China features in new chapter of "The Search"

John Battelle's book The Search, along with The Long Tail, has been one of the Web 2.0 publishing hits of the past year or so. He posts regarding the premature release of its paperback edition and then quotes from his new chapter which updates on developments in the past year. Interestingly (to me), this post relates to China.

He comments "...regardless of the sleepless nights, in the past year Google has entered China with gusto. It not only opened offices and poached staff from Microsoft (prompting an unsuccessful lawsuit from Redmond), it also launched a Chinese native site (Google.cn) and agreed to the rules of the Chinese government (in short, the site is censored).

Now, as I pointed out earlier, this is not a new development for US Internet companies – Yahoo, Microsoft, and many other information services had already submitted their products to Chinese censorship. But when Google made the move, well, that got some attention."

He goes on "[Google VP Eliot] Schrage and others admitted that China represented a conundrum, and during the hearings and afterwards there was vague talk of a “coalition” effort – an industry pact of sorts that might actually voice an opinion about China’s attempts to censor its businesses. But such ideas seemed doomed to remain just that – ideas. Were Google, Yahoo, or others to actually voice a strong opinion about Chinese policies, well, Beijing would not look kindly on such moves. Not to mention Wall Street, of course – there’s profit to be made in China, if everyone just keeps their heads down".

Update: catching up on a backlog of posts elsewhere, I noticed, immediately after sending off the above, this interesting piece from Fons Tuinstra about how Google is losing 'traction' in China at the high end of the market. The report started with Red Herring, I gather, but Fons has updated with a few additional links in this piece.

Compare and contrast

Two reports today, one from China, one from India on the development of the Internet.

Highlights:

* India has approx. 45mn Internet users; only around 10mn are power users (for research and ecommerce)

* Online Advertising in India to grow at a CAGR of 50% from 2005 to 2010; $57 million for current fiscal year.

* China has 123 million users by the end of June this year

* The number of broad band users in China reached 77 million

* There are currently 788,000 websites in the country.

The China story in particular is brief and I will be reading the India report with interest. It's easy to sneer at the small numbers, but growth is clearly strong and, without the regulatory stranglehold of government which makes life in China so complex, there are clearly going to be great opportunities there.

Update: According to the China Web 2.0 Review, there are 17.5 million bloggers in China. That's more than the total population of the Netherlands.

India Search Engine Marketing currently worth $50 million

Contentsutra.com passes on a report on the size of India's search engine marketing market. Of the reported Rs2.3 billion (US$50 million) targeted at India's web users, only about one-third is currently spent by Indian companies, the report says.

That represents 0.5% of the $10 billion SEM market and is spread over 40,000 marketers - an average spend of just $1,250 as far as I can see. I'm not sure whether to regard this as good news (presumably it's growing fast) or a bit depressing (pie still very small and carved up by thousands of tiny players).

eBay to exit China?

The market is abuzz with rumours that eBay is ceding the Chinese market to Alibaba's taobao.com and planning to sell its Eachnet service to Hong Kong's economic 'superman' Li Ka Shing's Tom Group.

Xinhua's report of the story admits early on that analysts believe a complete eBay withdrawal is unlikely at this juncture. eBay has so far invested $180 million in Eachnet, so watch the price carefully if a deal does materialise. Li is not generally known for over-paying!

Auctionbytes.com reports the Li rumour but passes on another that Tencent is also interested in acquiring all or part of the business.

Pouring fuel on the fire is a Wall Street Journal report (behind its firewall) that Eachnet's CEO Martin Wu has quit. MarketWatch also had something on this yesterday.

The last time we poured cold water on a rumour like this, Yahoo! ended up investing $1 billion in Alibaba.com. So, we'll be more careful this time and wait and see.

Update: I'm working backwards through the sources of this and find a piece on the China Web 2.0 Review early yesterday citing a CCID piece (in Chinese).

Learn from Reuters, copy Reuters and replace Reuters

Jane McCartney's columns from Beijing for the London Times are consistently worth reading. Her round-up of the Xinhua shenanigans is as good a summary as I've seen. She suggests that the head of Xinhua, as well as implying the sentiments in the title of this post has the expressed aim "...to oust every Reuters and Bloomberg terminal from the desk of every banker, broker and trader in China and offer them a Xinhua alternative (to be created). Because, after all, the big bucks are in selling information to the markets".

If she's right, then he's right (that last sentence anyway) and the battle should provide continued entertainment for some time to come.

China click fraud

There's an interesting piece from BusinessWeek that I just noticed that explains how click fraud in China is exacerbated by the big web sites using agents to sell online advertising for them. Many of the small advertisers apparently neither trust e-commerce sufficiently nor have the credit cards, etc. which would allow them to book online. So, a business has emerged with hundreds, if not thousands, of small commission agents onselling web-based advertising inventory.

Apparently Baidu is being sued by disgruntled advertisers who have also been protesting outside its offices about this.

The report also quotes an Analysys survey from earlier this year of 2,000 online advertisers which suggests that one-third of them believe they have been victims of click fraud.

Bruno again?

He has featured here before (see here and here) and once again we find ourselves wondering just what Bruno Wu of Sun New Media (latest name of many) is up to.

At a time when the world is watching aghast at Xinhua's antics in trying to collar the financial information market, he has announced a deal with The China Periodical Management Center that would give Sun New Media:

* Exclusive access to a state-owned content library, which houses 6,500
      books, 1,500 audio and video products, 44 journals, and 3 newspapers;
* An exclusive partnership with the Chinese Government to issue digital
      publishing permits for business-to-business (B2B) online publishing;
* Support for developing a B2B search engine for all of China that will
      enable users to search for information within specific industries;
* Ongoing government support for e-publishing as the industry undergoes
      regulatory changes.

As you might guess, that piece about the exclusive partnership to issue digital publishing permits (I wonder what they are exactly) caught our eye. The PR Newswire press release says that the China Periodical Management Center is a division of the State Administration of Press & Publications. We've never heard of it and googling it only throws up references to the Sun New Media deal but we'll put that down to our own ignorance and mistranslations. We also thought that the Ministry of Information Industry was in charge of Internet Content licenses but I guess this is something different and we don't understand.

Meanwhile, on Danwei, we find Bruno and his lively wife again, mixed in with stories about the late and lamented Oriana Fallaci and a penis transplant reversal. This time he is telling how he lost $100 million on his Sun TV ventures and blames this on Murdoch (him again). He is, apparently, seeking his revenge with a 5-Year Plan to dominate the Chinese internet. Hmmm. This startling insight apparently first popped up in the UK's Independent newspaper.

Send in Wendy

BusinessWeek suggests that Murdoch is using his Chinese secret weapon - his wife Wendi Deng - to smooth the path for launching MySpace in China. Given that the Chinese government still severely restricts the Rotary Club because of its effectiveness in organising people outside the mechanism of the Communist Party, one wonders how enthusiastically they will welcome a Chinese version of MySpace. Judging from the computers of my teenage boys, it has supplanted e-mail as the preferred mode of communications among the next generation and, given its capacity to link ah hoc groups quickly within a rich media environment, must terrify the Mandarins in Beijing.

Still, Murdoch has already proven his critics wrong on a number of counts with MySpace, so maybe this will finally be the successful sally into the Chinese market on which he's been working for 15+ years now.

Update: we now see that this has been quite widely reported including this piece in the FT which says “We have to make MySpace a very Chinese site,” Mr Murdoch said at a media conference organised by Goldman Sachs. “I have sent my wife across there because she understands the language.” He reportedly told the conference "MySpace in China was likely to have local partners, who would own around 50 per cent". Good idea to flag your negotiating position to the Chinese regulators Rupert.

The Economist discovers Jack

I suppose if you are 160 years old, you can be forgiven for moving slowly. So, the wide-eyed piece in this week's Economist about Alibaba.com's "Alifest" annual meeting in Hangzhou seems to have caught on to news a bit late.

However, it does contain some interesting tidbits:

1. It quotes Alibaba.com as projecting revenues of $200 million this year.
2. Meg Whitman is claimed to have decided to by Skype after having seen the instant messaging features built into Taobao.com when she was in China.
3. Jack Ma needed six bodyguards to escort him from a recent meeting in the Great Hall of the People such was the crowd waiting to greet him.

Some of this may even be true.

The Economist's correspondent is not the only one who comes over as wide-eyed in this piece. Bob Peck, a Bear Stearns analyst is quoted saying "“Jack is not just a Chinese visionary, but a global one. Western companies are taking pages from the Alibaba book.”

But, to be fair, the piece does end with a good piece of standard Economist common sense in its last sentence. "He will have to tackle profitability if he is really to call the tune", it says. Quite so, although the model is looking good so far.

Been away, back now

I've been on the road again. A week ago, I was in Amsterdam speaking at the SIIA's Global Information Summit. An interesting cross section of technical and B2B publishers, database folks and the usual array of consultants and bankers. We talked about Asia and surprised a few people by pointing out that China and India weren't all roses....not many roses at all, actually. It was the first session of the conference and got people quite fired up.

My co-panelists were Joachim Bartels of Intrepid Explorers, EPS and the Business Information Industry Association Asia/Pacifc & Middle East, Karen Chistensen of Berkshire Publishing and Macmillan CEO Richard Charkin.

This week I was back in Seoul working with my Thai clients. From yesterday, all eyes were on the situation in Bangkok with everybody hoping that, as it seems, things will settle quickly and peacefully. So far, business appears to have been fairly sanguine about the impact of all this and is looking forward to a reasonably speedy return to 'business as usual'.

Now back in Hong Kong and catching up on the news. Picking up on the themes we discussed in Amsterdam, I see an interesting piece in Foreign Policy reporting a media briefing from Li Wufeng, the director-general of China's State Council Information Office (SCIO). The magazine describes him as "China's top Internet cop". Li apparently claimed 'We have neither the technology nor the manpower" to censor or filter the Internet. "We have just dozens of people in the Internet affairs bureau. Half of them are here today [in the room]"'. Make of that what you will along with this statement: "If someone is shouting bad things about me from outside my window, I have the right to close that window."

Finally, some action from GlobalMarket

I've been watching Guanggzhou-based GlobalMarket for almost five years, like the company but have, until now, been a bit disappointed by its failure to keep pace with Global Sources and Alibaba.com. I was, therefore, very interested to see the report in the People's Daily online noting that Nasdaq-listed Ninetowns Digital World Trade Holdings has invested $5 million for 16.25% of the business.

The report quotes Ninetowns' CEO Wang Shuang saying that "the firm will seek to increase its investment in GlobalMarket in the future as part of its Internet-oriented transformation".

See here for PR Newswire's distribution of Ninetown's press release.

Government competition

Global Sources has been fulminating for years against what it sees as subsidised competition in Hong Kong from the Trade Development Council. We were interested to see this Xinhua piece then (thanks to Fon Tuinstra for pointing us in the right direction). It talks about the Chinese government's launch of the an E-business website China Suppliers with the memorable URL of www.china.cn. New subsidised competition it seems.

The piece notes that "During its trial operation over the past month, some 3.6 million companies registered and it published 40 million commercial messages". Supported by the Ministry of Commerce, it is said to target SMEs as does, of course, Alibaba.com. The report notes, rather sniffily, that "until recently, all major Chinese commercial websites were run by private firms". Something distasteful about that as far as those Xinhua boys are concerned.

It has to be said that government involvement in the industry sectors most served by Alibaba and Global Sources is limited at best and we imagine that neither in Hangzhou nor Hong Kong are they exactly quaking in their boots at this announcement.

Online trading agents

We have written a couple of pieces recently about how eBay is becoming a livelihood for large number of Indians (most recently here). We were interested, then to see this piece in the Shanghai Daily about the emergence of a 'new' type of business in China, the online trading agent.

The article comments:

...fair-weather users may find it troublesome and not worth their time when it comes to the actual procedures, especially if they involve things like customs claims and the interested buyer is from overseas.

These difficulties have prompted the rise of a new profession in China - the online trading agent, who helps sell other people's stuff that they don't need any more, or aids corporate trading on the Internet.


It profiles 29-year old Tian Wei who, it says, is one of the first three people certified as trading assistants by eBay Eachnet. It notes that "Tian has signed contracts with two companies - a Chinese medical equipment producer and a Korea registered clothes manufacturer - to be their trading assistant. She is in talks with other companies to serve as their dealer".

I love to read about the way new and unexpected businesses emerge from these B2B online initiatives in Asia's more interesting markets.