The history of China’s internet is rife with stories of foreign firms who have struggled, if not outright failed, to break through. Most narratives followed a familiar arc in which Western headquarters refused to give local management autonomy to adjust the business model for China, and thus lost ground to more nimble local competitors.
The most famous example of this is eBay, which first entered China in 2002 through the purchase of a stake in local online auction house Eachnet, which it later bought outright. eBay handed majority control to Tom Online in 2006.
EBay’s mistakes were legion, but its first and fatal flaw was to continue to charge users a transaction fee while local rival Taobao offered its services for free. "Free is not a business model," was eBay’s verdict on its local rival.
A poor technical strategy also drove eBay users into Taobao’s hands.
"A year after we came into the market eBay decided to move their servers back to the US," said Christina Splinder, head of corporate communications for Alibaba Group, Taobao’s parent firm.
"That created a huge latency problem for consumers accessing the website. So a lot of the consumers defected to Taobao at that point."
It may be too early to pass judgment on US social networking site MySpace, but the firm has had a rough ride so far and the exit of its China head, Luo Chuan, doesn’t augur well.
Analysts say that MySpace did a better job than most foreign firms in terms of empowering Chinese management and staff. However, one industry insider said that MySpace China has stumbled thus far because it lacks a raison d’etre, unlike in the US where it started as a platform for independent rock bands.
"If anything, they didn’t have a central driving idea the it way that MySpace did in the US," the insider said.
But Tangos Chan, publisher of the China Web 2.0 Review, believes MySpace may still have some fight left in it.
"MySpace is trying something new in China, trying to really localize its service, not just translate it into Chinese. We still cannot judge whether it’s been a success or not, but they’re trying."