The top five tips of China’s Internet landscape

• Source: Global Times
• [15:04 August 24 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.

As the last of the 14-part series on China and the Internet, this week we will try to sum up what are the key differences and how successful Chinese Internet competitors synthesized components from their Western counterparts, all the while innovating to accommodate the unique characteristics of the Chinese market.

Chinese Internet entrepreneurs haven’t always – or even generally – come up successful. Yet a glance at the Internet playing field in China today should convince you that few can be successful in China without being steeped in the local culture. Foreign firms have, to their chagrin, found that business plans that have worked in the West can fail spectacularly in China. Yahoo, Google and Microsoft have experienced this, without clearly understanding why their previous success stories couldn’t be extended into China. Indeed, their Chinese rivals' successes are predicated on abandoning American experiences and practices.

First of all, China's Internet users are different as well as their needs.

1) China Internet users are young people looking for fun and friends

While more than 70 percent of the United States' Internet population is 30-years-old or more, the opposite is true in China, where 70 percent of users are younger than 30.  They look for entertainment and companionship online, especially when most of them come from one-child families.

That explains why online games, which provide the perfect playgrounds for young people who are seeking friends and fun, is the most vibrant sector in China's Internet scene.

In fact, out of the 10 largest Chinese Internet companies by revenue, six offer online games as their major business. The largest one, Tencent, was able to turn its online chat services into a gold mine because it treated online chatting as a community for kids, not a tool for adults. 

Tencent, too, derives a significant part of its revenue from online games.  The rest of its revenue is mostly entertainment related items, such as avatars and ringtones.

Even search engine Baidu is heavily tilted toward the fun and friends concept.  In the early days, it built its popularity with MP3 downloads. Many of its popular applications are built around a community. For example, its Postbar (Tieba), a virtual forum where users discuss all kinds of topics, now accounts for 14 percent of the site’s total traffic. Another service, Baidu Knows (Zhidao), a community-driven knowledge base where users answer each other’s questions, is also been a hit.

2) The competitive landscapes of many industries are different in China

Another point is that many industries in China have very different competitive landscapes than that in the developed western world. One example is the media sector. 

While the media industry in the West is concentrated in the hands of a few powerhouses, China’s media sector is highly fragmented with very few strong players.

The weak media sector created an opportunity for web portal Sina to offer an alternative online.  

It built its business by gathering content from newspapers and magazines across the country. And by focusing on topics that interest the general public, it stands out easily from traditional media companies that are either too small or too strongly identified with the government. In fact, most have become Sina’s partners, believing this can boost their reputation and influence.

Similarly, China’s dominant video sharing site, Youku built its popularity by partnering with television stations. Most videos watched in Youku are TV programs in the mainland, rather than homemade video clips uploaded by users.