American internet companies are the dominant tech companies around the world, with one glaring exception.
In China, and Asia more broadly, they’re struggling to make a mark.
It’s not for lack of trying, either.
U.S. tech companies keep trying to enter the Asian markets, and yet, they learn the hard way, over and over again, that Asian tech companies are entrenched, smart, and understand their markets better.
For a country used to winning, it’s an embarrassing prediciament.
So what’s going on here? And who are these upstart Asian companies?
Google has been trying to tap into China for years, but basically gave up earlier this year with little to show for it.
Baidu, on the other hand, is the phenomenally successful Chinese search engine that beat Google. It has almost 60% of the Chinese market -- and over 6% of the global market, making it as big as Bing globally.
Even more impressively, 99% of Chinese internet users use Baidu at some point. (They also use other search engines, explaining the 60% marketshare.)
You don't hear too much about Tencent relative to its size, but it's the third biggest publicly traded internet company in the world, bigger than eBay or Yahoo.
Tencent started out as an instant messaging service called QQ, and now it's the biggest social network in China. It makes money not just from advertising but from sales of virtual goods and social games. Meanwhile the biggest internet companies in those sectors, Facebook and Zynga, are nowhere in China.
(We should also note that Tencent did something AOL couldn't -- make a business out of instant messaging.)
Tudou is the 'YouTube of China', although maybe it would be more fair to call YouTube the Tudou of the US. Tudou went live in April 2005, whereas YouTube was launched in November of that year.
Today Tudou is a roaring success, hosting over 40 million videos, viewed by over 200 million people a month, and raised over $130 million from marquee investors. Tudou began with user generated content, but that's hard to monetise even in China, but it has moved into premium licensed content and is actually now more like a Hulu of China than a YouTube of China.
As far as we know, LinkedIn is nowhere in China. Is this something LinkedIn can afford? As China becomes ever more indispensable and embedded into the global economy, such a huge blind spot could go from simply a missed opportunity to a very serious threat.
Ushi is one of several 'LinkedIns of China', and seems to be the most successful. It was founded by a group of over 100 China-based entrepreneurs and executives, which kickstarted its network right away, and it looks set to dominate professional social networking in China.
It's somewhat hard to tell given how new this market is and how fast it's changing, but it seems that Meituan is the biggest Groupon clone in China.
Groupon has yet to crack China, and with Meituan reportedly raising $5 million from none other than Sequoia Capital and it has a chance to make sure Groupon is never a factor.
Unlike Google, Naver doesn't crawl and index pages and rank them according to links. When Naver was started, the South Korean-language internet was too small to do that.
Instead, Naver is like a question and answer service. South Korean internet users help each other out find things, and Naver used that information to crowdsource a page ranking and create South Korea's best performing search engine.
Social search is a big buzzword in Silicon Valley but it's been a reality in South Korea for over 10 years.
While Facebook is focused on real identities, Japanese social networking users care a lot about using aliases and avatars. Furthermore, they are extremely protective of their privacy, and Facebook tends to be a little too lenient with that.
This is why Mixi dominates social networking in Japan. It now has 80% marketshare. The company is profitable and publicly traded. Meanwhile, Facebook is just playing catch up in Japan.
Given how big mobile social networking, is in Japan, we'd except Foursquare to take like a duck to water there, and yet it hasn't. What are you waiting for, Dennis Crowley?
While Mixi is the dominant social network on the fixed internet, GREE is the dominant mobile social network in Japan. GREE went public on the Tokyo Stock Exchange in 2008 with a billion dollar valuation.
Rakuten is the biggest e-commerce company in Japan. It's not an Amazon or an eBay, instead it has its own unique B2B2C model. Basically, existing shops, sellers and companies can set up storefronts on Rakuten.
Because it doesn't own inventory, it can post reliable 20% net margins, giving it a huge war chest as it seeks to expand into e-commerce in other categories. And expand it has. Rakuten built a partnership with Baidu in China, a very smart idea as Baidu needs commerce expertise and Rakuten needs a Chinese partner, and it has acquired Buy.com in the US, and in Europe PriceMinister, the biggest e-commerce site in France. Clearly Rakuten has global ambitions, and it shouldn't be discounted.
Looks like some ideas truly are global, and the simpler the better. Twitter does really really well in Japan and in China.
In Japan plenty of celebrities use Twitter and it has even introduced a pay service there, with people paying to read popstars' tweets. Some people credit Twitter's minimalist design, even though the design of the most successful Japanese websites looks cluttered to our Western eyes.
Perhaps even more striking is Twitter's success in China, given the government constraints on foreign internet companies, particularly communications companies. Twitter played a big part in exposing the Sichuan earthquakes and embarrassing the Chinese government, and it is often blocked. The government even sponsored a Twitter clone called Weibo, but it's going nowhere and Twitter is huge in China. It goes to show that the government isn't the only reason why US tech companies have a hard time in China.
Yahoo is probably the most successful Western company in Japan. Yahoo! Japan is the biggest online portal in the country, and way ahead of Google in marketshare. Yahoo! also owns an extremely valuable stake in Chinese e-commerce leader Alibaba. In fact most of Yahoo's value is in its Asian assets today.
Yahoo's Japanese success is a lesson for other US companies: in each case, it went in with a local partner, Alibaba in China and Softbank in Japan. It approached those markets with humility instead of thinking what worked in the US was necessarily going to work in Asia.
Maybe for once companies like Google and Facebook can learn something from Yahoo and not the other way around.
Business Insider Emails & Alerts
Site highlights each day to your inbox.