During one of the lunches at the LIFT conference in Geneva I met Markus Fuhrmann. He’s the co-founder of Web2Asia. A European service with headquarters in Shanghai that specializes in supporting western Internet companies and Mobile content developers to get a company or service going in China, Japan and Korea. Needless to say, there’s a lot of potential in these rapidly developing markets. Some of their clients are Jimdo (Germany), Xendex (Austria) and Vanilla Live Games. I kept in touch with Markus, and the business he runs turns out to be really fascinating. So I decided to ask him some questions about this hard to comprehend Asian markets.
Markus has a entrepreneurial history in games. His story in China began with an IMBA semester at Tongji University in Shanghai. “In the beginning I both loved and hated it in China, because I started my stay with one week in a Chinese hospital with pneumonia. After recovering and getting used to the cultural and environmental differences, I started to enjoy the dynamics and sheer endless opportunities available here.” He consulted several companies on how to launch in China. When he met his partner George Godula they connected immediately and it made perfect sense for them to team up.
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So, when I want to enter the Asian market, what should I take in account? “The East Asian characters. This is a smaller problem for completely web based services but can amount to a lot of work if you have to change your client or back end infrastructure because you forgot to use Unicode and double byte support in the first place. In terms of function and usability there are a lot of things to watch out for, especially in Japan and Korea with the example of mobile phone support, which is crucial.”
“The second important part is the content side. Here you have to take care that the content fits the Asian culture, especially in terms of symbols and language. Another sensible topic is working specifically to local legislation requirements and restrictions on certain content.” I assume Markus is referring to dealing with censorship in China. Which probably brings some conscience issues.
The last part is less complicated and controversial, namely the feasibility of the underlying business model. Markus: “It’s already quite hard to earn money through advertising in Europe and the US, but it is even more difficult to earn money through this model in East Asia. The positive examples have been able to transfer a model of premium memberships, customizable content – micro payments – and value added services.”
Facebook doomed to die
These three different parts seem to create some obstacles for all the global players, since they failed to gain a foothold in East Asia. “One of the most famous examples that didn’t work out in China has been Ebay China, the local competitor Taobao realized that Chinese users prefer much more to buy products instantly than to wait for an auction to end. Same thing with Google; in Korea the company only has approximately 6% of the market share. As for other western hypes, they have yet to make it to East Asia, which are not good signs either. For example, jokes are already going around in China calling Facebook, “fei si bu ke” (非死不可) a transliteration which means ‘doomed to die’.”
So why are the Internet Goliaths defeated by Asian Davids? “One of the main reasons is that most of them came very late to Asia, or have applied the same business model they used in their home markets which did not accommodate the local needs. Another reason is that many companies lack the human resources and the necessary financial backing to also enter Asian markets. Very often startups also have a hard time letting other people help them grow their business outside their home markets, because they think only they know the right formula for that business and don’t want to miss the excitement”.
“The combination of those factors leads to a market where the big foreign enterprises, like Google and Facebook, face huge entry barriers by local competitors who have had time to grow and learn in Asia, creating a continuous game of playing catch up for foreign enterprises. On the other hand, new and innovative startups also have to watch as Asian imitators apply their ideas and designs before they are big enough to go to Asia themselves. This leaves a market where a lot of promising western ideas never have a chance to take off and accelerate in such a rewarding market.”
The right way to approach Asian markets
So as most companies get it wrong, Markus can also came up with ventures that DO get how you should enter the East Asian markets. “A lot of the successes are from companies who came to China very early in their product life cycle, giving them time to adjust before Chinese competition could copy their business model, or create a more culturally matched version. Others have been founded by foreigners, or foreign born and raised in Asia, who took their ventures and ideas from the markets they came from and grew them in Asia. A lot of these companies are commanding a strong position in different niches, and don’t forget that a niche in China can be a market as big as a small European country. There is no reason why culturally sensitive and properly executed Western ventures should not be able to grow here and maintain their advantage and momentum.”
I also asked Marcus which cultural differences struck him the most. Of course he mentions the mobile phone usage, the excessive instant messaging and the fascination for their online identities. Yet I want to hear the funny misunderstandings I haven’t heard it before. Luckily, Markus mentiones one: “Very small cultural differences can have an immense impact. On Chinese e-commerce websites, or general websites for example, any hyperlink to an individual product page will open in a new browser window or tab. This leads to many Chinese users automatically closing the previous site they were visiting, right after they clicked the link. If your site however, uses hyperlinks that open in the same window, this will lead to many users accidentally closing your entire page.”
So we Europeans don’t get how to launch a product in Asia. Yet it probably is a learning process. Thanks to companies like Web2Asia, the markets become more accessible. However I also think that with common sense and a road trip through the countries, you can get pretty far as well.
Oh and to ease your mind, Markus also mentions that it works the other way around: “At least failures for internationalizing interactive media companies do not only happen to western companies in East Asia, but vice versa as well. Cyworld, the biggest Korean social networking service for example, just recently closed down their operations in Europe.”