Understanding the Chinese startup scene 101

Small section of China on a globe.

There are a handful of Chinese Mark 2 tech companies growing from copycats to lions in China. Let’s take a look at the “Chinese version” of popular western concepts.

Search

Baidu.com is the Chinese version of Google. It reached ¥22.3 billion (around £2.23 billion) revenue in 2012.

E-commerce

Taobao.com is the Chinese version of eBay. It was founded in 2003 by Alibaba Group. It has 370 million registered users with ¥61 billion transactions (around £6.1 billion) value in 2011. It takes up to 80% of the Chinese e-commerce market share.

360buy.com is the Chinese equivalent of Amazon. It was founded in 2004 with a focus on consumer electronic B2C sales and has now expanded to all categories. It reached ¥110 billion (around £11billion) transaction value in 2013.

Social media

Kaixin001.com is the number one Chinese version of Facebook. When Facebook was blocked in China, the founding of Kaixin001 was an inevitable outcome by targeting white-collar workers. It takes up to 41.4% of China SNS (Social Network Site) online sector.

The number two of SNS is renren.com. It was founded in 2009, focusing on the student community and social network gaming. It takes up to 25.4% market share.

However, both companies are suffering due to their Weixin competitor. It will be interesting to find out, one year down the road if Kaixin001 and Renren will be completely wiped out.

Professional network

Due to Chinese culture difference, connecting with people online with professional purpose had yet to mature until recently. Founded in 2008, dajie.com duplicates LinkedIn’s model to build a network for Chinese professionals. The Chinese are known for being very protective of their own “Guan-xi” (it means connection/relationship in Mandarin).

The connect-inbox-meet behaviour of LinkedIn users was believed to never work in China. That is why, though found in 2008, it took dajie.com quite a few year to accumulate 24 million users. Thanks to China’s gradual internationalisation, dajie.com has gained significant momentum and is about to close series C funding from large American VCs.

Video

The rest of the world has Youtube, China has youku.com. founded in 2006. It applies “speed-to-market” tactics religiously so that it offers the best service to its users at all times. In 2010, youku.com IPO’d on the New York Stock Exchange. It is now marching towards a $23 per share target in 2014.

Tudou.com was the main competitor of youku.com. It went IPO on NASDAQ in 2011. In 2012, tudou.com and youju.com merged.

Mobile messaging

While WhatsApp is suffering from lack of monetization, its Chinese twin, Wechat, is conquering the world. The company Weixin was established in 2012 by Tencent.

Tencent has always focused on instant messaging solutions. Its first blue chip product was QQ (an equivalent of MSN) on laptop and, in 2011, it launched Wechat that targets mobile messaging sector. Within 433 days of its launch, Wechat’s users grew to 100 million. As of Oct. 24, 2013, Wechat’s number of users reached 600 million, literally half of Chinese population.

It’s now launching the Wechat newsletter functions for business to publish content to its followers, Wechat mobile payment, Wechat group buy, Wechat go dutch and other fascinating functions that could expand quickly based on the ripple effect of the “close friend” group that Wechat has taken pride in. By using Wechat, one can chat, shop and pay based on close friends’ recommendation and effectively avoid scam; therefore, it has gradually eroded the market share of other eCommerce platforms such as taobao.com.

Chinese startup 101

In short, all these internet companies are formed by smart and adaptive Chinese locals. There are almost no success stories about western/international startups achieving any momentum in China. Is it a miss or a myth? I guess we could closely observe Amazon.com to have a better answer. In essence startups from the UK, America and around the world should start thinking about how they’re going to approach China.

Further reading: Is the Chinese startup scene a gold rush?

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