Top Web Apps in China

China is
next in my series on top international Web apps. If you haven’t been following, the other
countries I’ve profiled so far have been Germany, Holland, Poland, Korea, United Kingdom, Russia and Spain. As this
series has gone on, the comments have become as important as the posts – perhaps moreso.
I’m hoping this post about China’s Web application market is no exception, because China
is (obviously) a huge country and one blog post can’t hope to cover it all. So I
encourage people from China who may read this, or people who are familiar with the
Chinese Web, to contribute your thoughts in the comments here – and add web apps to the
list. 

I have to thank several people for the information in this post: In particular Tangos
Chan, who runs the excellent China Web 2.0 Review
blog, and Benjamin Joffe – CEO of Asian Internet consultancy Plus Eight Star Ltd and co-founder of Mobile Monday Beijing. Also thanks to Chang W. Kim, who introduced me to Tangos and Benjamin!
Sam Flemming of Chinese research company CIC Data
and Micah Sittig from Shanghai also contacted me
with their thoughts.

Overview of China market

Let’s start with an overview of Chinese web apps. Benjamin Joffe said “there is
basically at least one Chinese equivalent for every single US web2.0 service that is more
than 2 months old.” Here are some other characteristics of the China web scene, suggested
by Tangos Chan and with further comments from Benjamin…

Big companies still dominate the market

Tangos says that so far there are no outstanding small startups that have successfully
gained the attention of ordinary internet users. For example, in the blog hosting market
Blogcn, Bokee and Blogbus were among the first movers. But after big companies Sina, Sohu
and Baidu entered the scene, they won market share quickly [see short profiles of these
companies below]

Benjamin adds that no Chinese startup that stays a startup for long –
“basically they grow to over 100 staff and get their first million $ round of financing
fairly quickly, or disappear.” 

Chinese startups often copy the Silicon Valley model

Tangos: “Sometimes, just a copycat even without any change.”

Benjamin: “True enough in a first step, but as usually more than one company does
this, it eventually results in tough competition to differentiate and gather/lock in
users as quickly as possible. Some are making use of China’s unique characteristics in
terms of mobile penetration, labor cost, cheap logistics and lack of credit cards.”

M&A is rare in the China market – or is it?

Tangos says M&A is rare in the China market, which makes it more difficult for
China’s startups to raise funding and find an exit.

Benjamin has different information from an M&A consultancy firm: “there has been
over $500M worth of M&A in 2005, which is huge for a country with a GDP/capita well
below 1/10th of the Western developed world. But he says that “most of the
M&A occur in the wireless space” and there are “several hundreds, if not thousands”
of companies competing in this wireless space.

Tangos agrees that China’s mobile sector has more innovation than the Web sector,
because of the high penetration rate of mobile handsets and highly developed short
message, ringtone and ringback tone services. He said that in the general Web sector the
big companies – Sina, Sohu, Baidu, Netease, etc. – seldom acquire startups, unlike what
usually happens in Silicon Valley. In China the bigcos “just build new services by
themselves.”

So looks like both Tangos and Benjamin are right – M&A is relatively rare in
general web apps, but common in the wireless space.

Regulation is a potential risk for Chinese startups

Tangos: “for instance, SARFT (State Administration of Radio, Film and Television) recently
announced
plans to regulate the online video market.”

Benjamin: “I would also mention the regulations in the mobile space (as many Internet
portals derive revenues from mobile phones). Sanctions and new rules for getting
subscribers all impact the content providers’ businesses. You can have a look at the
change in their stock price around mid-July to see the impact of China Mobile new
regulations.”

Foreign companies find it difficult to compete

Tangos says that language barriers, difference in culture and government policies and
regulations make it difficult for foreign companies to compete in China’s market.

Benjamin totally agrees – he says “it is almost a national sport to show how foreign
those companies are.” He mentions a viral video by Baidu making fun
of a foreigner, representing Google (explanation here).
Benjamin also thinks US Internet giants are suffering from many shortcomings in
China:

“…lack of understanding of local netizens’ tastes, weakness in Chinese language
software treatment, slow reactions. The only one doing fairly good in China is Google.
Yahoo and Amazon bought their way in, and web 2.0 US companies are all concept-copied and
adapted by local players.”

Top China Web Apps

Baidu is the leading Chinese language search engine. It’s
the 4th ranked website in the world in
Alexa’s rankings
– putting it only behind Yahoo, MSN and Google on a global scale.
According to Wikipedia, the Chinese word
“Baidu” translates to “hundreds of ‘degree-level'” in English. It has an index of over
740 million web pages, 80 million images and 10 million multimedia files. Baidu.com had
its initial public offering (IPO) on 5 August 2005. It also offers blogs and other
services similar to the US Internet giants.

Sina is is the largest Chinese-language web portal
(news, entertainment, email, search, etc), so similar in a way to Yahoo. Alexa ranks Sina
as the 7th biggest web property in the world, just behind MySpace. It’s said to have 94.8
million registered users and more than 10 million active users engaged in their fee-based
services, with an estimated 3 billion page views every day [source: Wikipedia].

Sohu is a “mass portal and leading online media
destination” [source: Wikipedia]. It’s
ranked 12 globally by Wikipedia.

Benjamin told me that Sina, Sohu and Baidu are all listed on US Nasdaq and each is
valued at over $500M. And those are just 3 of the more familiar names to english-speaking
Web people. China is such a big player now on the Web that they have 4 companies in
Alexa’s top 10 web properties in the world (Baidu, qq.com, sina.com, 163.com). The US has
5 in the top 10 and Japan 1.

Other China Web 2.0 apps

There is already a ‘web 2.0 logo’ display
of China web apps, at internetdigital.org (in list format here). So
for this post Tangos has come up with his personal list of favorites. Feel free to add
yours in the comments, along with reasons why. Here’s Tangos’ list:

China Web blogs and news

I’m sure there are other interesting english language blogs about China Web that I’ve
missed, so please mention them in the comments.

Thanks again Tangos and Benjamin for the fascinating information. China is obviously a
very important part of the Web and its influence will only get bigger over the coming
years, particularly in mobile one suspects.

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