FOR NEWSWEEK SELECT JAN. 2008
Sending out an SNS
Chinese and international social-networking services want to “friend” you.
By Megan Shank (Shanghai)
No other culture in the world emphasizes building guanxi (connections) as China’s does. Recently, the foreign powerhouse social networking sites (SNS) Facebook and Friendster have engendered themselves as part of that experience here.
Only a five-year-old phenomenon, today there are hundreds of SNS sites, which collectively possess 194 million profile users worldwide. With more than 162 million people online, China’s not a bad place to start looking for new friends.
Within the past two months, Friendster introduced both simplified and traditional Chinese character pages as well as new user services. The company’s vice president of marketing, David Jones tells Newsweek Select the Chinese edition comes as part of a concerted effort to build on the company’s dominant position in the Asia Pacific region, where Friendster already has 25 million registered users. In addition to Fan Profiles, where entertainers like Malaysian singer Karen Kong just debuted her first Mandarin album, new widgets allow Chinese users, such as the music site yobo.com, to create buttons for their audiences’ pages. Open apps allow young IT geeks to, as Jones envisions it, “build gems that could be a hit around the world, and they could make money doing it.”
Friendster is currently the number one site in the Philippines and number two in Singapore, Malaysia and Indonesia, according to the web information company Alexa. However in China, the company hasn’t yet escaped Facebook’s shadow. Although both companies decline to release the current number of their registered Chinese users, Facebook, not Friendster, makes it as one of China’s top-100 visited sites, according to Alexa.
During the first week of December, it was reported that the Chinese billionaire, Li Kashing used an entity independent of his companies to invest $60 million in Facebook while maintaining rights to invest another $60 million, giving him an ownership of 0.4 percent. Not long ago, in November, both China site Zhanzuo and Facebook emphatically denied a rumored $85 million cooperation.
Li representatives wouldn’t comment on the December deal, and Facebook’s spokesperson could not be reached at the time of writing, but Lee Lorenzen, founder and CEO of the first Facebook-only VC—Altura Ventures—who has recently drawn skepticism for claiming Facebook’s future worth at $100 billion dollars, says that he believes Li will serve as a valuable advisor to the company’s founder Mark Zuckerberg on how to work within the Chinese marketplace. “There is much more than just localizing the site that will need to be done and Mr. Li’s blessing of Facebook as the world’s most popular social operating system will help China to view it as a site that has a strong local investor,” Lee says.
Looking ahead, Tianwang.com, the student-focused search engine, which announced its own negotiations with Facebook in mid-November, might be announcing “interesting” news in mid-January, Tang Jingcao, the company’s COO tells Newsweek Select. “It’s essential for Facebook to keep grabbing new users,” says Tang, who sees his company as an important part of that process, “we provide a place they can do that.”
But even if Facebook can nab the users, in China an online company’s impressive numbers don’t automatically equal impressive profit. None of the major online companies, including Microsoft, MSN, Google and Yahoo, have made any real money here. Interfax recently reported that after two years of service via cooperation with TOM Online—another Li investment venture—Skype has more than 51 million users in China but has not yet found a suitable business model to break even.
Local SNS companies both defend the loyalty of their plugged-in pals and disdain what they deem as arrogance on the part of Western corporations that believe they can so effortlessly crack into Chinese cliques and change the culture of how friendships are won. “We discovered in talks with Facebook that they don’t understand China,” says Zhang Fan, Zhanzuo’s CEO. “It’s because foreign companies don’t understand their new customers’ habits and limitations,” adds Tang. “Look at Taobao and eBay. Chinese customers aren’t willing to spend money on selling fees where with eBay these fees still exist.”
And yet, in certain circumstances, it has been proven unnecessary for a local company to be revolutionary or adopt a different model in order to achieve commercial success. China’s first SNS, Xiaonei, is nearly a carbon copy of Facebook—from the simple blue and white format to the wall posts. Yet in late 2006 the Chinese Internet consortium Oak Pacific Interactive (OPI) bought the site for an undisclosed but rumored to be very large sum and merged the company with OPI’s own college social network 5Q.
“At that time,” says OPI’s CEO Chen Yidan, “China’s two biggest SNS services were 5Q and Xiaonei—each held about 30% of the market. If anyone wanted to be the top dog, anyone could only grab about that much.” Although no independent statistics can confirm whether or not the merging of the two companies has yet achieved their targeted 75% of the market as it tossed off smaller Chinese SNS sites in the wake, currently Xiaonei has more than 18 million registered student users from 2,200 schools.
However, like Facebook, which Zuckerberg emphasized to Newsweek in August is not just a service for college students, Chinese SNS companies are looking to make broader connections. Tianji.com, a site targeting Beijing and Tsinghua University graduates, currently has a user base of professionals with an average of three to 15 years of job experience. This user base might be attractive to those looking beyond the school gates to the greater world—especially with site’s recent effort to undertake cooperation with vidaeo.com, a European SNS site.
Either prospective students have found greater diversions in their new professional lives, or they’re not prepared to leave their childhood web-grounds, even as they enter the workforce. According to Alexa, Tianji’s traffic rank in China still hovers at a dismal 931, while Xiaonei’s is 45. EAs Xiaonei makes plans to move in on the professional market this year, which Chen estimates is as much as three to five times greater than the student one, sites like Tianji might feel the squeeze—and it won’t be coming from their new friend’s hand.
Representatives from Chinaren, owned by Sohu, also point out that as the range of web users expands in China, the Internet will no longer merely be the realm of while collar professionals and students but also working class people. Foreign sites like Friendster and Facebook have no power when it comes to marketing their brand to these new audiences. “Many of today’s new web users can’t even think of the name of their own website, don’t tell me they’re going to learn how to navigate a foreign site,” says the company’s CEO Zou Dan.
During the 2008 Olympics, in hopes of bolstering their image, Chinaren plans to go primetime as a sponsor under parent company Sohu . As the Chinese gear up for the greatest competition they’ve ever hosted, how appropriate the official Olympic song, “Forever Friends,” may double as the theme for a match of a very different sort. Come what may, none of these SNS companies want to share the gold–or their friends.
With Maggie Zhou (Beijing)
Great title ;)
Micah Sittig
January 5th, 2008