Mark Evans

The Online Balancing Act in China

There have been two interesting pieces of online news coming out of China this week: Alibaba.com is apparently looking to raise $1-billion through an IPO later this year, while MySpace has moved into the Chinese market (source: TEXYT). With 137 million Internet users, including more than 90 million broadband subscribers, China is the world’s biggest online community and, not surprisingly, the most attractive to investors and entrepreneurs.

With opportunity, however, comes risk. In particular, the Chinese government’s regulation of the Internet, which has forced companies such as Google to back down if they wanted to participate in the market. Tony Jung, for example. points out that there are a few things different from MySpace China than other places in the world. According to Tony:

1. On publicly available message boards and forums, certain topics just don’t exist — religion and politics, for example

2. There is a keyword filter to any searches, postings and comments, where trying to query a specific term, or post using a suspicious keyword will flag your post and tell you to “try again”.

3. (the most troubling) There is now a means for users to flag *other* content, whether it be messages, profiles, or what not, so as to alert their overseers administrators for “misconduct” by other users. What does this mean? The usual things like “endangering national security, leaking state secrets” and so on — but it also, apparently, includes the vaguely worded phrase “disturbing the social order”.

As well, China has been a difficult place for foreign online companies to establish a strong foothold. eBay, for example, made a concerted effort to move into the market but is a distance second to Taobao, while Google’s dominance of the search market has been extended to China where Baidu rules the roost. The question how international players will get into the market. It seems challenging trying to do it alone given Chinese consumers appear to favor local players. Perhaps buying minority stakes is the most attractive option to gain access to market that could break through 200 million customers within the next three or four years.