Welcome to China’s Parallel Cyber Universe

The Straits Times reports on the failure of international Internet companies to compete with local Chinese counterparts:

In China, most global Internet giants live miserable lives. Auction giant eBay, which once controlled as much as 90 per cent of the China market, was thrashed so badly by Taobao that it shut its main China website in 2006. Social networking titan Facebook is ranked a poor 55th in terms of overall cyber traffic in China. Its faithful China copy, Kaixin, came in 15th.

In contrast, the Chinese websites have grown into local giants. Sina and Baidu are listed on Nasdaq, and last year, Baidu registered income of 3.1 billion yuan (S$681 million), an increase of 83 per cent from that of the previous year.

A key reason for the failure of these global big names lies in their defeat in the word-of-mouth contest. Nine of out 10 new search engine users, for example, are recommended to use Baidu, according to Chinese media reports.

… There is also a darker reality behind the rise of the Chinese copycats. Faced with stringent censorship by the Chinese government, international websites have been blocked for carrying content critical of the communist regime.

Access to the likes of Google, YouTube and Wikipedia have all been blocked at some point in the last few years by the infamous Great Firewall of China.

All Chinese companies, on the other hand, are required by state regulators to censor users’ content so as to keep their business licences. The censorship slows down download speed of international sites, driving even more users to the local sites. This political censorship environment, said Professor Xiao Qiang, who runs the China Internet Project at the University of California, Berkeley, has given the Chinese firms a ‘competitive edge’.

‘In other words, the Chinese government treats Chinese information and communication technology companies as more ‘politically trustworthy’, which not only forces international companies to adopt local censorship policies, but also fundamentally handicaps them in competition with Chinese homegrown clones in terms of domestic marketing,’ he added.

April 20, 2009 11:21 AM
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