Twitter, Facebook, Dropbox, and nearly everything that Google produces – all blocked in China. But that’s not discouraging some US startups from entering the notorious tricky and divergent Chinese market.
Let’s take a look at the fate of seven American ventures in China – including Evernote, LinkedIn, Uber – and see if their progress holds any lessons for other overseas apps and services looking for a slice of the Chinese web.
We’ve ranked these seven US startups on their performance so far in China and given them a score out of 10 for their ability to (so far) cut it in a tough, unique market. Using a mix of user numbers where available, app store ratings and comments, and the gut feeling from someone who likes to peek at what other people are using on their phones whilst on the subway (yes, not exactly scientific), we’ve put the list in order of which US firm is making the best job of their Chinese expansion. First places goes to…
Official China launch: May 2012
Success rate thus far in China: 9.2 / 10
Having already accrued some Chinese users over the course of 2011, Evernote arrived in China in May 2012 with local staff and a new brand name. Indeed, operating in China necessitated a whole different service that’s disconnected from the international version of Evernote. In China, it’s branded as Yinxiang Biji.
Upon launch, the Evernote blog cautioned people: “[U]sers of Yinxiang Biji should be aware that Chinese authorities may have the right to access their data according to current regulations.” That’s why a spin-off service was needed. The Chinese service lacks collaborative notes.
Evernote’s main rival – indeed, its larger competitor – is Netease’s (NASDAQ:NTES) Youdao YunBiJi. The Chinese web giant hit 15 million users for its note syncing app last summer, shortly after Evernote grew to four million Chinese users. But since then Evernote managed to double its China user-base to eight million as of November last year.
Netease is being aggressive with pricing, offering 80 percent of Evernote’s premium features for free. Netease also has the advantage of being able to cross-promote its notes app in its popular news-reader apps – effectively giving it free advertising. In contrast, Evernote is on its own.
While the Youdao Yunbiji app is more popular than Evernote’s Chinese app in the local app stores, Evernote is holding up well with plenty of comments and five-star ratings on the China iOS store, and over 1,200 ‘likes’ on the Wandoujia store.
Official China launch: February 2014 (in beta)
Success rate thus far in China: 8.9 / 10
LinkedIn (NYSE:LNKD) is the largest of the American ‘startups’ seeking out a niche in China away from the controversies surrounding broader social media networks like Facebook. LinkedIn, with its focus on business connections, has never been blocked in China. It even managed to grow for years without a Chinese version of its site.
China is the land of business connections, encapsulated in the term guanxi. Who you know – and how well you charm, wine, and dine (and perhaps bribe) – gets you very far. That’s what LinkedIn needs to tap into in China, despite it being a slightly different dynamic than seen among businesspeople in the West.
Due to the strength of China’s tech ecosystem, LinkedIn – like all the other US apps on this list – already has homegrown rivals in this business networking niche. Tianji is larger than LinkedIn in China with over 10 million users back in 2012; LinkedIn recently revealed it has about five million users in China. Tianji is run by a French company called Viadeo, so it’s technically also an overseas startup.
LinkedIn is finally fighting back in 2014. A Chinese version of LinkedIn appeared in beta form in February this year, though many social features are missing at this stage. Also missing are the Groups feature and the option to self-publish articles on users’ profiles as LinkedIn walks a fine line between China’s laws and regulations regarding media content. It’s possible these features will be added in later.
But LinkedIn hasn’t been able to avoid dealing with censorship in China. Just last week, a number of prominent users noticed that their shared links to politically sensitive content were removed. LinkedIn’s official statement on the issue confirmed that its new censorship practices are here to stay. “[I]t’s clear to us that in order to create value for our members in China and around the world, we will need to implement the Chinese government’s restrictions on content,” a section of the statement read. That creates a two-tier system where users inside China – and content viewable in China – are treated differently from the rest of the world. But most Chinese users of LinkedIn won’t even realise this is happening and it’s unlikely to hamper the site’s growth.
The company is hiring in China and is planning to launch a Chinese version of its Pulse news reader app.
LinkedIn’s prospects in China got a huge boost at the start of the year as the phenomenally popular messaging app WeChat added in support for users to bind a LinkedIn account to their WeChat profile.
Official China launch: December 2011
Success rate thus far in China: 8.5 / 10
Flipboard got blocked in China in the summer of 2011. By the end of the year, the magazine-style reader app had figured out a way to overcome the ban – by making a separate version of its app for the China market. The Flipboard China edition arrived first on iPad, and by March 2012 it appeared on iOS, eventually reaching Android in June that year.
The global version of Flipboard got unblocked at some point, but by August 2013 it was once again slapped down by Net Nanny. The Chinese version of the app has never been blocked.
There are numerous magazine-style reader apps in China, such as Zaker, as well as Netease Cloud Reader, so Flipboard has a battle to stand out from the crowd and be seen in China’s numerous third-party Android app stores. Flipboard partnered with two such stores – Wandoujia and AppChina – to ensure the app is as visible as possible.
While Flipboard isn’t as popular as Zaker on the app stores in China, Flipboard is still performing strongly.
Official China launch: August 2013
Success rate thus far in China: 8.3 / 10
Uber first rolled into China on the streets of Shanghai in August 2013. By February of this year, the soft-launch phase was over, and the mobile-connected limo service was ready to drive into the limelight. Sam Gellman, Uber’s head of growth for Asia, said at the hard-launch event that demand in Shanghai exploded, displaying the fastest growth of any of Uber’s markets around the world in its first six months.
Uber is now running in Shenzhen, Guangzhou, and Beijing too.
The UberBlack service – wherein Uber recruits chauffeurs to join its network exclusively – has plenty of offline rivals in China, as well as one major online rival in the form of Yongche. But Uber sets itself apart by its flexibility and its luxury appeal.
Nonetheless, Uber will have to battle offline limo companies that have years of guanxi (there’s that word again) with companies and can offer lower rates for some companies who bring in a lot of business. Uber is already the priciest option in the market.
Uber’s app is growing slowly on both the iOS China store and Wandoujia – though rival Yongche has had a lot more time to build up users and enthusiasm for its app. On the plus side, Uber is great at doing promotions, and knows its elite customer-base well. The service lends itself to fun promotions, as Uber has done in other markets with things like the on-demand ice cream truck in New York and the on-call dragon dance troupe in Singapore.
Official China launch: April 2012
Success rate thus far in China: 8 / 10
In order to enter the Chinese market officially, TuneIn opted to self-censor its radio streams for users located in China. As we noted upon its China entry in April 2012, attempting to play BBC Radio 4 instead redirected anyone in China to a state-approved radio channel. A TuneIn representative explained, “We are complying with Chinese government regulations to remove aspects of our service in China.”
With only one convincing and good-looking China-made app for streaming radio online, TuneIn seems to be doing well in the app stores. It’s also boosted by other partnerships in China, and comes preinstalled on a number of car entertainment systems.
Official China launch: April 2014
Success rate thus far in China: 6 / 10
Pocket, the read-it-later app, is on an Asian push these days, adding support for Japanese, Korean, and Chinese in March and April.
There are already a handful of homegrown save-it-for-later apps, but they’re mostly a niche preference for geeks. The same will likely be true for Pocket.
Nonetheless, Pocket is starting its China debut with a huge bang, getting more China iOS store ratings than any of these other US apps on the list – a whopping 132 ratings, mostly positive and five-star – and seeing a huge boost in reviews and engagement in the days since its Chinese-language update rolled out.
Official China launch: summer 2012
Success rate thus far in China: 5 / 10
Path founder and CEO Dave Morin said in September 2012 that China is the app’s second biggest country. Indonesia has since surpassed China.
It seems that the idea of Path is more popular than Path itself in China. When the app hit the headlines in 2011, a number of rip-off apps popped up that copied the idea of Path as a mini social network with messaging on the side. Several more popped up in 2012. Sina (NASDAQ:WB) – the maker of Sina Weibo – even rolled out a Path clone in the form of Sina Meyou.
However, both Path and its clones have since fallen out of favor. Messaging apps are on the rise – mainly just WeChat in China – and that has caused many people to abandon other social apps. Even Sina Weibo is suffering as WeChat becomes a hub for a great deal more than just messaging – for status updates from friends, for photos, reading and sharing news, telling people what you’re listening to. All that should be Path’s speciality, but WeChat is doing it all – and a lot more.
You can survive on the Chinese web, but…
What lessons can be drawn from these American tech ventures? Self-censorship is a running theme for nearly all these US startups entering China. No matter how niche the service, China’s strict media regulations will likely impact in some way, necessitating your startup altering or removing aspects of the app/service. To enter the market, you’ll likely need to create a product that’s separate or parallel from your international app.
We’ve even seen this need for compartmentalization happen for WeChat, which is trying to do the reverse – expand from China to the rest of the world. WeChat app does a lot more in China than it does for overseas users, emphasizing that you cannot roll out the same global strategy when you’re doing business in China.
What else stands out? In a word, enterprise. No overseas company will be allowed to compete in sectors like general media, search, or operate a broad and uncensored social media site. The key to success in China seems to be having a very niche product aimed at China’s urbanites, business people, and most tech-savvy individuals – ones who can appreciate how it stands out from the inevitable flock of local rivals.
It’s also important for overseas startups to iterate quickly with a local product team to stay ahead of local competitors. Engage actively with users via Sina Weibo, WeChat, Youku – and anything else that’s relevant. Learn lessons from Chinese companies like Xiaomi – engage on social media, know what your customers are into, and get your China product manager to speak out and inspire your tech-savvy customers. If you’re too late – like Pocket – or too detached – like Path – you’ll be lucky to gain any meaningful traction in the country.
Where there are exceptions to the rule, it’s worth noting that there are many sites for whom their China survival rests on a knife-edge, on the flick of a censor’s switch. Instagram has survived in China through its startup phase and even into its adoption by Facebook. But such a broad social network could be turned off in seconds in China – just a few photos of a protest happening in a Chinese city and the app will be blocked. It could happen any day now.
We try to avoid the cliché ‘1.3 billion’ figure on Tech in Asia when we write about China because it applies to so few companies that truly have universal products. You should aim at 1.3 billion Chinese consumers only if you sell Coke, or washing powder, or run a search engine. US startups – or any overseas web business – should ignore that landmark number because you’re never going to be allowed to do anything that’ll reach everyone online in China. Instead, find a niche, know how many people in China that sector entails – ten million? 100 million? It doesn’t matter – and go make something that’ll blow their minds.
An earlier version of this article first appeared in the Tech in Asia Emag, which is exclusive to our Insights subscribers. Find out more about TiA Insights.