The story of western social network sites losing out to local Chinese competitors continues; this time MySpace China joins the list as its CEO Luo Chuan makes it official that he is going to leave to join a local online video startup.
Although it is a well-known fact that local management teams need to be empowered to compete successfully in the Chinese market, western tech companies continue to make the same mistakes over and over again. I believe that the reasons for this are:
- While there is much talk about diversity, there is the firm belief that “brands” must be protected with a unified set of features and look all over the world;
- Most VPs of marketing are not fluent in other languages and cultures, and try to dictate from headquarters. When they visit the local office, they appear sympathetic, but when they return to HQ, everything learned from visits to local subsidiaries is quickly forgotten;
- Local Chinese competitors are unrestricted by these considerations; they just do what they need in order to win users. There is very little if any discussion of “brand” and “look and feel”. These are the horses VCs like to bet on;
When you come right down to it, there is little a global brand can bring to the table in China. Most add a burden of a faraway headquarters without empowering the local management team to be more competitive. This is not a problem which is unique to China, it is also happening in the social networking market in Japan.
My conclusion: The problem does not lie with China, but instead lies with the reluctance of western social networking sites to empower their local management to do whatever they need to win users and market share. By trying to force common features, standards and branding too early from their headquarters way before the market is mature, they cripple their local companies’ chances of success, and cede the market to the local competitors.
That is why the successful local competitors get such high valuations; they make ideal acquisition candidates and give their founders a good exit strategy.
Ask Meg Whitman, former CEO of eBay.