China market spotlight 2011 for Hemisphere

Market Spotlight: ChinaNet JacobssonSilicon Valley, 22 March 2011

Top TrendsMarket Highlights AgendaKey LearningsQuestions

1.4 Billion Chinese 50/50 Urban/Rural

#1 Internet NationAdding more than a month!

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?

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

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

Why do Foreign Players Encounter Challenges in China? Domestic Foreign Players Entrants Struggles of Foreign EntrantsRegular 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 Slowresponsiveness Yahoo! China was acquired by Alibaba Local content + +/- Local service + +/- Google struggled with Baidu, local attacks & eventually gave up ChinaFinancial pocket Not so deep Very deep

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

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)

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

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

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

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China market spotlight 2011 for Hemisphere

by Net Jacobsson on Mar 25, 2011

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China market spotlight 2011 for Hemisphere — Presentation Transcript