Foreign entrepreneurs in the China Internet industry

• Source: Global Times
• [14:12 August 17 2009]
• Comments

By Sherman So and J. Christopher Westland

Editor’s note:
This article has been adapted from the book Red Wired: China’s Internet Revolution (http://redwiredrevolution.blogspot.com) co-authored by Sherman So and J. Christopher Westland. The to-be-published book is aimed at helping the readers gain a firsthand understanding of how the Chinese combined successful components from their Western counterparts with innovation, to accommodate the unique characteristics of the Chinese market.
 

In the last few weeks we talked how local entrepreneurs triumph over Western Internet giants by cleverly changing their models to suit China’s business environment. But, to be fair, not all American Internet companies have failed in the Chinese market. 

Despite being overshadowed by their Chinese counterparts, Google and eBay both do good business in the country. Many small businessmen in China use them as a platform for overseas sales, a capability that the likes of Baidu and Taobao lack.  Game developer Blizzard also found millions of customers for its online game World of Warcraft by partnering with local operators.

Although Yahoo failed to attract many eyeballs to its Chinese portal sites, it turned around its track record in China by investing $1 billion for 40 percent of the Alibaba group in 2005. Just its investment in Alibaba’s listed B2B subsidiary alone has now amounted to almost $5 billion in August 2009. Most analysts believe Alibaba’s Taobao would be an even more valuable jewel, once it turns profitable.

Recently released China Internet Network Center (CNNIC) data shows that the size of China’s Internet population has grown to 338 million people – greater than the entire population of the United States –and yet the penetration rate is only about 26 percent – compared to 75 percent in the US and 74 percent in Japan.

Inevitably these numbers will swell in the next decade. There are roles for entrepreneurs, both local and foreign, to play. Many foreigners worked in the country’s first Internet ventures. And many have arrived since. This week, we look at several stories of westerners who founded their own companies in China – people who had only a smattering of Mandarin at the start and ended up running companies where everyone else is Chinese.
  
Marc van der Chijs

Dutchman Marc van der Chijs was sent to work in China in 1999 to work for Mercedes Benz. At the time he was 27-years-old and employed at the headquarters of the German luxury carmaker. When Mercedes posted an opening for a financial controller in its North Asia regional office in Beijing, he applied and got the job.

“It was an interesting job,” said Van der Chijs. “I traveled around the region a lot and did a lot of presentations.” His was a comfortable expatriate life, with good money and a nice house. But something was missing. “I felt I could do more than just write reports,” he said.

Van der Chijs was dazzled by China’s vibrancy. Everything was growing, with construction sites everywhere.  “It was the place to be for entrepreneurs. It seemed like everything was possible. There was lots of potential.”

When his contract expired in 2002, he quit Mercedes but stayed in China. “I was going to study Chinese and probably start my own business,” said Van der Chijs. But in reality, he did not have a plan.

He enrolled in a Mandarin course at Beijing Foreign Studies University. However, student life was rather boring for someone accustomed to the demands of the business world.

As a result, Van der Chijs started his first company – a small consulting and trading outfit. Business grew quickly and within a few months he was feeling the need for frequent business trips, which clashed with his studies. “The first time I did this, the university let me take several days off. But the next time they didn’t allow it, although I was probably the best student in the class.” So he quit school and went back to work full-time.

Van der Chijs traded different products from China to mainly Europe. He also consulted for companies looking to enter the Chinese market. “The purpose was to make some money while I figured out what I was going to do – and what I could do.”

For the next three years, Van der Chijs did a lot of different things, including producing the first reality TV show in China.

“It was a show sponsored by Ford, Sheraton and Nike. We flew to Hainan, south China for the filming. There were 12 contestants competing with each other for 12 days and the winner got a car. It was like Big Brother.”
 
Then he met his business partner, Gary Wang. Together they founded one of the largest video-sharing sites in China, Tudou.com. “I met Gary through my wife. They were colleagues at Bertelsmann. I was sitting next to him at the first-ever Formula One race in Shanghai,” said Van der Chijs.

From 2005 to 2006, Van der Chijs made another career breakthrough. Spil Games, a small online games company in the Netherlands, wanted to set up a website in China.

“I figured, they know about games and I know something about China, so we might just be able to make it work,” said Van der Chijs. He and the Dutch company set up Spil Game Asia in Shanghai in January 2006.

He worked part-time on Spil Games Asia at first, continuing to run his trading business and help oversee Tudou. But the gaming company’s prospects were so bright that he soon took it on full time.

 “Now, we have 75 staff in total, two websites and about 32 million visitors monthly,” said Van der Chijs in late 2008. “Our traffic is about 40 percent of Tudou’s.”

Almost all of Van der Chijs’s staff are local Chinese – people he hired not for their English skills but for their business acumen. “Many foreigners judge their staff by their ability to speak English and they promote the wrong people as a result.”

By the end of 2008, Spil Games Asia was already breaking even. Its revenue came from advertising, which Van der Chijs used for marketing the sites and to attract more users.