DESCRIPTION
Central Message
The book looks at innovation in the China internet industry.
It also stresses:
1) Why U.S. Internet companies failed to dominate China?
2) How mainland internet companies thrive by finding clever ways to adapt to
China’s unique environment and how many entrepreneurs have gone from the
brink of bankruptcy to huge riches.
3) These opportunities are not limited to the local Chinese – foreigners can grab
them too. The easiest way is to be an investor. Long term investment in the
top players can be most rewarding as past performance has shown. The more
daring can actually try to build their own companies in this fast-paced,
fascinating world.
This book looks at three powerful forces in the global economy today: China,
Innovation and the Internet.
The web is growing in China at explosive rates, at a time when China is
undergoing a profound economic transformation: from central planning to market
economic; from a mostly agriculturally based society to the present industrial
based one with a vibrant consumer sector.
China is increasingly important in the world’s economy. Since free market
reforms began in 1978 China's GDP has grown an average 9.9 percent a year,
driven by exports of consumer products and a growing middle class. Its GDP
ranks third in the world after U.S. and Japan. It is also the world’s third largest
trading nation after the U.S. and Germany.
With 250 million internet literate citizens, China is now the world’s largest
internet market by number of users. Some of the richest men in China owe their
fortunes to the Internet, e.g. William Ding and Chen Tianqiao, founders of
Netease and Shanda, two of the leading online game companies in China.
Foreign investors, too, have gotten rich on the phenomenon. In the past two years
(2006-08), the best performing stock on the Nasdaq 100 has been the search
engine Baidu, the Google of China, which grew 520 percent from US$63 a share
to US$390. (Blackberry maker Research in Motion ranked second with an overall
return of 415 percent; Apple was number ten at 175 percent.)
But this book means to be more than just a summation of statistics and five-year
compounded annual growth averages (although there will be plenty of supporting
figures). It is a voyage into China’s Internet world (and underworld). You will
meet entrepreneurs and venture capitalists who are risking their own money.
A simple copy-and-paste business plan does not work in China, as eBay, Yahoo,
Google have discovered. This book will explain what successful Internet startups have done to adapt to the unique conditions of the Chinese market – their
innovations and the results.
Having said that, the Chinese market is not a total failure for the U.S. internet
companies that have entered. Despite being overshadowed by their Chinese
counterparts, Google China and Ebay China actually have a good business. Many
small businessmen in China are using them, as a platform to sell overseas something Baidu or Taobao cannot do because they lack global audiences.
We will also cover several stories of Westerns who founded their own companies
in China – their adventures starting from knowing only a smattering of Mandarin
and progressed to running a company in which everyone else is Chinese.
Although this is a business book meant for a serious business audience, it will not
take an academic tone. The book will emphasise anecdotes. It will tell stories.
Ultimately, it will rely on the players in China’s Internet industry – the innovators
and their financial backers – to tell their own stories.
Organisation
The book has three sections:
1) Introduction
2) The main body
3) Conclusion
For the Introduction I will discuss:
 China is the largest internet market in the world.
 China's increasing importance in the world's economic
 Why have U.S. Internet companies failed to dominate China.
 What is different about China
 What is actually different; what the Chinese think is different;
 Where these difference create the greatest challenges to European and North
Americans
 Where Chinese differences are similar to other countries or markets in the
world
The second section - The Main Body is organised along innovations the Chinese
internet players made when they implemented the major current Internet business
models in China. Some of them are innovations in product, some in promotion,
some in distribution and some are hard to classify.
For example, for an innovation in product: When Wang Zhidong, founder of Sina
and Charles Zhang, founder of Sohu adapted Yahoo's online portal business
model to China, they noticed that news was the killer application. At the early
stage of internet development what Chinese people were going online to read
news. So, while Yahoo's web design is balanced between news, email, search,
etc., the two of them focused on dumping news online. They even hired editors to
manually put major newspaper and magazine content online. Benefiting from lax
copyright rules in China, they can do that without any legal consequences. Most
mainland newspapers and magazines also consider that a way of publicity for
them – It's great to be shown as headline news on Sina today. The end result was
Sina and Sohu attracted many more eyeballs than Yahoo from early on, and built
their dominance then.
In each chapter we talk about one of the innovations in a specific business case.
1.
2.
3.
4.
The way the business model works in the West
The challenge in China
The Innovation in the Successful Chinese company
Lessons learned
The advantage of this approach is it highlights what readers can get from the book
– 13 innovations, which they can apply to their own situation or inspire them to
find new solutions. It is also flexible. The number 13 is just a rough number. We
can add more or delete some chapters as we see fit.
At the moment, I have, coincidently, 13 cases in mind:
1.
2.
3.
4.
5.
6.
Sina / Sohu: dumping news online (in portal)
Ctrip: promoters at airports + call center for taking orders (for online travel)
Baidu: Call center for selling keywords (for Search Engine)
Baidu: targeting first time users of internet (for online search engine)
Alibaba: electronic message board for small businessmen (for B2B)
Alibaba: Free of Charge claim (which allows it to dominate the B2B and C2C
market)
7. Tencent: internet value added services (on top of instant messaging services)
8. Shanda: using scratch cards for payment (for online game)
9. Giant Interactive / Shanda: Charge players by game items instead of time (for
online game)
10. Giant Interactive: on-the-ground promotion troop to internet café (for online
game)
11. Linktone: SMS voting for singing contest (Wireless Value added Services)
12. Internet Songs: free in internet for promotion, charged by mobile ringtones
(Wireless Value added Services)
13. 51jobs: printed + online (in online recruitment)
(Currently, I see each case taking about 20 pages so that means a roughly 260 300 pages book, including introduction and conclusion.)
The final section is the conclusion. I will split this into two parts.
In the first part, I will discuss:
 Some success stories of the U.S. internet companies in China.
o E.g. Google and Ebay is profiting from Chinese users wish to sell
overseas.
o Video game developer, Blizzard, is doing extremely well by partnering
with local company, The9, to operate its online game World of
Warcraft in China.
 Several stories of Westerns founding their own companies in China.
o A Californian who founded a company in Shanghai doing search
engine marketing.
o A Dutchman who has his own online game company and invests into
other internet startups on the side.
o etc.
In the second part, I will discuss:
 Lesson learned: we try to define strategies (market entry, expansion, finding
partners, investment, dealing with government, etc.) for foreigners coming to
the Chinese market.
 What roles the internet plays in growth in China? Is it just financial or also
related to the maturity of the society or other aspects such as its relationship
with the rest of the world?
 The future of internet in China: what lays ahead – opportunities and
challenges
The Chapter Outline is as follows: (the chapter titles are not yet final.)
Preface
Introduction
Innovation #1: Sina / Sohu: dumpling news online
Innovation #2: ....
....
....
Innovation #13:...
Conclusion
Part I: Come back of the Westerners
Part II: The road ahead