The China Vortex

Unless you have been living under a rock for the past six months, you have probably heard of Twitter. Developed with Ruby on Rails, it has now hit the big time, with many companies offering client versions of Twitter, so that you don’t have to keep the Twitter web page open to record your deepest thoughts, which you can share with your community/ies.

Technically speaking, there is not a whole lot of difference between Twitter and many other IM clients, including Tencent’s QQ, the immensely popular Chinese IM client. If there is any difference, it is that Twitter makes it possible for dispersed communities to keep track of each others’ activities. In contrast, the IM clients are mainly Web 1.0 tools which enable people to find and contact each other to meet offline. QQ, for instance, is a great enabler for that popular activity which we shall call “dating” in China.

The difference between Twitter and the Web 1.0 IM clients is not so much in the technology, as in the way people handle relationships. Put simply, the lines between offline and online relationships are blurring, and in many cases, more people spend more time online than they do offline. For this reason, their online communities are gaining value, and in a few cases, are assuming primary value, while their offline relationships become secondary.

This was not the case for most of the Web 1.0 IM clients.

From the business perspective, this means that businesses will have to pay even more attention to what is going on online, as I have mentioned in my previous post.

In China, many people do not have email addresses, instead they rely on QQ ID numbers to identify each other. Walk into any Chinese working area (including Starbucks and any other area which provides free Wifi) and chances are you will see that almost every screen has a QQ or Windows IM client window open.

And they are using it for business, not just personal gossip.

So, the ultimate test of whether Twitter becomes the American QQ is whether American’s use it for business, not just social chatting.

If that happens, the American Internet will suddenly look a lot more like the Chinese Internet.

Technorati Tags: American, business, China, client, community, dating, email, im, internet, marketing, qq, relationships, rubyonrails, Starbucks, tencent, twitter, US, wifi, windows

As China becomes more developed and sophisticated, more westerners are coming to China to understand the reasons for its success. I don’t believe that the Chinese success can be fully ascribed to China’s rising wealth and development; a good deal also has to deal with how western countries have screwed up in their politics and policies.

In the kingdom of the blind, the one-eyed man is king. Right now, China is the one-eyed man.

Setting this aside, there are areas where China’s growth is remarkable.

In a recent blog posting, Henry Jenkins of MIT shows how much more willing Chinese youth are to live their lives out and share their behavior with complete strangers in a manner American youth are not yet willing to. Here are some of the statistics (mostly in percentages) of what he has observed:

# Almost five times as many Chinese as American respondents said they have a parallel life online (61 percent vs. 13 percent).

# More than twice as many Chinese respondents agreed that “I have experimented with how I present myself online” (69 percent vs. 28 percent of Americans).

# More than half the Chinese sample (51 percent) said they have adopted a completely different persona in some of their online interactions, compared with only 17 percent of Americans.

# Fewer than a third of Americans (30 percent) said the Internet helps their social life, but more than three-quarters of Chinese respondents (77 percent) agreed that “The Internet helps me make friends.”

# Chinese respondents were also more likely than Americans to say they have expressed personal opinions or written about themselves online (72 percent vs. 56 percent). And they have expressed themselves more strongly online than they generally do in person (52 percent vs. 43 percent of Americans).

# Chinese respondents were almost twice as likely as Americans to agree that it’s good to be able to express honest opinions anonymously online (79 percent vs. 42 percent) and to agree that online they are free to do and say things they would not do or say offline (73 percent vs. 32 percent).

Some of the differences can be accounted for because, until recently, Chinese played relatively few games using game consoles, an area American youth have long had free access and exposure to. Instead, they play games in the Internet cafe, which offers an online and offline social experience which has not existed until very recently on the Microsoft and Sony platforms, and which has been addressed very well with Nintendo’s Wii.

These statistics do not tell us much about China on their own; I frequently insist that if one is to really understand what makes China’s Internet different it is necessary to dig deeper and look at its development at least from the application level. If one were to make even the most cursory look at users in any Internet cafe in China, one would find that most if not all, would have an instant messaging (IM) window open and are chatting with their friends while they are playing an online game. Lately I have noticed that in the Starbucks I frequent near Guomao in Beijing (Starbucks in China often offers free WiFi, compared with the US which charges users a daily subscription through its partnership with T-Mobile; go figure), many office types often have an IM window open even when they are busily working through their Excel spreadsheets.

For this reason, I particularly welcome the recent report by Plus8Star on Tencent’s QQ which started as a simple IM client and has now metamorphosized into China’s largest online company, and which has more than than 270M users in China. Basically, it has become what AOL would have become if it had been able to pull everything off with its acquisition of ICQ in 1998. In fact, the first version of QQ was called OICQ, standing for “open ICQ”; in its early days the company approached AOL seeking to become its China partner; it was brushed off. Now the company is listed on the Hong Kong stock exchange and has a market cap of US$11.4B.

The report is available in a free downloadable PDF version; the full version costs US$3,000. The greatest value of this report for those coming into China is that it provides valuable context and answers the “how” and “why” China’s Internet has developed the way it has.

Too much of the time, western observers claim that China’s Internet has changed the way it has because of Chinese government control and policy; not enough is mentioned about the business reasons why local competitors have succeeded why western companies have failed. This reports does a good job of plugging that hole in most peoples’ knowledge.

The title of the report sums it up: “Inside QQ: Learning from China’s leading online community”. An especially helpful page is page 23 of the report “Why do global giants fail in China?”. There have been billions of dollars which have been expended, and mistakes have been repeated over and over again in their quest for western dominance of the Chinese consumer market. I’m amazed that it continues to this day. This page alone is worth the price of the whole report; just read it.

If you are a business person anxious to break into the Chinese consmer market, or are just interested in learning more about the Chinese Internet, this report is a must-read.

Technorati Tags: AOL, Beijing, cafe, China, gaming, guomao, ICQ, im, instantmessaging, internet, microsoft, nintendo, qq, sony, Starbucks, tencent, wifi

I have been visiting Shenzhen for the past few days. The last time I was in Shenzhen was in 1999-2001, when the Internet bubble peaked.

This time around, the city has changed considerably since the last time I spent time here. Parts of the city are not recognizable, all in the good sense. There are many more skyscrapers than before, but somehow the city seems more refined and green than Shanghai and Beijing. When I was last here, the city had a grimy, grungy feel about it; no more. It takes pride in being the garden city of China, and in large parts, it is. The downtown area is clean, there are new and very modern shopping malls, and the people seem happy.

I have ridden several times on the Shenzhen Metro, it is very clean and modern. There is one line which roughly runs east-west; another line is under construction. Before, when I lived in Shenzhen, I would cross to Hong Kong every weekend. Now, I feel no need to do so; I can get everything I need in the city. Last night, I went out with a friend to a very nice and clean Japanese restaurant, owned by a Japanese, which had excellent fresh sashimi.

Real estate is still substantially cheaper, and many Hong Kong residents now keep their homes in Shenzhen, crossing the border every day when they go to work. Their children also go to Hong Kong schools, so when crossing customs in the morning and afternoon, there are often large groups of schoolchildren.

I went to a Starbucks once (there are many in Shenzhen; they first opened in the city in 2002), and in section of the cafe, I counted 25 persons and eight notebook computers in use. (In China, Starbucks offers free Wifi service.) If you work out the ratio, that means there were nearly three persons to every notebook computer in use, which is a very high ratio. I have not seen ratios this high in Shanghai, Beijing, or for that matter, in the US which is increasingly falling behind in many Internet usage statistics.

I have not checked any of the Internet cafes here, nor do I plan to. My own guess is that most Beijingers access the Internet from their offices, and the poor or 民工 access the Internet from Beijing’s low-priced Internet cafes since they cannot afford it at home. People in Shenzhen, for the most part, are comparatively well off since the city, which now has a population of 7-14 million mainly comes from other regions of China. (Over the years, the hukou system of individual registration has fallen into disuse, which is why the city government is no longer able to keep track of population.) If their usage of notebook computers in Starbucks is any indicator, they are also much more mobile.

Shenzhen is surrounded with factory satellite towns which employ many workers; most of these factories also supply food, housing and entertainment facilities to their employees. I’m sure that many of these factory workers now have broadband Internet access from their dormitory facilities.

Just to give you some indication of how common broadband is now, I am staying in a Home Inn (a Chinese chain of moderately-priced motels) which charge about US$25 a night. Broadband access is provided free of charge.

Shenzhen now has a very large and modern port and container facility which rivals Hong Kong in capacity.

I cannot help being impressed with Shenzhen’s and China’s development as a whole. In the late 70s, just when China’s reforms were starting and Shenzhen was just a fishing village, many refugees would try to swim across Mirs Bay to seek freedom in Hong Kong. Many of them drowned, and their bodies were washed up on the shores of Hong Kong, or Hong Kong held offshore islands.

Those days are gone.

The women in Shenzhen are fashionably dressed and wear makeup, and are more conscious of their looks than Beijingers. They also smile more readily, and look less self-conscious when they do. There is a lot of truth in the saying 天高皇帝远 (”The skies are higher when the emperor is far away”)

Definitely China is making progress. If the expressions on peoples’ faces are any indicator, China has come a long way.

Technorati Tags: Beijing, cafes, China, Hongkong, internet, port, shanghai, Shenzhen, Starbucks, wifi