Web 2.0 to China: Ok, Let’s Try This Again…

Yesterday, I had lunch with one of the top people in the Chinese Internet scene who said, “We have a saying here, ‘Internet multinationals all fail in China, Google was just the last one to go.’” As sayings go, that’s not especially catchy. But it is devastating. And true even if you count Google's recent actions as a China morally-based forfeit. The stark truth is there are already more Chinese than Americans online and China is only at about 20% Internet penetration. And yet, so far, Yahoo is the only one to play this market well, by swapping its local assets and $1 billion for a 40% stake in Alibaba back in 2005. But a funny thing has happened between my last trip to China in October of last year and my current trip. The Silicon Valley Web 2.0 gang has invaded. OK, “invaded” is the wrong word, it’s more like gingerly “waded into the pool.” Most of the entrants are being very cautious, staying below the radar with limited, hedged plans. But there is a clear trend of Web 2.0 testing the Chinese waters—and hoping it doesn’t make the mistake the first generation made.