web2asia-startonomicsbeijing-090611020226-phpapp01

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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

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12

4

2

2008

2007

2006

2006

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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

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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

-

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

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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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