This is a talk I gave on China at Hemisphere, the a global community of executives with operating experience leading international expansion and market development for digital companies worldwide.

1. Market Spotlight: China
Net Jacobsson
Silicon Valley, 22 March 2011

2. Top Trends
Market Highlights Agenda
Key Learnings
Questions

3. 1.4 Billion Chinese
50/50
Urban/Rural

4. #1 Internet Nation
Adding more than a month!

5. Market Highlights
• 450 MM reg Internet Users > 750mm 2014
• 800 MM Mobile subscribers > 1.1 Bn 2014
• Mobile Internet users: 303mm
• Online Ad revenues past $5Bn
• With these numbers its easy to understand
why it is attractive for US companies.
• For Chinese companies, why look outside the
domestic market?

6. Top Trends
• Group Buying: Lashou,
Meituan, Mituan etc (1700+
sites..)
• Social Networks: Qzone,
Renren, Pengyou,
SinaWeibo, Kaixin001
• Online Gaming - Tencent,
Shanda, Netease
• Online Advertising
• Mobile

7. Challenges
• Regulations
• Local competition: well
funded, scrappy, hungry &
not much younger that
their U.S counter parts
• Recruiting/Culture
• Product ownership

8. Why do Foreign Players Encounter
Challenges in China?
Domestic Foreign
Players Entrants Struggles of Foreign Entrants
Regular barrier Low High eBay EachNet experienced market share erosion in
ecommerce to Alibaba/Taobao & sold to Tom Online
Reporting
Lean Fat
structure
Local Mostly left after Amazon / Joyo yielded its traffic leadership to Dangdang
In Charge
Management acquisitions
Relationships
Good O.K MySpace - SV/China Mgnm issues - lack of local product
with SOEs
ownership
Customer
Quick Slow
responsiveness Yahoo! China was acquired by Alibaba
Local content + +/-
Local service + +/- Google struggled with Baidu, local attacks & eventually gave
up China
Financial pocket Not so deep Very deep

9. US China approach v.s.
Chinese companies
“trying to land advanced jets in muddy rice
paddies”
“very good at commanding regular troops, they
don’t know how to fight a guerrilla war”

10. What about Chinese
companies in the US?
• Mostly Gaming companies & app dev:
• Tencent (Outspark, Riot Games)
• The 9 (Aurora Feint)
• Shanda (Mochi Media)
• Alibaba (exception)

11. Chinese IPO’s
• 2010: 39 Chinese Companies on NYSE &
NASDAQ (37 in 2007) - most fared well
• Nature of IPO’s reflect the maturation of the
Chinese Internet : shift from gaming to
ecommerce
• Move from entertainment > shopping (increased
trust from consumers) > aids content sites
relying upon advertising

12. Key Learnings
• Know why you get into China - long term (if any) investment
• Roll up your sleeves. There are no passive engagements in China
• Chinese Internet companies are well funded, scrappy & very hungry
• ABC MBA’s does not equal a good management
• Don’t mistake language ability with business or management
competence
• Zero-sum mentality vs win-win
• Guangxi - over rated, temporary and non-transferrable - resides in
the hand of the individual who has it

13. Discussion
• Is China despite its vast market size worth the
effort? Are you ready to roll up your sleeves?
• Have US companies learned any lessons from
past failures? Hello GroupOn?
• When should your company enter China?
• Enter the dragon: JV or Organic?
• With such a huge domestic market - why would
Chinese companies look outside China