Why Don’t More Chinese Internet Companies Expand Overseas?

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chinese flagWe’ve written a lot about Tencent’s success with WeChat, which now has 50 million overseas users, but the truth is that Chinese internet companies don’t tend to step outside the country’s borders much, and when they do, they tend not to succeed. So what’s stopping other Chinese web companies from seeing the same kind of success WeChat seems to have found?

  • Lack of interest. Frankly, many Chinese internet companies simply don’t care about overseas markets because China’s market is so huge and is likely to continue growing rapidly over the next decade. With a giant market at home that promises lots of opportunity, why even bother taking a risk overseas?
  • Lack of expertise. In the same way that many Western internet companies failed to properly adapt to the Chinese internet and thus were beaten by domestic competitors, Chinese internet companies face similar challenges when expanding abroad. Adapting Chinese services to the needs and wants of overseas users is difficult and expensive, and often finding the personnel necessary to do it properly isn’t easy.
  • Political problems. Chinese law can sometimes pose problems for companies hoping to expand overseas. As Tencent learned in February, for example, China’s requirement that all Chinese companies use maps that claim all disputed territory as Chinese isn’t something that goes over well in Vietnam (which also claims some of that same territory). But to remove the offending bits of the map would violate Chinese law. Some companies prefer to avoid these kinds of issues entirely by staying within China, where there’s only one political position you need to worry about.
  • “Brand China” is poison. I wrote about this a while ago, but in part because of stereotypes and in part because of very real issues like government censorship and China’s political scuffles with its neighbors, a lot of non-Chinese web users simply don’t want to use Chinese services, and in fact will go to some lengths to avoid them. Simply being a Chinese tech company in and of itself puts you at a disadvantage in the international marketplace, so many companies choose not to bother trying to row against the tide.
  • Entrenched competition. While many Chinese internet services have evolved into pretty unique platforms, most of the big ones started more or less as copies of successful Western services. But those Western services are still around, and outside China they have way higher user counts, way better brand recognition, and way more momentum. Chinese tech companies generally have enough competition to worry about domestically; trying to take on someone like Google internationally is hugely time-consuming and expensive.So, again, many companies choose to focus on the more-than-big-enough domestic market and just not bother trying to fight entrenched overseas competitors.

Of course, even given these issues, many Chinese companies are taking at least early steps towards expanding overseas. Baidu, for example, has been pretty active in Southeast Asia, with a research lab in Singapore, a portal site in Indonesia, and a security suite for Thailand, among other things. Tencent, of course, has the aforementioned WeChat that’s doing quite well overseas, and it likely won’t be long until other companies decide the risks are worth the potential rewards and follow suit.

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