Brazil is moving to attract business by suspending export taxes on IT hardware and software for the next five years. Citibank and IBM (IBM) are among the companies already sending work there. And who can blame them? With all due respect to Mumbai, we're betting most American execs would rather spend their time on the road in Rio.

. Walter Thompson, the 141-year-old advertising agency, held a funeral this past winter. On Feb. 28, staffers in Paris lit a bonfire and tossed in materials from old campaigns. In Tokyo founder Commodore J. Walter Thompson received a mock burial at sea. And thus the $1.3-billion-a-year J. Walter Thompson was reborn as JWT. The ad agency is dead! Long live the ad agency?

JWT is responding to the malaise that has afflicted Madison Avenue for almost a generation, as agencies have been forced to give up their fat commissions on the commercials and print ads they place on behalf of clients. A 2004 study by the Association of National Advertisers found that only 10% of agencies now work solely on commissions. Instead they charge fixed fees or hourly rates for time spent devising and executing campaigns. That pinches margins. WPP Group, the $10-billion-a-year London parent of JWT, aims for 20% operating margins, but in recent years they've hovered at 14%.

Those brutal cost pressures, of course, are coming as unconventional media emerge as the main source of growth in the $279-billion-a-year advertising universe. National advertisers are expected to spend $7.9 billion on the Internet this year, a 15% increase from 2004. (That represents the bulk of advertisers' spending on nontraditional forms, which also include videogames and product placement.) Naturally, the visionaries in agency-land are cooking up ways to grab their share of the pie, and that may mean not just reinventing the 30-second TV ad but remaking the agencies themselves. They present their plans—some genuinely creative, some redolent of snake oil—with all the fluency you'd expect from people who pitch for a living. Which strategies will work? You be the judge.

360 degrees of Ogilvy Ogilvy, the $752-million-a-year ur-agency (sample clients: American Express, IBM, Cisco—and Yahoo) sees its 33-year-old OgilvyOne direct marketing and interactive unit as the centerpiece of a "360 degrees" strategy to cater to clients' every need. To midwife the development of the American Express OPEN small-business network, Ogilvy since 2002 has choreographed internal town-hall meetings; designed a new brand identity; planned direct-mail, TV, and online ads; written the product into the reality TV show The Restaurant; trained call-center workers; and tested one-to-one pitches on different types of customers, such as doctors shopping for equipment.

The agency likes OgilvyOne so much that OgilvyOne president Carla Hendra is now co-heading Ogilvy's flagship New York City operation with its president, Bill Gray. And by the end of this year the company, which has always maintained separate brands for its units, will integrate the disciplines so they can work more closely together.

Agency spin: Under the new model, says Hendra, "the breed of account person that we've been growing and training will be able to handpick a team from all the disciplines and put it in the service of this great idea that comes out of creative."

Reality check: Turning an agency into a talent warehouse—specialists in every discipline from direct marketing to product placement to creative—is expensive. And few clients possess American Express's affinity for comprehensive marketing (or its deep pockets).

Taking it to the street Two years ago Kaplan Thaler Group, a subsidiary of $4.6-billion-a-year Publicis, set up a so-called guerrilla-marketing unit called KTG Buzz. The goal, says Robin Koval, chief marketing officer and co-author of Bang: Getting Your Message Heard in a Noisy World, is to find nontraditional ways "to get ideas into the pop culture." Though a traditionalist might object that guerrilla marketing isn't that far removed from hiring a guy to walk around wearing an EAT AT JOE'S sandwich board, Kaplan Thaler didn't care. For Aflac it brought the U.S. synchronized-swimming team to perform in a pool outside David Letterman's theater. And it routinely stages Quackattacks among the tourists watching The Today Show through the studio windows at Rockefeller Center. Another triumph: writing an ad for Herbal Essences into a February episode of the WB show What I Like About You.

Agency spin: Inserting ads into the middle of programs is a brilliant innovation on the 30-second spot. The Herbal Essences placement, crows Koval, "was TiVo-proof!"

Reality check: Guerrilla marketing works well for building brand awareness, but it's not so effective at telling the story behind a product. And you don't need an ad agency to do product placement. Hollywood talent firms like William Morris and Endeavor have started their own product-placement units to work directly with FORTUNE 500 advertisers, and sports agents are busy inking deals to place their clients in videogames. In a contest between predatory agents and smooth-talking ad people, our money's on the sharks.

What's an ad agency? "The term ad agency needs a true and sincere facelift," says Peter Arnell, chairman and CEO of Arnell Group, a New York unit of $9.2- billion-a-year Omnicom. Indeed, many agencies are putting themselves under the knife. Arnell, an architect and industrial designer, says agencies have to think of ways to "build the advertising and brand into the product." He has been hiring industrial engineers and designers to get his agency involved in product and store design. Last fall Arnell was hired by Swedish appliance maker Electrolux to help design and promote a new line of blenders, toasters, and other appliances.

Agency spin: Arnell has described his company, which handles Con Edison, Almay, and Cuervo, as a "brand-ideation and experience-marketing company specializing in integrated branding, strategy, and communications solutions."

Reality check: Truly and sincerely, Arnell lost us at "brand ideation."

All the world's a screen Advertising is now about bringing commercial messages to screens of all kinds: computer screens, giant screens in Times Square and at stores, and teensy screens on videogames and cellphones. That's the theory at Havas's McKinney & Silver, a 200-person agency in Durham, N.C. The disciplines that stood agencies in good stead for TV—combining irresistible images with music and words—still matter. For the launch of Audi's A3, McKinney & Silver created an intricate reality-game scenario encompassing 10,000 web pages—"The Bourne Identity meets The Da Vinci Code," as president and CEO Brad Brinegar describes it. It challenged users to figure out who stole the Audi. TV ads steered viewers not to car dealers but to the campaign on the web.

Agency spin: "We're in the adolescent phase of interactive advertising," says Brinegar. (He's not referring to the flatulent horses in Super Bowl XXXVIII's moronic Budweiser spot.) "Interactive today is where TV was 50 years ago."

Reality check: Who's to say that people won't have the same negative reaction to advertising on computers and cellphones that they do to ads on movie screens?

Revenge of the media planner For years media-planning and -buying companies were the lowly number crunchers who figured out where to place the ads devised by superstar creatives, earning a few percentage points of commission for their trouble. But with an expanding media menu and a growing ability to track response to campaigns in real time, planners are suddenly hot. "Seven years ago media was the last five minutes of the presentation. Now it's reversed," said Rishad Tobaccowala of Publicis Groupe Media, whose fast-growing Starcom division helps clients buy and measure interactive, mobile, and gaming ads. "Today media [buyers] and the ad agency are equal partners." Some full-service agencies, which had been content to outsource buying, are rediscovering its virtues.

Agency spin: "Because the media marketplace is so much more complex and every day something new emerges, we do all the planning and buying in-house," said Linda Sawyer, managing partner and chief operating officer at IPG unit Deutsch Inc., which has $2.7 billion in annual billings.

Reality check: Do bright young things accept advertising's meager salaries for the thrill of coming up with the next "Where's the beef?" Or do they really prefer the frisson of running spreadsheets and tallying click-through rates?

Same as it ever was Forget about hiring experts in interactive gaming and database management and building a one-stop shop, says Chuck Porter, a founder of Crispin Porter, a fast-growing independent agency. Advertising still comes down to creativity: "To worry about how we're going to deliver the message is a waste of time. The skill set for the new world of brand communication is very simple: brains, talents, and imagination, and passion." Traditionalists like Porter are content to see their agencies' reputation and compensation rise and fall with the fortunes of their clients. Crispin Porter charges a fee plus incentives for performance. So does Modernista, the 80-person Boston firm that has tripled in size in two years and that devised the evocative TIAA-CREF "A Place for Us" campaign.

Agency spin: "We're not an executional house; we're an agency that creates living, breathing business ideas," says Modernista president Clift Jones.

Reality check: The bonuses we're talking are more like tips. If you do a really good job, you might get your fee plus 10%.

And if clients opt to do it themselves? Skype, the Internet phone service, has reached 40 million users worldwide without spending a dime on advertising. In devising its biggest-ever ad campaign for a kids' book—a $500,000 multimedia push for the adventure fantasy novel Eldest—Bertelsmann's Random House is flying solo. As Random House marketing VP Daisy Kline told the Wall Street Journal, "We didn't feel we needed the expertise of Madison Avenue."

Conglomerates launching products without Madison Avenue, startups reaching global scale without ads, Google and Yahoo outdrawing the Big Three networks—and broadband is only in its infancy. Scary stuff. But look on the bright side. Total U.S. ad spending is rising, and capitalism will always reward a seductive pitch.

Sohu to resume messaging services
www.chinaview.cn 2005-08-01 10:06:47

BEIJING, Aug. 1 -- Chinese Internet portal Sohu.com Inc. will resume delivering multimedia messaging services (MMS) Monday, a month before a one-year suspension was scheduled to be lifted.

Sohu doesn’t expect the move to affect its third-quarter earnings guidance, which was issued Wednesday.

In a press release Friday, Sohu said China Mobile Communication Corp., the country’s largest mobile carrier, informed the company it decided to resume multimedia messaging cooperation on its nationwide network Monday. China Mobile had suspended the services for a year because of unsolicited marketing by Sohu to some customers.

Sohu said it transferred its multimedia messaging services business onto China Mobile’s mobile information service center platform in June, so it is “ technically ready” to resume the MMS business.

Because it will need to rebuild the business after 11 months of suspension, Sohu doesn’t expect the service resumption to materially affect its third-quarter outlook.

Earlier last week, Sohu reported its second-quarter profit fell 28 percent, to US$7.1 million, or 18 U.S. cents a share, and said third-quarter results would be weaker than expected, largely because of disappointing advertising revenue growth.

The company projects third-quarter earnings of 18 U.S. cents to 22 U.S. cents a share, on revenue of US$26.5 million to US$28.5 million. Analysts surveyed by Thomson First Call, on average, estimate earnings of 22 cents a share, on revenue of US$28.75 million.

Sohu said Friday it would leverage its resources to rebuild the multimedia messaging services business and would cooperate with online and wireless partner Walt Disney Co.

US$1.8 bn for online games
www.chinaview.cn 2005-07-30 20:18:42

BEIJING, July 30 (Xinhuanet) -- China plans invest 15 billion yuan(about 1.8 billion US dollars) to develop 100 kinds of online games with independent property rights in the next five years, the Shanghai Youth reported.

Yu Yongzhan, deputy director with the Press and Publication Administration of China (PPAC), was quoted as saying that the PPAC will make joint efforts with other government departments to speedup the construction of game software development centers in Beijing, Shanghai and Guangzhou cities and Sichuan province where10 to 30 home-made online game companies are expected to be launched within the next three years.

"This will give impetus to the growth of game industry across the country, " Yu was cited as saying.

The number of Internet users in China, the world's second-largest Internet market, grew by nine million in the first half of this year to reach 103 million.

The development represented an increase of 18.4 percent over the same period last year in a market that still has a vast potential for further growth, the China Daily reported on July 22.

The burgeoning online gaming market proved especially lucrative, with Internet gamers spending some four billion yuan (483 million dollars) on virtual equipment for their online alter-egos in the first six months. Enditem