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Western Internet Companies in China 8 hrs
3-8 hrs
1-3 hrs
< 1 hr
At a Glance
3,000 million registered BBS users (one netizen can register in more than one BBS)
> 60% of users log on at least 3 BBS more than 3 times per week
> 1,600 million total daily page view
10 million posts published every day
BBS in China
Anon
ymity
!
Anony
mity!
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At a Glance
80% of Chinese sites are running their own BBS
BBS on various topics
Discuz! the first ever social platform (BBS system) in China
> 400,000 BBS sites built on Discuz! system
> 70% Chinese BBS market
BBS in China
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Categories & Examples
BBS in China
Sewing Machine1.990.2288.619bbs.sewinginfo.comSewing
Travelling in Europe26.37844.800www.go2eu.comQiongyou
Diet & Losing Weight54.444144.300www.boohee.comBohe
Furniture359.391201.012www.furniturebbs.comJiaju
Tongji University28.105234.646bbs.tongji.netTongji
Business Forum9.460263.027www.fobshanghai.comFob
Home Decoration208.890286.340bbs.roomage.comZhuangxiu
Administrator Forum5.245322.205www.chinaz.comChinaz
Home Appliances16.798508.977www.jd-bbs.comJiadian
Auto1.425700.000club.autohome.com.cnQiche
Stock Forum6.6911.306.691www.55188.comLixiang
Mobile Phone3.4919.329.177bbs.imobile.com.cnShouji
General1.05210.000.000www.xici.netXici
General23820.000.000www.tianya.cnTianya
Target Group
Alexa
RankingUser NumberWebsiteName
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Online SNS in China
Active
users
!
Active
users
!
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www.facebook.com
www.xiaonei.com
3 million users in China
40 million users in China
SNS in China
The Copy-Cat Issue
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SNS in China
The Copy-Cat Issue:
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SNS in China
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SNS in China
The Copy-Cat Issue: Also among Chinese SNS
Recent example:
www.xiaonei.com www.xiaonei001.com
www.kaixin001.comwww.kaixin.comHappy: white collar workers
On campus: students
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SNS in China
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SNS in China
www.geeksonaplane001.com !?
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SNS in China
Foreign Capital Investment in Chinese SNS: Selected Examples
United Capital Investment/SIG
United Capital Investment
4
n/a
2006
2004
Wealink
Giant Interactive
Intel/Sequoia/Redpoint Ventures/SIG Asia
Investment
Sequoia
SIG
51
12
4
2
2008
2007
2006
2006
51
Softbank/SBI Holding/JOHO Capital
General Atlantic Partners/DCM-Doll Capital
Management
430
48.1
2008
2006
OPI
(Xiaonei)
InvestorsValue
(USD million)
YearName
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SNS in China
The Copy-Cat Issue: The Difference
Sales of virtual items:
avatars (personalized figures)
background music decorations for personal space
Targeted advertisingMain source of revenue
Multiplayer gaming
Virtual items
Interactive servicesSpecial applications
Entertainment
Killing time
Building up networks based
on shared interestsObjective n1 for users
Chinese SNSWestern SNS
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Case Study: SNS n1: Qzone: Virtual items
1 Q coin = RMB 1
SNS in China
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Western Internet Companies in China
or
Why is so damn hard for them to gain afoothold here!?
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Cat vs. Copy-Cat
A common excuse
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Copy/Paste isnot a Chinese
phenomenon
only
But
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A quick look at Germany
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GoogleGoogleSearch Engine/
eBayeBayC2C eCommerce/C2C
MSN MessengerMSN MessengerInstant messenger/
etc.etc.etc.
del.icio.usMister-wongSocial bookmarking/
DiggYiggUser submitted news/
Yahoo!GMX, Web.dePortal/
LinkedInXingBusiness SNS/
MyspaceWer-kennt-wen.deWorking Class SNS/
FacebookStudiVZStudent SNS/
YouTubeMyVideoVideo hosting/
Global playerLeading playerType/
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A quick look at Germany
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vs.
vs.
vs.
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Rest of Europe
33
Most popular website and SNS in
Poland/
Most popular website and
Search Engine in Czech Republic
Largest SNS in Finland
Largest SNS in France
Largest SNS in Spain
Largest SNS in the Netherlands
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So what are the real reasons?
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1. No formal internationalization/China entry strategy
2. Entered China too late/too slow
3. Corporate guidelines vs. Start-up feeling Local HQ has no full decision power
Short-term profit orientation
Too arrogant
4. Incomplete localization: Translation
Content Pricing
Branding (name, colours, numbers, etc.)
Features
Business model
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Meaning
Color China Europe
Black color of death, darkness, glory,
winter, north
death, darkness, mourning
White mourning, bad luck, age, autumn, west cleanliness, brightness, hygiene,
virginity
Red Traditionally: joy, good, wealth, bright,
summer, south, recently: government,
authority
danger, forbiddance, war,
sexuality
Yellow traditionally: emperor, earth, middle
and china, recently: pornography
caution, envy, avarice, cowardice
Blue algid, ill sky, water, reliable, authentic
Brown misfortune laziness, old-fashioned
Grey cheap, dull elegant
Gold glory, royal, wisdom, perfection money, sun, nature, friendliness
Green life, vitality, spring, east nature, hope
The Meaning of Colors
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Meaning
Symbol China Europe
Magpie que joy, fortunate marriage thievery, robbery, defraud
Owl xio disaster, scare, crime wisdom, clever, bright,
intelligent
Rat sh wealth, avarice, demonical
possession
dirt, cloacae, illness
Spider zhzh luck fear, disgust, threat
Clock short life, wish death time
Swastika wn luck, numerousness, all war, death, terror
Fish y wealth, luck Christianity, Jesus Christ
Dragon lng power, strength, wisdom,
luck, emperor
power, danger, chaos
Bamboo zh integrity, pertinacity,
conservativeness, long life
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The Meaning of Symbols
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Positive
6 problem-free, promising, smooth
8 fortune, wealth
9 forever, long-lasting
Negative4 s ( ) sounds almost like death, dying ( ), disaster
10 sh( ) sounds almost like 4, therefore death
13 failure, imperfection
14 yao sisounds almost like going to die
The Meaning of Numbers
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So what are the real reasons?
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5. No local technical development team Slower time to market
More expensive
6. Local legislation
7. Sometimes local startups simply have cooler ideas or
a better technology + business model
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What can Chinese Internet companies learnfrom that for their own international
expansion?
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About us
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Headquarter
Sales offices
About Web2Asia: Overview
Leading partner to launch and
scale web- & mobile based
companies in Greater China,
Korea & Japan
Active since 2006 with proven
track record of successfully
developing and growing Internet
projects for Western investors and
start-ups
Spun out ofinternational
marketing & eCommerce BPO
company
We and our customers benefit
from the know-how, infrastructureand global network of our parent
company
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About Web2Asia: Divisions
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1. Media & Events
1 M di & E t l t d l
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1. Media & Events: selected examples
Tour of worlds TOP techbloggers & journalists through China
Meetings with largest Chinese Internet players & most promising
start-ups
November 2008: Beijing Shanghai Guangzhou
Click here for details
Examples of articles & online publications:
Techcrunch: Chinese Social Networks Virtually Out-Earn Facebook And
MySpace: A Market Analysis
Venturebeat: http://venturebeat.com/2008/07/13/china-web-use-accelerates-e-
business-still-lagging/
Largest (and only) Pan-Asian Web conference
Started October 2008 in Seoul/Korea
Organized by East Asian work group
Click here for details
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2. Market Entry & Internationalization
Facts China Japan & Korea
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Facts China, Japan & Korea
USA EU27 China Japan Korea
Population 303.8m 490.43m
1.33b 127.29m
49.23m
Internet Users(Q1 2008) 215m 273m 230m 88m 35m
Penetration Rate 72% 56% 17% 69% 71%
Growth(2000-2007) 126% 199% 833% 86% 83%
Mobile Users(Q1 2008) 256m 549m 547m 103m 44m
Penetration Rate 84% 112% 41% 81% 89%
Growth (2007) 3% 8.6% 20% 2% 4.5
www.internetworldstats.com; www.nic.ad.jp; www.nic.or.kr; www.cnnic.cn; www.cencus.gov; http://ec.europa.eu/eurostat 46
Enormous Growth Potential
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Enormous Growth Potential
Asia is already the world's largest region in terms of Internet users, but the
comparatively low penetration rate in the region especially in China
bears an enormous potential for growth
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China Challenge
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China Challenge
Internationalization is hard, but China is an order of magnitude harder Many US Internet brands have been able to successfully enter Europe, and a few European start-ups are
starting to enter the US
However, most global Internet companies have failed or are struggling in China: Yahoo, eBay, Google are
famous examples
China Internet companies are extremely nimble, have strong government and business
relationshops ("guanxi"), have incredibly low costs, and are tailored to local tastes Most international Internet sites are relatively slow in localizing for the China market, do not enjoy powerful
relationships, and have relatively high costs
China's Internet landscape is fraught with dangers
The "Great China Firewall" slows or stops foreign Internet traffic
Content is carefully scrutinized
IP protection is difficult to enforce
Ad-based monetization is challenging
But perhaps most importantly, it is difficult to assemble a local team at international
standards
Management talent is incredibly hard to find
Communication is challenging
Trust is the rarest commodity
Because of these challenges, the minimum entry costs to China with a local team is EUR
350,000 with a medium to high probability of failure!48
China Strategy
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China Strategy
Internet companies must grow in their home turf at breakneck speed
Even if they have the capital, they do not have the management bandwidth to explore
internationalization
Copy cats regularly scout VC funding reports to see what business models toknock off
This is particularly true in China where development costs are a fraction of US and EU
markets
China Internet user population is the fastest growing in the world Also high broadband penetration and huge mobile adoption
Strong RMB - European & American ventures can benefit from this
development
Internet companies must have a China strategy not just for defensive measures, but to take
advantage of the huge growth opportunities most of them do not have the time to do it!
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Our Services
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Our Services
50
Market EntryStudies
FeasibilityAssessment
Asian Strategy
& RoadmapDevelopment
Translation
Localization -Cultural contentadaptation
Software Design
& Development
Legal Consulting
CommunityManagement
Customer &TechnicalSupport
OrderManagement,PaymentManagement &FulfilmentServices
Expansion
Financing
PR, Networking,GovernmentRelations
BusinessDevelopment
Online & OfflineMarketing
Hosting &Administration
CooperationDeals
Turnkey strategy development & execution of
your start-up's expansion to Asia
Work with Us
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Work with Us
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Your Advantages with Web2Asia
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Your Advantages with Web2Asia
On your Own With Web2Asia
InfrastructureHigh up-front investments ininfrastructure, legal entity and
relocation expenses
Fully functional infrastructure
Legal entity already established
HR
Loss of key management in thehome market
Hard to find qualified people to trust
Long training time
Local management and operativeteam fully functional
Home market focus can bemaintained
MarketNew and culturally challengingenvironment
No social and professional network
Deep market knowledge
Local network already established
Speed Operational start can take up to oneyear Operation can be deployed within 1to 3 months
Financial
High sunk costs and long termcapital commitments (infrastructure,contracts, cetup fees, expatsalaries)
Predefined budget and clearlydefined milestones and goals
Easy to pull out of the market iftargets are not reached
2. Market Entry: example Jimdo
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2. Market Entry: example Jimdo
We run German website
creator Jimdos operations in
East Asia
Launch in China 2007,
profitability reached 2009
Launch in Japan with KDDI
2009 (click for details)
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3. Incubation & Business Acceleration
3. Incubation: example BloggerInsight
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p gg g
Crowd sourced Market
Intelligence Provider
Start-up physically incubatedin our premises
Launch in China 2008 (clickfor details)
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