The big story last year for the internet? Facebook. But do most Chinese youth know Facebook? No. The big internet story this year? Twitter. Is microblogging (not necessarily Twitter) hot in China? Gang Lu seems to think so.

What else is there to know about China’s internet, and Asia’s internet overall? Let’s see…

The Dragon’s Web:

• 316 million internet users
• ~2.9 million Chinese web sites
• Internet penetration is around 25%
• 107 million bloggers by 2009-6-14 670 million mobile subscribers
• ~117 million surfing internet on mobile devices.

Fact One – Copycats

The C2C (Copy-2-China) Model:

• Youtube = Youku, Tudou, Ku6, 56, etc.
• Facebook = Xiaonei, Hainei, Xiaoyou, Tongxue, Kaixing001, etc.
• Twitter = Fanfou, Jiwai, Zuosa, Digu, etc.
• Linkedin = Wealink, Tianji, Linklist

Unlike copycats in other countries, Chinese copycats can not only survive, the can also dominate the local market.

Fact Two – Reformation

Social networking – kaixin001.com skyrocketed to 30 million registered user from the middle of last year focusing on white collar users with social gaming; 51.com implemented virtual coin and payment API into its open playform;

Microblogging (Twitter) – digu.com is turning twitter-like service from a tool to entertainment.

Fact Three – Innovation

Social networks can be distributed – Comsenz developed UCHome, a mini-Facebook-like SNS that can be downloaded for free.

Combination of traditional business and web 2.0:

• Dianpin.com is the place to search for restaurants.
• Alipay.com allows you to pay after you receive the goods.
• Liba.com provides a full package for your living (housing, wedding, etc.).

Internet culture

QQ (by end of 2008):

• 891.9 million registered user accounts
• 376.6 million active user accounts
• 31.4 million registered subscriptions for fee-based internet value-added services
• 14.7 million registered subscriptions for fee-based mobile and telecommunications value-added services

Tencent, owner of QQ has revenues of 7.15 billion RMB (1.05 billion USD), and a gross profit of 4.98 billion RMB (732 million USD).

BBS discussion forums:

• 3000+ million registered BBS users
• ~80% of Chinese websites are running their own BBS
• Total daily pageviews over 1600 million
• 10 million posts published every day.

Sina, the biggest Chinese news portal acquired Focus Media, the leading outdoor media operator.

When West Internet Culture Meets Dragon

Many foreign internet companies fail in the Chinese web market, including MySpace, eBay, AOL, etc. Google is doing okay but only takes 30% market shar. It is too late for Facebook.

However, many foreigners are now setting up their startups in China, e.g. Qifang won Technology Pioneer award from WEF; ChinesePod was TOP10 podcast site by TIME, CMUNE creates a new web-based 3D engine; Neocha is one of the leading SNS focus on artists and indie muscicians.

US/EU Web and Asia Web

In US/EU web, becoming an international company is relatively easier, and language is not a huge barrier (ex. Le Web 3).

In Asia web, China has a huge market, Japan has a very advanced mobile market, and Korea is leading in online gaming. It is difficult to find a web company or service that is cross-country. Gang Lu finds it interesting that the local Asian industry has seldom or never talked to its neighbords despite the similarities in culture.

What is really happening in Asia?

A Starcraft competition in Korea.

Korea:

• Has very good infrastructure.
• Naver still dominating the market.
• Online gaming is conquering the world (e.g. Nexon).
• Cyworld is operating outside Korea.
• Story Blender won Techcrunch 40.
• Wisia.us has very good implementation and cool design! (Note: Interesting, Gang Lu told everyone to check this out, and upon navigating to the site, it had a notice of its English non-Korean service being terminated!)

Japan:

• Mobile market far ahead of the rest of the world.
• Mixi, GREE, Felica Networks.
• Always the entry market for western services (e.g. YouTube, Facebook, Twitter, etc.), as in that Western service tend to enter Japan before other Asian markets.
• There are some clones but with more innovation (e.g. Nicovideo.jp).

Hong Kong:

• Not many startups but they focus on global market (because the home market is naturally small)
• Some companies have their office set up in GZ/BJ/SH.

Taiwan:

• You can always find that some influential and successful person is from Taiwan, such as the cofounder of YouTube.

India:

• Not really in Web 2.0 yet, but they don’t have the language ebarrier and are already very active in Western markets (e.g. slideshare.net).
• Startups are getting hot (e.g. burrp, picsquare, etc.)

Singapore:

• Small market but its government is very supportive.
• Center of Southeast Asia.

Israel:

• Many startups are actually founded by Israeli entrepreneurs.

Vietnam:

• The battle place when those big names decide to go abroad;

Gang Lu, The Dragon’s Web & Asian Internet

Gang Lu is a co-founder of OpenWeb.Asia Workgroup, a co-organizer of WopenWebAsia Conference, and the founder and Chief Editor of Mobinode. He has previously done a whole lot of other things I can’t even begin to bother listing, but basically make Gang awesome. More CNR Barcamp Shanghai 2009 coverage here.

Post from: CN Reviews

Gang Lu: The Dragon’s Web & Asian Internet

Here’s a rundown of his slideshow and talk:

The China market (for online payment settlement) is fragmented.

• There is no Paypal for the Chinese market.
• Why? Because Paypal doesn’t really target Chinese consumers. They target overseas merchants.
• Alipay, a Chinese payment-settlement service similar to PayPal run by Alibaba, has a lot of political enemies.
• They don’t share with Unionpay (see below).
• Some other payment settlement services: Yeepay, 95bill

Yeepay, Alipay, 95bill?

What is UnionPay?

• Government appointed authority on payment.
• Takes a cut on every transaction.
• Banks hate them (they’re a monopoly that makes money doing nothing).

What about credit cards?

• Credit cards don’t actually exist in China. They’re really “post-paid” Unionpay cards, where the payment is actually processed by Unionpay. Visa (for example) only works (or is involved) outside of China.
• Credit cards have to be co-issued with foreign banks. They are like hybrid cards, half Unionpay (used domestically) as issued by a local Chinese bank and half-credit card (used abroad) as issued by a foreign bank (such as HSBC).
• Most Chinese people don’t have credit cards.
• However, there is a hard push for issuing and adopting credit cards. For example, go to any busy commercial area and you’re likely to see small booths and stands where you can sign up for “Lock&Lock” storage containers.
• These are operated by credit card representatives who are paid a “bounty” of 80-100 RMB per card issued. They take some of this money to buy these “free gifts” that are in turn used to attract more people to sign up.
• While the above is true for first-tier cities, 2nd and 3rd tier cities are “still miles away.
• For reference, even Shanghai only has ~500k POS (point of sale) terminals.
• Market penetration of credit card POS terminals is only 20%…of what it “should” be compared to other western cities. Thus, there is certainly a lot of growth potential.

How do I pay online?

• Most common is COD (cash on delivery).
• Taobao -> Alipay
• Get a bank account:
  1. Activate online payment (2 forms, 4 stamps)
  2. Set quota for online payment/month/day (if go over, must call to reset quota)
  3. Sign in to online banking (get out your random number generator or your SMS)
  4. Get another code
  5. Pay

• Chinese people love stored value cards, where a user purchases online “credit” or “points” offline through convenience stores or other vendors. These cards usually contain codes that are entered into online accounts, crediting those accounts with online currency/points. Toine says these are China’s “answer to micropayment.”

Circle Pleasure, the company Toine works for, makes 3D worlds in Korea and are entering China. How do they plan on handling online payment transactions in China? Will they use Alipay like others?

Their idea is to “do it better.” This has involved them becoming one of 67 companies in China licensed to sell pre-paid stored-value cards. Their twist is to make their cards and online currency open and “available to everybody” in the sense that they are willing to partner with anyone, allowing the stored value to be used for other people’s services, goods, and businesses. All they ask for is a 1% flat transaction fee. They also offer tax invoices (those who understand China’s tax system will better understand the implications involved in this).

Going forward, they recognize that what they’re doing isn’t really different from what already exists in China, so they also want to import fancy Korean technology and develop a next-generation licensed secure payment system around a USB key with integrated RFID, security chip, memory, etc. The idea here appears to be creating a portable physical device and new payment infrastructure that can be used to pay for many things and transfer money from other systems, such as banks, and offer other perks, such as e-coupons and discounts.

Sounds ambitious, right?

More CNR Barcamp Shanghai 2009 coverage here.

Post from: CN Reviews

Toine Roojimans: Payment In China – Systems & Habits

Observations shared by John and the audience:

• Online gaming revenues are heavily skewed, going beyond the 80/20 notion where 80% of your revenue comes from 20% of your users. The numbers he’s seeing through his own app is described, half-jokingly, as 90/2.
• There’s a lot of good talent in Taiwan, but even if they are not all at Yahoo, the environment is dominated by Yahoo.
• With regards to making inroads into the mainland China market, John feels that Taiwanese online gaming companies really need to be in China and not try operating remotely from abroad in Taiwan.
• Another major issue for Taiwanese companies is suddenly finding their website and service completely blocked by China’s GFW simply due to some content on their websites. The ensuing outage would naturally severely impact the company’s service and growth.
• An audience member also astutely pointed out that apps or games hosted abroad tend to be much slower than those hosted domestically in China. The speed of an internet application or game has a big influence on whether Chinese netizens or gamers will use or not use, play or not play.

More CNR Barcamp Shanghai 2009 coverage here.

Post from: CN Reviews

John Fan: The China Internet Market For Taiwanese Companies

They first started the company when they were working on developing China youth sports leagues, and felt there was an emerging trend of Chinese youth trying to express themselves more individualistically. Apparel was previously designed outside, brought in, and then localized for the Chinese market. They decided to start up a new brand that would be 100% focused on and designed in China. Their designs come from different methods, including in-house from their local Chinese designers, all under 25-years-old, as well as crowdsourced (a la Threadless).

Renee’s observations and insights:

• Some of the things that work in the US don’t work in China and vice versa. This is obvious. However, generalization like “only foreigners like Chinese characters and locals do not” is sometimes true, and sometimes not.
• Most Nike, Adidas, Kappa, etc. stores are franchised and the biggest challenge in China is a different retail process and environment. For example, there are less boutique stores that you can sell your brand in, unlike in the US where you might have Pacific Sunwear or Urban Outfitters.
• Shopping is social in China, with shoppers tending to come in couples or groups and less so alone. This affects both preferences and the decision-making process for purchases.
• People shop online in China for “really cheap stuff.” The online market is definitely growing, with examples being Taobao and Alipay, though most online purchases are still paid COD (Cash On Delivery).
• The youth retail apparel market is very sports-oriented, as opposed to lifestyle-oriented, which is flipped from the rest of the world. However, she sees this trend changing a bit, especially now with the Olympics having passed and a growing saturation of the sports-oriented apparel market (i.e. too many Nike stores on one street).

Renee shared that their challenge for themselves is to go from their current niche market to the mass market but do intent on remaining focused on China without expanding overseas.

An audience member asked the age-old China question of how eno handles counterfeiting. Renee says that eno tries to keep designs and trends moving fast and using limited editions to stay ahead of the counterfeiters.

Beyond clothing, eno is also enoVate, a design and marketing firm, and enoise, which is involved in music. More CNR Barcamp Shanghai 2009 coverage here.

Post from: CN Reviews

Renee Hartmann: Selling to China’s Youth Market With eno

According to Jenny, China doesn’t have a “cool factor” in the United States, despite often being in the news. It is stuck at a “niche” level, dominated by business, teaching English, and Chinese language learning because these are still the predominant reasons for why people come to China. People don’t come to China because it is “cool,” but rather because something needs to be done here. So, Jenny asks, how do we create buzz for China?

We need to “brand” China, she says. As one member of the audience later said, the current China “brand” is essentially all the “negative news” about China. By “branding” China, Jenny seems to be mean that we need uncover and deliver China’s “cool” to outside audiences. Toward this end, Jenny wants to tap into Chinese pop culture, and bridge it with the pop culture elsewhere, specifically the United States and thus create a “cross-border youth market.”  Yet, while this is where she says it must start, she believes pop culture is often in its own bubble, thus necessitating a “disruptive” force. This force needs to active and not passive, like merely importing a pop star and holding concerts. By active, she wants “engagement” from both sides.

This engagement, Jenny believes, will involve a lot of technology and creative ideas. One idea? Launching a virtual event such as a “ridiculously viral competition, something ridiculous but hasn’t been done before” between the youth in China and the United States. She’d keep the competitors amongst their own initially, “where they are most comfortable”, and then presumably bring them together. How? One way would be to record these competitions and allow both sides to watch each other over the internet.

In discussion with the audience, Jenny agreed that language is a major barrier and therefore believes it needs to be “visual”, also agreeing with audience members who suggested art, fashion, “looks”, etc. Music too could work. For Jenny, the “cool” in China already exists in its people, but it is a question of bringing it out, building the community around it, and ostensibly integrating that “cool” into a cross-border consciousness.

Some more interesting feedback from the audience:

• Japan seems to have more “cachet” than China. Why is this? Is it because Americans and American companies have appropriated Japanese concepts (ex. Gwen Stefani)? Can we export Chinese concepts to America?
• Maybe China isn’t interested in exporting its culture (pop or otherwise)?
• Pop culture takes time to develop, building upon layers of itself. Is there Chinese pop culture to export at all?
• Should we let it develop and evolve without the intercultural aspects Jenny suggests?
• There is innovation in China,  but how do we make it “cool” to Americans? What is it about China that we can brand, export, sell to America?