Der Westen verpasst grosse Ideen | .ch interview

Google tells us this means “The West missed on big ideas”. Sounds alright ^_^

” .ch “, a daily newspaper from Switzerland asked our views for an article about western social networks trying to enter the Asian market. We report below for the complete Q&A (you can access the e-newspaper here for the article in German, page 20).

.ch | What are the main obstacles western companies encounter in the Asian market?

Considering an “Asian market” tends to hide the huge discrepancies between them. For instance, China and japan are very different in terms of market maturity, infrastructure, digital media literacy, purchasing power, online advertising market size, number of competitors, access to capital… but from a distance, it’s all “Asia”.
Companies used to say “Asia – except Japan”. For Internet and mobile , we are now hearing “Asia – except Japan, Korea, China” and possibly India… Or sometimes “Asia” only means “China”.

Now, the main obstacles are generally:
Local competition (foreign players are not first mover nor dominant anymore, they might even have strong local copycats)

• Lack of understanding of the local market, notably business practices and mass market (in China we could call it the “Pudong syndrome”)
• Slow decision processes due to multi-level reporting and to HQ
• Hiring of “salarymen”, not entrepreneurs
• Unclear motives when entering. Usually it is to sell an easy “china story” to shareholders, while other less glamorous Asian markets would be easier to access, less competitive and more profitable. This is often an ego issue and a lack of understanding of the market differences and dynamics. Smoke and mirrors are at work.

.ch | In March, Facebook sent requests to its Chinese users asking them for help with the translation of the site. Is translating not one of the inferior tasks when approaching the Asian market? If so, what was the real purpose behind the requests?

FB can probably afford to translate text boxes themselves, likely with a higher quality than unpaid volunteers. Our understanding is that the key motives are:

• Psychological: firstly, it sounds very “web 2.0 and in line with FB’s image; secondly, it opens a dialogue with FB’s Chinese users by relying on them for a relatively simple task; thirdly it is a simple step of “engagement”. Anybody contributing to this translation effort will develop a sense of ownership and might become an ambassador for the service via word-of-mouth.
• Build the ecosystem: Translating FB interface will help tap into the very large developers community in China.
  As an illustration, when Google released their Android platform for mobile, there were 50% more downloads from China than from US.

That being said, it is also smart (though slightly manipulative) PR initiative rather than a real reliance on users, carrying little risk and little cost. We hope FB has planned some proofreading.

.ch | Considering that QQ already has 300 million active accounts, isn’t it being a little overconfident on the part of Facebook in trying to gain a foothold on the Asian social network market?

It is unlikely FB is so delusional as to think it will rule China’s SNS scene anytime soon. Other Western companies have tried China and largely failed with direct approaches.

• Google is still a distant second in search
• MySpace is almost nowhere to be seen
• Yahoo failed imposing its presence, then bought its way back by buying share of Alibaba/Taobao
• eBay did not get much traction against the dominant player Taobao.
• Skype is having trouble especially on the revenue side as regulations and operators policies still largely hold back the VoIP market
• MSN is a distant second to QQ

On the youth scene (which is large as 70% of Chinese Internet users at are below 30, vs. 70% over 30 in the US) FB will have to be very, very smart. Their product positioning is a bit weak as they cross over several age groups and are not that “real time” vs. QQ’s overwhelming presence in IM and entertainment, and Xiaonei’s dominance among students. At any rate, their measure for success is surely not profit (especially after the large investment they received).

Other markets in Asia – except Korea maybe – would be probably easier to enter and monetize, but only China makes instant headlines.

Now, a China story remains an easy sell and in this case, relatively inexpensive to implement, so why not?

.ch | Does the governmental control of the internet play a role in the difficulties the west faces with entering the Chinese market?

Yes, but this is not the biggest problem, and all local companies roughly deal with the same issues, and all get their list of keywords to filter out. Also, processes for licenses are still cumbersome but much clearer than before. The politics back in the US are probably a bigger hurdle than local ones.

.ch | What changes are required for the western and the eastern market to come closer together? Are they compatible in the first place?

Compatibility is probably a question about culture. Asians eat McDonald’s, watch Hollywood movies and drink coffee at Starbucks (less in China due to the high price, though), while Americans eat sushi, read more manga than comic books and play the Wii, so we tend not to worry too much about that aspect.

Essentially, the difficulty results from the strong bias at work considering that “all western stuff is great” while things Asian are at best “Asian” (and not for us) if not downright “freaky”. Asian companies and entrepreneurs learn from the West, while the West operates on a LAN and miss out on innovations, proven concepts and great ideas. How could 200 million Internet users in China, 90 million in Japan and 35 million in Korea not come up with any good idea while enjoying broadband, good education and support from venture capital?

What would be required is opening eyes to what is going on in Asia. Then, to understand it, there is a need for not only cross-market but also cross-cultural expertise, and this is not just speaking English or Chinese but require diving into the local markets for quite some time.