March 10, 2006

Beav, you goof, monetization of music in China ends with 3G

Filed under: Regulatory,Wireless — Administrator @ 11:03 am

Today, we received Piper Jaffary’s latest China Analyst research note titled, “Music in China – Monetization Through Mobile Platform.” While we don’t have any major issues with their thesis that “several new developments [in China music industry] suggest that monetization of music, through mobile services, is beginning,” we do want to call them out on how profitable music will be for content providers, distributors and intermediaries.

First, here are some key findings on China’s mobile music market (source: Piper Jaffary 3/06):

We estimate the Chinese mobile music market size to be approximately $200-$400 million in 2006 consisting primarily of ringtone and caller ring back tone sales.

Yet, in both the U.S. and in China, young people who will almost never pay to buy a CD or download legal copies, happily pay $5-$20 per month in the U.S and $1-$4 in China.

What [kids] are telling us and the industry is that they are willing to pay for music, but only on their terms.

Good stuff, yeah? Sure, but wrong conclusion! Kids/adults in China (and everywhere else in the world) aren’t paying for ringtones because they want to, and surely not “happily” – they pay because they have no alternative; the mobile companies control the mobile pipe, the gateway, and without paying for that mobile connectivity kids/adults would be, well, they would have talk to each other a lot more. Come on Piper, get with the game – you guys sound a bit, well, a bit square (“Gee, Beav, I don’t know?”).

This gets us to our point, finally, that content is going to be free, all content that is, the music industry as a content provider will need to own that pipe if they hope to profit from mobile sales; and the reason, moving forward, is one acronym: 3G.

What makes people believe that they can control file sharing through mobile phones anymore then they control it now on PCs? Widespread use of 3G (medium – high end users) in China is a couple years off, maybe 3 years, however we are already witnessing the proliferation of WiFi enabled phones (Dopod 818pro in the house!) and WiFi hotspots in China; we believe this makes any hope of earning a sustainable profit from music in China a pipedream (ex-our carrier friends – love that growing ARPU). And, we haven’t even touch upon “off-line” mobile P2P sharing but that’s out there, too.

For the record, so Piper doesn’t cut us off, we think the guys at Piper do a great job, it is just we don’t agree with them on the medium to long term picture of music in China.

March 9, 2006

Start-up due diligence: First looks, Siam Cement, and working shoes?

Filed under: Start-up First Aid — Administrator @ 5:49 pm

I think I’m becoming an expert at decoding embedded meanings in “first looks” which are really two second glances from people I meet for the first time.

For example, yesterday, I flew in from Hong Kong to meet with a bunch of Beijing based companies; at one of the start-ups, I was introduced to a new member of the team (a returnee). After we exchanged name cards and got the pleasantries out of the way, I noticed he glanced down at my shoes, grimaced, and returned his eyes to his colleague who was gabbing on about something.

I regarded his first look for a moment and realized it wasn’t the typical glance I’m accustom to (“he looks a lot like Tom Cruise”); in fact, this was the holy grail of first looks, it was the illusive “shoe first look” – that quick calculation used to measure an individual’s worth by the shoes he wears.

Moments later, as we were walking into the meeting room, I snuck a peak of his shoes and realized he was gliding down the hall in a pair of expensive fine Italian leather jobs – very fashionable, very European.

This brought me back to a conversation my ex-girlfriend had with me one day while in b-school, “…the world judges a man on two things, his watch and his shoes…” She is bright lady, so I took her advice and bought some nice business shoes; the problem was, by the time I actually had a reason to wear them, I was back in Asia; and as a rule I refuse to wear nice leather business shoes when I’m out in the streets in China.

I know I sound crazy but there is a very valuable lesson (and reason) that I learned dating back to my first job in Hong Kong; and thus, I beg a little patience as I fumble my way through this explanation.

It was 1995/96, and Asia was, well, rocking financially; I was 22 years old, a Hong Kong rookie, having just relocated from Tianjin, PRC, and over the moon about landing my first banking position as an equity analyst/sales-trader. About a week into my job, my British boss came to me, grinning, and said:

Boss: “Congratulations! We are sending you down to Thailand for two months to learn about the market…”

Me: “Where is Thailand?”

Boss: “…Americans. Right, lace up your wingtips, dry clean your suit, and get on that plane…”

Me: “Seriously, Tom, where is Thailand…”

Forty-eight hours later, I’m zooming through the streets of Bangkok, in the blazing heat, in the back of a tuk-tuk, a three wheeled motorcycle with a passenger carriage, wearing a nicely tailored, professionally dry cleaned, charcoal grey suit and shining black Italian leather shoes. I was looking good, feeling great, and ready for my first company visit with Siam Cement.

Calculator in one hand, note book in the other, I stepped out of the tuk-tuk and into a puddle of mud. Ah, crap! Mud was everywhere – outside my shoes, inside my shoes, and on my face (it was a big puddle). I think my level of embarrassment was up there with unknowingly walking into a meeting with bird shit your head.

After the meeting, the MD of Siam Cement took me out for drinks. As we were walking out the door, heading to the bar, I noticed he was wearing working business shoes which are not boots, but not dress shoes either, perhaps Doc Martens are the best description of them. I didn’t say anything but remember thinking, “dude, this guy is MD of Siam Cement and is wearing a suit with Doc Martens, what is up with that?”

A couple drinks into the session I got up enough courage to ask him, “Why aren’t you wearing nice shoes” (I was young, a little tipsy, and working for a British firm, it was a fair question). He regarded me for a minute, looked at my shoes, and grimaced (same same look as I note above). The MD took a sip of his drink, turned to me and said,

“Why would you want to destroy a nice pair of shoes walking around in that crap outside in the streets just to look professional? Real life, success in business, isn’t about nice Italian leather it is about taking stock in your surroundings and adapting to those surroundings. My employees earn a couple dollars a day, what impression do I give off if I walk around the office or project site in shoes worth more money then their annual salary? It is a mindset, I want to remind myself I’m not finished, I’m not retired, I still have work to do. By the way, nice shoes but mud isn’t your color…”

I thought that made a lot sense and shared his insights with my boss, who in turn “recommended” I clean up my shoes, dry clean the suit and prepare for my next meeting; which I dutifully did, however I never forgot what that MD from Siam Cement said.

Now, when I’m doing my due diligence on new investees, when I remember, I try and check-out (not a “first look” though) their shoes to see if they are “style shoes” or “working shoes”. I like to see start-up guys wearing working shoes. I like the symbolism, that gritty, scrappy working shoe mindset. And, this is why I wear my working business shoes in China.

March 7, 2006

Hello train, goodbye kitty — China’s travel sites getting smarter about pricing, supply & demand

Filed under: E-commerce — Administrator @ 11:07 am

One of the nice bits about traveling in China is that the airlines actually cut the price of their tickets closer to the date of departure – rather than the other way around, as it is just about everywhere else in the world.

For example, a one-way economy ticket from Shanghai to Beijing might cost RMB1,110 a week prior to take-off, yet drop to RMB580 the day before departure.

This pricing policy, according to a good friend who is CEO of a major Hong Kong airline, is one reason, the core reason, discount airlines will never make it in China.

Er, that was then (two weeks ago) and this is now. We were shocked, just flat out shocked, to learn yesterday that both e-long and ctrip no longer discount tickets closer to the departure date. In fact, according to our favorite e-long agent, at least in Shanghai, the maximum discount the agent can offer four days prior to the departure date is 20%, not the 40 – 60% we’re accustom to.

Everyday, we see little signs that China’s business environment is evolving, maturing, and this is great to see, even it if it means we need to consider taking the overnight train more often to Beijing than we would like.

95% of most wealthy American’s shop online

Filed under: E-commerce,Gaming — Administrator @ 9:05 am

USAToday ran a short note on a recent Time magazine e-commerce poll, it reads:

An overwhelming majority, 95%, of affluent Americans have made an online purchase in the past year, according to the latest Time online poll, featured…the most popular items bought online were clothing, accessories and books; 68% of respondents made such purchases in the past year.

This is interesting from the perspective that in China (we imagine this trend holds true for other Asian countries) e-commerce is not only powered by the 18 – 25 year old segment, but also over 80% of these kids are actively engaged in some form of e-commerce.

And thus, compared to the USA (and Europe?), e-ecommerce demographics are completely different here in China as these 18 – 25 year old guys/gals are not all that affluent – basically, spending their time gaming online rather than purchasing electronics online. If we use USA/Time e-commerce poll as a proxy for China’s e-commerce timeline, well, I guess we better dig-in as it is going to be a long wait.

One thing is for sure, we are glad we are not heavily invested in the e-payment space

March 5, 2006

Asynchronous Communication has caused us some problems this week…

Filed under: Web 2.0 — Administrator @ 1:35 pm

As far as weeks go, this past week was definitely challenging – riddled with conflicts and misunderstandings across the board. In hindsight, we can sort of make out where we stumbled – the question is, how do we prevent this from happening in the future?

Perhaps more than anywhere else in the world, in China, the importance of face/self-worth/ego are paramount – more so in the major cities, such as Shanghai, were people (both Chinese and Westerners) tend to take themselves more seriously (i.e. “…I’m educated, and thus you must respect me…”). We understand this very well but it isn’t enough to simply understand how the game is played you’ve gotta practice it 24/7 – truth be told, it gets exhausting.

One solution we are thinking about is phasing out our “asynchronous communication”, or rather:

…communication that does not require that all parties involved in the communication need to be present and available at the same time. Examples of this include e-mail, discussion boards, which allow conversations to evolve and community to develop over a period of time, and text messaging over cell phones.

And, replacing asynchronous communication with “synchronous communication”, or rather:

…communication where all parties involved in the communication are present at the same time (an event) is a form of direct communication. Examples include a telephone conversation, a company board meeting, a chat room event and instant messaging.

True, this seems a bit extreme (and perhaps not very practical in this day and age), but there is some merit to it – should a conflict arise during the “synchronous” conversation all the parties involve can stop, circle back, resolve the conflict, and hopefully move on rather than stew on something for x number of hours (as is the case with “asynchronous” conversation).

March 4, 2006

Indie film competition in Shanghai – “Contest 2.0”

Filed under: Video/Film,Web 2.0 — Administrator @ 11:46 am

It is a little late to enter but I just learned of a cool short film competition that is currently underway in Shanghai called “Contest 2.0” — the group organizing the contest is MeiWenTi Productions.

According to the contest’s guidelines there are a number of specific elements or situations that must be included in the film:

a bobble head
a flight of birds
an animal
a hidden secret that is revealed in the last 45 seconds of the film
the heart of Shanghai
the line “that’s so cool, can you do that again”
a pair of shoes
some eggs
an accusation and a violent reaction

We have an Indian friend who has entered this competition, his group’s film is titled, “Life as a Shanghai expat” and it promises to be very entertaining. When we get our hands on it we’ll convert it into an mpeg and post on this site.

March 3, 2006

Education is Web2.0’s “Killer App”

Filed under: Education,Web 2.0 — Administrator @ 12:46 pm

China use to cycle 5 to 7 years behind the West, in terms of technology/Internet business models, however with the introduction of business models leveraging “Web2.0” (this words is so overused and generic) technologies this cycle lag has dramatically narrowed; we’d argue China is only 2 to 3 years behind the West (while Japan and Korea might actually be trailblazing thanks to the proliferation of broadband).

As a result, local entrepreneurs looking to break into this Web2.0 space don’t necessarily have the cushion they once had – “hey, the train is leaving the station and you’re still trying to figure out how to buy your ticket…” – with Web1.0 business models. Furthermore, the very nature of Web2.0 ventures, being all user generated content and stuff, are significantly more global friendly (i.e. localization is bottom up, not top down) – for example, Flickr is as relevant to Xiao Wang in Xi’an,PRC as it is to Redneck Bob in New Hampshire, USA.

Not solely for this reason, but perhaps the above comment is a main driver of our belief that China based blogging communities are not financially viable over the long term (ex-advertising revenue model), for example, a recent survey revealed that over 40% of China professionals use MS Spaces, which is free and not a Chinese homegrown product. We think this certainly holds true for video storage/sharing sites as well.

Heather Green from Business Week fundamentally shares our view on blogs/podcasts/vblogs but “we thinks” Heather is overlooking one specific opportunity – Web2.0’s “killer app” – here is what Heather has to say:

But I believe the general notion here is that there isn’t a huge amount of money to be made just on podcasts and that the disruptive nature of podcasts lie in the fact that most people will be doing them for themselves and their friends and families.

So, what is the killer app (or business model) in the Web2.0 space? To Heather’s point, how are we as investors (and you as entrepreneurs) going to profit from this disruptive force – free content and storage? Well, after months (not years, mind you) of hard core research and analysis we’ve identified the perfect killer Web2.0 app/business model: Education.

We liken the Web2.0 education model (language/test prep) to online dating, but not match.com, more like Jdate.com – a dating site targeting the global Jewish community. Jdate can charge up to US$34 per month for their service because they have a captivated audience (Jews) looking for a specific payoff (a date/marriage) and are willing to pay for this (users trust the content/service).

To preempt any inflow of dating b-plans, for the record, we don’t see dating as a very good Web2.0 business.

Education is perhaps one of the only services/categories that not only leverages the benefits of community, RSS, podcasting, etc to vastly improve the user’s experience (“making learning fun”), but also does so inexpensively and, if you get the content and usability right, profitably. Furthermore, the market remains wide open (perfect environment for China based entrepreneurs) with only a handful of start-ups attacking this space (and no clear leader).

And, within the education space, we believe language and test preparation are the most exciting segments – largely because it combines both the foundation of a captivated audience (“I need to pass my GMAT to get into b-school or it’s back to the countryside for me”) and specific content (language is, well, language) with established/popular/free distribution channels (podcast, RSS) and the support of community/network (user generated content). In other words, consumers will pay for your content, while your costs associated with distribution are relatively low.

We especially like what the boys over at Shanghai-based OnDemand Training are doing with Chinesepod.com and Englishpod.com

March 2, 2006

Ogilvy Asia’s Chairman, Miles Young, talks about how culture impacts the branding mix

Filed under: Direct Marketing,Marketing — Administrator @ 10:56 am

We’ve been meaning to write a post about the impact of cultural dynamics on branding in Asia/China – last week (2/27), Stuart Biggs, a journalist from Hong Kong’s South China Morning Post, interviewed Miles Young, Chairman of Ogilvy & Mather Asia Pacific, discussing this very topic – the article is titled, “Advertising chief spins culture into the branding mix”.

Miles concludes that Japan, as a result of zaibatsu legacy, is less accepting of single product branding (e.g. Bluebird), instead Japanese managers seek to promote the branding of the corporation (e.g. Nissan) – whereas in China, there is a “religious” acceptance to the concept of branding largely because Chinese manufacturers see branding as a defense against foreign product penetration.

We’ve transcribed a section of the article below (the article is password protected on SCMP website):

Until recently, the zaibatsu legacy – giant corporations such as Mitsubishi founded with political patronage in the late 19th century to industrialize Japan – had overshadowed more – western concepts of product branding.

“It didn’t matter what industry you were in as long as you were large and the brand was therefore the same as the corporation…separate product brands underneath that corporate umbrella were very difficult for them to grasp.”

The same is not the case in China, where Ogilvy has benefited from the “religious” acceptance of the concept of branding.

“What has driven the belief in China is that the market has opened up, so branding is seen as a defense against foreign products coming in. It is connected with how to defend market share and you certainly don’t just want to do that on price.”

Ogilvy’s clients have developed from state-owned enterprises insecure about working with foreign agencies 10-year ago, to more progressive companies such as China Mobile – “as dynamic and marketing savvy as any of its international peers”

Definitely some useful commentary from the front lines, and while we do not pretend to know more than Miles on this subject, we bid Miles a “beg-your-pardon” on the China front – branding in China is definitely not as widely accepted as we are let to believe in the interview.

Well, if you consider hypnotic messaging (e.g. Focus Media 10 sec spots repeated 1,000 times a day) or tent shows in large shopping plazas brand building, then yes, it is widely accepted, but we don’t (from a cost-benefit-measurability standpoint).

While it is true to a couple major brands turn to branding to protect their turf from foreign competitors, the fact of the matter is, until very recently, local Chinese neither had access to nor could afford foreign brands; furthermore most foreign companies entered China as joint ventures, often branding under the local’s brand, for example Gillette purchased Shanghai based Eagle razors.

More to the point, joint ventures between foreign and local manufacturers always had support of the local government and/or a state owned enterprise (SOE) – automobiles, electronics — and thus it has always been in the interest to promote the branding of these joint ventures (yes, in many cases locals “borrowed” technology and went off and did their own thing).

The real brand battle isn’t so much foreign v. local, but rather it is local v. local. If someone can afford a foreign brand, they will buy it because the quality/service is better, not because they recognize the brand, per se. Until Chinese products and services (at least higher end goods/services, we aren’t talking about soap or socks) met or exceed that of foreign offerings, branding will never be an issue.

March 1, 2006

Beijing lifts 6-year ban on door-to-door direct markting/sales…Avon ladies rejoice!

Filed under: Direct Marketing — Administrator @ 3:58 pm

Last week, China’s Ministry of Commerce gave Avon Products the thumbs up to resume door-to-door direct sales in China. In 1998, Beijing outlawed direct sales after a rash of “pyramid schemes” surfaced. This move paves the way for other companies to resume direct marketing operations.

Victor Mallet, a Financial Times reporter, published an article on Tuesday titled, “The flight to Asian cities needs managing not curbing” suggests:

…there will be an additional 300m to 500m people, equivalent to the entire population of western Europe, are expected to move to towns and cities from the countryside by 2020…

At last count, Avon had a global sales force of five million independent reps; Avon expects the addition of new China based reps will ratchet this number significantly higher over the next decade.

In some bizarre twist of fate (and this might be a stretch, but here goes) the resumption of direct marketing in China might not only elevate entrepreneurial spirit but also (in some small measure) help stem the flow of x number of migrants running to the cities for employment – it reasons that the sheer number of direct marketers needed to serve a nation of 1.3 billion people must number in the millions – mass hirings by direct marketers (e.g. Avon) in the larger towns/villages might keep a portion of these migrants at bay (i.e. “I have a regular client base near my family…”) or at the very least, increase the number of traveling salespeople constantly on the go (i.e. “have sample bag…will travel”).

We dislike being predictable, but since we don’t have a creative bone among us (queue popular Chinese proverb) :

“Give a man a fish, and you’ll feed him for a day. Teach a man to fish and he’ll sit in a boat and drink beer all day…”

Woops, wrong Chinese proverb…try this one:

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime…”

In other words, Beijing has either found an interesting tool to reduce the number of urban migrants or just created a nation of fast food eating, Motel 6 sleeping, traveling salespeople…

With all of the above noted, what happens to this sales force with the proliferation (er, what proliferation?) of ecommerce? It may not be an issue today but 5 to 10 years down the line it might just very well be…gosh, predicting future trends in China is so confusing…

February 25, 2006

Podcast #2: Questions VCs may ask during a customer due diligence interview

Filed under: Start-up First Aid,Ymer Podcasts — Administrator @ 3:31 pm

Click here to listen to the podcast

Welcome to Ymer Venture Capital’s podcast #2.

We are casting from the Victoria Peak in Hong Kong where it is raining today.

Today’s podcast is filed under the “Start-up First Aid” and the topic is due diligence.

We gets lots of emails from start-ups asking us what type of questions venture capitalist ask when interviewing the start-ups’ customers during the due diligence process.

Frankly, every VC has their own list of questions, and to be honest there isn’t a set format, but we have 13 base questions that we like to get out of the way before we ask spontaneous questions…

February 24, 2006

It takes longer than 15 seconds to make an investment…

Filed under: Start-up First Aid,Web 2.0 — Administrator @ 12:47 pm

I think you can learn a lot about life, relationships, and investing from watching sitcoms, especially US sitcoms – no joke!

For example, I have been watching season three of NBC’s Scrubs, a hospital spoof based on the lives of young doctors and nurses coming to age. In last night’s episode, the main character, Dr. John “JD” Dorian, commented:

“…a recent study showed doctors spend an average of 15 seconds with each patient – sounds insensitive but that is all the time we need…”

Reflecting back on JD’s comment, it stirred a thought, something that I’ve been noticing/observing for quite some time now – when it comes to investing, China based VCs a vast majority of China based VCs tend to spend more time listening to the opinions of other VCs than they spend on truly understanding the business and listening to opinions of the management team. So, let’s call this phenomenon “clubbing”.

I can totally understand that there is safety in numbers and that there are some benefits in building a syndicate (i.e. leveraging diverse relationships, experiences, and portfolios) but these spoils only go to the gold standard start-ups (i.e. those companies who fit the “Valley” venture model).

But this is China and as of yet there isn’t an acid test that is applicable to a majority of investments. The fact of the matter is that the VC environment in China is not only immature, but also untested (i.e. no serial entrepreneurs). Ultimately, lots of hidden gems fall through the cracks because their composition/profiles buck the conventional wisdom of what is an “A” team v. “C” team.

In my view, this is the time VCs should be backing less traditional ventures (i.e. anti-gold standard), when the market is less defined and investors are more accepting of China’s raw environment.

Turning back to our sitcom, Scrubs, (and yes, like all formula based sitcoms, there is a lesson here) JD recognizes the flaws associated with a 15 second diagnosis – let’s read what he has to say:

“…the problem with only listening for 15 seconds is sometimes you don’t hear everything, and when you finally figure out what they were trying to say you might have lost them forever…you can never underestimate the importance of listening…ultimately it keeps you in the moment so you don’t miss the things that really matter…”

A bit corny, we totally and unapologetically recognize this but, nevertheless, this is relevant to the point we are hoping to make…

February 23, 2006

Greylock’s Roger Evans discusses some of the things he looks for from an initial meeting with a start-up

Filed under: Start-up First Aid — Administrator @ 5:03 pm

Today, I had lunch with Roger Evans, Greylock, and Steve Williams and Hank Horkoff from Chinesepod.com — we had an interesting discussion about what VCs look for when meeting an investee for the first time. Roger is a Partner at Greylock and has over thirty-years of experience as both an entrepreneur and an investor – below are just some of his sage advice:

(1) Business focus – “what separates the men from the boys is focus, knowing what your core competencies are…what your addressable markets are…and being disciplined enough not to cross those boundaries…”

(2) Defend your territory– “once you’ve staked out your core competencies, how defensible are they?”

(3) Thought process – “the way you have thought through your business strategy/model…what factors did you take into account…where did you get this information from…”

(4) Motivation – “what gets you up out of bed each day?”

February 22, 2006

Push-back from South Korean online gamers intensifies, NCSoft forced to take action

Filed under: Gaming — Administrator @ 7:26 pm

Today’s Financial Times (FT) reports South Korean gamers are ganging up on Chinese gamers, whom they view as greedy and rude.

In Lineage, which has more than 3m subscribers, players in the form of knights, wizards and elves chase monsters who drop money and other valuable items that increase players’ strength, such as swords and medicine. These items can be sold for real money through online trading sites.

However, there is an etiquette to be followed: players interact along the way, but you are not supposed to take things dropped by someone else’s monster. Many young Chinese are joining South Korean matches because that is where the most items are traded and where the most money can be earned. But players say they do not follow the unwritten rules.

There have been reports of Chinese [parlors] where gamers play for hours to earn money using South Korean identities. More than 220,000 South Koreans have had their online identities stolen in connection with Lineage, NCSoft said yesterday.

We haven’t fully thought through the medium to long-term implications of this, but it can’t be good, especially because Chinese gaming companies license a majority of their MMORPG from South Korea. One thing is clear, it brings to light both the opportunities and the pitfalls associated to worldwide networking…

Why not to “under-promise, over-deliver”

Filed under: Start-up First Aid — Administrator @ 4:26 pm

A Technorati search reveals over 500 blog links to the phrase “under-promise, over-deliver”

We bring this up because, well, it seems to be the catch phrase of the month — 9 out 10 entrepreneurs prefer to “under-promise, over-deliver” — this mindset worries us greatly — when it comes down to it, we want to know an honest assessment of what you are capable of doing and where you believe the company will be in x number of months.

Otherwise how can anyone truly make an informed decision — from both an operational (resource requirement) and investment perspective…

February 21, 2006

What we want to see in your video sharing site…

Filed under: Social Networks,Video/Film,Web 2.0 — Administrator @ 7:35 pm

Man-o-man have we received a ton of b-plans pitching video sharing sites over the past couple of weeks. By last count there are no fewer than 50 such sites in the US alone; and since barriers to entry are so low making a move in this space is challenging. However, here are four criteria we want to see even before we will consider your venture:

(1) Destination – #1 spot, #1 spot, #2 spot (if you also own the #1 spot)

(2) Captive audience – size does matter (“super size me”), but so does their length of time on the site

(3) Rich content – audience contributes content as much as they consume

(4) Control – clear, functioning copyright and mature content control/policy

Zhong-doka 2.0 and e-Long

Filed under: E-commerce — Administrator @ 6:18 pm

What kills me about China’s Internet companies, even listed, well capitalized companies, is their lack of attention to details. For example, today I called Beijing based travel agent e-long to book a ticket from Shanghai to Hong Kong using the company’s “In Mainland China Number: 400-810-1119”

Here is my conversation with e-Long’s travel agent:

Ymer: “Hi, I would like to buy a ticket from Shanghai to Hong Kong”

e-Long: “Are you calling from Beijing?”

Ymer: “No. I’m in Shanghai…”

e-Long: “I’m sorry, you can’t use this number to book a ticket from Shanghai, you can only use it in Beijing…”

Ymer: “So, why, on your website does it inform customers in mainland China to use 400-810-1119”?

e-Long: “I don’t know…”

Ymer: “Don’t you think that is a little strange? I can’t be the first person to bring this up…have you ever asked your manager why this is the case or made a suggestion that customer service should try and clarify this?”

e-Long: “…(silence for 30 seconds and then there was laughter and a gulp)…do you want the mobile number of my boss to ask him yourself?”

I get it that people in Shanghai like to talk to other Shanghainese (strange phenomenon in China), but this is easily solved by using a web based PBX software – there really isn’t any excuse for this sort of service.

At the very least there should be a feedback loop from the front line agent to her immediate boss whereby suggestions are made and executed upon. Japanese automotive manufacturer, Toyota, did this famously, whereby they called it Jidoka:

…It refers to the ability to stop production lines, by man or machine, in the event of problems such as equipment malfunction, quality issues, or late work. Jidoka helps prevent the passing of defects, helps identify and correct problem areas using localization and isolation, and makes it possible to “build” quality at the production process.

Maybe we need to come up with a similar process – we can call it “Zhong-doka 2.0” and start evangelizing it to China’s web-based community?

Landscape of China’s white collar blogger…

Filed under: Web 2.0 — Administrator @ 2:48 pm

From Oriental Morning Post via Pacific Epoch:

According to a recent survey by Chinese career consulting firm CBP Career Consultants, 52% of white collar workers in Beijing, Shanghai, Guangzhou and Shenzhen have their own blogs and 28% more will launch their own blogs soon, reports Oriental Morning Post. According to the survey, white collar bloggers update their blogs every 3 days on average, and Shanghai’s white collar workers update their blogs every 4.5 days on average. The report said that 41% of white collar bloggers use MSN Space because it is only open to friends.

February 19, 2006

Case Study: CEO Secession — So, how did we get here? Who is responsible? How do we fix it?

Filed under: Start-up First Aid — Administrator @ 11:53 pm

I don’t like to give out too much advice on what to do and what not do if you are a start-up, largely because I think there are smarter people out there with better insights than me. However, today, I want to touch on a subject that has been running around in my head for several weeks: CEO Secession.

For the past six months, I’ve been working very closely with a Shanghai based technology start-up. As a result, I believe I’ve built an honest, trusting and open relationship with the CEO (Harvard MBA) and her management team. Typically, I’m wearing my “vc hat” however in this case I’m wearing both my “vc hat” and “team hat” which makes things a bit difficult as the investor inside of me must remain cold and calculating, while the team member inside is pulling for the company.

In this case, we are in the process of closing a second round of financing with a seasoned US/China based VC — one of the outstanding question marks is whether or not the CEO in place is the “right person for the job”? And if the answer is, “no, she is not” then at what point do you replace her?

In some ways (“vc hat”), I think it is wonderful that this question is coming to the forefront early on, rather than 6 or 9 months down the road — the reason being that: (1) the investors are passionate about this investment and are doing their homework, and (2) at least we have time to plan for a contingency strategy rather than going into crisis mode when the shit hit the fan.

However, in the same breath (“team/vc combo hat”), I’m a bit disappointed that this is even an issue so early on — perhaps this isn’t a simply a “CEO issue”, perhaps the issue is more a result of poor market conditions (too early), limited resources (more head count and funding needed), and/or basic early stage hiccups. In which case this is a “structural issue” common in almost every single early stage company I’ve even been involved in. Isn’t this why we (the venture capitalist) is in this game – to add value, to be hands on investors – supporting entrepreneurs is our sweet spot (and if we do it right, we make some nice change to boot).

Putting all my hats away, I’m left resolving the best way to directly address this issue with the CEO so as to not shake her confidence while eradicating any grey area as to what the core issue is: “Can you take the company to the next level and if so, how do you plan on doing this”?

Never too shy to “ping” a complete stranger for help, I emailed Garage Ventures MD, Guy Kawasaki, this morning seeking some insights into this matter; Guy was cool enough to quickly reply:

I wish I had a magic solution for you, but I don’t. You’re just going to have to discuss this openly with the CEO. A good CEO will recognize that the company comes first, not his own needs. Also, there is a chance he could grow into the position–believe me, VCs don’t know everything about how someone will grow into a job.

I shared this email with the CEO, we chatted at length, and resolved this matter (with the support of her advisors) rather quickly. I’m really proud of this lady; her response was neither aggressive nor condescending (i.e. I’m local Chinese, therefore I know best how to run a company in China); in fact she totally agreed that her interest must never get in the way of the company. And with that, she went about mapping out an execution game plan for the next 3, 6 and 9-months and at each milestone highlighted specific, measurable, and tangible results that she would ultimately be solely responsible for. Furthermore, a contingency plan in is the works, which includes key/replacement hires. In my book, that is a responsible, fundable leader (especially in China where it is extremely difficult to find an entrepreneur with this quality).

Only time will tell how this pans out, whether the milestone and accountability stick – for if they don’t, it will be as much the responsibility of the CEO as it is of the “value-add” investors (myself included)…

As a side note, Guy Kawasaki wrote a very nice article called, “The Art of Execution” – totally worth a read for start-ups going through similar situations.

February 18, 2006

Podcast search engine: Podzinger

Filed under: Podcasting,Web 2.0 — Administrator @ 6:16 pm

BBN Technologies launched Podzinger, which uses speech technology to convert to text the contents of 60,000-plus podcasts. Since it can search through the text of podcasts, it can better determine the relevance of search results to help you find what you’re looking for.

There are several China-based blog search engines that do very basic searches, such as feedsearch, 8fang, feedss, and Bokee’s Booso.

However, none of these blog search engines have the capability of searching podcasts, which is unfortunate as Podzinger is an English only podcast search engine.

February 17, 2006

Mobile technology allows consumers to sereach for product reveiws, prices in Japan and China

Filed under: E-commerce,Social Networks,Web 2.0,Wireless — Administrator @ 10:34 am

USAToday reports that Toshiba, a Japanese electronics company, has developed mobile-phone technology that searches for product reviews on up to 100 Web journals, or blogs, in 10 seconds.

Although, there might be issues of trust (commentary) and accuracy (data), we like this concept very much and will be following its development closely.

In the same breath, there is a small Shanghai based venture called Kaible.com that is backed by Dragon Venture that does something similar, however its offering focuses on price comparison.

We are not a big fan of Kaible’s model as it’s less dynamic (real time pricing) and completely dependent on the participation of merchants providing reliable, truthful data. Furthermore, we don’t see the value in it for the retailers — why would they want to reveal pricing to their competition. And finally, anyone who has shopped in China knows plenty well that haggling (over the price) between customer and clerk is more the norm than the exception – how does Kaible account for this?

(One approach might be to encourage consumers to SMS/Email Kaible with price information in return for loyalty points, or a chance to with gift certificates – however the most powerful driver would be community.)

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