00:00hi this is Chris Dixon this is a 16gb
00:03podcast I'm here today with my
00:04colleagues Benedict Evans and Connie
00:06Chan and we were going to talk about
00:08tech in China so Connie has been a lot
00:12of time thinking about China I think
00:15just because a lot of people who might
00:16be listening is don't really understand
00:18the landscape there could you just give
00:20like a quick overview who are the big
00:21companies what do they do what are they
00:23working on the big companies people have
00:27historically talked about would be they
00:29call them the back companies B stands
00:32for Baidu a stands for Alibaba and T
00:34stands for $0.10 but on top of that
00:37there are some emerging companies like
00:39Qi who that are growing very quickly
00:40that are worth paying attention to as
00:42well I think these three companies are
00:45actually quite misunderstood
00:46unfortunately out here in the West for
00:49example I read a lot of articles that
00:52talk about $0.10 and they say that
00:54advertising is their main business model
00:56but people don't realize if you just
00:58look at their financial statements
00:59advertising is less than 10% of their
01:01revenues and 80% of their revenues are
01:04coming from games and value-added
01:05services so these are like in-app
01:07payments on games and things like that
01:08yeah yeah they actually are very active
01:11in gaming $0.10 is the creator of one of
01:14my favorite mobile apps called way Shing
01:16which in English it's called WeChat it's
01:19one of I think of one of the most
01:21innovative messaging apps that I've seen
01:24for a long time that a lot of Chinese
01:26now consumers are using to do a number
01:29of things outside of just communicating
01:30to their friends and family they're
01:31using it to order taxis to send money to
01:34order food from restaurants to follow
01:36celebrities to get local traffic all
01:39sorts of things Alibaba is the other
01:42company I mentioned they have a number
01:45of huge properties team all is is
01:47probably team all on table are probably
01:49the two most well-known ones that are
01:51massive players and e-commerce Ellie
01:54Ewing is also a cloud product that they
01:56have as well as la Paix which is
01:59somewhat similar to PayPal here in the
02:01Baidu is often called the Google of
02:04China and that's because they're
02:05dominant and search also very dominant
02:08in maps in addition to those two
02:10properties they have a couple other ones
02:12those are the two that they're mostly
02:13known for and the one that I mentioned
02:16earlier to who they started in security
02:18but now they're starting to get into
02:20search and other mobile products - are
02:22there any US websites wet web services
02:26that are large in China you know Google
02:28as obviously hasn't succeeded against
02:30Baidu yeah a number of US companies have
02:33attempted to go out there some are more
02:34successful than others in the last
02:38couple of years some of the Silicon
02:40Valley back startups such as Flipboard
02:43linkedin evernote have tried to go out
02:45there and some of them are doing quite
02:47well who's doing well there
02:49well LinkedIn is as a recent player that
02:52just launched and I know they have huge
02:53aspirations to hire a lot of people so
02:56that's one that's worth watching
02:57Evernote has has found a really good
03:00team in Beijing and I think they really
03:02benefited from having a good local
03:04partner they're working with CBC Capital
03:06who is also the same team that brought
03:08out LinkedIn it's interesting with me
03:11this is sort of generalized sort of
03:13slightly naive idea that somehow the
03:14Chinese are stuck behind the Great
03:16Firewall of China and that they're
03:17desperate to use Facebook and Google and
03:19actually they've kind of got their own
03:21internet and it's just as good as ours
03:23and actually it much more well the night
03:26is now so the the cynical view though is
03:28that they effectively blocked the US
03:30companies in the state their sponsor
03:33these say Japan or South Korea they're
03:37not behind a firewall and those US
03:38companies haven't done any better there
03:39I mean you know they've got a few
03:40exceptions but it's more that the you
03:43could subtract the other way and say
03:45it's more that where you have a country
03:46that's actually big enough to sustain
03:49real scale businesses and has a
03:50fundamentally different language and
03:52culture then it's quite hard for Amazon
03:54or Google to roll in
03:56whereas what happened in you know a
03:57small European country or you know some
03:59other part of the world is you didn't
04:01really have the scale all the language
04:02barrier to allow a domestic company to
04:04really grow what about it like in
04:06Germany or something like they they use
04:08mostly US services right yeah but
04:09Japanese much much smaller
04:11I mean Germany's half the size of the UK
04:13in in Internet I guess your point in
04:15here has a lot of its own services and
04:17yeah exactly India has its own services
04:19but even there it's not protected by
04:20language I was it and I think it's
04:22interesting if you think about how you
04:24actually define innovate
04:25if you think of it as also business
04:28models and monetization there's a lot of
04:31innovation happening out in China and I
04:32think a big mistake that people make is
04:34they look at a company and they say oh
04:35this is the Facebook of China this is
04:37the Yelp of China this is the the
04:39Groupon of China or YouTube of China and
04:41most of the time that's just too too too
04:45too simplistic of a way to kind of
04:48summarize what these companies do and
04:50most of these companies have multiple
04:52business models behind them and they
04:54monetize in ways that are very different
04:56than their United States do you think
04:58that's because they're head of the
04:59United States counterparts or because
05:00it's a different culture I think it's it
05:03depends on which products so for
05:05something like messaging I think they're
05:07something like logistics I think they're
05:09ahead online video I actually think
05:11they're more experimental as well and
05:15then some of it is cultural what and so
05:17for example messaging they're had what
05:19what does that mean for us or let's say
05:22non China based messaging like what will
05:23be that does that have implications for
05:25whatsapp for example I actually think
05:27it's it's a positive that you can learn
05:30and see what's working in China because
05:31China's just the land where there's so
05:34much experimentation going on and there
05:36are lots of startups going after every
05:38single industry and if you look at the
05:40companies that are going into messaging
05:42and China wishing is obviously the
05:44biggest one but there are a couple other
05:45players too every single one of them is
05:48coming up with something innovative that
05:50I haven't seen in a lot of messaging
05:51companies in the US yet so like if you
05:54had to predict then if whatsapp or to
05:56copy them what would be what would they
05:58do to monetize well well we chats
06:01has has a number of ways they can
06:02monetize in the future right and I think
06:05part of it is linking that application
06:07with all the other services okay so link
06:09it to the taxi app and the games and
06:12kind of think of it almost as own
06:14operating system well that's the only
06:15thing about what's that business it's
06:17the biggest and it's the only one that's
06:18not trying to do any of this stuff so
06:20obviously we chad is the standard bearer
06:22for trying to create use the messaging a
06:24platform and messaging as a platform to
06:26do lots of other we'll start right which
06:28it's Facebook did on the desktop and
06:30line is trying to do globally as well
06:32but what's that very deliberately said
06:34we're not going to do anything
06:36other than this extremely narrow an
06:37extremely deep I think so Connie's point
06:39but what this the Chinese example
06:42suggests is that you can do you can
06:43layer on monetization and weight it
06:45doesn't annoy people yeah I think
06:47there's a big point around you know what
06:49is the right channel for getting this
06:51stuff to people is it going through
06:52Google is it going through Facebook is
06:54it going through the App Store is it
06:55going through some sort of social
06:56messaging system right your facebook
06:58built on the desktop but haven't really
06:59built that on mobile and some of those
07:01apps for example we shop monetizes in
07:03the US by selling sticker packs and I
07:06know stickers aren't necessarily as
07:07successful out here than they are in a
07:09lot of the Asian countries but it is one
07:11way that they're monetizing users here
07:13yeah it's like Asians live stickers and
07:15Westerners like filters knowledge well I
07:18also think that a lot of the stickers I
07:20see in China are very innovative
07:22actually so rather than just sharing a
07:24single expression that that moving
07:28animated gif actually captures an entire
07:30phrase so it's not just someone looking
07:32sad it's someone looking sad because
07:34they're hungry it's someone looking sad
07:36because they're tired and so the
07:38emoticons I actually think are even more
07:40creative out in Asia than they are here
07:43so a lot of these companies now seem to
07:45be interested in entering the u.s. yeah
07:48there are a number of them that are
07:50coming out here and in several different
07:52ways too one way is actually just
07:55straight-up investing in a lot of US
07:57companies and so a lot of we're seeing a
08:00lot of that like in our Investor seeing
08:02them as co investors yeah and so that
08:04that interest and their pitched
08:05entrepreneurs is we can help you enter
08:07China and teach you about what we've
08:09learned from China yeah yeah mostly but
08:13that interest is coming from not just
08:14the major strategics like the ten cent
08:16Alibaba and the choose they are very
08:19active out here but it's also coming now
08:21I see from China VCS and actually even
08:25sovereign wealth funds around Asia
08:27there's just a lot of interest in
08:29diversification in getting more learning
08:31from the United States and being in
08:34closer relationship with a lot of these
08:36companies so one of the things I think
08:38sort of seems to be going on in now is
08:40that you're having a kind of
08:42a sort of a war in mobile between the
08:44bat companies and so they're all kind of
08:47aggressively moving into each other's
08:48spaces and it seems like you're getting
08:50some bleed out of that into the rest of
08:52the world so we'll see we had done its
08:56Tencent who was it that took a stake in
08:57tango remember now yeah so out of all my
09:00talks taken in tango because tents any
09:04stormy messaging another messaging
09:08product already yeah that wasn't doing
09:10as much so these guys gonna the bat
09:12company is going to try to come into the
09:14u.s. and go head-to-head against this
09:16body you gonna try to take on Google in
09:17the US or like is that are they gonna
09:19come in and that strongly I don't I
09:22don't think that's necessarily that
09:23strategy but in terms of learning and
09:25investing in the states I do think it's
09:27more about all of these companies I'm
09:30not a invasion yet I wouldn't call it an
09:34invasion but I do think there's a lot of
09:36ways to find mutual cooperation or
09:39mutual learning and it's funny actually
09:42when I go to China a lot of my friends
09:43out there they read TechCrunch and or in
09:46the read Pando daily and they read a lot
09:48of the tech blogs we read out here
09:49because a lot of those articles get
09:51translated into Chinese almost
09:52immediately and it just shocks me how
09:55many people out in Silicon Valley don't
09:57do the same in Reverse because there are
09:59actually a lot of companies we can learn
10:01from in China what would you recommend
10:03that english-speaking Americans read the
10:06English sites there aren't that many but
10:08tech in Asia is one that I like tech
10:11node is another one so those are two
10:14that are in English that have daily
10:16coverage but like you were saying
10:18earlier a lot of the Chinese companies
10:20are coming out here sometimes it's to
10:22invest sometimes it's actually to bring
10:24us hardware products out to Chinese
10:26consumers so that's a growing trend as
10:28well and anything that we see out here
10:31for example like a jawbone that the up
10:34band is actually very popular in China
10:36and so they are there are a number of
10:39commerce companies in China that would
10:41just love to be distribution partners
10:43for hardware companies out here I mean
10:45the interesting from part of China from
10:48the sort of point of view of the border
10:49mobile ecosystem is that although Apple
10:51is present in China and
10:53selling doing well selling iPhones and
10:54iPads um obviously the kleva by far the
10:57biggest smartphone platform in China is
10:59Android but it's Android without Google
11:00so you have even Samsung and even I
11:02actually used to Motorola phone a couple
11:05of weeks ago that was being sold in
11:07China and had no Google services on it
11:08at all so you've almost got two androids
11:11and there's two thirds of Android which
11:12is the one that Google gets numbers for
11:14is outside China and there's another
11:15third of Android which is in China and
11:17doesn't have Google Play on it or Google
11:19Maps on it and yeah it's still
11:20potentially in a market so you've got
11:22these apps Chinese app stores that are
11:23starting to look at whether they can get
11:26foreign developers to come in and sell
11:28to Chinese consumers yeah and that
11:30brings up a great point that I think is
11:32another thing that a lot of Silicon
11:34Valley entrepreneurs should be aware of
11:35which is that just by putting your
11:37application on Google Play doesn't mean
11:39you're getting distribution in China
11:40there are a ton of other app stores and
11:42even the top strategic companies all
11:44have their own as well that you need to
11:47have close relationships with and have
11:49special promotion partnerships with if
11:51you want your apps to get distributed
11:53Google Play I believe is less than 10%
11:55of Android domain gave a number of 6% of
11:59the installs on their network yeah yeah
12:01so all of my friends for example who are
12:04are born in China who who use devices
12:07and none of them are using Google Play
12:09to download apps they're all using these
12:11third-party services and that's not even
12:13a policy issue it's just the nature of
12:15the ecosystem there yeah I mean it's a
12:17function of a lot of the Chinese
12:18developers are directly giving their
12:21applications to those companies instead
12:22and those are often the app stores that
12:25get pre-loaded on a lot of the devices
12:27that get sold in China because just like
12:29you said earlier a lot of the devices
12:31that are sold it's not preloaded with
12:33Google services so they don't have
12:35Google Play time to use they have to go
12:37separately download it if they even want
12:39it and and therefore often times
12:42consumers will just use whatever app
12:44store is preloaded on that particular
12:45device and it also makes sense that I
12:48think Google services is aren't aren't
12:52readily available on those devices
12:53because to be quite honest a lot of
12:55Google products are difficult to use
12:57when you are in China they're either
13:00slower to load or for example the maps I
13:03believe they don't have the correct
13:06not 100% sure on that I think Apple is
13:09there Apple is licensed maths in China
13:11so kind of weird because if you look at
13:13China on an iPhone from outside to China
13:15you see like one road in the whole
13:17country but if you're in China then you
13:20see these really really are the rights
13:22to send this yeah exactly they're
13:23satellite imagery then even the
13:25satellite is just the street maps but
13:26then when you're in China you get really
13:28really good maps for China that Apple's
13:30licensed in China but then you don't see
13:32any roads anywhere else in the world so
13:34they've got this kind of weird licensing
13:35thing going on and of course for some
13:36strange reason the Chinese didn't want
13:38Google to drive its cars although China
13:40to map and filter in maps so Google
13:43doesn't have its own kind of ground
13:44truth maps for China yeah they'd have to
13:46license them as well but you know even
13:48on the mapping front well by do as the
13:51market leader there I looked at $0.10
13:53mapping product recently and their
13:55Street View was phenomenal phenomenal
13:58technology that's it I mean it's an
13:59interesting thing interested it see if
14:01you agree with me but I kind of have the
14:03impression that the function of having
14:05these three Internet giants in China is
14:08that whereas outside you have you know
14:10Amazon is one e-commerce and Facebook
14:12one social and Google one Maps and
14:13search and nobody else is even trying to
14:15do maps really I mean the apples trying
14:17but you know not on the way whereas in
14:18China generally got two or even a three
14:20companies are doing some pretty good in
14:22most spaces so it might be that they're
14:25not necessarily as quite as good as
14:27Google Maps might be in San Francisco
14:29you've actually got a lot more
14:30competition going on is that kind of
14:32fair I do think there is more
14:34competition in China and it's around
14:36every single every single possible
14:38business opportunity it's also just a
14:40function there are more people there
14:41there are more startups there right and
14:43and I do also see this changing though I
14:45mean as you look at all the acquisitions
14:47that Facebook has been making recently
14:49you can easily foresee them acquiring
14:52more things that don't naturally see
14:55seem like their social and on the outset
14:57certainly it happened with Google and it
14:59seems like it might be I'm in facebook
15:00now but like Google you know five years
15:02ago you predicted by a thermostat
15:03company like no way right right so
15:06they've become much more like the GES of
15:08technology or something
15:09clonk conglomerates what so but so let's
15:12end up maybe with a do you have a few
15:14predictions you'll make about the
15:15Chinese companies or the future
15:19well I think there are a couple of areas
15:22that China is really innovating on and I
15:26do think some of the newest coolest
15:28features will come out of Asia
15:30particularly around logistics I've seen
15:33a lot of same-day delivery companies try
15:37and create startups around Silicon
15:38Valley around San Francisco but I look
15:40at logistics and that's a problem that
15:42China's been tackling for same-day
15:45delivery for the last five five plus
15:47years right and so logistics because the
15:51big justice company there is it only
15:52Baba well there are several and a lot of
15:55the e-commerce players have their own
15:56logistics teams as well so for example a
15:59lot of people talk about jingdong
16:00because they can do same-day delivery
16:02with it within a handful of hours
16:04sometimes as quick as four hours with in
16:07a large city like Beijing but I think
16:10logistics is one area that China can be
16:13really innovative and because they've
16:14been forced to if you look at
16:17populations in Beijing and Shanghai
16:19those cities are so densely packed and
16:22they also have the added benefit of very
16:24low labor cost so they can be very
16:26experimental and figuring out the best
16:28customer experience and whether or not
16:31they should for example take an area of
16:33a map and break it off into squares or
16:35hour circles actually more efficient
16:38than squares because there's overlap
16:39these are all things that they've been
16:41tackling over the last five years and so
16:42that that area particularly I think
16:46there's a lot of learning to do from
16:48China ecommerce is another one where I
16:50think it's going to be really
16:51interesting to watch because something
16:54that's misunderstood about China is that
16:55the second and third tier cities are
16:57very different than the first tier
16:59cities and oftentimes if you go to a
17:01third or fourth tier city they don't
17:03have a local mall a local drug store
17:05that's within driving distance or
17:07walking distance and so some of those
17:10places they're really skipping and going
17:13not not from just having a village and
17:17they're going to a mall but they're
17:18skipping the mall portion and going
17:19straight to buying online and so just
17:21online adoption and then the logistics
17:23challenges are on that I think are gonna
17:25be really interesting to watch messaging
17:28I mentioned earlier is an area
17:29I think that he's just going to be very
17:31innovative and education is another one
17:34education and mobile payments that that
17:37I those are two areas that I'm starting
17:39to look at China for innovation - all
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