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Market Spotlight: China
Net Jacobsson
Silicon Valley, 22 March 2011
Top Trends
Market Highlights   Agenda
Key Learnings
Questions
1.4 Billion Chinese
       50/50
       Urban/Rural
#1 Internet Nation




Adding more than            a month!
Market Highlights
•   450 MM reg Internet Users > 750mm 2014

•   800 MM Mobile subscribers > 1.1 Bn 2014

•   Mobile Internet users: 303mm

•   Online Ad revenues past $5Bn

•   With these numbers its easy to understand
    why it is attractive for US companies.

•   For Chinese companies, why look outside the
    domestic market?
Top Trends
•   Group Buying: Lashou,
    Meituan, Mituan etc (1700+
    sites..)

•   Social Networks: Qzone,
    Renren, Pengyou,
    SinaWeibo, Kaixin001

•   Online Gaming - Tencent,
    Shanda, Netease

•   Online Advertising

•   Mobile
Challenges
• Regulations
• Local competition: well
  funded, scrappy, hungry &
  not much younger that
  their U.S counter parts
• Recruiting/Culture
• Product ownership
Why do Foreign Players Encounter
                   Challenges in China?

                    Domestic        Foreign
                     Players        Entrants             Struggles of Foreign Entrants

Regular barrier       Low              High          eBay EachNet experienced market share erosion in
                                                     ecommerce to Alibaba/Taobao & sold to Tom Online
  Reporting
                      Lean             Fat
  structure
    Local                        Mostly left after   Amazon / Joyo yielded its trafc leadership to Dangdang
                    In Charge
 Management                       acquisitions
 Relationships
                     Good              O.K           MySpace - SV/China Mgnm issues - lack of local product
  with SOEs
                                                     ownership
  Customer
                     Quick            Slow
responsiveness                                       Yahoo! China was acquired by Alibaba

 Local content         +               +/-

 Local service         +               +/-           Google struggled with Baidu, local attacks & eventually gave
                                                     up China

Financial pocket   Not so deep      Very deep
US China approach v.s.
  Chinese companies



“trying to land advanced jets in muddy rice
paddies”
“very good at commanding regular troops, they
don’t know how to fight a guerrilla war”
What about Chinese
   companies in the US?

• Mostly Gaming companies & app dev:
 • Tencent (Outspark, Riot Games)
 • The 9 (Aurora Feint)
 • Shanda (Mochi Media)
• Alibaba (exception)
Chinese IPO’s
•   2010: 39 Chinese Companies on NYSE &
    NASDAQ (37 in 2007) - most fared well

•   Nature of IPO’s reflect the maturation of the
    Chinese Internet : shift from gaming to
    ecommerce

•   Move from entertainment > shopping (increased
    trust from consumers) > aids content sites
    relying upon advertising
Key Learnings
•   Know why you get into China - long term (if any) investment

•   Roll up your sleeves. There are no passive engagements in China

•   Chinese Internet companies are well funded, scrappy & very hungry

•   ABC MBA’s does not equal a good management

•   Don’t mistake language ability with business or management
    competence

•   Zero-sum mentality vs win-win

•   Guangxi - over rated, temporary and non-transferrable - resides in
    the hand of the individual who has it
Discussion
•   Is China despite its vast market size worth the
    effort? Are you ready to roll up your sleeves?

•   Have US companies learned any lessons from
    past failures? Hello GroupOn?

•   When should your company enter China?

•   Enter the dragon: JV or Organic?

•   With such a huge domestic market - why would
    Chinese companies look outside China
China market spotlight 2011 for Hemisphere

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China market spotlight 2011 for Hemisphere

  • 1. Market Spotlight: China Net Jacobsson Silicon Valley, 22 March 2011
  • 2. Top Trends Market Highlights Agenda Key Learnings Questions
  • 3. 1.4 Billion Chinese 50/50 Urban/Rural
  • 4. #1 Internet Nation Adding more than a month!
  • 5. Market Highlights • 450 MM reg Internet Users > 750mm 2014 • 800 MM Mobile subscribers > 1.1 Bn 2014 • Mobile Internet users: 303mm • Online Ad revenues past $5Bn • With these numbers its easy to understand why it is attractive for US companies. • For Chinese companies, why look outside the domestic market?
  • 6. Top Trends • Group Buying: Lashou, Meituan, Mituan etc (1700+ sites..) • Social Networks: Qzone, Renren, Pengyou, SinaWeibo, Kaixin001 • Online Gaming - Tencent, Shanda, Netease • Online Advertising • Mobile
  • 7. Challenges • Regulations • Local competition: well funded, scrappy, hungry & not much younger that their U.S counter parts • Recruiting/Culture • Product ownership
  • 8. Why do Foreign Players Encounter Challenges in China? Domestic Foreign Players Entrants Struggles of Foreign Entrants Regular barrier Low High eBay EachNet experienced market share erosion in ecommerce to Alibaba/Taobao & sold to Tom Online Reporting Lean Fat structure Local Mostly left after Amazon / Joyo yielded its trafc leadership to Dangdang In Charge Management acquisitions Relationships Good O.K MySpace - SV/China Mgnm issues - lack of local product with SOEs ownership Customer Quick Slow responsiveness Yahoo! China was acquired by Alibaba Local content + +/- Local service + +/- Google struggled with Baidu, local attacks & eventually gave up China Financial pocket Not so deep Very deep
  • 9. US China approach v.s. Chinese companies “trying to land advanced jets in muddy rice paddies” “very good at commanding regular troops, they don’t know how to ght a guerrilla war”
  • 10. What about Chinese companies in the US? • Mostly Gaming companies & app dev: • Tencent (Outspark, Riot Games) • The 9 (Aurora Feint) • Shanda (Mochi Media) • Alibaba (exception)
  • 11. Chinese IPO’s • 2010: 39 Chinese Companies on NYSE & NASDAQ (37 in 2007) - most fared well • Nature of IPO’s reflect the maturation of the Chinese Internet : shift from gaming to ecommerce • Move from entertainment > shopping (increased trust from consumers) > aids content sites relying upon advertising
  • 12. Key Learnings • Know why you get into China - long term (if any) investment • Roll up your sleeves. There are no passive engagements in China • Chinese Internet companies are well funded, scrappy & very hungry • ABC MBA’s does not equal a good management • Don’t mistake language ability with business or management competence • Zero-sum mentality vs win-win • Guangxi - over rated, temporary and non-transferrable - resides in the hand of the individual who has it
  • 13. Discussion • Is China despite its vast market size worth the effort? Are you ready to roll up your sleeves? • Have US companies learned any lessons from past failures? Hello GroupOn? • When should your company enter China? • Enter the dragon: JV or Organic? • With such a huge domestic market - why would Chinese companies look outside China

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