(* Source: Richard Yu *)

Editor’s Note: Social networks are taking off in China. The following guest post by George Godula. David Li, and Richard Yu explores how Chinese social networks are pursuing different business models than their American counterparts, relying more on micropayments and the sale of virtual goods. George Godula is the founder of Web2Asia, an East Asian incubator and also a consultancy for Western startups trying to enter markets in China, Japan and Korea. David Li is a developer of social networking applications such as Growing Gifts, and he also was the developer of OnChat, an early in-browser graphical avatar chat system. Richard Yu is a Seattle native living in China, where he consults for Shanghai-based web startups while writing his blog.

Despite China’s massively growing internet market, international giants like Google and Facebook are having trouble making gains with the 300 million Chinese online users. China’s netizens are on average very young – 66.7 % of them are younger than 29 years old and 35.2 % of them are teenagers—with social networking and entertainment applications being the most popular.

While companies like Facebook struggle to conquer market share in China and to create viable business models everywhere, their Chinese clones have built lucrative cash machines literally earning billions of dollars a year. Unfortunately, adopting Chinese methods may not help American social networks due both to cultural differences in Chinese user behavior and industry practices. Below is our analysis of the Chinese social networking scene.

Chinese Social Networking is Dominated by Local Players

Bulletin Board Systems (BBS) have long played the dominating role in Chinese Internet life and still continue to be one of the most popular online platforms for social interaction. Registered user accounts, which are mostly anonymous, surpass 3 billion (users have multiple accounts) and 80% of Chinese sites run their own BBS. However in the last year social networking services, most of which require real name registrations, have shown explosive growth in China with 19.3% of netizens using them regularly.

Despite the popularity of social networking in China, the social networking market is dominated by local Chinese players, and Western networks have trouble adapting to Chinese culture and user expectations. Facebook does not rank among the top 15 asocial networks in China while MySpace has only 6 million users (vs. the goal of 50 million users after 2 years initially proclaimed by Rupert Murdoch).

Meanwhile, China’s leading social network Qzone, which is targeted at teenagers, may even be the largest in the world. Tencent, Inc., the company that runs Qzone, recently announced group revenues of over $1 billion in 2008.

As ad sales slump in the recession, only approximately 12% of Qzone’s revenue stems from online advertising with the rest coming from virtual item sales such as applications and avatars. Internet ad spending in China is expected to reach $1.7 billion in 2009, which is about 4% of total ad spend. In comparison, the US is estimated to spend $25.7 billion reaching consumers online through advertising. These comparably low online budgets in China are largely spent at four large news portals, which earn the majority of online ad revenue. This forces most “smaller” portals to find more innovative ways to monetize their traffic.

51.com, which targets working class adults from rural parts of China, is the second most popular social network in China with 130 million registered users. Concurrently, Chinese students flock to Xiaonei with approx. 40 million users. It is backed up with $430 million in funding from its parent company Oak Pacific Interactive and investors like Softbank. Kaixin001, which skyrocketed out of nowhere to 30 million registered users from the middle of last year, targets white collar workers in China’s largest cities by employing controversial invitation techniques and copying apps directly from Facebook.

Yet the astronomical growth of China’s social networks can be attributed as much to its massive market size as to its cultural norms and values. Social networking apps can hit hyper-viral levels in China due to a higher tolerance of intrusive app invitations. It is not uncommon for apps to essentially force new users to invite people and perform tasks before being able to join their friends online. Once friends have joined they are required to interact much more with the apps and advertisements than on Western applications. While this model is not replicable for the US market, certain aspects of this strategy/cultural mindset are necessary if companies like Facebook or Myspace want to compete in China.

Open Social Networks are Not So Open in China

In the middle of 2008, Myspace was the only social network to support OpenSocial in China. Despite Google’s effort, the adoption of OpenSocial was slow among the major social networks. Eventually, other platforms caved into the partnership with Google and gave half-hearted support to OpenSocial. Apart from some of the large social networks mentioned previously this included City!N, Yiqi.com as well as the business network Tianji and BBS Tianya. Other social networks such as Douban, Hainei or news portal Sohu had originally announced to join OpenSocial but then never implemented it, choosing an F8 style API instead. Today, only one of the top 50 apps in China’s social networks runs on OpenSocial despite the hard work put in by the Google team in China.

When Xiaonei and 51.com at first opened their own platforms, their terms of services outraged the developer community with clauses that practically blocked all monetization opportunities and a shared user base with their own websites. The developers launched several public protests against the social networks including the website www.anti-opensocial.com to rebel against hypocritical support for these “fake open” platforms. The executives from these social networks did respond quickly to the developers demands and changed the terms of service to more reasonable terms, allowing limited monetization opportunities for the developers.

Unfortunately, most social networks continue to ignore “Open Social” practices, opting for the more familiar “Guanxi paradigm” in business practices with third parties. The term ”Guānxi” describes the basic dynamic of gaining influence and receiving favors within social relationships, and is a central concept in Chinese society. For social networks, this means that rather than developing an open ecosystem, they focus on dealing with third parties individually and face to face. New Open Social Networking platforms (or better put, “selectively opened”) such as Yahoo’s Guanxi, Tencent’s Xiaoyou and Tianya court established third party app developers like Five Minutes while largely ignoring the wider developer community.

Additionally, ad sales are also strictly controlled by the social networks themselves even though 51.com set a threshold of a $35k fee to be paid for app developers to operate their own ad revenue -based applications (which until now no developer was willing to pay).

Keso, China’s most widely read tech blogger, who we asked to contribute to this article through China’s online expert panel BloggerInsight, summed up the situation by saying “Despite an open platform strategy, Chinese SNS are still competing with each other on the application level”.

Imitation of Facebook was only a Launching Point

Chinese sites are notorious for their C2C strategy, or “Copy to China”. This applies to the app market in the same way as it did to the social networks and all other Web 2.0 and eCommerce services. A year after Facebook introduced the F8 open platform, Xiaonei.com followed suit and announced its open platform in July 2008. The developer group xCube on Xiaonei attracted individuals and companies interested in third-party apps. Yet Chinese outsourcing developers such as Apptz and Ismole armed with experience working on Facebook applications made significant inroads by launching several apps and attracting millions of users in just a few short months.

At about the same time, the apps space also felt the power of C2C with copies of popular apps on Facebook such as “Friends for Sale” and “Parking War” popping up on just about every social network in China. Other leading social networks such as 51.com and Comsenz!’s Ucenter Home (similar to Ning.com) launched their own open platform soon after Xiaonei’s effort.

Chinas 51.com first social network in the world to open up payment API

While Chinese social networks started out as mere clones of existing sites, they’ve managed to innovate the business models to create a very lucrative market by cementing the relationship between application developers and the site’s user base. Happy Farm, the most popular app in China reportedly collects well over $75k a month through installations on various platforms, and according to Chinese application tracker, Appleap, the value of the total social network’s apps install base is approx. $4.5 million.

Opening up the payment system was one of the most anticipated announcements from Facebook’s developer conference F8 2008 but the company failed to create an integrated ecosystem for users to buy and sell apps. China’s socail networks took the great leap forward in this area when 51.com became the first social network in the world opening up its payment system to third party developers in 2008. Users pay money to 51.com and receive virtual coins which they can then again spend on third party applications. The revenue is split 50/50 between the social network and the developer.

Facebook on the other hand currently does not offer developers access to its payment system. If a third party application redirects Facebook users to their own website and payment processor, they usually lose the advantage of Facebook’s trusted brand name and the majority of potential revenues.

At the same time, companies like Becomedia are cooperating with 51.com to bring OfferPal-style cost-per-click/cost-per-action (CPS/CPA) for virtual currency models to China. CPS/CPA is one of the fastest growing sectors of Internet ads in China. This means revenues for the developers by trading their virtual currency for hard cash.

Season Xu from Five Minutes, the maker of China’s most popular app, confirmed the three basic revenue models for apps in China: shared ad revenues, income through virtual currencies, and customized development for branded applications. However he and Herock, a leading figure in the Chinese tech blogosphere whom we also spoke to, expect a consolidation in the app development market soon with larger companies taking over and benefiting from effects of scale, rather than individual developers still being able to produce top apps.

What can Facebook and Western social networks learn, if anything?

If monetizing a social network is so easy, then why hasn’t Facebook opened up its payment API to third party developers? While the aggressive and intrusive hyper-viral aspects of the apps in China may not be replicable in a Western Market, the problems for creating a more viable business model run deeper. Western companies cannot innovate in the same way due to institutional problems stemming from their own struggle for an identity and revenue.

Facebook has just recently announced a “credits” system, but it seems to miss the mark. The new system demonstrates little incentive for users to shell over money, and does not speak to the same need as paying for a social application that all your friends are already on and talking about. Facebook may be afraid to become a marketplace for applications, because they are reluctant to be labeled as a social gaming network or a social app store. Instead, they are a self-styled guru of dynamic human interaction. If they opened up their platform to become an apps store, their major revenue streams would put them into a pigeonhole, calling their $15 billion valuation into question. They obviously don’t want to be labeled as a “gaming platform” either, and don’t want to fully depend on selling digital trinkets.

Like during the American gold rush in 1849, where Chinese merchants prospered while most prospectors went bust in search of striking gold, it appears that building viable, scalable businesses for Social Networking sites may still be an ancient Chinese secret for Westerners.

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(* Source: Michael Wei *)

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(* Source: Tangos *)

From the Web2.0 boys in China, good overview.... 

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(* Source: Sam Flemming *) 

Sam says on his iMedia article...

As the global internet community is striving towards a more connected online landscape, China's new media is already showing signs of the 'future'.

In its recently published report "The Connected Agency", Forrester suggests that the agency of the future will be a "connected agency", which should have "a deep understanding of consumer communities, helping brands create and nurture connections, deliver targeted, on-demand messages, and network for talent and insights."

While the Forrester report does not cover China, the need for agencies to help brands connect is more urgent with an online consumer community landscape that is more active, more complex and overall more evolved than the West. The state of China's online landscape is indeed so. For the country, the internet has always been social, and internet communities have always existed in the mainstream. In short, in China, the 'future' is happening now.  

Unfortunately, in contrast to the greater presence and impact of online communities in China, it seems that agencies here are arguably less prepared and less knowledgeable than their Western counterparts. As a result, you often find agencies recommending copy & paste internet word-of-mouth (IWOM) strategies from the West that at best have little impact.

Before taking action, it's important for brands to have an understanding of the different types of communities. Let's take a quick review of the current Chinese internet word of mouth IWOM landscape to understand where brands have opportunities to connect with communities.
 
BBS as the core of the social Chinese internet
BBS, or topic-based online bulletin board systems, serve as the online nation's "water cooler" for every kind of situation and topic imaginable. While bulletin boards in the West have existed for years, in China, they have not only been in existence for sometime, they actually dominate with 35.5 percent of the 210 million Chinese netizens who use BBS on a regular basis. Most importantly for brands, there are active product communities for almost every category including automobile, mobile phone, parenting and cosmetics. Taking just automobile alone, we see over five million messages per month coming from communities built around specific car models that include detailed product feedback as well as queries related to customer service. In China, BBS communities are the first place to look for active, mainstream and influential consumer communities.

Blogs as diaries
Blogging is absolutely popular, with 23.5 percent of Chinese netizens using blogs regularly. However, blogs, for the most part, serve as personal diaries for individuals (not "power influencers").

Portals have blog "circles" around certain categories, but it would be a stretch to call these circles "communities." Microblogging (such as Twitter- type applications) is beginning to take off with sites like fanfou and jiwai, but has yet to hit critical mass. While there are notable exceptions for some categories, including technology, for the most part, blogs generally have incidental product mention with no real community.

QQ as an ecosystem
Over 80 percent of netizens use IM, with Qzone and QQ groups covering over 70 percent share. QQ is for all practical purposes a social nework service (SNS). Compared to Facebook, it has 50 percent more active social network users. Most importantly, QQ has proved itself to be a capable partner for brands, leveraging its platform for massive reach, even if not deep engagement. An obvious example of that is Coke's iCoke platform.
 
SNS has not achieved much traction -- yet
While SNS has yet to gain traction in China, Xiaonei is the SNS to watch as it burrows into the university mindscape to provide an alternative to local university BBS. Xiaonei will need to differentiate itself in order to stand out among booming QQ and BBS, and gain attention from those using the Chinese "social" internet.

Q&A communities serving info seekers
Baidu's "I Know" question and answer community, along with Sina's I-Ask, and Tianya's Wenda, has fuelled a segment that has not really taken off in the West. Brands like KFC are beginning to sponsor certain topics as a way to connect with targeted communities and it is worth exploring this hot area.

The many emerging others
Online communities that support product feedback and other consumer discussions already exist within BBS. We are now seeing new sites and applications which are trying to create better platforms for these communities. Dianping is a restaurant review site which will likely morph into a more successful Yelp. Douban is a music and book review community that fulfills the same need as Amazon reviews. Wodeyichu is a community site that leverages netizens' propensity to show off their new purchases with pictures; Meeli takes this a step further as a site where netizens list their purchases, with pictures and pricing. These platforms are emerging and are enjoying varying degrees of traction.

Of course, awareness of the communities is just the beginning. How to meaningfully connect with, support and participate is the next and most difficult step. Navigating partners and strategies within such a varied, vibrant and complex IWOM media landscape is arguably more difficult than in the West even as the opportunity is more compelling.

Take Ford Focus for example: every month, there are over 150,000 messages around the car on automobile BBS communities. How can Ford be a part of these communities? Is it welcome? How can they join the conversation? In which communities are they being discussed? Are there other communities beyond auto BBS communities that might be relevant? To be a truly connected agency in China will require a different mindset that includes actually listening to and understanding local Chinese communities, not just knowing about them and treating them like a new media.

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(* Source: Ed Peto *)

Mathew Daniel says...

As Olympic hosts and country-of-honor at MIDEM, China’s music industry is an increasingly common feature on the western agenda. There is, however, almost a whiff of the ‘Wild East’ in the way companies are approaching licensing in the Middle Kingdom.

It has to be realized that the vast majority of labels at MIDEM are probably currently unscathed by piracy in China and that’s likely because their music is so obscure in the Chinese consciousness that they have not even had the dubious honor of gracing the servers of China’s notorious MP3 search engine, Baidu.

Piracy in China often gets a lot of attention but many forget the other Ps of marketing and these are the basics that labels intending to come into China should first focus on. For dramatic effect, let me first quote Tim O’Reilly when he said that “Obscurity is a far greater threat to authors and creative artists than piracy“.

I wouldn’t go so far as to say that one is worse than the other as it is a case of horses for courses. I would also add that in China, in true Darwinian fashion, one man’s piracy is another man’s marketing. But as O’Reilly explained, piracy eventually develops in a manner akin to progressive taxation in exchange for greater exposure and appeal: There is always the regretful possibility that one may eventually despair at the crossroads of Robert Johnson.

Ed Peto’s piece about the music business in China also noted the labels’ part in engendering piracy in China:

“The arrival of western product in the early 90s came courtesy of ’saw-gashed’ CDs: Excess stock and deleted titles from western majors attempting to avoid taxation and disposal costs. These CDs had their cases cut to mark them as defective and were then shipped in to China through free-market economic ports like Guangzhou, only to end up on the black market. An end result that can be seen as a partial shooting-in-the-foot for the western majors who then had to come in and fight against the pirate networks they inadvertently helped set up.”

Kaiser Kuo, one of the pioneers of China’s rock scene added, “During the 1990s they were an important source of foreign music”. And so, this rejected music from Western shores - a good proportion being hitherto obscure - has bizarrely taken root in China while the majors also propagate low common denominator fare like the Backstreet Boys, Britney Spears, Celine Dion, Sarah Brightman et al in CD stores. A recent alumnus of this group, UK’s X-factor winner Shayne Ward was in Beijing this week and was awarded a Gold Record for sales of 15,000 for his new CD ‘Breathless’.

The major labels are still counting on physical distribution to help make their numbers in China and International Marketing Director at Universal Music China, Danny Sim has worked tirelessly to develop the market for international artists. In 2007 his efforts resulted in “a significant increase in revenues for CDs and I expect it to be even greater in 2008″, but in general international artists still account for probably less than 10% of the majors’ overall digital revenue in China. As more Chinese are being exposed to Western music via the internet and the media playing more Western music, Danny also hopes that the labels and SPs can work together to cultivate music genres and themes instead of single song hits.

However, this cannot happen in a vacuum and other Western labels who do not have the benefit of an existing network in China will have to do their part to sow the seeds in areas that are often taken for granted, like pro-actively providing artist information in Chinese, building artists’ websites in Chinese and, in general, stimulating more literature and musical discussions about artists online.

The following is an important checklist for labels intending to license digital music in China and illustrates the prior requirements before their music even tempts the pirates:

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(* Source: Tangos *) 

Tangos reports... 

According to the latest report by China Internet Network Information Centre (CNNIC), at the end of June 2007, Chinese Internet users has reached 162 million, which means an increase of 25 million in last six months, the biggest half-yearly increase ever. But it may because CNNIC report change the definition of Internet users, in all previous reports, Internet user means Chinese citizen aged 6 and above who averagely use the Internet at least one hour per week. However, in its latest report, Internet users are Chinese citizens aged 6 and above who use the Internet in last half year.

The following are my quick thoughts on the latest report:

• Mobile Internet will become more and more important, over 44 million users use mobile handsets to access Internet, an increase of 27 million (159%) in last six months.
• Over half of all Internet users(51.2%) are under age 25. The Internet penetration rate for users aged between 18 to 24 is 43.4%. Internet has become their lifestyle, that’s also part of the reasons that QQ and 51.com are so popular in China.
• The percentage of Internet users with high school education or below increased from 48.2% in half year ago to 56.1%. The percentage of users with an income below 1000 yuan increased from 47.6% to 51.7%. You need to understand these group of young users to become leading player in China’s Internet market.
• Over 37% users, increased from 32.3%, access Internet in Internet cafe. It is said that 51.com is very popular among Internet Cafe users
• IM is more important in China than email for communication. More netizens use IM than email (69.8% vs. 55.4%), while over 90% Internet users use email in US. IM usage rate is even higher (74.6%) among users under age 25, while the email usage rate is only 46.6% among them.
• Online entertainment demand is the most important demand among Chinese yougsters(under age 25), with 91.4% of them used online music, 79.6%% used online movies, and 67.1% played online games.

Well, from this data, you may find the characteristics of Chinese Internet is quite different from those of US, you should study the report in detail to understand Chinese Internet users better. The full report in PDF file can be downloaded (English version report) here.

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(* Source: Kristen Nicole *)

(* Source : Walstreet Journal *)

A feel-good film about a girl from the Chinese countryside who moves to the big city to discover love, blogging and Starbucks will premier this month in an unusual venue: Shanghai's subway.

"A Sunny Day," is scheduled to play exclusively on thousands of high-tech flat screen monitors on Shanghai's subway cars and station platforms.

Girl meets boy and Starbucks in 'A Sunny Day,' to be shown in installments

Tailored for an audience of 2.2 million who cram onto China's biggest underground railway each day, the full-length feature film will be shown in daily segments of a few minutes each over 40 weekdays, soap-opera style. Subtitles in Chinese will help commuters follow the dialogue over the subway noise, and multiple daily rebroadcasts and tie-ins on the Internet are designed to ensure no one misses any of the cliffhangers.

Instead of an ordinary film, the so-called "subopera" is a blend of drama and advertising. A venture between Starbucks Coffee Co. and PepsiCo Inc. financed and helped produce the drama as part of a campaign that kicks off today in Shanghai to introduce bottled frappuccino drinks to the Chinese market.

"It's quite unique and demonstrates a departure from conventional marketing," says Howard Schultz, Starbucks chairman. The coffee company hasn't traditionally advertised, Mr. Schultz says, adding that a soap opera can be effective since it creates "real entertainment for our customers and along the way there is a complementary message." PepsiCo, which will bottle and distribute the Starbucks-branded drinks, referred questions to Starbucks

The film has a clear commercial bent. In some shots, the mermaid from the Starbucks logo gets as much face-time as the movie's big turnstile draw, Huang Xiao Ming, a 29-year-old pop star who is so well known he is sometimes called China's Justin Timberlake.

Still, "A Sunny Day" is no infomercial. Mr. Huang's character "CC" is a struggling musician who strums his guitar for coins in the subway, and falls for big-hearted Sunny, who is trying to get over the death of a boyfriend and fit into a new job.

During the shooting on a recent Sunday, as a gaggle of teenage women sneaked onto the set, Mr. Huang described the subway a "fashionable, very modern" venue that will appeal to a trendy audience.

Subways around the world have long featured visual distractions. A century ago, platforms were showcases for art, like the swank metro stations in Paris. In the 1970s, spray paint enlivened the dank and dangerous New York subway, and in the 1980s, the late Keith Haring helped make graffiti a respected art form with projects like "Studio in the Subway."

This year, the Berlin subway's 1.5 million daily passengers were the judges in a weeklong festival of 90-second, silent films called "Going Underground."

Advertisers are also pressing beneath the streets. Sidetrack Technologies Inc. of Winnipeg and New York-based Submedia LLC place light-board advertising in subway tunnels in several cities around the world, giving riders the motion-picture like effect of seeing a flipbook.

China's $20 billion advertising industry is increasingly adopting the global trend toward marketing disguised as entertainment. In addition to Hollywood-style product placements in TV shows and movies, a rapidly expanding segment is directed at an emerging middle class during the workday hours with slickly crafted TV-style ads in taxis, airplanes and even elevators.

More here 

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(* Source: Erick Schonfeld *)

In a presentation at last week’s Web 2.0 conference, Morgan Stanley Internet analyst Mary Meeker did her annual data dump, quantifying the Web’s growth in dozens of ways. (You can watch a video of the presentation here, although it frustratingly does not show the actual slides, which you can find here). One data point in particular really stood out for me. In 2003, the combined market capitalization of China’s publicly traded Internet companies was $5 billion. Today, it is $50 billion.

Of course, it’s not just Chinese Internet stocks that are going gangbusters. Floyd Norris at the NYT points out that, of the top 20 most valuable companies in the whole world as measured by market cap, 41 percent are Chinese, surpassing the 38 percent represented by American companies. Contrast that to 1999 when U.S. companies represented 77 percent of the top 20. And in 1989, it was Japan that dominated with 73 percent of the list. Maybe the China bubble won’t pop until China hits at least 70 percent and a Chinese Internet company is on the list. Or maybe it will deflate over time as more Chinese stocks become available to investors, who are currently fighting over a limited supply of shares.

(The Chinese companies on the list today include Petrochina (which has a larger market cap than GE), the Industrial and Commercial Bank of China (which is more valuable than Microsoft), China Petroleum, China Life, and China Construction. The only Chinese technology company on the list is China Mobile. Google doesn’t even rank in the top 20.)

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( * Source: InsideTonic.com *)

We recently had the chance to talk to Cindy Jiang, head of marketing at HiPiHi, to understand a bit more what HiPiHi is about and how it aims to attract users.

What are the social networking aspects and tools of HiPiHi? How can users interact in HiPiHi?

HiPiHi is a platform, which can offer a totally interactive, immersive and open-ended experience for users to create, inhabit and govern a new world of their own design. So it is also natural to be a social networking platform. Just like in real life, communication is the basic part of your life in the virtual world. The users can exchange their ideas through the online chatting tools (only text for now). They can also send messages to each other both online and offline.

How is it different to Second Life?

HiPiHi does have some similarities with SL. However, the fundamental difference is that we are targeting different values and cultures. A virtual world is not just a 3D environment, but a complicated social system involving relationships, policies etc. HiPiHi was born in China, and we really hope it can embrace Chinese culture. We also believe functionality will be better in HiPiHi than in SL. For example, HiPiHi will make creativity a much simpler process by using pre-fabricated objects, and there will also be advanced setting for users to build customized objects for trading.

 




 
How can you move around? What equipment is available?

In the HiPiHi world the user can choose different actions, such as walking, flying, jumping, swimming, dancing, and etc. Moreover, during the period of the limited beta test, every users can have their helicopter, which can make them move fast.

6 of the 10 characters you can choose from are women. Does that mean Hipihi is aimed more at women?

Absolutely not. We want to target anyone with a computer and net connection.

We only saw human avatars. Will other creatures be available? Tell us about the different customizations available.

Not yet. When you enter the world, you can customize your avatar first, by choosing different hair, face, clothes, body, etc., everyone can be unique and special. Then you can claim an 100mx100m area (It’s only free for the limited beta test). So in your own area, you can try to create things. You can use those pre-fabricated objects, which will be a little easier to use for beginners. You can also use the advanced settings for more complicated creations.

Describe the economy. Can you buy property? Are you expecting people to create and sell products inside the environment?

A business model similar to a 2D model can be applied in 3D. Advertising and branded products will be incorporated within HiPiHi. We have been approached by the marketing departments of many foreign and Chinese companies looking to become involved in HiPiHi. Subscription to HiPiHi will be free, although there will be products/services for sale within the world. We haven’t yet decided whether there will be a HiPiHi currency as in SL yet – a lot depends on market regulations – but of course there will be trading.

More here 

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(* Source: Nextgreatthing.com *)

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(* Source: Paul Verna *) 

(* Source: Sophie Taylor *)

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(* Source: eMarketer *)

Video game market revenues in China increased 68% last year, according to Niko Partners' "2007 Chinese Video Game Market Annual Review & Forecast Report."

Internet cafes are integral to the industry in Asia since a lot of people do not have PCs at home. The report accounted for 20 million PCs in China's 225,000 Internet cafes.

The online segment brought $995 million in revenues, as players spent more money on virtual items and services.

Legitimate sales of PC offline software titles increased 29% in 2006, to 904,000.

Revenues from video game software and services are estimated to have a 19% compound annual growth rate through 2011.

Lisa Cosmas Hanson of Niko Partners said that "China added 3.4 million total gamers in 2006 and now boasts 37.5 million gamers, 90% of whom play online games. By 2011 this number is expected to swell to 71.9 million."

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(* Source:  Aydin Senkut via three Billion *)

Today China boasts over 105 million Internet users, not to mention 350M mobile users (growing by 57 million every year). By 2010, Chinese Internet users will outnumber US Internet users by 25%. Currently, 87% of the Chinese Internet audience uses search. And given Internet search’s dominance of monetization and audience rankings globally, the competition for the top spot in the Chinese search market is pretty intense.

Baidu, Google, Yahoo, Sohu and Sina are battling each other to be the leading provider of search in China. Currently the two largest search players, Baidu and Google, account for almost 90% of the searches (source: CNNIC Search Survey, 2006), per the latest local search market share depicted in the pie chart below.

Chinese Search Market

Though it doesn’t show up in the main search rankings, Tencent - the leading Chinese Instant Messaging (IM) platform with over 220M active users - has been making significant in-roads into this market by licensing Google’s search in 2005.

More than 3 out of every 4 Internet searchers in China use multiple search engines (source: CNNIC Search Survey, 2006). Therein lies one of the more interesting dynamics of this market: Baidu and Google clearly lead the field in all aspects of search, through the variety of searches they offer and the quality of their results. Sohu features more prominently in MP3 and video search, compared to its lagging ranking in web search. Yahoo, on the other hand, has been struggling with its local partnering strategy - as it failed to take advantage of large acquisitions locally, including 3721 and the much publicized Ali Baba. Indeed Yahoo's brand seems weaker in China compared to Google’s and other local players - as a result of its lack of focus (and differentiation).

 More here

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(* Source: Tangos *) 

The New York Times has just published an article named “Internet Boom in China Is Built on Virtual Fun“, which is mainly on history and development of Tencent. I agree with the key point of the article, that currently Chinese internet users are mainly for entertainment and fun, foreign internet companies need to understand this culture.

While America’s Internet users send e-mail messages and surf for information on their personal computers, young people in China are playing online games, downloading video and music into their cellphones and MP3 players and entering imaginary worlds where they can swap virtual goods and assume online personas. Tencent earns the bulk of its revenue from the entertainment services it sells through the Internet and mobile phones.

Another distinguishing feature is the youthful face of China’s online community. In the United States, roughly 70 percent of Internet users are over the age of 30; in China, it is the other way around — 70 percent of users here are under 30, according to the investment bank Morgan Stanley.

…And in China, the No. 1 priority for Internet users is entertainment; in the U.S., it’s information. That’s why Google is dominant in the U.S., but Tencent rules China.

…Analysts say the American companies struggle here partly because of regulatory restrictions that favor homegrown companies, but also because foreign companies often do not understand China’s Internet market, which is geared primarily to entertainment and mobile phones.

Posted by brian tiong at 03:08 PM | Permalink | Comments (0) | TrackBacks (0)

(* Source: Tangos *) 

Totally 16 companies from China made the Fortuna China Magazine’s 2005 Coolest Companies List, 7 among them are internet companies, their business range from online games and download tool to new online media like podcasing and e-magazine, from mobile search to WAP portal.

3G.net.cn is a Guangzhou-based free WAP(Wireless Application Protocol) portal for mobile users, to provide ringtone and image download, mobile game, news and information and other mobile-based services. By the end of 2005, its users amounted to 10 million. In early 2005, IDG invested 2 million USD in 3G.net.cn, and it is seeking second round financing.

Cgogo, established in 2003, provides wireless search service that enable mobile users to search internet information on their cellular phones. “Cgogo Search is an innovation of dynamic fuzz search for concept clustering.” It generates revenue by the similar way as Baidu does, that is auction-based paid list services for corporates.

ChinaCache, founded in 1998, is the most famous CDN (Content Distribution Network) provider in China, and currently renders services for Sohu, Netease, eBay China, XinhuaNet and many other main stream sites. ChinaCache made break-even in 2002 and become profitable since 2003. Its revenue of 2005 is expected to RMB 62 million Yuan (about 7.65 million USD).

Nineyou mainly provides online casual games One of its most important games is O2Jam, a multi online music play game developed by O2media from Korea. 9you got 20 million USD investment from Carlyle Group and other investors in 2004 and 2005. Its peak concurrent game users reached 600,000 by the end of 2005. Nineyou’s revenue of 2005Q4 amounted to RMB 50 million Yuan (about 6.2 million USD).

Toodou is the only company in the list that we have covered before, and I think our readers are very familiar with it. It seems Toodou has been a representative sites for web2.0 development in China, many main stream media will take Toodou as an example when reporting China’s web2.0. Congradulations, Gary!

Thunder, a IDG invested company, provides a broadband download tool using P2SP/P2P technology.

Xplus (Nu Channel) is a company to distribute online interactive magazines. Its Xplus software takes advantage of P2P service to effectively distribute e-magazines, and will also provide readers analysis for magazine publishers. In the year 2005, total magazine volumes exceed 28 million copies. In April 2005, investors led by Legend Capital and iD Tech Ventures Ltd. (Acer) invested 4.5 million USD into Xplus.

Posted by brian tiong at 02:49 PM | Permalink | Comments (0) | TrackBacks (0)

(* Source: Luyi Chen *) 

Xplus is the online publishing platform of Nu Channel, a company established in 2003. Its shareholders include ID Tech Ventures, Legend Capital, China Merchants & Fortune Venture Investment Group, etc. Originally its main business is online emagazine. Although it has launched a platform for users to upload DIY magazines, but the whole UGC market in China still not matures enough for any serious business to rely on.

What caught our eyes is its new online newspaper publishing platform. It launched by the end of last year. It provides a new navigation style that combines traditional and online newspaper.

The advantage of traditional newspaper is how things are organized on one page, big headlines, fonts, images, etc. You can recognize important stuffs at a glance. Xplus epaper shows you an image of the hardcopy of the newspaper. Users can click the pixel area of any particular article and read it on the right side. Also it provides search, headline view of all the articles on one page and navigation to others pages, etc. In one word, it provides a way just like reading real newspaper and its content is more discoverable. What technology it uses? Seems Flash.

It also has some social features too. Such as people read this newspaper also read the following ones. People can leave comments on the newspaper, although not to each article, but the whole volume of one day. On its about page, they have an image which shows their business model. By showing newspapers in this way, they can track how users find interesting stuffs on a page and this data can be used by publishers to tweak their printing style, advertisers can adjust their strategy accordingly.

As the company said on a 5G seminar, newspapers will never die, and its evolution will last. The other big news about newspaper today is Usatoday’s relaunch with a bunch of social features.

Posted by brian tiong at 02:46 PM | Permalink | Comments (0) | TrackBacks (0)

(* Source: Tangos *) 

Yeeyan is an excellent blog which I tracked daily and added into my RSS reader immediately when I found it in last year.

Why? Yeeyan is a group blog which intends to translate articles, mainly blog posts, on tech, startups and internet into Chinese, to help to bridge the language gap. So far, they have done a terrific job. They update blog almost every day, translate many informative posts from A-list English bloggers, such as Michael Arrington, Richard MacManus and Fred Wilson, thousands of readers subscribe their rss or read the blog, including me. They even got the Chinese copyright of Inside Facebook, and will translate and publish it in China.

But now, I would like to introduce Yeeyan to overseas readers as well, because Yeeyan launched its English version recently, that is to translate Chinese blog posts into English, to help foreigners to know opinions and analysis of Chinese bloggers, such as U.S. internet companies’ top 10 mistakes in China and Yahoo China’s Fiasco.

In fact, in late 2005, we have also tried to summarize some Chinese blog posts in English for our readers each week, but we just can not continue it for various reasons. So I’m extremely happy to see Yeeyan’s English version. I’m sure it would be a must-read for those who want to know more about Chinese blogosphere and internet market but bothered by Chinese language barrier. Forget Google translation, to subscribe Yeeyan.

Posted by brian tiong at 02:44 PM | Permalink | Comments (0) | TrackBacks (0)

(* Source: Luyi Chen *) 

Riku has found a new music service that looks like Pandora, and with a name sounds like Pandora’s brother - Dola.

The company behind Dola is MusicGene, a Shanghai based startup. Some readers have pointed out that their website is much like MusicGenome, an Israel company.

Dola originally was LazyFM. Here’s one of their presentation on a venture conference by the end of last year. You should scroll down to find them, since there’re several companies.

From the report: 1. Their service launched in July 2006. 2. Two main founders, Victor Zhang is responsible for technology, Cao Zhifeng is responsible for marketing.

As of this writing, I have received a mail from Cao Zhifeng, CEO and co-founder of MusicGene. I have written back to ask for more details other than those publicly available.

Of course I remember Yobo is doing similar thing. So I asked Yobo if they have heard of Dola. I expected an answer sounds like no comment. But Allen, CEO and co-founder of Yobo kindly typed more than two words, so that I have something to share with you.

Music analysis is not an easy job. We should seriously treat it. It requires professional teams with enough hard working and passion. Dola is an early project, probably we are both targeting similar market. It’s not suitable for us to comment it. It would be better to leave it to our users.

In this stage, the important thing is doing, with the right attitude and approach, not talking. Yobo is also an early stage project. We are learning while we grow up. It’s inevitable to learn from advanced products and technologies from other countries, but we won’t feel lucky to skip any necessary fundamental steps. Chinese users need someone devoted to work out products they really want, not merely concepts.

Hat tips to Yobo. Yobo’s brand has suddenly risen up in my mind.

I also asked Yobo about the recent “per play per customer” royalty rate proposal. Yobo’s answer is:

Will Chinese authorities make the same policy? I am not sure. But they seem to have too many things more important to deal with. They even haven’t nailed down all the cases with mp3 search engines. On the contrary, we are doing with legal approach. We will become a promoting platform for copyright holders.

Posted by brian tiong at 02:32 PM | Permalink | Comments (0) | TrackBacks (0)

(* Source: Luyi Chen *)

Since the latest launches of online music services like Musicpaw and Yobo, we have been tracking online music services that can help you search, organize, listen, share and discover music online.

What differentiates music from other media like article, photo and video is that you would listen to music you like again and again, while you won’t do this with others. And music is a bit difficult to understand, so that you probably don’t know why you like a particular song.

So application for organizing and sharing music must be different from the ones for photos and videos. Besides Musicpaw and Yobo, there’re six other services also worth looking. They are 8box, Douban, Yahoo Musicbox, Baidu Zhangmenren, We@zone and Funbox.

We first look at two search engines. They are the places to look for online music links. Although this has brought copyright issues, search engines still act as a promotion platform for artists.

• Baidu mp3 search is the most frequently used music search engine in China. One year ago, Baidu launched Zhangmenren, which is a service for users to sharing their playlist. To celebrate one year birthday of this service, they have opened several public lists where everyone can distribute their favorite songs.
• Other search engines have similar feature too. My second choice is Yahoo Music. They have human-edited profile page for artists and bands with their album release history. This is useful to music newbie like me. Their music box service, launched in June, lets users keep their own playlist. You can generate playlist more freely in Yahoo music than in Baidu Zhangmenren. Yahoo’s service is more like a private service, while Baidu’s is for public promotion. In Yahoo, you can save music into your music box directly from search result.

Some services don’t act as a music search engine or host any music files, but they provide a place to organize your online playlist, which contains music that you can play directly without downloading them to local storage. Three services result in this category.

• Musicpaw is a new service launched on Nov. 26 2006. I like their tagline, Sketch with music. Hope they really can let us describe music visually like this. Currently you can organize playlist, tag and review music in this community. I think the website is cool especially their command line console, where you can navigate the website and perform all operations of the music player.
• We@zone is in a different style, and I like its simple design. It lauched on June 26, 2006 by Andy, who is located in Beijing, now a product manager of Hexun. On its Digg style homepage, users can share music review, recommend artist, and promote music related event. On users’ personal page, visitors can listen to their music collections though a flash player.
• Funbox is a service launched in July. The main feature is to organize online music links into playlist. It doesn’t provide music review, but it does have quite a lot of embedded code in different styles to publish playlist on other website like blogs.

Although in above three services, you can also discover new music by browsing others people’s profile page or by looking at what they are listening if the service supports this. But chances to find music suitable to you are still small in this way. So you probably want to try some recommendation services.

• 8box is one of the earliest services to provide music recommendation in China. It launched in May 2006. Originally based in Shanghai, now located in Hangzhou. What I like most is the music roaming feature. You can start from one music, then it will guide you though a series of tracks with similar style. After you rating enough tracks for the system to learn about you, it can recommend new music to you based on collaborative filtering technology. We have an interview with 8box in June.
• Yobo is a Pandora like service just launched several days ago. Main part of the service is a big flash player where you can listen to endless music. While you are listening to music, by telling the system whether you like it or not, you can affect future music recommended to you. Based on my own testing, there’re too many duplicates in its current recommendation result. That’s probably because of the small media database.
• Music recommendation feature of Douban is weaker than 8box and Yobo. It launched in July 2005. As we mentioned in the beginning of this article, music is different from book. While few people would say they particularly like one chapter of a book, most of them just like some tracks in an album. On Douban you can only treat music in album level, which makes the service less flexible. But this is still a great place to find useful music reviews.

Summary

Online music is a wonderful world. After you move your listening habit from local to online, you can not only access music from anywhere but also discover more music from others.

Search engine is useful for searching online music links, but you cannot find music you don’t know in this way. Recommendation service as ongoing search will give you more personalized experience and help you find music that you like but you would never discover in other ways.

Music communities that don’t have explicit recommendation feature are also useful for discovering new music. It’s hard to tell which style is better for music community. There’re still rooms for killer applications to show up.

Posted by brian tiong at 02:11 PM | Permalink | Comments (0) | TrackBacks (0)