I read a fantastic article last week on the Advertising Age website entitled, “The Internet Does Not Rise Above Nations and Cultures.” The article, by @wolfgroupasia of the Silicon Hutong blog, takes a closer look at why foreign Internet companies in China fail. Wolf writes that through observing past examples (such as: eBay, Yahoo! & Google) we are able to see some common threads of why foreign Internet companies fail in China. Rather than attribute failure to external factors such as government interference and unfair competitive practices, Wolf makes the excellent point that most foreign firms adopt a similar failed approach, which he terms “T&T” or “transplant and translate”:
The standard practice of foreign online firms coming to China has been to do some cursory research, hold a big press conference announcing that they are coming to China, open an office, hire a large local staff, and with some modest degree of localization set out to do in China the very same business they are doing in their home markets.
After a brief period of success and accolades, the following situation occurs:
The numbers stop rising as quickly. Maybe they even start to decline. Steeply. A local competitor pops onto the scene who seems to offer little more than a clone of the foreign site, but with a few weird differences. Suddenly the buzz is gone. Users flock to the competitor, advertisers and media agencies stop returning calls, and global headquarters is starting to ask hard questions.
A Closer Look at the “Local Clone with Weird Differences”:
If we take a look at this recent Economist article introducing the top 10 sites on the expanding role of Social Media in our lives (ranked by total unique visitor) a clear irregularity pops out:
1. Facebook
2. Windows Live
3. MySpace
4. Baidu
5. Twitter
6. Orkut
7. Hi5
8. QQ
9. LinkedIn
10. deviantART
Three of the top 10 global sites, ranked by total unique visitors, are Chinese sites intended primarily for the Chinese domestic market. These are the sites with the longer shelf life, and they’re also sites that were created by Chinese, for Chinese, in China. Yes, with a total Internet population that exceeds the total country population of the United States, homegrown Chinese Internet companies can rely on the domestic market alone to achieve success.
As long as foreign Internet firms apply the T&T strategy to the China market, domestic Internet firms will continue to thrive without much competition from abroad. This is all fine if Chinese firms focus solely on China, but will these homegrown Internet companies develop the best practices to win overseas? Or maybe the right question to ask is – with a domestic market of such grand proportions, is international expansion even worth the effort?
I highly suggest reading Wolf’s full article on the Advertising Age website HERE
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