Suzhou Creek has historically been a sharp dividing line in Shanghai. Adapting itself in response to international trade, occupation, and an era of modern prosperity, it has separated the north from the south, British from American, Japanese from the rest, and the poor from the rich.
From the north, you can stand on its banks, look over to the south, and see some of Shanghai’s glitziest high-rises: the elegant Four Seasons Hotel, the rabbit-eared Shimao International Plaza, and the tall skyscraper of Tomorrow Square, looking like the sharp tip of a fountain pen. On the north side, the buildings aren’t quite so impressive. The one that houses Spil Games Asia is a hulking, grey slab that broods by the river as peppier projects spring up around it. A few doors down from its entrance, a large pile of trash and crumpled cardboard boxes cover a stoop. A steady cacophony of motor scooters, cars, and foot traffic squeezes by on the narrow strip of road outside the building’s front door. On the other side of the creek, a tree-lined walkway lazily wends its way upstream by the feet of upscale apartment blocks. It looks like it could be America.
To get to Spil Games from the south, you cross an arched vehicle bridge, which wouldn’t look out of place if it were spanning the Seine in Paris. It stretches low across coffee-colored waters that for decades served as a drain for industrial and human waste. In the late 1990s, city authorities launched a rehabilitation project to clean up the river. It’s now good enough to host rowing races, and creek-side properties have become desirable real estate.
In a large corner office that looks out over all of this from the fifth floor of that hulking slab, Marc van der Chijs walks me to the window and shows me People’s Square, just a 10-minute walk away. Farther off in the distance, it’s possible to make out the skeleton of the Shanghai Tower, which when completed will be the world’s second-tallest building. Van der Chijs has the office as a director of Spil Games Asia, a branch of the Dutch social gaming giant that competes with Zynga. Until recently, he was CEO, but he has stepped aside to concentrate on a new startup called UnitedStyles, which allows shoppers to customize their own designer clothes and have them delivered for cheap directly from a Chinese factory. (Since our interview, van der Chijs has moved himself and his business to Canada, largely for family reasons, but also because many venture capitalists in China don’t have a global outlook, making it hard to raise money for international startups like UnitedStyles.)
Van der Chijs, an amiable Dutchman, is one of the few Westerners to succeed in China’s Internet industry. He was the co-founder of the video-sharing site Tudou, which he established with Gary Wang. In fact, Tudou also started in this very building.
For more than five years, Tudou waged war on arch-rival Youku, which looked similar, behaved similarly, and chased the same audience. The two became the leaders in China’s online video sector, controlling a third of the market between them in a crowded field that also featured heavy hitters such as Qiyi, 56.com, and Ku6.com. The two companies fought in the press, traded lawsuits, and raced to become the first to go public. Youku, headed up by Victor Koo, would ultimately win that race, thanks largely to the fact that Wang was going through a messy divorce that delayed Tudou’s initial public offering.
But then, in March 2012, the two companies did something unexpected. They announced a merger. The paperwork finally went through that August. The deal was worth $1.1 billion and made the new company, now called Youku Tudou, a clear market leader. Wang retired from the company and now he and van der Chijs are together exploring other projects.
Tudou has been disparaged in the Western press for copying YouTube, which is both inaccurate and unfair. (Forbes in particular has been a repeat offender, referring to Tudou and Youku as “China’s leading YouTube clones.”) Actually, Tudou went live on April 15, 2005, eight days before YouTube uploaded its first video. Youku launched in December 2006, but both differ from YouTube in other key ways.
While the social platform and user-generated content has been important to both over the years, Youku and Tudou have served a more important role in the entertainment mix for Chinese consumers than YouTube has for Americans. That’s because the sites are genuine alternatives for programmed content and provide access to TV shows that Chinese viewers otherwise wouldn’t get. Of course, that means both have played host to, and benefited from, large quantities of pirated content, but nowadays they also commission original content and legitimately air licensed shows from China and abroad, including hit American shows such as Lost and Desperate Housewives.
Both Youku and Tudou, and now the joint entity, are like a combination of YouTube, Hulu, and HBO, a hybrid model necessary for the company’s existence in China’s hyper-competitive business climate. “Tudou is a big media company, it’s not just an online video site,” says van der Chijs. At one point, Tudou had as many as 500 competitors. “If it was just YouTube, there’s no way it could have survived.”
Van der Chijs says Tudou’s business model innovation is illustrative of the type of Chinese ingenuity that gets overlooked by many tech industry watchers. Copying has been such a prolific and mainstream part of the Internet business in China that it has earned its own acronym: “C2C,” meaning “copy to China.” Benjamin Joffe, a China Internet consultant, has cheekily called it “innovation arbitrage.” China is home to thousands of Facebook clones, Twitter clones, Groupon clones, Yelp clones, eBay clones, Amazon clones, Quora clones — pretty much any Internet business you can think of. Basically, if a Western company has ever appeared on a tech blog, it has a very similar Chinese analogue. Aspirant cloners apparently keep close tabs on TechCrunch in order to be the first to rip off any bright new US ideas.
To an extent, the idea-pilfering is understandable. With Netscape, Yahoo, Google, eBay, Amazon, and Facebook, the US has clearly dominated the Web so far. No other country has come close. China, however, is the only other country that has given rise to multiple multi-billion dollar consumer Web giants. It got to that position by watching the US closely, learning quickly, and adapting. As the likes of Tencent, Baidu, and Alibaba prove, the country has become adept building actual companies — and that simply isn’t achievable by just copying an idea.
That reality is often overlooked by critics of China’s Internet industry, and particularly Western observers who turn their backs on companies that initially appear to copy their ideas. They thus fail to notice the developments that happen as the products and companies grow and evolve.
American Internet companies generally don’t pay much attention to what their Chinese counterparts are up to, van der Chijs believes. “They know they are being copied, and they sort of let it go, they don’t think about it. That’s a mistake. They could really learn from the companies what they’re doing here.”
China is not just a lagging idea-sap running to catch up to a more creative superpower. “There’s so much happening here that people don’t know about in Silicon Valley, and that they could copy and use,” van der Chijs says. “People only look at China as a copycat. It is, but it’s only at the beginning. They copy the concept, and then they localize to the Chinese market, and they innovate.” The reason is pretty obvious, according to van der Chijs. “There’s so much competition here that if you don’t innovate every single day, you’re going to be crushed by the competition.”
One of the most dramatic and successful examples of this “copy and twist” approach is the microblogging service Sina Weibo. The advent of weibo (the Mandarin word for microblog) in China has had a tremendous cultural and social impact. Sina Weibo was launched in August 2009 after the government blocked Twitter and its main Chinese counterpart, Fanfou, following riots in Urumqi, the capital of Xinjiang province, where the local Muslim population sometimes clashes with immigrant Han workers. Twitter had been popular among China’s urban elite, who used the service to share information about “sensitive issues,” such as a fire at the Chinese state television company’s Beijing headquarters. The authorities, however, essentially gave Sina their blessing, because unlike Twitter and Facebook, it proved willing to play by China’s strict censorship rules. Fanfou was allowed to return in November 2010, but by that time, Sina Weibo already had a strong grip on the market.
Today, Sina Weibo claims more than 500 million accounts, a figure matched by fast follower Tencent, which launched its own Weibo in April 2010. While it started life as a direct Twitter clone, Sina Weibo grew and mutated until it became more like an amalgam of Twitter and Facebook, allowing comments on each post and having more of an emphasis on pictures. What’s most powerful about Sina Weibo, however, is its ability to give voice to the previously voiceless. Even though it operates according to the government’s terms, the communications platform’s power and reach has caught the authorities off guard.
Sina Weibo had its watershed moment in July 2011, when a high-speed train crashed near the city of Wenzhou, killing 40 people and injuring 192. Weibo users on both Sina and Tencent’s services ridiculed official media reports of the crash, which railway authorities had initially blamed on a lighting strike, and broadcast their own images from the scene. In the five days following the accident, more than 26 million messages about the disaster were posted to the sites. Cultural commenters and tech watchers alike said it represented a new era for collective skepticism in China and an increasing unwillingness to believe Communist Party propaganda.
It’s difficult to know if either Twitter or Facebook could have achieved such a widespread social impact in China. Part of what makes Sina Weibo so effective is that it deftly blends the strengths of the two American social networks, allowing users to share pictures and videos in-line with their 140-character “tweets” — for sake of ease, that’s how English-speakers in China refer to Weibo posts — and build conversations around them in the accompanying comments threads. It’s worth noting, too, that you can say a lot more in 140 Chinese characters than you can in 140 English letters.
Bill Bishop, a two-time entrepreneur and independent Internet analyst based in Beijing, is an avid user of both Twitter and Sina Weibo and has about 15,000 followers on each. He says the Chinese version is a far superior product. “Each post you make on Weibo, you can see if it’s been retweeted or forwarded, or if it has been commented on,” he says. “Each individual message you post on Weibo has potential to become its own full-on conversation between thousands of people.”
Unlike Twitter, Sina Weibo also offers premium accounts for its most dedicated users, charging about $1.50 a month to allow customized homepages, audio posts, and to provide increased security. Soon, premium users will be able to filter posts automatically by importance.
There have been many calls — including my own on PandoDaily — for Twitter to copy Sina Weibo to improve its user experience. So far, however, Twitter has been resolute in not evolving its product beyond its core functions, apart from a “Discover” section that presents a curated list of suggested readings based on popular tweets. Marc van der Chijs reckons Twitter should assign three people full-time to filtering the best Weibo functions into its own service. “It’s so simple,” he says. “They handed it to them on a golden plate, basically. But no one’s looking at the plate.”
Another Silicon Valley company, however, doesn’t appear to have been so shy about taking inspiration from Sina Weibo. “When Google+ was launched, I was looking at it, I was like, ‘That’s a copy of Weibo,’” van der Chijs says. Google+’s in-stream commenting and design, and the way it is integrated into the parent company’s other Web products are, or were, all strikingly similar to the approach Sina took with Weibo, he points out. “Google+ copied Weibo,” van der Chijs says bluntly. “People had no clue. It’s almost exactly the same. That’s the sort of thing people don’t realize.”
Sina Weibo was the hottest story in China tech in 2011 and for much of this year. Now, however, it is being surpassed and threatened by a mobile product that until the summer of 2012 had barely been heard of outside China’s borders. That product is another example of China’s patented “copy and twist” approach. Tencent’s Weixin, a mobile messaging app, now has 250 million active users — all accrued in its less than three years of existence.
Like Sina Weibo, Weixin — or WeChat, as it is called in English — is both derivative of and different from its Western predecessors. It’s also arguably better. While Weixin started off as an instant messenger for mobile — a natural extension of QQ — it has grown into a social network and uber-communications platform that one day may even overtake its colossal desktop predecessor in dominating the mindshare of China’s Internet users. Also like Weibo, Weixin was for a long time largely ignored by the West.
Until Weixin started gaining international attention in mid-2013, a Google search of the major US tech blogs other than PandoDaily — including TechCrunch, The Verge, VentureBeat, AllThingsD — revealed only a handful of mentions of either “Weixin” or “WeChat,” and when they were mentioned it was usually in the context of a wider piece about “free mobile chat apps” or in a post syndicated from the Chinese tech blog TechNode. “Weixin” (but not “WeChat”) returned one result on Forbes.com and only as part of a story about Sina Weibo. The New York Times carried its first story on WeChat in November. CNET included Weixin as one of the five hottest Chinese smartphone apps of 2011, and in October 2012 published a short post about WeChat. Meanwhile, in the first three quarters of 2012, PandoDaily had published 10 posts specifically about Weixin, and mentioned it in many others. Considering the rate at which Weixin is taking over China and expanding into other parts of Asia, that is restrained.
Weixin started as a direct copy of a voice-messaging app called TalkBox, which came from Hong Kong. It also has elements similar to American apps Whatsapp, Voxer, and HeyTell. Since its January 2011 launch, however, it has added photo-sharing with filters (just like Instagram), a social timeline for sharing of “moments” (just like Path), video calling (like Skype), and a platform for plug-ins that makes it unlike anything that exists in the West.
In those ways, however, it is a lot like South Korea’s KakaoTalk, which has an open API and a gaming center, as well as all the other functions Weixin offers. KakaoTalk, which now has more than 110 million registered users, launched in March, 2010. In May 2013, Tencent paid $63.4 million for a 13.5 percent stake in Kakao, the maker of the app. In Japan, LINE, made by Korean company Naver, is also finding a big audience, recently surpassing the 300 million registered users mark.
It’s certainly true that, with Weixin, Tencent has been an aggressive copier. But by selecting the parts of other apps that make sense for China and adding in elements that could be a major revenue driver in the future, Tencent has continued its tradition of micro-innovating, and building a product and business line around an idea that at first was “borrowed” but then was tweaked almost beyond recognition.
It is also set to be a lucrative money-maker for the company. Even though Tencent has said that monetization of Weixin isn’t a concern at this early stage, it has already opened the door to brand campaigns from Nike, Starbucks, and Cadillac. It is difficult to think of similar non-banner-oriented campaigns for mobile that have been run in the US. Indeed, monetizing mobile is a primary concern for Facebook, which admitted as much in a pre-IPO SEC filing that contributed to its early stock dive. “We do not currently directly generate any meaningful revenue from the use of Facebook mobile products,” Facebook said in the filing, “and our ability to do so successfully is unproven.” No doubt, Facebook — as well as Google, Twitter, and a few others — will be watching these Asian upstarts closely. They could stand to learn from them, too.
The Internet is not the same place it was in the first decade of this millennium. The likes of Yahoo, eBay, Amazon, Google, and even Facebook are starting to look like crusty old veterans as lighter, more nimble, and more mobile competitors spring up around them. That’s certainly happening in Silicon Valley and New York, but it’s also happening in countries farther abroad. When it comes to finding a new hotbed for innovation, China is perhaps the most exciting and promising of those prospects.
It’s not only that China has more than half a billion Internet users, a startup ecosystem that is approaching maturity, and a number of increasingly well educated and savvy entrepreneurs. It’s also that China has spent the first waves of the Internet — Web 1.0 and Web 2.0 — learning from the US and figuring out how to make ideas and companies work in China.
In Tudou and Youku, the country has produced companies that are like YouTube, but with added localized layers that have allowed Internet video to serve as an important alternative to terrestrial media. In Sina Weibo and Weixin, it has established products that have built on the success of their US counterparts and improved them in ways that make sense for — and dollars from — hundreds of millions of users. Along the way, these companies have been forced by a hyper-competitive and fickle market to innovate on their products at Tweet-speed. These practices further prime China’s Internet industry for innovation on a wider scale.
The passing of the eras of Web 1.0 and Web 2.0 coincide with the China’s modernization. Tudou, Youku, Sina Weibo, and Weixin together are a little like Shanghai, holding on to history and Chinese culture on one side of the creek while embracing the advances of American culture and technology on the other. If the north side of the Suzhou — and the hulking, grey slab in which Tudou got its start — shows where China has been, the south side, with its shining skyscrapers and leafy urban playgrounds, shows where it is going. There too will go China’s Internet.
While Shanghai is China’s glittering showpiece of modernity, however, it is to Beijing that one must look to understand the history of the country’s Internet, and how far its startup ecosystem has come in just a few years. That story is written amid the rise of Zhongguancun, which has transformed itself from a giant electronics market into the nearest approximation China has to Silicon Valley. If you’re looking for the beating heart of High-Tech China, you must start here.