American Internet Companies Fall on Their Face in China
This article comes down hard on American Internet companies in China. Almost as if they don’t stand a chance going it alone.
Do you believe it? Leave your thoughts below.
The following was translated from the January 6th edition of Modern Weekly:
Not Acclimatized to China
eBay is easing out of China while MSN Live also quietly acknowledges its loss in China. What should American Internet giants in China do now?
After a bitter struggle in China, eBay choose to take the same path that Yahoo did. eBay China recently declared that it would open a jointly run site with Tom Online, with eBay investing $40 Million and retaining 49% of the new company, and Tom Online investing only $20 Million but controlling 51% of the company. Though eBay’s CEO Meg Whitman believes this is just a change of strategy in China, to investors it is a sign that eBay is flailing in China.
American Internet Giants Falling in China
This is just the newest case of a depressing failure by American Internet giants in China. Amazon bought Joyo to make their way into China, but sales been less than spectacular for Amazon’s business in China. Yahoo, once fighting for its life in the Chinese marketplace, gave up and sold its business to Alibaba. And not too long ago, Microsoft decided that its Chinese language MSN and Live websites would use Baidu’s search engines and ads. This clearly demonstrates MSN/Live’s failure to establish its own search engine in China.
Vast China Internet Market
In their fight with local Chinese competitors, American companies are losing the battle over China’s Internet piece by bitter piece. In reality China the Internet market of China is vast. With 123 Million Internet users, China is just behind America as the second largest Internet market in the world. Yet this 123 Million is paltry in China. It doesn’t even make up 10% of China’s still growing population. China’s Internet users are quickly multiplying, and the potential of the Internet market in China is gianormous.
One of the main reasons why American Internet giants in China are tumbling left and right is their lack of understanding and adjustment to China’s culture. A good example is eBay. When its competitor Taobao entered the Internet auction marketplace and began providing free auction listings, eBay reacted very slowly, which helped a large portion of its Chinese customers find their way to Taobao. In contrast to Taobao’s methods, eBay did not encourage buyers and sellers to communicate directly (via instant messaging and VOIP), further dissatisfying Chinese users of eBay. Even Microsoft was not an exception to the tumbling giant rule. With its Live Internet search service not up to par, the Chinese user base slowly built up through Messenger and Hotmail lost their patience with Microsoft’s Chinese search services.
“Jack” (Ma Yun) always comes back
Americans must acknowledge that part of their failure in the Chinese Internet market is due to “Jack” Ma Yun, who is regarded as a beachhead that must be broken, co opted, or worked around, in order to conquer the Chinese market. Ma Yun is the one who single-handedly created Alibaba and Taobao, first swallowing Yahoo China, and then squeezing eBay out from the China Internet auction marketplace.
If you can’t beat your enemies, become their friends. American Internet giants seem to finally be grasping this kind of thinking these days in China. If directly providing services to China’s Internet market doesn’t work, perhaps cooperating with local companies that better understand the Chinese Internet market will yield better results. But not all people think like this yet. Google, the largest Internet company in the world, is still competing directly in the Chinese Internet market. How much further can Google walk alone in China whilst trailing far behind its competitor Baidu?
I always buy from Taobao,hehe~
My girlfriend always buys from Taobao too – plus, she sells something through it every now and then. But the margins on most items are just terrible. You’d have to be selling massive quantities of stuff (much more than on eBay in the States) to make any money).