A must read monthly report to explore Chinese web/mobile Internet Industry.

1. STARTUPSWATCH
SEPTEMBER 2010
With this monthly
report we hope to:
1) highlight the
best content and
opinions from
non-mainstream
independent
bloggers. 2)
provide overviews
and commentaries
on the views of
innovators, and 3)
give thoughts on
both hot and new
topics in Chinese
web industry.
EXPLORE EMERGING MARKET
New Horizons For Innovative Enterprise
For innovators and teams geFng in on apps for the discussion and providing
entrepreneurs, the ques2ons the three major Japanese helpful informa2on to
about emerging markets, social pla=orms, as well as understand and consider the
modes of opera2on, and the current status, LBS paradigm in the context
explora2on never stop. New dis2nguishing characteris2cs of the Chinese market.
market pla=orms mean huge and future development
spaces full of poten2al for opportuni2es of each of the
development and profit, and pla=orm. Second, we talk This month's Startups Watch
new products and modes of about the entrance of luxury is edited by WEB20SHARE’s
product development mean brands into the ecommerce WatsonXu and MOBINODE's
an opportunity to get closer market, and associated LuGang, CindyJiang, This is a
to user demands and bring innova2ons and monthly bilingual report.
about added value and breakthroughs. In our rising Thanks much to our English
growth. These all represent stars sec2on, we introduce 7 translator MoyHau and
precious opportuni2es and new companies that have English editor Dan Ciez. We
exci2ng new horizons for come online recently, and at look forward to hearing your
innova2ve enterprise. the end of this publica2on feedback.
This week, we focus on we recap the contents of
Feel free to drop us message
exploring emerging markets. August's NTalks forum on via mobinodetv@gmail.com
In the first sec2on, we go into Loca2on Based Services,
two topics: first, Chinese dev summarising the contents of
1

2. FOCUS. September 2010
Aer gaming and SNS became connected
in Japan, we saw some amazing
enterprises come to the forefront, among
them the three big players: GREE, DeNA,
and Mixi.
DeNA currently has a market valua2on of
4.121 billion USD, GREE 3.356 billion USD,
and Mixi 802 million USD.
Japanese Social Gaming Platforms
Chinese Developers Jonesing to Get In
More and more Chinese social game developers are GREE was established at the end of 2004. It listed on the
turning their sights on the Japanese internet market. It’s Tokyo Stock Exchange at the end of 2008 with 10 million
giant in terms of scale and space, and rela2vely mature. It registered users. As of July 31, 2010, the company had
has good users who are ready to pay for product, much 21.25 million registered users, making it the largest
more profit per user poten2al than the Chinese market, pla=orm in Japan. As of last quarter, its revenue was 127
and it’s rela2vely closer to China not only geographically million USD, up 113%. 104 million came from direct user
but also in terms of culture and user needs. We’ll be expenditure, and the remaining 23 million from
focusing on the three major Japanese online social adver2sing.
pla=orms in this issue, as well as the state of Chinese
teams’ entry into the fray. GREE’s products include a social network with avatar and
adver2sing income streams, and Flash Lite social games
Aer gaming and SNS became connected in Japan, we saw forming a strong virtual income channel. 98% of the traffic
some amazing enterprises come to the forefront, among comes from mobile phones. In June of this year, GREE
them the three big players: GREE, DeNA, and Mixi. DeNA imported 40 third party games from tradi2onal players
currently has a market valua2on of 4.121 billion USD, GREE such as Sega and Nancom, as well as some Chinese
3.356 billion USD, and Mixi 802 million USD. The three developers.
companies are listed on the Tokyo Stock Exchange.
Together, they are close to half of the combined valua2on GREE’s userbase consists primarily of the 15 to 30 age
of America’s EA and Blizzard. bracket with a more or less equal sex distribu2on. Most of
the friend rela2onships on the site are virtual, The pla=orm
Most Users: GREE focuses on entertainment. GREE is aiming to expand into
China as well as the American and European markets, as
GREE has exploded onto the Japanese scene recently, well as onto the iPhone and Android pla=orms. GREE’s
experiencing the fastest growth among the big three. It iPhone site is already in live beta, with a complete version
currently has about 100 employees. due out soon.
2

3. FOCUS. September 2010
Highest Valua2on: DeNA Wars clone. DeNA is also working on number. Twiqer, however, is spreading
DeNA is Japan’s largest social player in Android products. Addi2onally, the like a wildfire, with even the most
terms of both opera2ng income and company is working with Yahoo! Japan basic of mobiles integra2ng its
valua2on, with more than 400 to come out with a PC games pla=orm func2onality. As of February of this
employees. Founded in March 1999, it in October of this year. DeNA wants to year, it already had 5 million users.
went public in 2005 on the Tokyo bring its products onto the global
Stock Exchange. Mobage‐Town is stage in a big way. DeNA is working with Yahoo! Japan to
DeNA’s flagship mobile entertainment form a completely new social network,
pla=orm, with a userbase of 20.48 Super Social: Mixi Yabage‐Town. Yahoo! Japan claims
million as of July 31, 2010. Mixi is the site that most closely 24.11 million ac2ve users, but third
resembles Facebook. Most of the party analysis points out these are
DeNA’s products include mobile social website’s design borrows concepts mostly from older demographics.
networks, mobile services, and mobile from Facebook, and most connec2ons
social games. Approximately 80% of its between users are based on offline CyberAgent’s Ameba has 10 million
income comes from the social games rela2onships. It was established in ac2ve users, most of which use their
area. Mobage‐Town opened its June 1999, and listed on the Tokyo blog pla=orm. The company also has a
p l a = o r m i n S e p t e m b e r 2 0 0 9 , Stock Exchange in September 2006. It virtual world service, Pigu, and a
accep2ng a number of third‐party has 313 employees, 21.02 million microblog service.
games, a ring into which China’s Rekoo registered users, and an ac2ve
quickly threw in its hat. The most userbase of 14.3 million. Korean game company Hangame’s
popular game on the pla=orm was Japanese subsidiary announced 32.39
developed by DeNA and is similar to Mixi has a more or less even sex million registered users, but analysis
Mafia Wars. distribu2on, with slightly more has pointed out that there are a very
females. Most users are in the 18 to 30 large number of duplicate accounts on
Mobage‐Town’s users also form age bracket and live in Tokyo and the service.
rela2onships that are not grounded in other larger ci2es within Japan. It
face‐to‐face connec2ons, and it is also opened its PC pla=orm in August Zynga took an investment of 150
entertainment‐focused. Of the major 2009, and its mobile pla=orm in million USD from Sobank Capital for
players, DeNA is the one with the most October of the same year. There are a joint‐venture to distribute social
overseas development experience. more than 800 applica2ons for the PC games in Japan. Zynga also purchased
The company already has subsidiary pla=orm and about 400 for the mobile Japananese social game developer
enterprises in both China and the one. Unoh in August to help its entry into
U n i t e d S t a t e s , h av i n g b o u g h t the Japanese market.
IceBreaker in the United States and a With is open pla=orm, overseas 3rd
controlling interest in China’s Tianxia. party developers have entered into
their network. Rekoo’s Farmville clone
In order to break into the iPhone has been massively successful on the
pla=orm, DeNA has bought a 20% pla=orm, with about 5.1 million users.
stake in Aurora Feint, oen referred to Ac2ve developers include Rekoo,
as the “Xbox Live” of the iPhone Yicha, DeNA, Cybird, HappyElements,
pla=orm. DeNA put five of its games Drecom, Kaiying, Rockyou, 5minitues,
on the pla=orm, including its Mafia and others.
Mixi established a subsidiary in
Shanghai in 2008, called MixiU. Mixi
has also recently invested in a number
of Chinese enterprises, pulling them in
to develop games for their Japanese
The Internet Social Circle in Japan
pla=orm. Mixi has an iPhone app, Mixi
Besides Mixi, DeNA, and GREE, there
Touch, and there are also a number of
are a number of Japanese firms
3rd party Mixi clients listed in the
a c 2 v e l y i n v e s 2 n g i n o v e rs e a s
Japanese App Store. Unlike GREE and
development, including Infinity
DeNA, however, Mixi has yet to
Venture Partners, one of the investors
produce any games of its own.
Together, the three companies are in Rekoo and Qpod, and also a
close to half of the combined par2cipant in the forma2on of
Other Social Pla=orms
valua2on of America’s EA and Groupon.
Blizzard. Facebook only has 1.33 million users in
Japan currently, a rela2vely small
3

4. The biggest event in the Japanese scene currently is
FOCUS. September 2010 IVP’s Infinity Venture Summit, which happens twice a
year, once in the north and once in the south of Japan. It
brings together industry luminaries from both Japan and
abroad.
This sec2on was wriqen by Netease’s Snake Chen, a
three 2me par2cipant at IVS. He covered the start of
Rekoo in China firsthand, as well as the opening of the
three major pla=orms in Japan, the growth of GREE, and
Zynga and Playfish’s entry into the market. You can
contact Snake through africa815 AT gmail.com for
further discussion.
Tips for Luxury Brands * The market is very
in Chinese e-Commerce According to the latest (26th) report geographic. According to Taobao’s
Market released by CNNIC, by June 2010, report, the TOP 5 e‐commerce ci2es
Chinese e‐commerce users have are Shanghai, Beijing, Shenzhen,
Sales of luxury goods grew 12% in reached 142millions and increased Hangzhou, Guangzhou which
2009, to $9.6 billion, accoun2ng for by 31.4% in past 6 months. Also via generate ~22% transac2on.
27.5% of the global market, iResearch, the Chinese e‐commerce * Counterfeit issue in China
according to Bain & Co. In the next transac2on volume in Q1 2010 has has to be considered, especially for
five years, China’s luxury spending hit rmb 1015.27 billion ~ luxury market.
will increase to $14.6 billion, making $150billion). * Despite the e‐commerce
it the No. 1 luxury market globally. market is hot here, it is s2ll NOT
In 2009, China overtook the U.S. to More and more tradi2onal business that mature. People are expec2ng
become the world’s second‐largest see the huge poten2al from Chinese more about cheaper price online.
luxury‐goods market, behind Japan. e‐commerce, and some of the
Roughly half of the luxury goods luxury brands see that too. Luxury e‐Commerce in prac2ce:
purchased in China are bought as industry in e‐commerce, so can we
gis. (via AdAgeChina) find the perfect matching of both? * Pla=orm – think over
whether to build the online
One of our editors GangLu was pla=orm on your own or go partner
involved with a project consul2ng with the exis2ng e‐commerce
an interna2onal top luxury brand pla=orms;
which is planning its e‐commerce * Logis2cs – Efficiency, safety
strategy in China. Gang neither a big and reliability. Usually this can be
fan of luxury product, nor ever into easily solved with the partnership
the market. However, the with other pla=orms;
experience of working with both a * Payment – it’s not the
luxury brand and local e‐commerce difficult part usually as there are
services was great. Here he want to several payment gateway you can
share with our audiences some of easily integrated into your own
his finding which does not come pla=orm
with sta2s2cs by research but hope * (Social) Marke2ng – the
you find it interes2ng as well as internet culture is very different in
prac2cal. China, e.g. you need learn how to
talk to local via old style – BBS
General Takeaways: (online forum) which is amazingly
popular in China and you also need
* Despite more and more understand the power of new
business want to try out e‐ media, such as microblog. Do check
commerce, NONE of luxury brand is Sina’s microblogging service which
ac2vely doing e‐commerce in China. will be leading Chinese social media.
4

5. FOCUS. September 2010
Build your own e‐commerce pla=orm: pla=orms can not offer you fully customizable design;
they can only do with different templates; As a luxury
* The advantage is that you have full control of brand, you don’t want to give your customer a Cheap
your user’s profile which you can use for direct looking, do you?
marke2ng, such as sending newsleqer, data analysis * For sure, the thirty‐party wants some
etc; commission, probably per transac2on basis; the rate
* But can you legally do that in China? In order to could be varied, depends on what category of products
run e‐commerce in China, you may need a Chinese you sell online.
partner set up a JV, or do a WFOE structure; * It’s a safe and easy strategy to start with your e‐
* Understanding Chinese users’ online behavior is commerce: Partner with one big pla=orm which can
important. It is very different so it must be concerned drive traffic and revenue for several years, in the
when you design the UI/UX? Check out all those meanwhile you can learn the market and plan your
popular e‐commerce sites, you will see the layout of own e‐commerce pla=orm. Yes. That’s workable, but
each site is QUITE similar. make sure that that partner allows you export all your
* And don’t forget that you yourself need deal customers’ data upon the contract expires.
with logis2c which sounds easy as there are several
logis2c companies you can choose and the price is Which pla=orm is the best for the business?
rela2vely transparent. But if you are a luxury brand, you
don’t want your packaging damaged, got dirty etc when * Taobao, well, yes, you can not ignore such a
it arrives at your customers, right? giant which takes ~80% Chinese e‐commerce market
share; Go talk to them and they have a good team
Work with third‐party e‐commerce pla=orm: which is able to deal with Interna2onal brand.
* But Taobao is not everything. Especially for a
* It’s the solu2on suitable for small/medium luxury brand, it’s risky!! Keep that in mind, people come
company. For sure, they will offer you a full package: to Taobao for Cheaper stuff;
user base and traffic, online e‐commerce pla=orm, * There are several others you should check, such
logis2cs, even customer support via IMs, Call Center, as P1.cn’s online shopping mall for luxury people, MSN
email etc; then you just need decide on what product Shopping and Ule China for brands, 360buy and newegg
you want to sell online; for electronic product, dangdang for books and so on.
* But if you really care about your brand, make They may offer you something which Taobao may not,
sure the pla=orm the third‐party provides can be fully e.g. more customizable pla=orm.
customizable. Most of the exis2ng e‐commerce
More and more
tradi2onal
business see the
huge poten2al
from Chinese e‐
commerce, and
some of the luxury
brands see that
too. Luxury
industry in e‐
commerce, so can
we find the
perfect matching
of both?
5

6. EXPLORE. September 2010
Lezipu is a financial social network and an electronic
Established in 2009, Mokard issues member cards that marketplace entertainment and shopping pla=orm. It
help retailers and marketers establish customer allows users to locate nearby stores and injects game
rela2onships and build brand trust. Clients can use the elements into the experience, allowing affluent
pla=orm to administer membership cards as well as urbanites to find suitable loca2ons to spend money on
issue virtual cards linked to mobile phones, as well as entertainment. It also includes func2onality to stay in
see geographic and sales informa2on. The company touch with friends, as well as compe22ons, point‐
now has both iPhone and Android clients. collec2on and interac2vity features.
Link http://www.mokard.com/Index.aspx http://www.lezipu.com/
Looa is a pla=orm that alerts users to discounts and Uimio is a loca2on‐based social network, which allows
deals as well as allows informa2on sharing between users to publish real2me updates linked to their
users, providing reliable informa2on through loca2on through mobile phones. Users are not only
coopera2on with merchants. The company is able to publish their own updates but also to comment
experimen2ng with bringing social financing into e‐ on others, find nearby ac2vi2es, and add them to your
commerce, and is definitely worth watching. todo list. The pla=orm currently has an iPhone client.
http://www.looa.com/ http://www.uimio.com/
Youkia is an entertainment‐based next genera2on
online community which aims to combine the best of
Yingyonghui is a full featured Android soware networking and gaming in a gaming‐based social
management system, based on the Android pla=orm, network. Youkia.com has effec2vely brought social
of course. It is more localized than the Android Market, networking and online gaming together. The site
and states its goal as, “Making the most complete, supports both real‐name and alias‐based iden2fica2on
most convenient download pla=orm.” It is a product of to make a trustworthy and trendy network that
Innova2on Factory. everyone can enjoy. The development team has
extensive experience in social games, as the creators of
2000’s biggest virtual community: .
http://www.yingyonghui.com/
http://www.youkia.com/index.php/index.
Wacai365 is a product of Hangzhou‐based Caimi
Technologies, and is an accoun2ng pla=orm, both
desktop and mobile‐based. It provides Android,
Windows Mobile, and Java clients at present.
http://www.wacai365.com/.
6

7. REVIEW. September 2010
and is considering the injec2on of ads profit, as fees are taken directly from
into the services, as well as adver2sers that LBS users comment
conduc2ng research that shows that on.
Japanese people have a psychological Reac=ons to LBS and Dianping
What gets talked about at NTalks need to check in. Culturally they
announce their arrival and departure Kaikai’s Mu Rong made the analogy
We had IDG’s vice‐president, Li Feng; that tradi2onal online shopping like
a representa2ve from Japan’s VC at work and at home ‐ it’s a
fundamental component of the Dianping.com is more like the male
C y b e r A ge nt , Z h a n g Q i n g c h u n ; method: find what you want and buy
cofounder of 16fun, Yuan Tianlin; language. CyberAgent believes that
when the 5 million user mark is it, whereas LBS is more like the
founder of Kaikai, Mu Rong; Vice‐ female method: go to the mall first,
Director of Sales and Marke2ng for reached, regional differences will start
to become significant. and then see what there is to buy.
GypSii, Liu Jianjun; and cofounder of IDG’s Li Feng believes that
Sifang.com, Gao Shi. Although IDG has invested in similar Dianping.com relies on trus2ng the
Ji ep an g ’s fo u n d ers D avi d a n d applica2ons within China, but not the reviews of strangers, which requires a
Yuancheng couldn’t make it, they ones that showed up for NTalks. Li buildup of trust over 2me, whereas
delivered a short video message in Feng had three points to make about LBS operates on the principle of
which they introduced Jiepang to the Foursquare‐like services: review of opinions of people you
audience and gave “greetz” to 1. Mee2ng the internet adver2sing already trust, and is thus quicker.
everyone at NTalks. We also enjoyed needs of the ter2ary sector (small and Dianping.com already has an android
excellent audience commentary. medium‐size enterprise) is a big client that has check‐in func2onality,
value‐added market. Baidu and and its API is par2ally open to other
How loca=on‐based services work: Google mostly work on the secondary manufacturers. The check‐in
16Fun is a loca2on‐based game (LBG), sector. func2onality allows users to solicit
similar to a virtual real estate market. 2. Foursquare allows users to stack on real‐2me commentary and provide it
Kaikai is a loca2on‐based service (LBS) each other to improve effec2veness themselves. The API isn’t a fully
that brings the element of loca2on of word of mouth, and check‐in also mature product yet and is
back into the SNS realm where it has offers a quick, easy solu2on. consequen2ally only par2ally open.
been missing. 3. The almost 1,000 group‐buying LBS and tradi2onal review sites differ.
Tuding started off as more of a sites that have sprung up over the Tradi2onal review sites like
mobile‐based blog, but with the past few months have indirectly Dianping.com works by allowing you
addi2on of following and sharing of helped LBS by educa2ng the ter2ary to weigh others’ opinions against
updates, it became more of a check‐in sector about internet adver2sing. each other, whereas LBS sites require
service through which people can you to trust your friends more.
follow each other around. LBS has two development models:
Sifang is a larger service based on the SNS and adver2sing. The SNS model is
broad concept of LBS, and is much the “s2cky” mode, as LBS s2mulates
more than a simple check‐in service. virtual and concrete interac2on,
increasing the level of social
CyberAgent has invested in similar closeness. The adver2sing‐based
LBS applica2on providers in Japan, model is the more direct route to
Current Issues Wrapping it Up
Everybody was in agreement that problems aren’t a There are a lot of start‐ups in LBS right now, and
maqer of the fundamental technologies or map data, but everyone’s very eager to see what will come. The market
rather modes of opera2on. For instance: is in its ini2al stages with user habits s2ll being formed
1. Suitability. A lot of people are developing LBS for and profitability s2ll a ways off.. LBS in China has many
Android and iPhone now. possibili2es and the mul2ple players may take it in
2. User habits. Chinese users are s2ll geFng used to the different direc2ons– hopefully we’ll see some great stuff
concept of LBS and “checking in”. A lot of people are out there for the Chinese market.
running MTK chipsets and use it as their only real
entertainment pla=orm. WAP pages are compara2vely NTALKS is an offline event organized by
simpler, and LBS just carries too much complexity for MOBINODE on a regular basis to 2ghten the connec2on
MTK. among local start‐ups, as well as a pla=orm and
3. Openness. A lot of Foursquare’s success comes from community for grassroots and startups to demonstrate
2e‐ins with Facebook and Twiqer, but Chinese pla=orms their works, share their experience and communicate
are much less open. with the poten2al partners and investors.
7

8. STARTUPSWATCH
SEPTEMBER 2010
With this monthly
report we hope to:
1) highlight the
best content and
opinions from
non-mainstream
independent
bloggers. 2)
provide overviews
and commentaries
on the views of
innovators, and 3)
give thoughts on
both hot and new
topics in Chinese
web industry.
Special Thanks to OrangLabs Beijing, BlueRun China and TrilogyVC
Feel free to contact us via
mobinodetv@gmail.com
Please keep a lookout for our blog
www.mobinode.tv
www.mobinode.com
www.web20share.com
8