Commentary

Still Salad Days for China Web 2.0

Alan TienBy Alan Tien
The world needs another Web 2.0 conference like it needs another Social Networking Site. However, I was pleasantly surprised by the line up of interesting Web 2.0 speakers at Avail Corporation's recent conference bearing the unwieldy name of "Nurturing and Commercializing Online Communities Forum 2007".

The conference took a slightly different angle from other Web 2.0 conferences by examining how large corporations should embrace this trend towards "open source and collaborative intelligence." However, although I got a good look at a lot of fascinating internet experiments with some astounding numbers, at the end of the conference, I was not any wiser as to how China's Web 2.0 companies will make any money. Having lived through Silicon Valley's Internet bubble and bust, I can only feel that we're still in the salad days of China's Web 2.0, a period of "irrational exuberance."

Before I highlight some key points of the conference, though, I thought the greatest innovation was the use of real-time SMS or IM to keep the audience engaged. Like the CNBlogger 2007 conference, this forum embraced the theme of open collaboration by using JiWai.de, a "twitter-like, on-site interactive platform" where audience members texted in their questions, which were then displayed on the projected screen. I believe this is an innovation all conferences should adopt. Wouldn't it be great if the audience could rate the speaker real time and mercifully end boring presentations?

On the other end of engaging the audience, I couldn't understand why all these Web 2.0 experts still relied on a flat Powerpoint presentation. Instead of trying to explain "natural language artificial intelligence," why didn't Yuan Hui, CEO of Incesoft, just demo how his Xiaoi Bot let a user ask for the weather or a stock quote through his favorite IM client, whether it be QQ, MSN, Yahoo or Google Talk? CEO Max Pang of Edushi tried describing the wonders of "Location-Based Community," but he only showed screenshots of his site's super-cool 3D maps of real China cities. How cool would it have been to have demo'd his avatar flying through Shanghai?

The first speaker, Alex Lin of ChinaValue.net, waxed philosophical, pointing out from James Canton's Extreme Future that the speed and complexity of the future business environment will be beyond the ability of a human to cope. Yet, we are not to despair. The Italian poet Luciano de Crescenzo said it best:
We are all angels with only one wing.
We can only fly while embracing each other.

That is how Mr. Lin introduced how mass collaboration, the wiki-structure of many Web 2.0 sites, will be our answer to this extreme future.

Another fascinating statistic Mr. Lin mentioned was that in 2006, the web generated 3 million times more information than what humans had created since the beginning of human history. Therefore, to surf this tidal wave of information, we will rely more and more on authority and credibility.

The second speaker, Chen Gelei of Marketing 2.0 Research Center, explained how Marketing 2.0 turned the traditional marketing model on its side. He showed the infamous marketing iceberg model, where brand is just the tip kept afloat by all the company's business processes, the unsexy stuff like customer service and quality assurance and training. However, in Marketing 2.0, the model is tipped over because all areas of the company are laid open to the consumer, where customer service is an integral part of the company's PR and consumers directly communicate with product development teams. Scary stuff, but rich rewards for companies that can master this new form of communication with their customers.

Allen Wang, CEO of babytree, added a dose of reality by discussing the lessons learned during the 8 months since launch. He admitted that they did not do any formal market sizing when starting the company; interesting confession considering co-founder Yi Bo Shao's HBS roots. However, it doesn't take a math genius (though Bo is one) to see that the 34 million new parents — each year! — in China need some guidance and support on how to raise a child, being the first of the "little emperors" generation. One of the most interesting lessons babytree learned was that they needed "a perfect combination of online and offline." With that, Mr. Wang unveiled plans for a real world babytree store in Beijing.

I could not help think of Kleiner-backed $22M teen site Kibu.com. Only a few weeks after I attended their launch party of a physical store in San Francisco, the site shutdown, earning it the #9 spot on CNET's Top 10 dot-com flops. However, this may be an instance of adapting to the China internet landscape; perhaps the real world presence is one of the only ways to monetize, taking a page from all the Chinese dating sites.

Liu Lei talked about how Shanghai Volkswagon is changing the "M" of CRM (Customer Relationship Management) to "Marketing." Using their inhouse CRM system, SVW manages their "brand life experience" by reaching out to their consumers through multiple channels, from showrooms to cell phones to MSN Messenger. However, he admitted it was difficult to measure the ROI of such an approach. FYI, it seems like there's a great opportunity to create an online CRM application, China's own Salesforce.com? Locally developed internet sites have been able to take on the global giants in China. Maybe this is the next big idea, and remember, you read it here.

Sam Flemming of CIC gave an impassioned plea to big corporations to pay attention to the IWOM (Internet Word of Mouth). With a nod to The Cluetrain Manifesto, Sam explained that in 2004, consumers learned to talk to each other on BBS, but successful brands today must learn how to join that conversation. Unlike other countries, in China where brands are not well-established, WOM influences 40% of the purchase decision. An amazing 5 million messages are posted on auto BBSs every month in China. Automobile makers must find their own "voice" and join these communities, because this is where the new buyers seek advice from existing owners and influential bloggers.

Jack Wu of iPart tried to explain how they monetize their 6 million users with innovative advertising campaigns, but it's hard to believe that 18-24 years olds would be very excited to see the iPart homepage branded with Darlie toothpaste.

Liu Jian, the COO of Oak Pacific Interactive, really piqued my interest with some astounding, if not unbelievable, numbers. He said Mop.com has surpassed SOHU in web revenues, and xiaonei.com – often called "the Facebook of China" because of its focus on university students – has 80% of the market share with 18 million of the 22 million college students as registered members. He argued that Facebook could be more valuable than Google, even though Facebook only has $150M in revenues today. Google's money machine is based on keyword search, but it only knows about your needs when you go to its site. However, users actively tell Facebook what they want in their profiles and site activity; thus the ads could be even more targeted than Google. This argument is certainly self-serving, as are the huge market share numbers that sideline rival Zhanzou.com (BTW, Facebook PR denies the rumor of seeking to acquire Zhanzou for $100M – is this just a PR ploy of Zhanzou?).

Interestingly enough, the Marketing 2.0 panel ignored my question "Would Facebook be successful if it comes to China?" Similarly, when I asked Max Huang of 51.com – the self-proclaimed "China's MySpace" – what he thought of MySpace.cn, he also dismissed the question with a one line answer, "They are not a competitor; different focus." Hmmm.

Mr. Huang also rolled out eye-popping numbers. 91 millions users; 650,000 simultaneous; 40 minutes/session. But what was really interesting was that the majority of their users are from 2nd tier cities.

He said the China internet mainstream users are NOT white collar workers; they are the netizens who go to the internet cafes to play video games, watch video online, chat online, and of course communicate with their friends on 51.com. He pointed out all the websites built by white-collars for white-collars are destined to a limited audience of 8 to 9 million users. To truly get scale, websites must attract these "ordinary" citizens outside of Beijing and Shanghai.

Thoroughly exhausted after 2 days of presentations and panels, I reflect on the state of Web 2.0 in China. Arguably, China led the US in online collaboration with the enthusiastic adoption of BBS, while US sites were still brochure-ware graduating to e-commerce. US then led the innovation into Web 2.0, with China copying quickly, but neither side has figured out how to extract money out of the millions of users too busy talking among themselves. Perhaps, besides the few crazy outliers, most of the standalone Web 2.0 properties will fade away, and we will see Web 2.0 as really just another way for successful companies to interact with their consumers.

About the author:
Alan Tien is the China GM for Geni. Prior to Geni, Alan was the China Country Product Manager for PayPal, an eBay company. During his 5 years at PayPal, he launched PayPal China and PayPal’s first set of APIs. He graduated from Stanford University with a BS in Electrical Engineering.

7 Comments

  1. Chinese Facebook should be able to compete with these others if it can make acquisitions because now all the companies are racing to get a share of the market rather then making money but money will come again soon.

  2. I find Mop.com numbers highly unlikely and ridiculous for China. How could they surpass Sohu.com so much? They look like clowns when they make stupid statements like that. If they ever go IPO, they will have this post for investors to look back on and see what a horrible management team and group of liars they have working at the company.

    YuPing: when he says "salad days" he means those are "great days" and the company will make lots of money. I think it's an american phrase, so even Euros won't understand it.

  3. It is also very presumptuous of you to not think Mop.com has great financials. Have you yet to see their numbers with your own eyes? Probably not and therefore you should refrain from slandering their company on this forum.

  4. Bottom Line: How will web2.0 co's make money?

    They can not and they will not make money is my thought and I believe we are seeing another yet again bubble!

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