What does a long-deceased eunuch have in common with Chinese tech giants, Baidu and Tencent? It’s not an online music platform or a market capitalization north of US $40 billion (approaching $70 billion in Tencent’s case). Nor is it being a eunuch. Zheng He’s famed Ming-sponsored sea expeditions of the early 1400s represented a powerful China at the center of global trade and influence. Leading fleets of unprecedented size, Zheng He’s seven voyages graced the shores of modern-day Thailand, Indonesia, Malaysia and India, as well as the Horn of Africa, and extended the emperor’s sphere of influence.
While Baidu and Tencent may not be in shipbuilding (almost surprising given their polymathic aspirations), domestic success has left them with the funds to spread to new lands and markets. Just last January, Baidu broke ground on a new international building in Shenzhen’s Nanshan district. Strategically located near a number of handset manufacturers and mobile stakeholders, the campus will weigh in at twice the size of the company’s existing headquarters in Beijing when it’s completed in 2015. Meanwhile, Tencent has expanded through an office in Jakarta, a bigger space in Palo Alto and a number of investments abroad.
You might remember Baidu’s foreign adventures beginning audaciously with Japan when Robin Li committed 14% of Baidu’s total budget for 2007, about $15 million, to the highly developed country. Whether guided by hubris or a naïve belief that cultural and language similarities would provide it a natural advantage in the crowded Japanese search market, Baidu did not fare well. From 2008 to 2011, Baidu.jp filed losses of RMB 700 million and has had little to show for the effort. According to data from NetMarketShare. Yahoo’s Google-powered search continues to dominate Japan with 52% of the market and Google’s own property, Google.co.jp, enjoys a big slice at 45%. Meanwhile, Baidu barely registers at a fraction of a single percentage point–hardly a feat for the Chinese leader.
Though unwilling to fully bow out of Japan—whether to preserve face or otherwise—Baidu has wisely aimed its bow toward other lands. Baidu’s ascent in China, amid infrastructural growing pains, slower networks and rapidly changing internet penetration, has given it valuable experience to apply to its Asian neighbors in the South and West.
Now, Baidu is trying to combine its market know-how with superior cultural insight. In February, Baidu signed an agreement with A*STAR’s Institute for Infocomm Research (I2R) to establish a Singapore-based language research laboratory. Baidu’s vice president Wang Mengqiu recently commented that it was “too early” to know exactly how Baidu will apply its findings to Southeast Asian markets, but for markets where local languages are underserved, the implications could be significant.
The research will focus on Natural Language Processing, Information Retrieval and Information Extraction, and Speech Information Processing. As part of its strategic shift to mobile, Baidu will probably look to integrate this know-how with its Android-based Yi platform. Baidu’s cooperation with hardware giant Foxconn and its 1,000 RMB Smartphone dream could give it a powerful channel to Southeast Asia’s developing nations in the future. Though highly uncertain, the long-term implications could mean affordable Smartphones closely integrated with Baidu’s Yi platform in Vietnam, Thailand or an unknown like Myanmar.
Despite a well-crafted strategy for success in Southeast Asian markets, political winds are blowing unfavorably in Vietnam. Amid a fiery territorial dispute over the Paracel Islands in the South China Sea, the reception of Baidu’s planned social network service (called Tra Da Quan in Vietnamese and based on Baidu’s Tieba forum platform) has been less than hospitable. Tuoi Tre News reported that Baidu has yet to acquire the necessary operating license for running its Vietnam-based sites—Baidu.com.vn, hao123.com.vn, zhidao.com.vn and tieba.com.vn. In the event language mastery amounts to little for Baidu in Vietnam, the company will look to continue its efforts in Latin America, Egypt and Thailand.
Can Tencent go where Baidu cannot? On the back of domestic triumphs in gaming and chat, the Shenzhen-based company recently launched a powerful mobile social application known as Weixin, or WeChat in English. Available for iOS, Android, Symbian and Windows, the application offers a smooth interface with text, voice and video (iOS only) messaging, a potentially alarming location-based friend finder called Look Around, group chatting and photo sharing. WeChat’s “Moments” photo-sharing feature takes direct aim at Facebook’s Newsfeed with a stream of photo updates from contacts. The application supports 9 languages, including English, Portugese, Arabic, Vietnamese and Thai and already boasts over 100 million users.
Tencent has also released a localized cross-platform chat application for the Indonesian market called Qute. Qute addresses the needs of a hyper-social society, divided across a sprawling Archipelago, between BlackBerry on the high-end and a hodgepodge of Java feature phones on the low-end. With over a million downloads already, Qute looks to challenge BBM, WhatsApp and Facebook for its own space in Indonesia. In India, Tencent is leveraging its 20% stake in the gaming platform Ibibo to promote WeChat; the application has over 200,000 users in Thailand, where Tencent is an investor in the popular Thai portal Sanook.
Tencent, which champions the open-platform like its American cousin Facebook, is maintaining amicable relations with America’s social giant on the surface, even offering a way to add Facebook friends on WeChat. However, alliances are ephemeral and confrontation inevitable. The implications could go beyond advertising and gaming revenues, influencing Chinese and American soft power struggles in Asia.
Take Thailand and Indonesia as examples: both are integral parts of Facebook’s international growth story and offer highly-engaged user bases. Thailand’s love of Instagram is well-documented—and consequently so is its Suvarnabhumi Airport. Meanwhile, Indonesia is Facebook’s 4th largest market at over 42 million users and counting. As enthralled as these users may be by everything social, their eyeballs and clicks are not public goods.
WeChat’s emergence is a wake-up call for Facebook, whose S1 casually mentioned Tencent as a threat within impervious China, but failed to address the potential for Tencent to take the fight to Facebook abroad with a stellar mobile social product:
We would also face competition from companies in China such as Renren, Sina, and Tencent in the event that we are able to access the market in China in the future.
You don’t have to enjoy several Appletinis with Sean Parker and Pony Ma to know that half a billion users isn’t cool. And no matter how dignified Morgan Freeman’s narration made them seem, penguins are not always peaceful.
About the Blogger
James Hopkins is an American working for Alibaba.com in Hangzhou, China. He previously lived in the tech-heavy district of Nanshan in Shenzhen. The views expressed here are his own and do not represent those of his employer.
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