The China Vortex

Victor Koo, CEO of Youku, recently wrote an article, Internet Measurement in China: How to Get Out of the Dark Ages, where he highlighted the major challenge for Internet companies in China: the lack of reliable metrics for performance measurement.

In the article he talks about how even some VCs in China still rely on Alexa for very basic measurement stats, when in fact, Alexa is not considered reliable.

Many American service providers do not measure audiences from Internet cafes, which as I have pointed out, are a major source of traffic from China. Since American software companies are not familiar with the audience profiles of what is now the largest national audience in the world, they do not break out Internet cafes into a separate category, which underlines how American software providers are out of touch with this very important market. (This Internet cafe trend may change as broadband becomes more available in households, but it definitely should be counted as a major separate category in any report which claims to cover the Chinese market.)

The situation is not helped by government-supported “big picture” reports by CNNIC which give too broad numbers on a national basis and support a government agenda, but do not provide any business insights. They are great grist for press releases and the politically-charged Chinese and western media, but that is about the only value they have.

What Victor Koo does not mention is that the lack of reliable independent statistics has a very real debilitating effect on the healthy growth of the Internet as a sector in China, and the revenue outlook for Internet startups. This is because independent metrics, statistics, standards and definitions are requirements for the global media business. In order for media buyers to make good media buys for their advertising clients, they need standard definitions and metrics on the quantitative side so that they can make better overall qualitative recommendations and decisions.

It’s a testament to the robustness and attraction of China’s economy that the Internet has been able to grow as fast and as far as it has without these independent numbers and stats, but it is also a tragedy that many dollars have not made it to China because of the comparative opacity of the market.

If this systemic bottleneck problem can be addressed, the volume of ad money which would go to Chinese online publishers would go up dramatically.

Technorati Tags: advertising, alexa, business, cafes, China, Chinese, cnnic, government, internet, marketing, online, profiles, qualitative, quantitative, services, software, statistics, VC, VCs, youku

If you are interested in the kinds of social networking applications Chinese are now using today, David Feng offers some ground-level observations in this article. I’m a great fan of first hand research and observations and David offers some excellent observations.

Maybe it’s been a reaction to some of media coverage of everything which has been going on with the coverage of China and Tibet, but I have been diving into technology lately. Specifically, I have been digging deeper into Apple’s frameworks for development on the Macintosh and iPhone platforms.

Here are some of my observations:

– Everything’s an object, and everything’s object-oriented. Think of actors on a stage, and passing data to objects, which act on them. All the time.
– The MVC (model, view, controller) analogy is used throughout, which makes it natural for Macintosh developers to make the leap over to Ruby on Rails development and other non-Ruby frameworks such as Django;
– While Microsoft has worked on developing new languages such as ASP.net and C#, Apple has stuck with one: Objective-C, which has roots in NeXT and OpenStep. (For instance, all classes begin with NS. What does NS stand for? NextStep.)
– Apple’s efforts, in contrast with Microsoft’s, has been on developing frameworks;
– Think of the frameworks as sandboxes which Apple provides for you to play in, which you can gradually grow and develop with, and then later contribute to;
– Cocoa and Cocoa Touch are frameworks of classes, all based on Objective-C. You use these classes to instantiate your objects;
– Instead of thinking about writing code, you spend more time thinking what you want your objects to do, and objects messaging each other;
– Apple provides many sample applications and their code. You learn by making minor changes to the code and seeing what happens;
– There is a small and very dedicated community made of Apple developers. Very smart people.
– The documentation is REALLY good, and includes videos which you can download into iTunes, online documentation, and documentation in Xcode, the development tool. It is clear, sharp, concise and jargon-free.
– Every Macintosh ships with all the development tools you need, including Xcode, Interface Builder and Dashboard so that you can develop native apps or web apps right out of the box.

After some play with it, I’ve come to the conclusion that part of the reason there are relatively few developers working on the Objective-C/Macintosh/iPhone platform is because it completely rejects procedural programming as a development model. In fact, procedural programming would most likely be a handicap in shifting to the Macintosh programming model because it basically requires programmers to relearn a new programming model.

If you embrace object-oriented programming and agile development as a model though, it’s the best.

Technorati Tags: agiledevelopment, Apple, cocoa, cocoatouch, Dashboard, development, Interface Builder, Macintosh, microsoft, next, nextstep, objective_c, openstep, rubyonrails, sns, socialnetworking, software, Xcode

Paul Graham has just published an excellent article called “You Weren’t Meant to Have a Boss”.

He talks about many of the same ideas I have talked about on this blog, and why it’s best to work in small organizations if that is what most appeals to you, and works for your personality. This is particularly interesting because software engineers, especially Internet networking engineers are interested in scaleability. Paul Graham makes the point that large organizations don’t scale for many people; they are happier in small groups.

WARNING: If you work for a large organization, you may not want to read this article.

Technorati Tags: business, engineers, happiness, paulgraham, scaleability, software

A good way to find out how sharp a person is to listen carefully to the questions they ask. Smart people ask very sharp questions which cut right to the core of an issue, while less astute individuals kind of dance around the edges.

Smart entrepreneurs ask the sharpest questions because often the success of their own business depends on the questions they ask. Smart people who work for large organizations usually do not have to ask such sharp questions because they have an employer who tells them what they need to do, and they are usually not paid to ask questions, they are just paid to do things they are told to do, regardless of whether the tasks are smart or not.

I have long been an admirer of the folks at 37 Signals because I think that they are a small and very smart crowd of people. For me, they represent the kind of company which future entrepreneurial organizations should be like: small, smart, fast and lightweight. They are the Davids (as opposed to Goliaths) who want to continue to be small and smart, and focus on serving their customers’ needs.

One of the reasons I admire them is because they were the incubator/developer for Ruby on Rails, which I talked about earlier in this article. What is significant about the 37 Signals team is that they think of themselves more as designers than developers, which gives them a different perspective. Instead of adding features, they are focused more on making software programs easier to use. This is the thinking behind their online application suite offering which includes Basecamp, Highrise, Campfire, Backpack, Writeboard and Ta-da. After doing web development over several years, they have captured their thoughts about web application development in a downloadable PDF book called Getting Real.

A major part of their appeal is that aside from being designer/developers, they also have an appreciation of how the business world works. For this reason, I’m a frequent visitor to their website. Recently, they had a posting to their company blog called Question your work. According to this article, there are several questions which you should always ask:

• Why are we doing this?
• What problem are we solving?
• Is this actually useful?
• Are we adding value?
• Will this change behavior
• Is there an easier way?
• What’s the opportunity cost?
• Is this actually worth it?

All of the questions are very good big-picture questions which should be asked up-front before embarking on any major development project. I have seen many fairly major software development undertakings, as well as marketing projects, which did not answer these questions well, and frankly, a good deal of grief would have been saved if these questions were posed first.

So regardless of where you are, whether you are in the US, China or anywhere else, ask these questions first before you embark on a major business adventure.

Technorati Tags: 37signals, business, China, development, entrepreneurs, marketing, opportunitycosts, questions, software, startups, US

I was recently interviewed by Christine Lu of the China Business Network re the issue of China-India software outsourcing which I had earlier published a white paper about. If you would like to download the white paper, you can get it here
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You can download and listen to the podcast here.

This article touches on the number of Chinese visitors to India, and Indian visitors to China. The number of Indian visitors to China outnumbers the number of Chinese visitors to India by more than eight to one. This is quite a contrast to the huge numbers of Chinese who are now moving to Africa.

Any way you look at it, there is tremendous room for growth.

Technorati Tags: africa, China, india, outsourcing, software

Ever since its publication, The Tipping Point, by Malcolm Gladwell, has captured the imagination of marketers and PR people all over the world. Basically, the book argues that ideas are spread by different groups of people, and that some have more influence than others in helping an idea to spread.

For marketers and PR people, the book basically argues that there is a formula for success; just feed your client’s idea or product into this ecosystem, and you can come up with a very predictable result. It’s almost like a software engineer’s dream: given a certain input, then a process, there is a predictable outcome. The marketer/PR agency can argue that the amount of money spent forms a direct correlation with the input, and if a project fails to take fire, it’s because the client didn’t spend enough money. As a result, the right connectors could not be influenced, and the project failed.

This is known as Influentials theory and forms the backbone of much marketing practice.

All clear and simple, right?

I have always had my doubts about it. For one thing, the model fails to take into account what is a good idea and what is a bad idea. And it fails to explain how people decide what is a good idea worth transmitting to one’s network, and what is a bad idea which should be immediately dismissed or ignored. If you were a Google engineer, how would you write an algorithm to describe how these very human and subjective individual judgements are made?

It seems to me that it is impossible to write an algorithm to describe them. What an engineer can do though, is plot how ideas are spread in a time when we are bombarded with more and more information, making our attention spans progressively shorter.

Wouldn’t there come a point when influence becomes almost random, when Influentials lose most of their influence? And doesn’t this coincide with the breakdown of the “mass market”, a concept which has collapsed with the rise of the social networking phenomenon and the long tail?

I had long suspected this, but I had never been able to prove the thesis. However, the results of some serious research by Duncan Watts supports this thesis. In this article published in Fast Company, his experiments suggest that the success of many fads has become, for all practical purposes, random. The article is an excellent read.

For one thing, I believe that The Tipping Point was written too long ago, and it described a world vastly different from ours in 2008. When it was published in 2002, the book described a time when people still read paper newspapers and books and before blogs. You may remember a term then called the “mass media”.

Now, ideas spread much faster, and within smaller groups which may appear random. It is also very likely that products/services/ideas will be served to much smaller groups of people.

One example is the gaming industry where the shelf life of titles has become progressively shorter, almost to the point where the marketing industry has trouble keeping up with the shorter time cycles. Hollywood movies have to prove their box-office success in their opening weekend in the US. These two industries have yet to adapt to lower production expense models which fit in with the lower shelf-life of their titles.

Basically, they need to downsize their costs.

If you boil it down to essentials, it means that you will have to market your ideas/products/services yourself, since you know your own audience best and understand how to pitch it to them. If they like what you have to say/sell, then they will become your connectors, and push it beyond your immediate circle, creating a breakout phenomenon.

In the end, the Internet empowers smart generalists who understand technology and keep the human touch in their marketing. Dumb messages may have short-time entertainment appeal, but they are unlikely to be profitable unless there is something behind them.

And marketing cannot buy credibility.

Technorati Tags: algorithm, attention, blogs, engineering, google, human, ideas, influentials, malcolmgladwell, marketing, PR, software, tippingpoint

I have been spending some time researching Ruby on Rails, how it works, its development philosophy, and how it has affected web development, and will affect business in the near future.

The Ruby on Railsframework was released by David Heinemeier Hansson(it’s open source) in July 2004 has had a profound effect, and has been especially important in the development of the Web 2.0 movement.

Most importantly, Ruby on Rails simplifies the web development process through its “convention over configuration” and “Don’t repeat yourself” it fundamentally changes the role of the programmer in web development. Instead of asking questions like “How do I get function x to call method y?”, he is able to focus or how to do something, he is freed to focus more on the general business logic of the application.

This is why Ruby on Rails and the Agile software development movement go hand in hand. The Agile movement places a premium on human interaction and communication between programmers and business experts over software tools, process and methodology. The relationship between the Agile movement and Ruby on Rails is most clearly defined in the book Agile Web Development with Rails. Although the book is written for programmers, an intelligent lay reader and business person can also get a lot out of it, and understand the business implications of Agile development for web application development.

What does this mean? Basically, web application development as it is done by most businesses today is broken. Here are the two most common approaches:

• Designer-driven development. In this model, the client is non-technical and is more focused on “look and feel” than functionality. The web design firm uses Photoshop and Fireworks (or similiar applications) to create mockups to show the client. When the client finally selects the look and feel he likes, it is then handed over to the front-end developers to start coding the HTML, CSS, JavaScript and Flash files as necessary, while the backend developers create the databases and tables, and finally hook up the backend to the assets. The problem which happens when the website is prototyped, the client inevitably wants to make changes to the look and feel, and sometimes functionality. Changes to look and feel mean that assets have to be found, destroyed, created and moved around. Changes to functionality mean that new databases and tables have to be made and old ones destroyed. On the business side, this means that the projects inevitably go over budget, and often the client and web design end up in an unfriendly state of affairs.
• This is backend driven by database developers and developers who have good database and networking experience, and focus on creating the databases and tables, with little care, and often even less interest in the look and feel of the website. The most frequent result of this is a website which works fine on the functionality and business logic level but is butt-ugly. In projects of this kind the designers come in to mount rescue jobs, trying to turn a website only a mother could love into something which does not scare visitors away. In effect, the designers end up playing the role of the cosmetic surgeons in “Nip/Tuck”. Sometimes it works, often it doesn’t.

For a non-technical client more interested in creating a working application from the user point of view, this constant back and forth between client-side (front-end) design and backend programming throws them off completely from their established business goals. This is frequently made worse by the whole process: The client gives a brief then goes away, comps are submitted for approval by designers, then they go away, then the whole completed web application is shown to him, and he is expected to sign the check for the final payment with very little recourse if he is not pleased with the results, and all changes incur extra charges.By the time they have finished the project and made their final payment, they are often walking wounded.

Obviously, there is something very wrong with this development process. The designers get frustrated by limited client feedback until the project is nearly completed, the programmers get frustrated when the client changes the business logic, and the account people get frustrated at everyone, including the client.

This is what the Agile development process attempts to address. Basically, the client is asked to be fully engaged throughout the development process, sitting with the developers throughout and providing feedback all the while through while the developer is programming. The client can makes changes at anytime, and the website can even be tested in production mode to get user feedback, and more changes are made.

How is this made possible with Ruby on Rails? Since RoR is a framework, it creates default folders or directories in a basic configuration. The business logic is fixed by the MVC (model, view, controller) multitier architecture so that if the client wants to make changes, it is very easy to do so since the relevant files will always be in the same folders. There is no need to worry about where to find files to make changes. This design philosophy fits in very well with the web standards movement, which has focused on separating client-side development into HTML for structure, CSS for presentation and JavaScript for behavior on the browser side.

So how will Ruby on Rails change the role of the developer? It will no longer be enough for a programmer to be only a coder; a good developer will also have to understand business goals and user experience. With its emphasis on convention and process simplification, it is very likely that some of the best developers will come from client-side programming, while the best programmers will be those who have worked in business and understand business goals.

Does this mean that budgets for development will go down? In many cases it will probably be “yes”, but for developers who know how to understand communicate with their clients, and understand business, it’s more likely that their services will be especially in demand, and their fees will most likely go up.

Programming will be taken out of the lab, and it may well be that if you see two or three people sitting together over a notebook computer (most likely a MacBook Pro) in a cafe in Beijing, London or Pretoria, they are creating a new web application.

Technorati Tags: agile, agiledevelopment, application, business, clientside, clientsideprogramming, css, database, davidheinemeirhansson, designer, framework, html, javascript, opensource, rubyonrails, software, web20, webapp

I have just published a new white paper called “Why Indian Software Outsourcing Companies Are Outsourcing to China”.

The white papers covers the reasons why the Indian companies are coming to China, which mostly have to do with how tapped out the infrastructure in India is, the shortage of human talent, and lack of hardware infrastructure in India and how long it takes to set up in India.

China has good educational institutions in the tier two and three cities, which is why multinationals are expanding to those cities. I have not even heard anyone talk about India’s tier two and tier three cities.

Have you?

This means that India’s technology centers are highly concentrated, and because of severe competition from the leading IT service providers such as IBM, Accenture and EDS, they are under severe pressure to find talent.

Increasingly, the place they are going to find this talent is in China.

You can download this free PDF after registration here.

Technorati Tags: Accenture, business, China, EDS, ibm, india, IT, outsourcing, software, talent

Cory Doctorow, open-source advocate and publisher of the Boingboing blog, spoke in Beijing yesterday on Sept. 12. The Boingboing blog was one of the first blogs on the Internet, and now reportedly has more than 600K subscribers. The venue for the event was the Beijing Bookworm bookclub/bookstore in Sanlitun. Many members of Beijing’s English-blogging digerati were there including Jeremy Goldkorn of danwei.org who served as host, William Moss of ImageThief and Kaiser Kuo of Ogilvy China Digital Watch.

Cory opened his talk by reading a short story he had written. The story was set in 2027, where a VC was trying to talk a woman into letting him invest 600K in her company, which created customized mobile devices from junk, which she would then sell to customers. It was a perfect case of mass customization; this time, the VC had become commoditized, he was now part of a venture capital franchise and was looking for places to put his money. Trouble was, he had more cash to invest than what he knew to do with. The woman complained saying that she had tried to get money from Sand Hill Road in 1999, but she was blown off because her business did not, as the VCs put it then, scale. Now the tables were turned, and the woman was able to buy her raw materials for very cheap prices, and taking advantage of new technology design software and equipment, was able to design unique devices very quickly. At the end of the story, the poor VC was reduced to asking if he could work a shift on her assembly line so that he could have one of the devices.

After the reading of the story, Cory proceeded to talk about the issue of DRM (digital rights management) and copyright. He related the story of how Google had recently stopped selling videos from Google Video, disabling the ability of people who had paid for downloads to watch videos they had already paid money to buy. For this reason, many had turned to the Google search engine to find unauthorized downloads of those same videos which they did not have to pay money to buy, and which they could play anytime they wanted. This was a perfect example of how screwed up the whole copyright issue had become; it encouraged unlawful behavior by punishing those who acted lawfully, but now changes forced people to adopt and use products which were not “lawful”.

He then proceeded to talk about the DMCA (Digital Millenium Copyright Act) takedown request, which was used to remove content from Internet websites. He recounted the experience of one publisher, the Science Fiction Writers Society, of which Cory is a member, which asked that all references to Isaac Asimov be removed from a document publishing website. As a result, even high school reading lists had to be removed.

All this was done without any need for proof of ownership to be submitted to a court, or seeking of an injunction. His point was that the copyright laws are much more strict on the Internet, and do not need “proof”. In a twisted way, this has encouraged the proliferation of online piracy because the laws are unreasonable and unenforceable.

He then talked about how changes in technology had helped the publishing industry as a whole. Whereas before, major book hits needed to sell 50,000 copies, now many books became profitable by selling only 3,000 books. Technology has lowered the threshold of costs and profitability for small niche publishers, which are now able to reach a wider audience through the Internet, and later through mobile search and applications.

When the US was founded, for the first hundred years of its history, the US pirated all books written by English authors, and refused to honor British copyright laws. Cory added that the American founding fathers knew what they were doing; they were not prepared to have US dollars go into the pockets of the English treasury. It was only Mark Twain, an American author, became famous, did Americans become interested in copyright laws.

Now, Cory noted, China wants to become an accepted member of WTO and the international business community, and is seeking to honor international copyright laws. He warned that it is important for China to think through what its own interests are so that the country’s own best interests are not sacrificed to globalization.

Cory made it very clear that he believes that the current copyright laws are formulated to favor current copyright owners, at the expense of consumers. He noted that the current US copyright law, introduced some thirty years ago, has gone through eleven revisions, and that literally no one, including judges, lawyers and politicians understands it completely.

If there was a theme to his discussion, it is that the Internet has opened up a whole new world for those who are savvy enough to use it intelligently, and use it to reach niche audiences and interest groups all over the world, without being restricted by geography and language.

It’s great to know that we are all tied into our own interest groups through the power of the Internet. If we are willing to reach out, we can find people with similiar interests without any restrictions at all.

It’s all in our hands now.

Andrew Lih has posted a photo of the event on his blog and Frank Yu has posted photos of the event on Flickr. Search for “cory doctorow beijing”

Updated 9/15/07: Danwei has posted a video of Cory’s talk.

Technorati Tags: Beijing, boingboing, bookworm, business, China, copyright, cory, digital, dmca, doctorow, global, google, language, management, open-source, rights, sanlitun, software, US, video, world, wto

What do you call it when people pay nearly double current sales price to buy a product which is basically crippled of its most important function, and the maker has spent zero marketing dollars to sell the product?

I’d call that pretty powerful buzz marketing.

According to this USA Today story, some Chinese are willing to part with 8800 yuan to own an iPhone which doesn’t have working phone capabilities in China, because Apple has not yet signed a partnership agreement with a carrier. (Presumably, Apple would part with China’s leading mobile service provider, China Mobile, to launch iPhone service in China.)

Any way you look at it, Apple’s iPhone has had a successful launch in the US. Apple has taken its legendary experience in hardware/software design and integration and applied it to a whole new product, the mobile phone, bringing good design sense and functionality to a product which has confounded most users for years. On the marketing side, Steve Jobs has put the reality distortion field into overdrive, convincing many Americans who have never used smartphones before to part with their money. A few analysts have gone so far as to predict that Apple will replace Microsoft in the mobile space, becoming the leading player for a new category combining hardware and software design and integration in mobile computing. A report which came out on Sept. 4 has claimed that iPhone sales in the US in July have already beaten smartphone sales.

In China, mobile phones are very popular and are more than just communications devices. Often, with the Chinese concern for social rank, they are indicators of social status. On the business side, this translates into frequent replacements of handsets among China’s rising urban middle class as users want to have the latest devices. Mainly for this reason, handset makers have placed most of their research and development in China, to lower costs and to be close to trends for their single largest market.

But could Nokia, Motorola, Samsung and LG have missed something Steve Jobs and Apple saw, an opportunity which Jobs’ gang could not pass up? And could the high rate of handset sales belie not only a desire to have the latest mobile device, but be an indicator that Chinese users were not satisfied with any of the handsets made by any of the major hardware makers?

Moreover, could this represent an opportunity for Apple, which has never had major market presence in China for its computer business, but has made limited inroads with its iPod business? And is this a major opportunity for iPhone in a major emerging market?

First of all, let’s take a look at what Apple has done differently. In typical Steve Jobs style, Apple has played God, giving buyers a complete final sealed package and solution, including software (a version of OS X) by Apple, and a hardware design by Jonathan Ive, Apple’s superdesigner who has been largely responsible for the elegance factor in Apple’s products. To the consternation of a new generation of software developers, Apple has provided only very limited support and documentation for designers of third-party applications for the iPhone. But even with this very limited support, something interesting has happened: the developers have organized themselves to develop new apps for the iPhone.

When was the last time you heard of a large group of developers organizing themselves to develop and extend apps for new Nokia, Motorola, Samsung and LG phones? And for nothing?

While Apple and Steve Jobs try to create consumer reverence somewhere along the lines of Moses coming down from Mount Sinai with the Ten Commandments, the fact is that the first iteration of Apple’s products still are far from perfect. But the products always gets better. This reveals something about Steve Jobs which he strives to keep from the market: he listens and acts on intelligent customer input.

Uniquely among major hardware/software companies, Apple does not use focus groups. Designers design for Steve Jobs: designs and features Steve Jobs likes are kept; designs and features he dislikes are tossed away. There are no focus groups by marketing groups for senior management to use as crutches for their decisions.

If you look at it closely, what is happening with all the buzz for the iPhone is a mirror copy of what happened when the iPhone was announced on Jan. 7 at Macworld in San Francisco. The six month waiting period created a huge amount of pent-up demand and free buzz for the iPhone in the US, which translated into record sales for the product when it was launched on June 29.

Now, it’s happening even in China.

Genius. Pure genius.

Technorati Tags: Apple, business, China, chinamobile, Chinese, developers, interest, iPhone, iPod, management, marketing, microsoft, research, software