Qzone, “the largest social network in China,” and Tencent’s other SNS (QQ Campus and Xiaoyou), are failures for three reasons:
- Squandered Opportunity: Chinese internet giant Tencent was enviously positioned to dominate social networking, but blew its chance. QQ Campus failed. Xiaoyou is far behind the competition. Qzone does not reach any new demographics.
- The Site’s Design and Features are Lousy: The Qzone website is an unintuitive eyesore. Its applications are of poor quality and frequently inaccessible.
- Is Qzone Really No. 1? Tencent’s claim of 305 million active users is highly suspect; even its classification as an SNS is questionable. Its competitors are encroaching upon its core user base of young teens.
Does this mean Tencent will soon collapse? Absolutely not.
In June 2008, VentureBeat wrote: “The good thing is that PopCap’s games are well known in China. The bad news is that most retail versions are pirated.”
1.5 years later those words still ring true, but PopCap remains upbeat. PopCap is a patient pioneer: “PopCap prioritizes taking the time to get it right – whether that’s building a new game or approaching a new market. We’re investing in China as a market for the long term, we’re not looking for short term gains,” said Giordano Contestabile, Senior Director of Business Development for the Asia/Pacific, in a recent interview with China Social Games. On Twitter:
Cute and China-safe graphics
PopCap has two advantages in China: 1) its games are already wildly popular; and 2) its games are family friendly, suitable for the China market. PopCap’s big disadvantage is that its primary monetization model, “try and buy” downloads, is a loser in pirate-infested China. The real challenge in China is developing a new business model, not new games.
Zuma: treasured by Chinese pirates
Popular with Chinese Pirates
“When I meet someone in China and introduce my work, I often hear, ‘Ohh, my grandma, mom, and I all play your games.’ Possibly 100 million people play Zuma in China, but we’ve sold virtually none of the copies,” said Mr. Contestabile.
PopCap’s “Plants vs. Zombies” (Chinese: 植物大战僵尸), a charming cross of Tower Defense and Happy Farm, is another smash hit in China. The recently released title costs 20 USD and is not officially sold in China, but the pirated copy is available for free from a number of major Chinese download sites. The translated Chinese text is so professionally integrated into the game that I first believed it to be a genuine Chinese edition by PopCap (it’s not).
High-Margin Virtual Goods are Generating Very Real Profits
Chinese technology companies have a reputation for lacking innovation and original products. Yet upon closer inspection the industry is brimming with ideas. Despite the fact that Taobao resembles eBay, Baidu searches like Google, and RenRen looks very similar to Facebook, these businesses are not simply knockoffs. The “Copy-to-China” label grossly underestimates the power and ingenuity of China’s internet ventures.
Identical Western replicas do not work (there is a reason why no large multinational internet business is a leader here). Instead, local companies are innovating to serve the Chinese market better, creating products and services that appeal to the needs of the consumer. This is also true of other Asian markets, and the region is now a global leader in virtual goods. So much so that the businesses in Silicon Valley and elsewhere are starting to take notice.
For the unbelievers, there are enticing examples of the rewards to be had. Internet heavyweight Tencent recorded revenues of USD 1 billion, at a profit margin above 40 per cent, by selling virtual goods across its multiple online platforms for RMB 10 (RMB 1 = approx. USD 0.14) at a time. Home to China’s most popular instant messenger QQ, Q-Zone social network, and related game sites, it is one of a number of domestic internet sites making a very real profit from something “virtual”.