Silicon Valley poster boys (finally) come to Asia

Following The Guardian reporting the launch of MySpace in Korea we thought about writing a specific piece on MySpace’s chances there, but in a few days other news about the visit of another famous Valley boy motivated a larger story. Among the recent visitors to Korea, Japan and possibly China:

• MySpace | Chris DeWolfe, CEO | MySpace was the “previous Facebook”, but is pulling in more revenues. Fiscal 2008 (ending June): about 750 million USD from ads, up from 500 million USD the previous year, and profitable. Facebok pulls in 150 million USD, loss of 50 million USD.
• Slide.com | Max Levchin, CEO | Slide is one of the leading Facebook applications providers. Max Levchin is also the former co-founder and CTO of Paypal.

Digital goods finally quoted

Here is a quote from Slide’s CEO interview with Charlene Li from Forrester at the recent Web 2.0 Expo (quoted from VentureBeat):
“The future of social apps are split between brand advertising and direct-to-consumer sales,” he said. The latter is what the next few years will be all about. He said he got back from Asia, watching people make billions of dollars selling virtual goods, like eyes or hair for characters in online games or social networks.

This is a pretty strong statement – upon which (according to VentureBeat’s report) there was no comment and no follow-up question! QQ making over 500 million USD last year, most of which from digital goods (close to 350 million USD) should be a pretty good validator for this model but hey – it’s Asian, not American, and certainly sounds irrelevant until you actually try it or show it to a US teenager. Unfortunately, most business people don’t bring teens with them on business trips to Asia.

It might be interesting to put this market into perspective with the online ads market in China: 1 billion USD in 2007, and all portals, search engines and Web 2.0 companies fighting for it.

QQ revenues (mostly with digital goods) are worth half of the total Chinese online ads market.

If it’s still difficult to understand why digital goods is a proven and excellent model, probably it will become clear when it will be already everywhere in a few years time.

Digital goods carry emotions and value, regardless of physicality. A printed picture is just paper with data on it. A packaged software with a DVD inside is just plastic and paper, with distribution and packaging costs.

Back to the visit

Highlighting the tough local environment with local competitor Cyworld, the article from The Guardian still largely reads like a press release from MySpace Corp, even making it sound like MySpace actually brings something new to Korea in terms of functions.
We think it’s potentially smart for MySpace to come to Korea as it gives them access to one of the world’s best Internet laboratories to test new stuff, and learn a lot of very cool Korean services and concepts that does not exist anywhere yet.

Actually, they already did a bit of homework as the “minilog” and customization with animations is clearly lifted from Cyworld’s “mini hompy” (launched 7 years ago…). So it might help MySpace test-drive features, but mostly learn from the Korean market to export the best ideas to their global (mostly US) service. We call that “Innovation Arbitrage” and that’s what we do at +8*.

Of course they need to have enough local leeway and proper reporting structure so that their voice does not sound like a distant kayakeum. This reporting and agile management has been among what prevented eBay, Google and Yahoo to succeed by themselves in Korea, Japan and China.