Back from Shanghai Ad-Tech 2006

I went to Shanghai Ad-tech 2006 expo in Pudong Shangli-La Hotel this morning. Compared to the number of talks, the number of exhibitors is kind of small, only 20. I talked to 65% of them. There are several foreign companies, coming from Japan, USA and even Slovakia, to look for Chinese partners . There must be much more in the audiences.

85% exhibitors are Internet companies, a few are mobile marketers.

They are in three categories:
1. Search engine: Accoona, a business directory and information search engine providing advanced search to modify result by region, scale of company, and person’s name.
2. Marketing/ad technologies: Lyris (ListManager) and Radica (Email Marketing Management, EMM), iCast (Rich media technologies)
3. Advertising network: Creative, campaign management, data management, analytics, and affiliate

Interesting conversations:

Grigo: I heard that your company is No. 1 in China, but while I was visiting your Web site, I couldn’t find much.
Answer: Well, we are a big but low profiled company. (To be honest), we don’t want people (competitors?) to copy us through our site. You can find out more with this brochure.

Grigo: (with a Hong Kong company) How do you like doing business in mainland China?
Answer: Well, we beat Espolon and got a big client in China, but we want to deal with international/global clients rather than Chinese.
Grigo: puzzled… Isn’t it that China has a huge market and plenty of opportunities?
Answer: (continued)… We found that whenever you deal with Chinese, you need to think about the worst cases of how they would cheat you....

Grigo: I read a piece of news that you got a very important Chinese client recently; do you have an office here?
Answer: Not yet, but we are looking for a partner/partners here today. Actually, it was the client first found us in California.

Is the future a Swarm of Vertical Searchs or Google Singularity?

Via John Battelle I saw a Searchenginelowdown post highlight research that shows higher user satisfaction with Become.com vs. Google for shopping tasks. As you know, I think there are specialized search opportunities that can help people get the information they are looking for much more easily. The challenge for Become.com is discoverability and people's desire to do better than what they are currently using--something like a 80% satisfaction rate for Google (and a 68% for Yahoo!...sorry I need to look for the source.)

Here's an excerpt using the broadcast TV vs. cable TV analogy:

"when we talk about Google killers I don't think we're talking about a single source - we're talking about an aggregate of sites that do specific tabs of Google better....This will not be an overnight thing, but rather a year-by-year thing in which we will watch Google's search share erode to more targeted specialty engines....Cable didn't kill broadcast, but it certainly hit it hard, so perhaps "killer" isn't really a precise term."

There are 2 problems. First, is consumers may already be satisfied with Google, or to be more precise, the halo effect from success with general searches overcomes the specific failings of Google in a specialized area. Second, specialized search engines still face the issue of getting advertisers, and ultimately they are dependent on Adsense or Yahoo! publisher network.

I still think that Become.com and other specialized search plays have a chance. I don't think the answer is predestined either -- if numerous specialized search engines do a great job in their vertical, then people will be trained to look for better search tools, and everyone (in specialized search will win). So lets see if Become.com, Kayak, etc. can prevent us from falling into the Google singularity...

Everything is a game

I have a weakness for powerful, confident, reductionist theories that seek to explain everything through one single factor or dynamic. In college, it was Marx, Freud, Durkheim, Smith, Mill, Weber and deTocqueville. Now, its all about the fundamental game dynamics that drive all successful applications.

Here are some posts about China:
Living is China is like a Role Playing Game (RPG) - Sinosplice
Travel in China is like a Fantasy Novel - VioletEclipse

Here are some posts about social applications:
Ebay and MySpace are Games - BusinessWeek about Amy Jo Kim
In fact, every great consumer social application is a Game - See Amy Jo Kim's eTech preso at Shufflebrain.

Today, I was talking with an entrepreneur about some exciting mobile ideas...everything is under NDA so I can't share! But I find myself evangelizing this insight that I originally got attending Kevin Werbach's Supernova 2006.

UPDATE: Just found a link to Wired's guide to Second Life. I've been wanting to go to Second Life for a while and this might give me the impetus to go explore there.

The 95-5-0.5 rule of social applications

Via Hank Horkoff of Network Sense and ChinesePod (I met him via Adam Bornstein), I saw an post by Jakob Nielsen on participation inequality in social applications. Well, the 80-20 rule and even "long tail" have become conventional wisdom, but I think this post highlights the extreme nature of this rule in social applications. I first saw this when I was running ClickRewards, a 5 mm member loyalty program (not really a social application). Getting customers was easier than we thought, but activating them (driving engagement) was more difficult. This applies to blogging and social applications in an even bigger way.

Some examples that drive home the point:

Inequalities are also found on Wikipedia, where more than 99% of users are lurkers. According to Wikipedia's "about" page, it has only 68,000 active contributors, which is 0.2% of the 32 million unique visitors it has in the U.S. alone.

Wikipedia's most active 1,000 people -- 0.003% of its users -- contribute about two-thirds of the site's edits. Wikipedia is thus even more skewed than blogs, with a 99.8-0.2-0.003 rule.

Participation inequality exists in many places on the Web. A quick glance at Amazon.com, for example, showed that the site had sold thousands of copies of a book that had only 12 reviews, meaning that less than 1% of customers contribute reviews.

Furthermore, at the time I wrote this, 167,113 of Amazon’s book reviews were contributed by just a few "top-100" reviewers; the most prolific reviewer had written 12,423 reviews. How anybody can write that many reviews -- let alone read that many books -- is beyond me, but it's a classic example of participation inequality.

I met Jimmy Wales when I was at Intuit where he really put a point on this. Its really 1000 people who really drive the entire engine at Wikipedia!

Is this your blog? or your membership program? or your loyalty program? or your mmorpg?

Here is Jacob Nielson's prescription:

• Make it easier to contribute. The lower the overhead, the more people will jump through the hoop. For example, Netflix lets users rate movies by clicking a star rating, which is much easier than writing a natural-language review.
• Make participation a side effect. Even better, let users participate with zero effort by making their contributions a side effect of something else they're doing. For example, Amazon's "people who bought this book, bought these other books" recommendations are a side effect of people buying books. You don't have to do anything special to have your book preferences entered into the system. Will Hill coined the term read wear for this type of effect: the simple activity of reading (or using) something will "wear" it down and thus leave its marks -- just like a cookbook will automatically fall open to the recipe you prepare the most.
• Edit, don't create. Let users build their contributions by modifying existing templates rather than creating complete entities from scratch. Editing a template is more enticing and has a gentler learning curve than facing the horror of a blank page. In avatar-based systems like Second Life, for example, most users modify standard-issue avatars rather than create their own.
• Reward -- but don't over-reward -- participants. Rewarding people for contributing will help motivate users who have lives outside the Internet, and thus will broaden your participant base. Although money is always good, you can also give contributors preferential treatment (such as discounts or advance notice of new stuff), or even just put gold stars on their profiles. But don't give too much to the most active participants, or you'll simply encourage them to dominate the system even more.
• Promote quality contributors. If you display all contributions equally, then people who post only when they have something important to say will be drowned out by the torrent of material from the hyperactive 1%. Instead, give extra prominence to good contributions and to contributions from people who've proven their value, as indicated by their reputation ranking.

So I think 95-5-0.5 has a more clumsy mouthfeel than 80-20. I used to tell people that "you will have the 80-20 rule in your top decile" which means something to direct marketers but few other people! So maybe 95-5-0.5 it is then.

UPDATE: I posted on various aspects of China social applications on my new blog at CN Reviews. I also posted about China microblogging as part of my overall coverage of CNbloggercon.

Using Technorati RSS Feeds

Steve Rubel's post on using Technorati RSS Feeds. Need to think about how this applies to China and China VC (which doesn't really have an active blog ecosystem, or a clear community utilizing a set of tags).

His ideas on how to use this:

• Track when a blogger discusses a specific subject. This seems incredibly useful, even for creating different channels for our own blogging activity. Can we use this on ourselves?
• Drill down deeper into your favorite blogs.
• Track memes that others don't follow. Its nice to piggyback of off established memes but what if the memes we are most interested in haven't already gel'ed?
• Bucket your influencers into different feeds. I didn't really understand this.

Anyway, take a look at the original post and see what this might be used for.

China Answers - what level are you?

Since I came back from China in late September, I have been thinking about some kind of China Answers service. There are so many How Do I questions out there that seem very difficult to find. I think people are out there answering questions already, so it may be a search problem rather than an answers' community (like Yahoo! Answers or Baidu Zhidao).

I found this post on The 88s interesting...a bit of quiz to assess how much you know about China. A bit different from How Do I questions, but "levels" and "test" appeal to the competitive nature of people who want to show they are an expert on things...so what level are you?

"Level 0
(The guy at 7-11)

1. Can you locate China on a map? (no)
2. Can you name three famous Chinese other than Bruce Lee? (maybe…after 10 minutes)
3. Is there any real difference between China and Japan? (no. or “Yes, Japan has ninjas.”)

Level 1
(Your best friend’s mom?)

1. Can you locate China on a map?
2. What is the capital of China?
3. Who is the president of China?....
...9. Who is Zhang Ziyi?
10. Does China have malls? (no, I don’t think so)

Level 2
(The graduate student with a “Free Tibet” sticker on his Subaru)

1. When did the CCP come to power in China?
2. What language do they speak in Hong Kong?
3. What is Far Lunn Gong?....
...6. Does China have malls? (yes)...
...9. What was your favorite part of “Crouching Tiger, Hidden Dragon?”
10. Who was the Chinese leader who started China’s program of economic reform in the 1980’s?

Level 3
(The 23-year-old English teacher who’s been in Hangzhou for 2 months?)

1. Who is the President of Taiwan?
2. What is the capital of Sichuan province?
3. What is huo guo?...
...8. Who is the father of modern China?
9. What is the current renminbi/USD exchange rate?
10. What are some Chinese perceptions of the US?

Level 4
(The infamous China expat)

1. What are the prospects for democracy in China?
2. Which is better: Dalian or Dali?...
...7. What is the prevailing theory on the Hu/CYL and Shanghai factions within the CCP?
8. Who is worse: Zhang Yi Mou or Chen Kai Ge?
9. Describe the Chinese management style — if in fact you think such a thing exists.
10. Have you used the phrase 埋头苦干 as a double entendre in a pick-up line in a bar in Shanghai?

Level 5
(The “Sinologist”)

1. Is the yuan undervalued? Why or why not? Does China unfairly manipulate its currency?
2. What is the CCP strategy vis-a-vis the DPP?
3. How many of Jin Yong’s novels have you read in Chinese? Zhang Ailing’s?...
...8. In Beijing’s eyes, how does North Korea relate to the Taiwan question?
9. Is Chinese culture “anti-democratic?”
10. Compare and contrast May 4, 1919, to Jun-e 4, 1-9-8-9."

So there it is. This gets very current affairs / political economy oriented at the higher levels. At least that's my excuse for not being a Level 5. Some of the Level 3 and Level 4 questions are easy, and others I have no idea. Ahhh...to be pwned by a 23 year old English teacher in Hangzhou...

What level are you?

Official site of Skype China

http://skype.tom.com/

The right leadership model for Chinese start-ups

I read Helen Wang's post on innovation and leadership as presented at the HYSTA conference which I missed because I was too jet-lagged and tired from my 40 meetings in 15 days in China. One question I'm interested in is: "What is the right leadership model for Chinese venture-backed start-ups?" First of all, I should preface it by saying that there are many different roads to the same destination, and its difficult (especially in China) to come up with generalizations.

Here's part of the comment I added to her post:

Differences between China and US that drive differences in the right leadership model

1. Pre-legal environment
In general, China has a much less predictable legal environment. Its much easier to take intellectual property from your employer and start a competing company, without the company really having any legal recourse. That is why I think many traditional Chinese leaders have held know-how, customer relationships, etc. very very close to the vest, to insure employees are dependent on them. I think this is rational, but needs to be coupled with the habits of a Western, collaborative environment in order to generate better team based results.

2. individual vs. team. I've heard from Chinese CEOs that employees are much better at individual competition than cooperation as a team. One theory (I think from James McGregor) is that the Chinese education system is examination based, and there is a much lower focus on team sports and other extracurricular activities that Americans are exposed to early on. Young Chinese employees want to learn, and are very open to Western management style, but need to be provided the training.

3. Communication. There seems to be an opportunity for leaders to coach team members and employees on communication, both inside and outside the company. This is related to the team point above.

4. Hierarchical. Possibly related to the educational system point above, traditional Chinese businesses are much more hierarchical. Therefore, people expect to take direction in a corporate environment. Is being an open, collaborative leader interpreted as a sign of weakness, rather than strength? On the other hand, I've also heard returnee CEOs say that managing people in China is easier because people take direction!

5. Training and education. One similarity is that people want to feel invested in. I think a rich set of training/education tactics, and habits of identifying high-retention people and investing in them, is highly valued in China.

Anyway, this is not really a robust model, but just a start. Maybe I can convince some of my CEO friends to share some of their secrets (though this is harder in China than in the US ;) I'll keep noodling on this and I think the model will get better and better with some good collaborators...

China unblocks Wikipedia

Reported by Editor & Publisher (via BoingBoing), Wikipedia apparently is now available again in China. Here's Wikipedia's explanation

"We'll see how long this lasts," said the company on its site. "Chinese Wikipedians have expressed fears about the detrimental effects that a permanent ban would have. First of all, the block deprives a useful resource from the majority of Chinese speakers in the world. Moreover, since Mainland Chinese form a significant portion of the Chinese Wikipedia community (46% of all users in March 2005), a long-term block could severely stunt the growth of Wikipedia similar to the block in June 2004."

Here's the Wikipedia article itself on the history of blockage. The article shares how 1 Wikipedia sysop in China posed it in the public interest of China:

.. [t]he most effective approach is not to reject [this project] outside our borders, but to participate in it actively. If we block Wikipedia, we lose the opportunity to speak with the world with a Chinese voice, and allow forces such as evil cults and Taiwanese independence [to] control the development of content in the project, thus presenting to the world a twisted [image of] China; as users, we lose a channel through which we could access knowledge, a channel whose importance is rising constantly; such an act [i.e. blocking] is no different from cutting away our own voice and tongue, or shutting our own eyes and ears; it is closing the doors to our country in the age of the internet.

I think this is a good example of a Chinese citizen trying to pose the dilemma of control/censorship back to Chinese regulators in a way that suggests that active engagement in the global conversation is in the best interests of China. Most Western criticism poses freedom of the press as an unalienable human right, but I think this represents a more subtle approach that poses active, positive engagement in the free market of information as a case for more freedom.

UPDATE: Via ChinaHerald, and interesting post by Andrew Lih on how the unblocking actually happens...shows that the Great Firewall while mandated top down, is implemented bottom up, actually very distributed and very provincial...similar to most things in China.

How did Ebay lose China?

While I was in China, I heard conflicting rumors about Ebay's exit from China, and coverage of this exploded around 9/26 (when I was in transit back from Hong Kong).

• Om Malik (coverage here) speculates that Ebay spent over $500 mm in cost and opportunity cost after factoring in the $130 mm purchase price of Eachnet, operating expenses, lots of Meg Whitman time in China, and global buyer resentment about the free ride for the domestic China seller (Om Malik here).
• Also covered in TechCrunch here about the widely circulated but unconfirmed news that Tom.com/Hutchinson Whampoa was taking this on with a significant cash infusion. My independent sources claim that many better acquirers (e.g. Tencent, Netease, Sina, etc.) passed on this deal before Tom.com got a bite at it.
• Here's Pacific Epoch's take and an earlier rumor about a Tencent investment/acquisition, and Silicon Beat's take.
• AuctionBytes reports on the belief that this is a Yahoo! strategy (honorable retreat).

But all this happened 2 weeks ago, and there has been no follow up or confirmation. But the real question is: How did Ebay take an early 70% market share and find themselves with few strategic options in a market they deemed a "failure is not an option" geography?

I'll keep updating this page as I hear more or see more news. And I hope there is some better analysis of What Happened?

Top 10 from (to) a novice blogger

One of my former Intuit colleague's, Avinash Kaushik, shared some insightful tips that I really got a lot out of. I'm sure this may be obvious to some, but I learned from it. Here's the summary:

1. Nobody cares about you, they care about what you can do for them
2. Have a personality, reflect your core beliefs, be honest, have fun
3. Blogging is a very serious time commitment
4. Pick a subject matter you are passionate about and that you are good at
5. Respect the intelligence of your audience
6. Blogs need constant promotion, participation and evangelism
7. Being “digg’ed” is great exposure but traffic builds gradually over time, one person at a time
8. Have goals, whatever you want them to be
9. Be nice, save your hidden agendas for other uses
10. Nobody will read my blog

More detail can be found on his blog, here.

Robert Scoble boiled it down to two factors: (a) focus on something you are passionate about (#4 for Avinash) and (b) figure out how people are going to find you. This encompasses a bunch of tactics that I'm sure is so natural to Scoble he doesn't enumerate for us mere mortals: keyword research, SEO, link baiting, ecosystem blogs, inbound links, clear goalsetting/branding...as a mere blogging padawan apprentice, I seek to learn the deeper ways of the Force...:)

UPDATE: And my friend and former business partner Sandeep Giri comments further on this here.

Standing on the shoulders of giants...

A year after leaving Intuit, I have been doing some reflection about the last 12 months. In summary, it was a great year! I love the saying "standing on the shoulders of giants" and that's how I feel about my friends and advisers. Here's a sample (not comprehensive) of some of the people I'm thankful for:

• Gary Angel, founder/CTO of SEMPhonic, a super Web analytics advisor
• Adam Bornstein, Ymer Ventures, and partner on UAA fundraising
• Murray Brozinsky, founder/President of Cambrian Ventures
• Jeff Camp, leader of Full Circle Fund's Education Impact
• Eva Camp, Full Circle Fund Board member
• William Chang, founder, Affini, a person search startup
• Michael Fassnacht, now CMO at Draft Worldwide in Chicago, and former co-founder of Loyalty Matrix
• Sandeep Giri, CEO of Loyalty Matrix, whom I wish would join me on my next adventure
• Min Guo, my intrepid Ng Ventures team member based in Shanghai
• Amy Haugen, independent designer
• Jack Herrick, founder WikiHow
• Auren Hoffman, CEO/founder of RapLeaf, a reputation company
• Doug Hoover, Director/founder of Just Do Good
• Wei Jiang, founder/CEO of 2duNet, automotive classifeds startup in China
• Sheila Salvucci, VP Marketing of Presto, a photo printing device startup
• Faith Sedlin, co-founder of Oodle, a classifieds search company
• Eric Tilenius, fellow adventurer many times over, who introduced me to China deals
• Noah Tratt, former Microsoft collegue, now VP/GM within Expedia
• Chelsea Tu, Chinese Tutor
• Diane Wang, CEO of DHGate, a Beijing based wholesale merchandising startup
• Scott Wilder, QuickBooks community guy
• Howard Wolk, Co-President of Cross Country Group
• Jean Wu, CEO, China Help Line, and partner on UAA and NgVentures projects
• Mike Zhang, CEO of diet.com, and a great Christian brother and friend

Thanks again, and look forward to working together some more!

China trip report!

Apologies in advance for a long blog post!

I returned last Wed from a 2+ week trip to Beijing, Shanghai, Guangzhou, and Hong Kong. This is my 4th trip to China during the past 12 months and I continue to feel that China presents great business opportunities everywhere you look, but also presents huge execution challenges, especially for foreign companies and investors. With Google continuing to bleed market share (reported on CNet Asia here) and rumors of Ebay's exit/sale of Ebay/Eachnet (to Tom.com? Hutchinson Whampoa?), I think the road to success is littered with a lot of dead bodies...

I've been focusing on 3 themes related to China.

Automotive Services Market
My Shanghai team (Min and Jean) and I were serving a US client, Cross Country Group, a $400 mm revenue provider of roadside assistance services in the US, with over 70% automotive OEM market share and 70 mm customers under management in North America. We attended a conference hosted by AutoFans (in Chinese), aka Cheyoo, a Sinopec subsidiary. The conference focused on automotive associations (aka 汽车俱乐部) and enthusiast clubs (车友会).We even got some press coverage here, here, and here (all in Chinese).

Unlike automotive manufacturing (OEM), automotive services is very lightly regulated and relatively undeveloped so far. Some of the big aggregators include: UAA (earlier client of Ng Ventures and Ymer Ventures), BitAuto, ChinaCars. We also met some of the more focused tow operators: CAA, SYAA. I can't blog further on what we found because its confidential. :)

Global Trading and B2B
The second theme is around the area of global trading and B2B information.

We met with Jason Wan, CEO of BusyTrade. They just completed an angel bridge round (that I missed out on because I was on paternity leave), and are getting some great traffic (see Alexa ranking). I am convinced that there is serious growth opportunities in this area and that Alibaba is not going to be the only successful company in this space.

I also met with several other companies in this space, including Diane Wang, CEO of DHGate, providing wholesale marketplace services to Chinese suppliers and global buyers. There is another Shanghai-based, stealth-mode start-up that is more focused on the China domestic market.

I've also got some proprietary ideas about how to tackle this market but need to find the right partners to move these ideas a bit further along, possibly through incubating a start-up team to execute on these ideas. More on this later.

Marketing Services and Membership Programs

Met for the 2nd time with a company called Yacol, creating a membership club program across a network of merchants. I can't say a lot about what we discussed, but I can say that I'm excited about their traction so far and their future direction. Super smart team!

Also had dinner with Grace Liang, CEO of SkyLinkage, a marketing services provider to the financial services industry. This was also a confidential conversation, but I think this company is worth watching too.

I met with numerous loyalty marketing companies. I don't have an advisory relationship with any, but am happy to share advice on a non-exclusive basis to help as many of these companies be successful. My latest insight into loyalty marketing comes from the game design industry. As I blogged before, I really like Amy Jo Kim's formula for game addictiveness, boiled down into 5 key factors:

1. collecting
2. points
3. feedback
4. exchanges
5. customization

Here's her pitch from an earlier conference:
http://shufflebrain.com/GDC2006.htm

OK, sorry for the long post. Thanks again for the exciting conversations with some very talented Chinese entrepreneurs, and I'd be excited to help in whatever way I can.