Rich: China has had a history of not being that open as a society and as a government. Any issues related to the Chinese government when it comes to the mobile industry itself? Do they not only regulate it, but also get involved in monitoring or blocking calls, or any of that kind of stuff?
Bruno: Completely. This is the most obvious unfair advantage of local companies have over Western companies in China. For example, Facebook has been banned…blocked since the Iran troubles two years ago, I think.
* This is an excerpt from an interview report. Download full report at Angels and Startups, Don’t Play in China Until You Read This.
Rich: Right, right.
Bruno: From that moment on the Chinese government has put a firewall on the Internet to effectively block Twitter and Facebook, which means that two of the most powerful social and communication media in the West have been blocked.
Because companies are not allowed to provide unfiltered search results in mainland China, Google had to redirect their search results to Hong Kong. Google lost a lot of market share because it’s much more difficult to redirect results to Hong Kong. It took much longer and the advertisers were not very happy.
Photo: trix0r
So, there is absolutely a completely unfair advantage to local companies when it comes to certain aspects. It’s very difficult for a pure Western Internet company to compete head-to-head with local companies in China. I think entrepreneurs should be aware of that.
If you’re competing at the technology level, yeah, there is an opportunity. If you’re competing at the media level, say, Internet media, then you have to become either local, or be aware of the risk that there’s going to be an unfair advantage.
There are huge social networks here in China, and they don’t face any competition from Western social networks.
Rich: Oh, I see. OK, so it isn’t just Facebook and Twitter, but all foreign-based companies operating in that particular niche will find it more difficult to survive in China?
Burno: Yeah. We were even worried that LinkedIn would be banned for a while because LinkedIn offers a gateway to Twitter, if you’re aware of that.
Rich: Right, exactly.
Bruno: This year, there were a few incidents where LinkedIn got blocked for a few hours, or a few days. It was very cumbersome. It also made the Internet much slower.
So, in general, local Internet users are at a disadvantage, but local companies have an advantage over their foreign competitors.
But this is only one side of the coin. If you’re a local company you have a huge overhead – to filter the content that is going through your pipes.
So, while you have more competitive edge over their foreign competitors, you have to waste a lot of resources filtering, reviewing, and putting teams to read messages or blogs to make sure that it is compliant with the Chinese government’s requirement.
* This is an excerpt from an interview report. Download full report at Angels and Startups, Don’t Play in China Until You Read This.
