The Chinese Web Market

April 30th, 2013, 9:19 am PST by Greg

Since I have been in China, I have been thinking a lot about the web in China (and of course, living with a Chinese Internet connection). I know my share of web entrepreneurs, so one of the things that has been sitting in the back of my head is the question “how can foreign web companies expand into the Chinese market?” I know some excellent people thinking about doing just that.

After a few months, my honest advice to any web company thinking about China is: Don’t. It’s not worth the risk.

The unavoidable danger is being blocked by the firewall and completely losing any investment in China. The other is being cloned by a Chinese developer: shanzhai or copy-to-China. I propose to convince you here that these aren’t two independent risks, but are highly correlated.

Let’s look at the history of some prominent shanzhai sites and their foreign inspiration:

The pattern is clear here: a foreign company does something innovative, a Chinese company clones them and grows to be a viable competitor in the Chinese market. The foreign site becomes immoral and is blocked.

In each of these cases, the Chinese market moved quickly to the shanzhai site. I hear a little grumbling about the degraded Google service, and see the occasional Chinese kid on Facebook, but mostly the users moved smoothly to the Chinese-owned clone.

The reasons given for Internet censorship in China are generally prohibition of illegal material and promotion of national unity. There seems to be a clear side benefit: to neutralize foreign competitors when they become inconvenient to a local company.

I don’t think there is any quid pro quo there. I don’t think the Baidu founders went to the government and asked if they wouldn’t mind eliminating his competition, but the outcome seems identical to if they did.

So my advice on China is that there is too much danger of your entire investment being lost to the throw of an administrative switch on the firewall. Too much danger of a local clone. Too much danger of them both happening simultaneously.

Edit 03-2014: There has been some quid pro quo, at least on the scale of posts.

3 Responses to “The Chinese Web Market”

  1. Hexcles Ma Says:

    Quite agree!

    And here’s an off-topic:
    As a heavy user of Google services, I have found several ways to help speeding up Google in China. The best way is modifying the hosts file. Here’s a project called Smarthosts:
    for PC: https://smarthosts.googlecode.com/svn/trunk/hosts
    for Mobile: https://smarthosts.googlecode.com/svn/trunk/mobile_devices/hosts

    It works in this way: if you send HTTPS request to any Google web server, Google will always give you the right page anyway(maybe by doing some reverse proxy). And Google does have servers in Beijing with un-filtered dedicated lines linked abroad. I’ve done whois check on those IPs and they do belong to Google Inc.

    The Smarthosts will also help you solve DNS level block (such as Facebook, Github). But remember to force HTTPS(maybe need to manually add the prefix).

  2. Ted Kirkpatrick Says:

    Greg, I just came across this article in ACM Queue: “Splinternet Behind the Great Firewall of China”, http://queue.acm.org/detail.cfm?id=2405036. A good discussion of the technology and history of the firewall. Although you’ll likely have to circumvent the Great Firewall to get SFU proxy access to Queue to read the article …

    The author describes how the effects of the GFW spill into Internet transactions entirely between countries other than China.

  3. Ted Kirkpatrick Says:

    On another topic, here’s the list of upcoming host cities for the Very Large Database Conference (VLDB):

    40. VLDB 2014: Hangzhou, China
    39. VLDB 2013: Trento, Italy
    38. VLDB 2012: Istanbul, Turkey
    37. VLDB 2011: Seattle, Washington
    36. VLDB 2010: Singapore

    Interesting group in which to find Hangzhou.