BEIJING (AdAgeChina.com) -- In the wake of Google's threat to abandon the Chinese online search market, the attention of journalists and analysts here in Beijing has turned to the remarkable record of failure compiled by foreign online firms in China.
Over the past decade, we have watched a procession of successful global internet companies arrive, only to see them stumble badly or, in most cases, depart quietly, slinking from the Middle Kingdom like beaten curs. Why, I have been asked by at least a dozen professional "observers"?
There is rarely a single cause, and each company has had specific reasons for leaving: retrenchment at home, issues with local partners, inadequate funding, or perhaps one of the founders is seized by a delayed fit of misguided conscience.
The companies themselves most often blame China. Some even have the temerity to claim "protectionism," although with the internet industry at least, regulatory discrimination against foreigners has not been a major issue.
Yet after spending fifteen years watching successive waves of great companies get clothes-lined in China, observing many of their Chinese ventures up close, and spending untold hours conducting post-morta of each departure, it has become clear that there is an issue common to nearly all these failures. The reason foreign online firms tend to fail in China is that they weren't made here.
Allow me to explain. The standard practice of foreign online firms coming to China has been to do some cursory research, hold a big press conference announcing that they are coming to China, open an office, hire a large local staff, and with some modest degree of localization set out to do in China the very same business they are doing in their home markets. I call this approach "T&T," short for "transplant and translate."
Such an approach looks right on paper, and initial results seem to vindicate it: drawn by curiosity and the buzz, users initially flock to the site.
But soon things start to go wrong. The numbers stop rising as quickly. Maybe they even start to decline. Steeply. A local competitor pops onto the scene who seems to offer little more than a clone of the foreign site, but with a few weird differences. Suddenly the buzz is gone. Users flock to the competitor, advertisers and media agencies stop returning calls, and global headquarters is starting to ask hard questions.
An executive's natural reaction is to blame externalities: the government is protectionist, advertisers don't understand us, the competition is cheating. But the painful truth is that none of those things caused the buzz to die and users to go away once the site's novelty wore off. No, a mistake was made at the very beginning of the process. Somebody assumed too much.
The growth of the internet has been underpinned with a lot of utopian beliefs, and one of those implicit beliefs is that because it operates independently of location and distance, the internet actually rises above such outmoded concepts as nations and cultures. Apply that thinking to business, and you conclude that a site that is successful in one country will be successful in another.
But the Internet has been no more successful at creating a homogenized global online culture than it has been at rising above the laws of the world's nations. If anything, the internet has become a multicultural hothouse, not only nourishing cultural differences but leading to the growth of entirely new sub-cultures and tribes. Okay, so that's interesting from an anthropological standpoint, but what does it have to do with online business?
The world's major online companies emerged in -- and often as the result of -- these cultural differences. Google appealed to the information libertarians; AOL to those who wanted a sheltered online experience, and MySpace grew directly from the youth subculture around U.S. universities. These companies and others like them had an appeal related directly to the values and lifestyles of their target audiences, in most cases because the founders were from those very groups.
Transplant these companies (with linguistic and cosmetic changes) to a very different cultural context like China, and the reason for the falloff in popularity after a short honeymoon is obvious: these companies were failing the relevance test. Once faced with local startups created by enterprising members of the intended audience who understand how to strike the right note, and the foreign-born sites were doomed.
Baidu's virally successful "Baidu Knows" ad campaign captured the zeitgeist perfectly: don't be fooled by the Chinese patina slathered onto the global brands' local sites -- only the homegrown online brands are authentic and relevant.
Faced with this lesson, as marketers we now have to face our own moment of truth. If the global online companies failed in China because their transplanted sites were a mismatch for the local online culture, do the digital marketing tools created in San Jose and New York not face the same problem?
I don't just mean basic questions like whether we should try to shoehorn our global social media campaigns to fit a country where Twitter and Facebook are blocked and blogs play a very different role, or whether we have any business making online media buys for luxury watches in a country where most netizens are students. These questions answer themselves (or would, if asked.)
Rather, we need to ask whether the online marketing tools we have created elsewhere are going to be relevant at all in China, and whether instead we should be looking to create new tools that address China's unique online culture, and the very different role the internet plays in the nation's cultural context.
The answers to these questions are not obvious, and they will vary from company to company, and campaign to campaign, but they must be asked. Otherwise, the world's digital marketers will share the fate of the global online brands, locked out of the world's most promising internet market by our own hubris.
David Wolf manages Wolf Group Asia, a Beijing-based management advisory firm that specializes in technology, media, telecommunications, and entertainment.
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