The China Vortex

Alibaba has announced plans to consolidate two of its subsidiaries into one company. Alimama is the company’s ad network for Chinese SMBs, and Taobao is the company’s auction platform, which is best known for dramatically driving eBay China out of the China market after eBay bought Eachnet.

This is likely a measure to counter Baidu’s plans to enter the e-commerce market. According to this report from Keso, Taobao has blocked Baidu’s spiders from crawling Alibaba. Spiders from other search engines are not blocked. It is very unusual to hear of one search engine’s spiders being singled out for blocking; I have never heard of this until now.

Can you say hardball?

Spiders are software programs used by search engines to crawl other websites; they detect changes in websites and report changes back to the mothership search engine which are used to update the search engine’s search index.

According to Keso’s report, Jack Ma of Alibaba believes that Alibaba’s SMB e-commerce platform represent the family jewels, and he already has enough users to allow him to make such a dramatic parting of way’s with Baidu. Baidu is currently China’s largest search engine player, with more than 60% market share.

For Baidu, losing the capability to crawl Alibaba’s sites represents a huge loss, and puts more pressure on their nascent e-commerce platform to succeed. Otherwise Baidu’s e-commerce search results will look very weak, just as e-commerce is showing signs of takeoff.

Now, Google China is the wild card which might benefit from the Alibaba/Baidu faceoff. Significantly, Google China’s spiders are not blocked from crawling Alibaba’s sites. Jack Ma has three options:

• Build his own search engine team which would build its own search engine to crawl Alibaba sites;
• Make Google.cn the default search engine for Alibaba and its subsidiary companys;
• Go to Google China and propose a joint venture company which would have a separate search engine to crawl Alibaba sites. Search advertising revenue would be split between the two companies.

From a technology perspective, search engines are more challenging to build. Specifically, they need to continuously update their search index, although if the search engine is only pointed at the Alibaba community, it would not be as difficult. Search engines need to be continuously updated and modified to get accurate search results, although optimization on organic and paid search are very different in how they are updated and modified.

From the SMB users’ perspective, the key to success is providing a smooth and transparent transition between search advertising and online business transactions. Bad user experience has led to the downfall of many a business, most recently eBay in the US, which has continuously raised fees on its auction platform, driving away its originally fanatical loyal user base, and forcing it into a retail model which competes on unfavorable terms with Amazon, the online retail ecommerce leader in the US.

Things are getting interesting…

If you are one of the estimated 800,000+ iPhone users in China, then there is a more than 99% chance that your iPhone is cracked since Apple does not yet have a carrier partner in China.

For many of those users, there is the fear that once Apple ties up with a Chinese carrier and starts offering the iPhone3G in China, their first-generation iPhone will become an iBrick because it will not be recognized by the Chinese carrier and/or Apple, and there will be no upgrade path. (Apple and Steve Jobs are kind of famous for not particularly caring about background compatibility and upgrade paths. If you’re screwed, you’re screwed.)

Fortunately, Matt Cutts of Google has posted an article on his blog called “5 Steps to Upgrade From a Hacked iPhone To and iPhone3G”. The article is written for an American audience, but there is no reason why it could not apply to an iPhone user in China (or anywhere else).

The good news is that your first-generation iPhone will not become an iBrick, and you can likely sell it on Taobao. The bad news is in step two: there’s no way you can avoid spending money on another cool device from Apple.

UPDATE:One week after its release, the iPhone3G has been pwned (that’s geekspeak for cracked). So do you want to go legit or are you hardcore for open? It’s your call.

There has been a strong outpouring of support in China for the victims of the Sichuan earthquake, and I thought it would help just to give those outside China and/or do not read Chinese a picture of what is going on in the online world in China.

Tianya is one of the larger BBS sites in China, and they have created a page where Tianya users and visitors can make cash contributions to support earthquake victims and help the recovery.

Tianya has given visitors five options for making cash contributions:

1. Online payment using Taobao’s online contribution

option

2. Making an offline cash donation using a specially set-up post office account
3. Making an offline cash donation to the Chinese Red Cross using a specially set-up account at ICBC
4. Foreign currency donations are accepted at an account set up by Jet Li’s One Foundation
5. Community members can also donate goods to receiving offices in Chengdu, from where they will be sent on to earthquake victims.

There is a warning to Tianya members that they should be careful about who they donate their money to, as there are fraudulent accounts which have been set up to take donations.

The page further lists corporate donations from Chinese companies for earthquake victims, with amounts listed in Chinese yuan.

Leading gaming site Shanda has also set up a donation page for online gamers. Shanda chairman Timothy Chen Tianqiao donated 1M yuan to earthquake victims, which was matched by online gamers. Shanda then added another 1M yuan, making for a total 3M yuan which, according to an announcement, has already been sent to Sichuan for disbursement.

The9, another US-listed game publisher and distributor, created a simple page to announce their donation of 1M yuan.

Giant Interactive, also listed in the US, has created a page on their Zhengtu site where players can post their best wishes to Sichuan victims. They do not ask for money/goods donations.

Perfect World, a leading online game publisher, went public last year in the US under the PWRD symbol. Their BBS for their online community has not mentioned anything with regard to the earthquake or any drives to make donations to earthquake victims.