Nikkei Business
Download the Japanese/English article in PDF (3.2 MB)

Brief Summary:

The article describes the dramatically changing USA-led Internet business in the world with the rise of China. It mentions how Chinese companies, Alibaba and Baidu, are doing so well despite the fact that they launched in the China market later than Google and Ebay did. It also discusses the ambitions of Alibaba and Baidu whose Japan market entry has not been smooth and still mid-way. In contrast to them, WorldFriends Networks is cited as the sole example of a China-based company actually having Japanese members in volume and especially paid members and moved into profitability.

Main statistics and points:

Estimated Internet population in China is 150 million and expected to exceed that of USA in 2010.
Pie chart indicates the market share of following 3 categories in China:

1. Search engine: Baidu 66.3%, Google 18.1%, Yahoo 6%, others 9.6%
2. E-commerce: Taobao 48.1%, Ebay 25.6%, others 26.3%
3. Internet Advertisement: Sina 15.8%, Baidu 14%, Sohu 10.8%, Netease 5.2%, Tencent 2.8%, others 45.8%

*Source: iResearch

Main Internet companies in China:

*Unit price: USD, as of December, 2006. Alibaba is not listed company.

About Alibaba:

1. Alibaba established auction site Taobao in 2003. Taobao became popular largely due to its chat system which enables buyers and sellers to chat online (Ebay did not have this) and a secure online payment system. Its market share in 2006 (total buy and sell) was 48.1% as compared to that of Ebay 25.6%.
2. Providing a convenient (IM) and secure environment (escrow and trust pass: 3rd party verifies the conditions of the company, etc.) is the key of Alibaba’s success in China.
3. Alibaba succeeded in B2B transaction by helping medium and small sellers/companies to make money as compare to B2B in the west who have been focusing on the large buyers/companies.
4. Alibaba launched Japanese website in 2002 focusing to help Chinese companies to expand their presence in Japan, but it is now trying to help Japanese companies to expand their presence in China.

About Baidu:

Baidu was established in 2000 and became popular with its accurate Chinese language search engine and music file search service. Baidu’s market share, access to the top page, is 66.3% and that of Google is 18.1% in December, 2006.

About WorldFriends Networks:

WFN successfully entered into Japanese market in 2003 with its global and multilingual SNS and its member base has grown to 1.2 million. It is popular among the young East Asians who are interested in learning English and cultural exchange and the member base is increasing 40,000 to 50,000 monthly. WFN is based in Shanghai and also has an office in Tokyo to actively acquire Japanese members. Registration and search are free, but in order to send emails to other members, you need to become a paid member, but it is still free to reply to a message from paid members. Multilingual SNS is popular among Japanese: the one month service fee is 3500 yen. Japanese members account for 30% of the total member base, and 70% of 40,000 paid members. Due to increase of Japanese paid members, WFN moved into the black three years after its launch. According to Dominic Penaloza, “the language business market in Japan is huge. Our service is good value for money when you think of paying 3,000 yen for only one hour of language lessons”. There are many markets in China and Japan that American Internet businesses failed to succeed or find. Japan-China cross-border Internet business is coming out of the box and freshly developing.