How Facebook can Fail in China in 5 Easy Steps (if They Copy MySpace)

14-Apr-2011

I like this.

By







Apr. 13 2011 – 10:56 am 
By ERIC JACKSON
Image representing MySpace as depicted in Crun...
Image via CrunchBase

 

Many foreign companies have had disastrous forays into China.  Dreams of billions of yuan from hundreds of millions of Chinese buying their products and services fizzle.  These companies wake up to a reality of huge losses and major organizational distractions.

How do you assure your failure in China?  It’s only through learning from others’ (or our) mistakes that we can hope to avoid them in the future.

If Mark Zuckerberg is as smart as I think he is, he’ll study this quick and easy list of how to utterly fail in China – and then he’ll avoid doing these things when Facebook and Baidu (BIDU) set up their new joint venture social networking site in China (if reports from earlier this week prove accurate).

Some skeptics, like my friend Bill Bishop and former Google (GOOG) director of global public policy, Andrew McLaughlin, believe that Facebook will have a very difficult time succeeding in China, despite having a big partner like Baidu.

So who is the best poster child of failure in China that’s relevant for Facebook? It’s actually MySpace China.  Never heard of MySpace China?  Here’s why.  TechRice provided a great list of reasons for why News Corp (NWS) completely failed in their efforts to establish a beachhead in China.  Here’s my summary of them:

  1. Hire a competent CEO but then don’t let him make any decisions for himself. MySpace hired Luo Chuan to be their China CEO.  He was formerly the CEO of MSN China from Microsoft (MSFT).  They could have hired a monkey and it wouldn’t have made a difference because it was all run out of News Corp/MySpace headquarters in LA.
  2. Say “this time it’s different” and then make all the other mistakes failed foreign companies have made in China. “Our team here will have the sole right to decide the operation model, the technology platform as well as the product strategy… It’s very unlike the other multinationals you might have heard about or seen in the Chinese market,” said Luo at MySpace China’s launch.  None of this was true.
  3. Set up the venture’s board with a bunch of absentee landlords to undermine local management. News Corp immediately put MySpace co-founders Chris DeWolfe and Tom Anderson on the MySpace China board.  That wasn’t bad in itself, but their presence definitely led to an attitude of “We’ll tell you peasants in China how the great MySpace should work in your local back-water.”
  4. Throw in some nepotism and put someone with no business operating experience on the board. Rupert Murdoch placed his wife Wendi Deng on the MySpace China board with DeWolfe and Anderson.  When the operation was really in trouble, he even asked her to step in to a day-to-day role at the company as MySpace China’s Chief Strategist.  Murdoch explained his decision this way: “We have to make MySpace a very Chinese site. I have sent my wife across there because she understands the language.”  If only it was so easy as speaking the language.
  5. Pick a name for your website that native Chinese speakers can’t spell. Joe Chen, who is Chairman of the parent of hot Chinese social networking site RenRen, said: “You tell a typical kid in China who has never heard about MySpace and ask the person to spell it. 90% of the time the kid has no clue.”

Of course, even if Facebook avoids all these mistakes, there are others that could derail them.  Bishop has pointed out that Baidu may be successful in search but – much like Google – has failed in social.  Yet, Baidu will be the local partner in China telling how to do social so that it succeeds in China.  How do you square that circle?

McLaughlin also correctly points out that no American Internet company has succeeded in China yet, whether as a stand-alone entity – like Google or eBay (EBAY) – or through a JV like Yahoo! (YHOO).  McLaughlin believes that is because the Chinese government won’t let any of these foreign companies succeed in China.  He thinks Facebook ought to have stayed out of China until they could dictate their terms for coming in (and McLaughlin also never thought Google should have gone to China in the first place).

I still agree with Zuckerberg’s decision to go in now though and build a foundation in China that should pay off over the next few decades.  But he’ll have to be acutely aware of the situation on the ground there and ensure that Facebook avoids the potholes that have swallowed many other Internet companies before him.  Maybe I’m giving him too much credit but I believe he can succeed where others have failed.

http://blogs.forbes.com/ericjackson/2011/04/13/how-facebook-can-fail-in-china-in-5-easy-steps-if-they-copy-myspace/


Tags: , , ,

Post a Comment

Your email is never published nor shared. Required fields are marked *

*
*

Subscribe without commenting