The China Vortex » Internet

Discussing China on Quora

admin — Sat, 15 Jan 2011 23:05:13 +0000

With the recent test flight of the new Chinese J-20 stealth fighter, China’s growing economic influence, and the upcoming visit of President Hu Jintao to the US, 2011 promises to be yet another interesting year. In addition to writing for Forbes.com and Business Insider, I have also recently been posting a lot to a relatively new startup, Quora, which can be simply described as a question and answer startup.

I was invited to Quora (you need an email invite) in June, and started posting questions and answers. Since then, it has started to grow on me. It’s more than a Q&A site, it’s a knowledge network, and has managed to attract some serious and interesting China observers. If I can make a small claim, it was that I felt that the quality of discussion on China was not good on the Internet; the general media took a generally hostile attitude to China, then there are those in China who have had to filter their opinions because, well, they are working in China for Chinese employers, supporting them and their families. There wasn’t much of a middle ground, and there was little room for nuance. For this reason, I made some contributions to the discussions in the form of questions and answers, just to get the conversation going.

I am happy to say that I now feel some of the best discussion of China on the Internet is now on Quora, and it draws a very knowledgeable crowd, including people living inside and outside China. From reading the discussion, I think that you will find that there is a wide variety of opinions, but they do agree on some key issues.

I have pulled out three discussions which give you some idea of the level of conversation:

What do Chinese consumer tech companies need to do to be innovative enough to compete in developed markets like the US?
What will be the best entry strategy for a foreign-owned Internet company to succeed in China?
Is Amy Chua right when she explains “Why Chinese Mothers Are Superior” in an op/ed in the Wall Street Journal?

The last topic of Amy Chua’s has been particularly active and attracted a very interesting array of opinions.

The two founders of the company, Charlie Cheever and Adam d’Angelo, come from Facebook and the company is backed by Benchmark. The current buzz is that the company has a valuation of US$200M.

To join Quora, you will need an email invite. If you are interested and would like one, let me know.

Another Look At iPhone versus Android

admin — Tue, 19 Oct 2010 16:22:27 +0000

Lately there has been much discussion about how Apple’s iPhone is not open, as opposed to Google’s Android which claims to be open. Throughout the conversation, one thing has gone missing, and that is what’s good for users and their data privacy.

Which would you prefer, an app which charges you a small amount of money, say $5 or $10, for a one-time download, and keeps your data securely only on your iPhone, and then alerts you when it shares it with another app or website? Or do you prefer an app which is free, but then freely shares your personal data with other apps and websites in order so that the publisher can make his initial investment back?

I would prefer the app which charges me money upfront and keeps my data private.

But most people have chosen the free apps which don’t charge money, then sell data to other 3rd party websites and companies without their knowledge. Then they act upset when they find out that their data has been sold, and that their privacy is not private at all.

My reaction is “What did you expect?”

When you pay for an app, there is an implicit agreement that it will work, and the publisher feels the need to protect the interests of the user who paid him/her. If the app was given away for free, there is no such implicit agreement and obligation. Because Google’s Marketplace is largely offering free apps in order to gain marketshare, there is little desire to vet the applications to check if they have backdoors which will violate user privacy.

Caveat emptor.

But the Android camp doesn’t tell you this, since the vast majority of Android apps are given away for free. It’s like promiscuous unprotected sex for users. In contrast, iPhone apps are usually sold.

So yes, Android is open, but not exactly the way I’d like it to be. I would rather live with the rules Steve Jobs and Apple set.

Useful Skills For Remote Workers

admin — Tue, 24 Aug 2010 00:01:17 +0000

In my previous article, I brushed on the issue of how more work is being done remotely, by people working on their own.

The problem with the field of remote working is that there aren’t many people who do a good job of it, even though there are many software tools designed to help the remote worker. Basically, there is no good mentoring process for how to become a good remote worker for a team, which is why many criticize it, saying that it falls short.

I just came up this article The 7 Hats Of A Successful Team Member which gives a very good overview, and meaningful suggestions about what is needed, and how to become a good contributor for a virtual team.

Hope you find it useful.

My Take On Social Media Tools For Influence

admin — Wed, 04 Aug 2010 06:47:59 +0000

Today I would like to offer my views on several social media tools. They are:

Peer Index
Klout
Quora
Yahoo! Answers
Facebook Questions

When I woke up this morning and got online, I went to Google Buzz! and found this Youtube video from the vernerable Robert Scoble, in which he interviewed the founder of a new Twitter social influence tool, Peer Index. Basically, Peer Index goes one level beyond what Klout does; instead of just ranking people as influencers, curators, pundits, etc., it goes one level beyond, and divides people into vertical groups, and the identifying the groups in which they are influential. Just to give you an idea of how it works, here is my profile on Peer Index.

Partway through the video, I got a little surprised and my ego puffed up a bit when the China economy and biz section was brought up and I was mentioned. Always thankful for nice little mentions!

This looks like quite an improvement over Klout because of the finer granularity than Klout. I have been disappointed in Klout lately because they don’t seem to have kept their index updated. Give you an example: Here is my profile on Klout; notice how my tagline hasn’t been updated compared to my Twitter page.

For this reason, I much prefer Peer Index to Klout.

Another area I have been interested in are online questions forums; these really started with Naver in Korea, which has the predominant search engine in Korea. At one time, Naver marketed itself as the leading human-powered search engine; it relied on human vertical sector experts to answer questions. Eventually, some of these people first became experts in their field and became well-known first on the Internet, then on TV and through society. A few even achieved fame and riches through Naver.

One of the interesting side effects of this was that when people become well-known for the right reasons, they want to use their real names. Naver enabled this to happen.

Yahoo! noticed the success of this, and created Yahoo! Answers , which was largely a copy of the Naver model. Since it did not have the rigorous enforcement, policing and feedback which Naver did though, the quality of the questions and answers quickly went down in quality, with the result that the audience which used it also went down.

A recent variation on this has been Quora. This is a well designed question and answer model, which has good design and a good clean interface, and is heavily policed by editors. I tried it out for most of July and generally like it, but I found the editors too intrusive in the way they tried to edit questions. The community which is there is heavily slanted to ex-Facebook people, and the venture capital community. For a while I found this amusing, but after two weeks I found it boring, since I found both communities to be navel-gazers. As a side-point, I found many of the editors to be either Taiwanese who were deep-green pro-independence folk, or Indian. (Not that I care, but it is interesting how sub-communities shown through.)

For me, the straw broke when I asked a question in Chinese: 能用中文发问吗？(Translation: Can I ask questions in Chinese?) My motivation in asking this question was to engage some lively discussions in Chinese, since there is a significant number of Chinese on Quora. This question was quickly deleted by one of the Quora editors, and I was told to send an email to feedback at quora dot com. This was too much, and told me that their rules were too inflexible to make it a truly global Q&A forum, and I had had enough of the ex-FB and VC community, so I left and haven’t been back.

Facebook Questions is now undergoing closed testing; I expect this to be much better than Quora because it will associate people using their real names with their FB identities. For advertisers, this will be a very powerful tool because it will identify who really knows their stuff, and it should quickly replace Quora because of Facebook’s huge user base. In my opinion, Quora is too little too late, and their community is too narrow, and their editors’ overzealousness will prevent it from growing significantly.

After seeing Peer Index and the Q&A portals, I have decided that the Peer Index approach is much better. When people go to portals, they want to strut their stuff and show off, or of that doesn’t work, they just leave. In my own case, I like it much better when people can build their crowds based on their tweets, and you can build and lose followers according to Twitter. This is why I like Twitter and Peer Index much better than any of the Q&A portals.

I hope that Peer Index represents the trend of the future so that we get better quality as well as quantitative research when looking for influencers and knowledge experts on Twitter and the Internet.

New Article on Google in China

admin — Sun, 25 Jul 2010 03:53:49 +0000

Last week I was interviewed by Chris Myrick for an article on Google in China for Wharton. The article was translated into Chinese and titled “谷歌中国新动态：胜利，失败还是僵局？” I am quoted in the article.

You can read the article here.

New Articles for July 18-24

admin — Sat, 24 Jul 2010 02:28:12 +0000

Here are articles I have written on Forbes.com and Business Insider this week:

Forbes.com:

Why China Has to Dominate Green Tech

Business Insider:

Google China Is Struggling to Build Its China Business

If you are interested in learning about China blogs in English, please listen to this week’s Sinica podcast, you can listen to it here. I am mentioned in it.

Bold Predictions For China Tech Over Next Decade

admin — Mon, 19 Jul 2010 00:31:42 +0000

The past decade have seen the rise of many Chinese Internet companies which have become wildly successful, and which most in the west are only now beginning to notice. These are companies with names like C-Trip, Shanda, Tencent, Alibaba, Taobao, Baidu just to name a few.

For the consumer-facing companies who benefited from China’s rapidly growing consumer spending power, this growth was unrivaled. They rode two waves to maximum advantage: the popularity of tech among Silicon Valley venture capitalists and private equity firms, and with the Chinese government; and with the rise of China’s urban middle class. In contrast to many American firms which really did invest in significant technology, many of these companies had less in terms of technology; preferring instead to spend their investment money on hiring people and building a human salesforce. C-Trip, the popular travel site, was mainly a call center with a website when it went public; Baidu built up a network of resellers which it bought out when it went public, and Alibaba has an aggressive salesforce to work with Chinese SMEs.

Over the next ten years, there will be dramatic changes. Here are some of the trends I see:

Growth in the economy will slow gradually at first, then will become more dramatic. The Chinese economy’s period of rapid growth has already passed its peak.
Slower growth means that income gaps will widen in the society, along with opportunity gaps for individuals. From a marketing point of view, segmentation becomes more important. Qualified lead-generation businesses will become lucrative.
As the economy slows, targeted advertising will become more important for the Chinese Internet. Advertising-based Internet models which did not work well in China previously but worked well in the west will be re-introduced into China. Successful companies will adapt them to the realities of the China market without trying to force a western model.
Because of the slower economy, real technology adaption will take place in medium- , and even small-sized, firms. These will focus on working with very large datasets and data mining, and will focus on describing the topology of the Chinese Internet in a way so that other businesses can use this data.
Lower disk space and bandwidth costs will mean that even though Chinese companies adopt more technology, their costs will be lower.
From a venture capitalist’s and private equity investors point of view, the biggest cost will be the founding team. The best teams will be few and far between, and will be much sought after. Compared to Silicon Valley and the rest of the world, Chinese Internet startups will still be more likely to be led by individual entrepreneurs than by founding teams in the western mold. This is a culture thing.
The trend to Chinese government preference for RMB funds and local investors over US- and western-based venture capital and private equity funds will pick up pace. The more unfavorable the economic environment becomes, the more dramatic action the Chinese government will take. This will cause some tension with the US, but the Chinese government will be willing to take the hit because domestic concerns for social harmony take precedence.
Some western venture capital and private equity firms are studying the possibility of Chinese IPO exits. Don’t hold your breath waiting for these to happen; they are likely to be few and far between.
Hong Kong will gain some advantage because it policies are different from Beijing’s and like China, smart entrepreneurs will look for opportunities in the long tail instead of the large consumer market.

China’s economic development so far is based on two assumptions which will come under pressure over the next decade. The first assumption is that rapid urbanization is a good thing, since that will lead to the development of an urban middle class. The challenge over the next ten years will be how to find jobs for that urban middle class, whose living costs have gone dramatically higher, while the global macro climate has dramatically worsened? This is already showing up in the rise of the ant people, educated white collar workers who cannot make it up all the way to the top of the pyramid. For the first time in its history, the belief that education is the path to success in Chinese society will be challenged.

The second assumption will be a shortage of blue-collar factory workers, which has already begun to show up in southern China in the form of strikes and slowdowns at foreign-owned factories. As China’s working population dramatically ages over the next decade, this situation will worsen. Technology can, to some extent, ameliorate the labor shortage, but it cannot generate demand.

During the next decade, we will find out if China can become rich, on a sustained basis, before it grows old.

If the Chinese government does not succeed, then China will head into a prolonged economic slump after 2020, which will be much like Japan’s, and further adding to what is likely to become a prolonged global economic depression. In addition, the workforce which starts working after that year will have to deal with a worsening environment and dues, in the form of non-performing loans (NPLs), from spending in the high-growth years.

That is why this next decade is make-or-break for China.

Internet Crackdowns As An Economic Performance Indicator

admin — Fri, 16 Jul 2010 00:49:17 +0000

In China, the Chinese government is obsessed with maintaining economic growth at a high level. This is because a large part of the Chinese government’s implicit mandate with the Chinese people is guaranteeing continuing growth, which leads to a better standard of living. If growth slows down, then the whole basis of government legitimacy is challenged. This is why leading economists such as Michael Pettis, a very astute observer of the Chinese economy, believe that the Chinese government will continue their outbound investments in the US, for example.

Now for many other political observers of China, there is the widespread belief that Internet censorship is a human rights and free speech issue only, and something which is unrelated to economics. For them, this is an argument about humanitarian values which should be shared across the world. In the past few days, there has been a new crackdown on Twitter clones and some outspoken blogs in China have been deleted, according to this story in the Washington Post.

But what if economic performance and Internet crackdowns are in fact related, because the government fears outspoken criticism if economic indicators are much lower than the goals they have committed to and seek?

If that is the case, then the internal economic numbers which the government is seeing are a better indicator of how the people feel and will behave in the short-term, and bad numbers would make the government want to crack down pre-emptively, heading off potential dissent before the news becomes widespread.

When you put this into the Chinese context of domestic politics, and see that the Chinese leadership will be handed over to a new president and premier in 2012, what is happening on the Internet makes perfect sense. The current leadership of President Hu Jintao and Premier Wen Jiabao are due for retirement then, and will hand over leadership to a new leadership team. With two years left in their term, it is safe to say that world markets look unstable, with another wall of debt about to hit the US and Europe in the next year, further dampening consumer spending in the west. How can they manage a smooth handover without things getting unstable?

In China, there are early signs that there is an excess of white collar workers in the cities, and a shortage of blue collar workers in the factories, which is why factory workers have the leverage to slow down work or even go on strike. The traditional Chinese view of education is that the more educated you are, the better, but this view is being challenged now, and this view will sharpen over the next decade. China’s urbanization will mean more white collar workers will be looking for work in the cities, and they will have a harder time finding jobs. At the same time, this under-employed workforce will be aging quickly. Already, there are signs that a new subclass, the “ant people” are emerging, living in separate gated communities. Will this turn into China’s version of Brazil’s notorious favelas? This is the exactly the kind of situation the Chinese government wants to avoid. The gap between the urban rich and poor will become more marked.

As growth slows, the greatest challenge to the government will become readjusting the hopes and dreams of the Chinese people to a new reality of more moderate growth. This is an unprecedented challenge.

Is this a formula for social instability? You bet!

And where will they vent? On the Internet.

How will they potentially organize by spreading inflammatory remarks? On the Internet.

Seemingly this is a China problem, but as the world economy slows down, it will become a problem for other governments too. Free speech is taken for granted in good times, but in hard times, when social stability is at stake, it becomes another story.

New Goldman Report: iPad to Take Significant Netbook Market Share And More About iPhone Antenna Issues

admin — Thu, 15 Jul 2010 00:14:57 +0000

In a new report, Goldman Sachs says that the iPad is poised to take significant netbook market share because of the five Cs: consumption, content, connected, constant operation and commerce. You can read all the details at this report on the Financial Times.

If you have been a reader of the China Vortex, this would come as no surprise, since we predicted all this about the iPad way back on January 5, before even the iPad name was announced. When AAPL was trading around $215 per share, compared to today’s $252.73.

Or you could have listened to us in March 2008, when Apple announced the iPhone SDK and China Vortex predicted that it would be a game changer. Back then, Apple shares were trading around $130 per share.

Today, the Microsoft CTO Kevin Turner predicted that the iPhone 4 may turn into Apple’s Microsoft Vista because of the antenna issues. Aside from pointing out that Kevin obviously does not come from a PR background, I have been asking myself a question about the antenna issue.

The question is this: “Why isn’t the antenna issue bigger than it is now?” While some have called for a recall, the demand for the iPhone 4 continues. Why?

My answer: “People aren’t using it for voice calls much anymore.”

The main function of the iPhone 4 is as a data device or computer, not as voice phone. The heavy data usage stats for the iPhone and iPad show that these are devices for asynchronous data consumption, not voice communications. If the primary function of the iPhone 4 was as a voice phone, then yes, the problem would have been much more serious, on a level with Toyota’s recent brake problems.

It’s called an iPhone, but the voice phone function really isn’t that important.

New Goldman Chart Shows How Apple Seizes Mobile Phone Profits

admin — Wed, 14 Jul 2010 13:28:08 +0000

In my recent article for Forbes.com The China Tracker, “Apple, Google To Battle In China”, I predicted how Apple’s iPhone would be much more profitable than the Android platform even though unit sales would be lower.

This view is corroborated by this chart (second on the page) posted on Business Insider, which is now capturing close to twice the profit of the rest of the industry combined, even though unit sales numbers are only 3% of the total market sales worldwide.

I expect these numbers to be similar for the China market, and they show why Apple will be in a virtuous cycle in the China market, since iPhone and iPad sales will drive increased marketing expenditure in China, putting extreme pressure on Apple’s competitors in China.