Friday, April 21, 2006

Guanxi for Pay by Touch

In China, markets aren't always defined by something that can be mapped—such as a province, a city or a region. Markets can also be defined by a nearly invisible network of relationships. It's not just what you know but who you know—and who they know—that counts. The Chinese have a word for it: guanxi, (jiǎntǐzì) a Mandarin term that loosely translates as "network of influence." Guanxi is rooted in the deep sense of family loyalty that permeates the culture.

The importance of "Guanxi"

Regardless of business experiences in ones home country, in China it is the right "Guanxi" that makes all the difference in ensuring that business will be successful.

By getting the right "Guanxi", the organization minimizes the risks, frustrations, and disappointments when doing business in China.

Often it is acquiring the right "Guanxi" with the relevant authorities that will determine the competitive standing of an organization in the long run in China. And moreover, the inevitable risks, barriers, and set-ups you’ll encounter in China will be minimized when you have the right “Guanxi” network working for you. That is why the correct "Guanxi" is so vital to any successful business strategy in China.

The Lowdown: Pay by Touch forgives $1 million dollar loan, made last September 30th, in return for shares and the right to purchase shares of stock in Win Win Gaming Inc. tantamount to 19% ownership. The agreement also provides Pay by Touch with the ability to market their biometric (and processing) systems in Mainland China. This by itself would mean nothing, but Win Win has government connections..."guanxi."

As part of the Joint Marketing Agreement, Win Win Gaming, Inc. has agreed to the following joint marketing terms and conditions:

Until December 31, 2006, WinWin is obligated to provide PBT with the following support:

A reasonable amount of selling support to assist in driving PBT’s biometric authentication and payment solutions into the Chinese video lottery terminal solution that is being prepared for rollout across China.

* Introductions to senior Chinese government officials with whom WinWin has relationships for the purpose of promoting PBT solutions into other applications beyond video lottery terminals.

* Support from WinWin’s Chinese general counsel for the purpose of making introductions and helping provide tactical and strategic guidance to PBT in connection with its entry into China.

* Physical and logistical support for PBT’s entry into China, including providing access to WinWin’s distribution channels and making available without charge office space in Shanghai.

In addition, under the terms of the cooperation covenants, PBT is required to provide WinWin with reasonable support and assistance in promotional consideration and exposure of WinWin products, services and technologies. PBT is also required to provide WinWin with reasonable support and assistance in identifying sources of equity and debt financing and strategic partners and assistance with obtaining financing from such sources.

Also, under the terms of the cooperation covenants, both parties must use commercially reasonable efforts to identify and exploit opportunities for the benefit of both parties.

Editors Note: (Why This Could be an Important Development for Pay by Touch) The China business market is a very difficult one to get into. "In China, it's not what you's who you know, and if you don't know anybody, you have no chance." - CMO Magazine, January 06

Therefore, with Win Win's contacts, this is one giant step for Pay by Touch in terms of potentially penetrating what promises to be the largest market in the world. Truly a Win-Win Situation. (couldn't resist) By the same token, Win Win is extremely cash poor.'s a snippet on Win Win Gamings connections:

Slam Dunk: In the beginning of 2004, Win Win Gaming Inc. entered into an exclusive agreement with the Shanghai China Welfare Lottery to develop new Instant Ticket lottery games and a new TV lottery game show to be marketed throughout the Shanghai region. This agreement is the first of its kind between a U.S.-based lottery/gaming company and the China Welfare Lottery. In addition to the development of several new Instant Ticket lottery games and a full season of prime time TV lottery game shows, Win Win will also provide the marketing for the new lottery products and will consult on overall existing lottery operations in Shanghai.

"This is an unprecedented opportunity for a Western company to be invited to work in partnership with the Chinese government on Welfare lottery operations," said Win Win CEO/President Patrick Rogers. "

The market in China is poised for tremendous growth. This agreement validates the expressed desire of the Chinese government to blend Western-influenced marketing concepts, sales methods and technological innovations with the traditional Chinese approach to lottery operations."

Yu Jianguo, director of Shanghai Welfare Issuing Center, said, "We are very pleased that Win Win can help us on development of new Instant Ticket lottery games tied to a TV lottery game show. We look forward to a new and exciting program to improve our sales for 2004 and we are confident that together we will make it a success." Shanghai China Welfare Lottery was instituted in 1987 with proceeds directed toward the benefit of social programs throughout the area. In 2003, Shanghai China Welfare reports that gross annual sales of the lottery have reached 0.97 billion RMB.

September 21, 2005, Win Win Gaming's wholly owned subsidiary Win Win Consulting (Shanghai) Co. Ltd., entered into a Cooperation Contract with the Shanghai Welfare Lottery Issuing Center ("SWLIC"). Pursuant to this contract, the SWLIC retained Win Win Shanghai to design, market and promote the sale of a second generation of instant scratch off lottery tickets in Shanghai using the Company's "Slam Dunk" brand and trademark (the "Slam Dunk II Tickets"). The Slam Dunk II instant tickets will feature an IVR (Interactive Voice Response) component where players call to receive a "second chance" opportunity to win cash and prizes via an automated phone game. We also plan to roll out Slam Dunk II ticket games in additional cities and provinces throughout China pending final approvals from government lottery officials.