US Internet giants fail to break lucrative Chinese market
The lack of Chinese success for companies like Yahoo!, eBay and Amazon is down to 'lazy corporate culture'
When it emerged earlier this week that eBay was preparing to close down its Chinese operation, few observers were wholly surprised.
After several years of underperforming results in the auction giant's business in the country, press reports suggest that the company is planning a three-way split of its Chinese enterprise. Instead of taking on its competitors head first, eBay is instead expected to pump $40m (£20.3m) into a new venture with Tom Group, the Internet portal run by Hong Kong billionaire Li Ka Shing.
All parties have refused to comment on the reports, but experts say that the experience and influence of Li - ranked as the 10th richest person in the world - would bring some chance of success to eBay's desperate efforts to crack China. But if eBay has failed to break into the world's hottest market, it is far from being alone. Its withdrawal will, in fact, be just the latest low-water mark in the struggle by American Internet companies to conquer the Chinese market.
Amazon is among the casualties, after trying to enter China by buying Joyo.com - which promptly lost its title as the country's most-visited site to rival DangDang. Last year Yahoo!, one of the grand old men of the western web, ditched its own business in the country by selling out to rival Alibaba.com. And just this week it was also reported this week that MSN was going to link up with Baidu.com, China's homegrown search engine, in a tacit admission of defeat.
So what is it that makes it so hard for Silicon Valley to translate its western success to Asia's biggest economy? Jack Ma, the charismatic founder of Alibaba.com, is one of the country's leading Internet entrepreneurs and has already proved to be a very painful thorn in the side of his western rivals.
He presaged this week's news last month when he said that eBay was "half dead" and that American companies trying to break into the Chinese market were doomed to failure. He blames such collapses on the lazy corporate cultures of the west, and the quick successes demanded by senior staff who are used to being big fish on the other side of the pond.
"A lot of people assume that because of money, technology and branding, it will be a success. But the market can't be bought," he said. "You have to build little by little to get into the market - it's about people, and you need patience."
American companies operating in China, he said, are too focused on their troubles back home - either in the form of kowtowing to Silicon Valley executives or simply meeting the demands of shareholders. "Professional managers are making their bosses in the US happy, not the Chinese users," he said.
But despite this advice, it is likely that businesses from the US and Europe will continue trying their luck in Beijing. It is clear what makes China such an attractive target: lots of people.
With the Internet populations of America and the EU levelling off, the sort of explosive growth experienced by large dotcoms is largely unrepeatable in the west. In China, meanwhile, growth is still huge - 123m are online there: second only to America, but still just 10% of the overall population. And with around 70% of Internet users there aged under 30, they are a perfect target market.
That growth is also supported by a voracious homegrown technology base. Zhongguancun, the northwestern corner of Beijing often referred to as "China's Silicon Valley", is pumping out proficient and ravenous young entrepreneurs keen to ride the crest of their own technical revolution.
Ma's warning to rivals intent on believing that the cash cow could still be milked is far from subtle: "We did not beat eBay in the USA ... yet." That should be enough to send a shiver down the spines of more than a few boardroom Napoleons: worry about your own home turf, rather than trying to invade mine.
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