Ties That Bind - Bay Area Council Economic Institute

More documents

Recommendations

Info

74 Ties That Bind Companies also earn money from text and multimedia messaging, wireless internet over mobile phone, music downloads and custom ring tones. Tencent, an instant messaging web site, sells users phones linked to its QQ.com services, and charges for games, online dating services and data storage. Its ad revenues more than doubled in 2005 and ad rates rose 50%. At the same time, however, hunger for broadband content has driven up the prices internet services pay domestic and foreign providers of music, movies and games. Search and Sell Monetizing search poses special problems: Until 3G wireless is fully built out, search is done over mobile phone largely through non-internet directory trees, with users guided through unwieldy voice and keystroke menus. Business-to business (B2B) and business-to-consumer (B2C) services are slow to develop because most of China’s 22 million small businesses in 31 provinces are still “unmapped,” in stalls or storefronts without signs or building address numbers, on unnamed streets. Online commercial transactions are growing, but online payment is still in its infancy. McKinsey & Co. estimates that only about 50 million Chinese earn the $5,000 a year or more that provides them with true disposable income. As noted earlier, Chinese consumers have traditionally been debt-averse and pay their bills in full each month. As a result there are only about 12 million credit cards in circulation, compared with 800 million debit cards tied to a bank account. Few banks or phone companies have had the capability to manage electronic fund transfers via computer or phone, without partnering with portals or search engines. Growing Pains Successful, rapidly expanding services are testing the operational limits of broadband networks, and the patience of the Chinese government. Massively multi-player online role-playing games (MMORPGs)—NetEase.com Inc.’s Fantasy Westward Journey, Shanda Interactive’s Legend of Mir II, Tencent’s QQ Fantasy, The9 Ltd.’s World of Warcraft—have at times drawn as many as 600,000 concurrent players onto computer and mobile networks for a single game, raising actual or potential quality of service problems. Music download revenues in China last year exceeded the total revenues of the entire traditional music industry; a single top-selling song was downloaded 15 million times on China Mobile’s network alone over a six-month period. In November 2005 China’s central bank, the People’s Bank of China, set a maximum internet payment transfer amount of 1,000 renminbi ($123.53) per transaction and 5,000 Renminbi ($617.65) per day, to reduce the potential for e-commerce fraud. In July 2006, China Mobile— urged by the Ministry of Information Industries after a flood of complaints—established rules to curb fraudulent mobile phone marketing and billing practices. The government has also taken steps against portals for spam, internet pornography and fortune telling ads. Gradually, however, the obstacles are being overcome and a uniquely content-rich Chinese internet is emerging—but not without a lot of help from Silicon Valley.
%D\ $UHD &RQQH�WLRQV Bay Area-China Trade: Behind the Numbers Northern California companies and investors have played a central role in building China’s internet. The internet infrastructure is driven by Cisco Systems routers, switches and filtering technology, which make up the backbone of both the public internet operated by China Telecom, CHINANET, the nationwide CERNet education network, and the next-generation CN2 network. Sun Microsystems, Nortel Networks and 3Com also provide equipment and software. Web portals Google and Yahoo! between them hold an estimated 34% share of the China market. Baidu.com, the leading portal with a 44% share, is the creation of Robin Li, a veteran of the Silicon Valley internet navigation firm Infoseek; and Eric Xu, a UC Berkeley post-doctoral graduate with a background in Silicon Valley biotech and e-commerce. Since 2002, Baidu has taken over the lead position from Google with a uniquely Chinese combination of self-censored search and ready access to MP3 music downloads. The company launched a highly successful public NASDAQ offering in August 2005, aided by Bay Area venture firms Draper, Fisher, Jurvetson and IDG Venture Capital, among others. IDG and Walden International were early funders of the two other leading Chinese web portals, Sina Corp. and Sohu.com. Silicon Valley investors and advisors also participated in the formation and growth of mobile phone portals KongZhong, Linktone and Tencent. Competition and cooperation in the sector have intensified simultaneously. In 2004–05, for example, Google and Baidu had an estimated combined market share of 90% and Google had taken a 2.6% stake in Baidu with an eye toward possible acquisition. Baidu’s IPO took the two companies in different directions, and Google sold off its stake. Google, meanwhile—which has taken the name Gu Ge (“Valley Song”) in China—provides its search platform to portal rivals such as Chinese-language gaming and media portal NetEase, and Hangzhou-based business-tobusiness (B2B) e-commerce platform Alibaba.com. Hewlett-Packard has struck deals to load Baidu on its computers sold in China, and provide Shanda with MP3 players that it sells under the Shanda EZPod brand. Yahoo! acquired a 40% stake in Alibaba, in a 2005 deal valued at $1 billion. Alibaba, formed in 1998 by a former English teacher and government translator, Jack Ma, brings to the table one of China’s largest business databases; a B2B trading, advertising and auction site for small and midsize businesses that bypasses costly Chinese distributor networks; and, most recently, the Taobao (“digging for treasure,” in English) consumer auction site competing directly with eBay. Menlo Park-based Granite Global Ventures, along with Yahoo!, is an early investor in Alibaba, which has its U.S. headquarters in Fremont. John Wu, a core member of Alibaba’s management team, previously worked at Oracle and developed Yahoo!’s first search engine. Yahoo! has, in turn, handed over management of its Yahoo! China unit to Alibaba for local control, providing access to a sophisticated global search engine, email and advertising platform. Previously, Yahoo! had acquired 3721 Network Software, a Hong Kong firm offering the most used Chinese-language internet directory, and software that enables users to type in Chineselanguage keywords to access Roman-alphabet domain names. 75
Page 2 and 3:
The Bay Area Economic Forum wishes
Page 4 and 5:
Bay Area Economic Forum 201 Califor
Page 7 and 8:
Table of Contents Introduction ....
Page 9 and 10:
Introduction About This Report The
Page 11 and 12:
Introduction dollar-denominated ass
Page 13 and 14:
Introduction practices of their sup
Page 15 and 16:
Executive Summary The San Francisco
Page 17 and 18:
Executive Summary As Silicon Valley
Page 19 and 20:
Executive Summary 8. Establish regi
Page 21 and 22:
1 A Rich History of Work and Reward
Page 23 and 24:
A Rich History of Work and Reward m
Page 25 and 26:
A Rich History of Work and Reward t
Page 27 and 28:
A Rich History of Work and Reward T
Page 29 and 30:
2 New Networks Emerge The Bay Area
Page 31 and 32: New Networks Emerge With scholarshi
Page 33 and 34: New Networks Emerge nomic Law; the
Page 35 and 36: New Networks Emerge and academics f
Page 37 and 38: New Networks Emerge schools on the
Page 39 and 40: New Networks Emerge Hong Kong and T
Page 41 and 42: New Networks Emerge financing—ban
Page 43 and 44: New Networks Emerge Since the mid-1
Page 45 and 46: New Networks Emerge (R&D) innovatio
Page 47 and 48: Hong Kong Seeks Its Role New Networ
Page 49 and 50: New Networks Emerge In recent years
Page 51 and 52: New Networks Emerge savings rates a
Page 53 and 54: New Networks Emerge Two, featuring
Page 55 and 56: New Networks Emerge All of the abov
Page 57 and 58: 3 Bay Area-China Trade: Behind the
Page 59 and 60: Bay Area-China Trade: Behind the Nu
Page 81: An Electronic Public Square Bay Are
Page 113 and 114: 4 Investment: Building Global Busin
Page 115 and 116: Investment: Building Global Busines
Page 121 and 122: 14,000 12,000 10,000 8,000 6,000 4,
Page 133 and 134:
Investment: Building Global Busines
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
5 Building Bridges, Leveraging Asse
Page 147 and 148:
Building Bridges, Leveraging Assets
Page 149 and 150:
Building Bridges, Leveraging Assets
Page 151 and 152:
Acknowledgments This report was co-
Page 153 and 154:
Walter Reichert Hewlett-Packard Co.
Page 155 and 156:
Sources Introduction American Chamb
Page 157 and 158:
Sources Hicks, John D. “The Ameri
Page 159 and 160:
Financial Services Sources “A Gre
Page 161 and 162:
Sources Schmitt, Kellie, “Lost Ho
Page 163 and 164:
Sources “China-Based Worksoft Cre
Page 165 and 166:
Sources Guerin, Didier, “Human Ca
Page 167 and 168:
Sources Cooper, Chris, Ken DeWoskin
Page 169 and 170:
Sources Liou, Fu Tai, “How Taiwan
Page 172:
Bay Area Economic Forum 201 Califor
show all

Ties That Bind - Bay Area Council Economic Institute

Create successful ePaper yourself

Delete template?

Save as template?