Money

Long journey to Internet success

By Lara Farrar (China Daily)
Updated: 2010-06-23 07:58

Potential customers check tour information at a travel agency. Travel service websites are hot with a strong demand for tourism from residents. CHENG NING / FOR CHINA DAILY

Can foreign entrepreneurs successfully run Internet companies in China?

Yes, if you ask Fritz Demopoulos: "I don't think I am an anomaly. What it takes to be successful in the Chinese market is the same stuff it takes to be successful in other markets. We forget that here."

Anomaly or not, Demopoulous' name is one that often comes up in Beijing's tech circles as a rare example of a foreigner who has found success in an Internet market that is perceived as one where those who are not Chinese have little, if any, future.

Such perceptions have only increased after the high profile closure of Google's China search engine in March, preceded by the less than stellar performances of other American companies here, including eBay, Yahoo and MySpace.

"[American companies] ought to come in with an advantage, but the advantage turns into a disadvantage because ... the company does not empower the local team and does not have enough humility to understand the Chinese market," said Kai-Fu Lee, former head of Google China and founder of Innovation Works, an incubation company. Lee was speaking at an Internet conference held last month in Beijing.

"If you want to participate, you have to build a true local presence, otherwise don't play. You will end up following the others' footsteps and wasting a lot of money," Lee said.

Demopoulos, originally from Los Angeles, is the first to admit he has tried and failed with other Chinese Web ventures since he moved to China more than a decade ago. Out of those failures emerged Qunar, which Demopoulos co-founded with two Chinese business partners in 2005.

Qunar.com (which translates into "Where are you going?" in Mandarin) is now the number one travel site in China, followed by Ctrip.com. Similar to the American travel website Kayak.com, Qunar operates as a travel search site. Users can search for flights, hotel deals, packages and other travel services that are aggregated from hundreds of other Chinese portals.

Last year, 700,000 searches were made on Qunar.com. In 2009, the company, which generates revenue from selling ads, received $15 million in its third round of financing from GGV Capital, Mayfield Fund, GSR Ventures and Tenaya Capital. It is planning an Initial Public Offering (IPO) in New York or Hong Kong sometime this year or in 2011, according to Zero2IPO research in Beijing.

There are other Internet companies in China with foreign leadership. One of the co-founders of Tudou.com, the largest online video portal in China, is from the Netherlands. Darwin Marketing, a Shanghai-based online marketing firm, was co-founded by an American.

Yet the number of foreigners who form the leadership of Chinese Web ventures remains small, at best.

"There are not that many of us," said Demopoulos. "It takes a while, but the numbers are slowly starting to add up."

Demopoulos, CEO of Qunar, points to several ingredients that have led to his position at the helm of the most successful travel site in China. Combining his expertise of Internet businesses with the knowledge his Chinese partners have of the domestic Web industry has been crucial, he said.

Access to capital as well as technological know-how has also been key to the company's success (Qunar has developed proprietary search technology that enables users to have real-time results of the latest travel deals offered across the Chinese Internet).

While Demopoulos says he is able to use his experience to guide the overall strategy of the company, there are limits to his involvement.

"I can bring an outside perspective," he said. "But I am not going to be able to make a decision about whether a Chinese consumer likes A or B. I am the first to admit that if we have three great job candidates, I would not know which one will fit into my organization and which one wouldn't." Even with the small, but growing number of successful foreign Internet entrepreneurs, Demopoulos says he questions whether, in the long-term, companies from abroad will have a place in China's Web industry.

"Foreign companies fail because what value are they really bringing to the table?" he said. "They (Chinese) don't need us. They have access to all of the technology and know-how. Foreign companies can succeed but they are going to have to do what everyone else does, and they have to realize there are some worldwide resources they have that don't mean much."