Using history as a mirror, one can understand the cycles of rise and fall. The Chinese internet has seen seas turn into mulberry fields — immense changes.
1. The first Chinese internet company listed in the US was Chinadotcom (Medium华net). Its domain name was badass and it had the China concept. Its stock price once soared to over $100, then fell all the way to rock bottom, and eventually it delisted. Now, who even remembers it?
2. Lenovo once launched fm365.com as part of its internet strategy — a very, very early move. As Lenovo pre-installed it on its PCs, it was once touted as one of the top few domestic portals. And then? Later, the domain was even lost at one point, and there was no "and then" after that.
3. We know that the biggest literature site now is Qidian Literature, and the biggest download sites are Huajun Software and Sky Download, which was acquired by Baidu. But the once-biggest literature site was Golden Book House (黄金书屋), and the biggest download site was Hai Kuo Tian Kong (海阔天Empty). However, these sites were all acquired at very low prices by a company called Duolaimi (manycomeRice). Back then, personal sites weren't worth anything. So Duolaimi bought up a bunch of the best personal sites of the time — and ended up running every single one of them into the ground.
4. The earliest e-commerce website was 8848.com, once the leading e-commerce site in China. At the critical moment of its IPO, it failed to score that final shot, and then went from bad to worse.
5. When world internet giants acquire Chinese internet leaders, it sounds like a nice union of titans. Two cases: eBay acquired EachNet (easy趣), the then-leader, when EachNet held more than 80% of China's e-commerce market share — and then it was utterly routed by the newly established Taobao. Yahoo acquired 3721, when 3721 surpassed Baidu in both revenue scale and terminal coverage — and then people watched Baidu's myth come into being.
6. The first internet concept stock on China's A-share market was called Haihong Holdings (海虹control股). At the time, it held a controlling stake in China's largest, completely undefeated chess-and-card game platform, OurGame (unite众游戏). Then, gradually, OurGame decayed, falling further and further behind the times. Today, we don't even need to mention Tencent — I estimate that chess-and-card platforms like Boke City (波克城市) earn considerably more revenue than OurGame.
7. The once-biggest download tool was called NetAnts (Networking蚂蚁).
8. When the internet bubble burst, NetEase was the most fragile of the three major portals. Its stock price once fell to below $1. Ding Lei fired the CEO he had hired, financial scandals emerged, and the media ran a daily countdown to NetEase's delisting. Everyone was gloating. Yet looking at it today, among the three major portals, NetEase made the quickest turnaround and its new business expansion was the most successful. In today's gaming market, even Tencent can't do anything about it.
9. When Naspers (South African telecom) invested in Tencent, all media people thought the South Africans were idiots, fooled by Ma Huateng. They said Ma Huateng's valuation method was completely bogus, and that OICQ users (not called QQ at the time) were all young, low-tier users with no purchasing power. Now, the value and returns from being a Tencent shareholder are the biggest pillar of Naspers' current market cap, surpassing its own self-operated business.
10. Everyone once believed the Chinese internet landscape was set, and that the dominance of Sina and Sohu was unshakable. Looking back today, heh.
11. Baidu and Sina once had a huge falling-out. At that time, Baidu was still a technology service provider — Sina's search was powered by Baidu's technology. Then Sina delayed payment of Baidu's technical service fees. Li Yanhong, in a fit of anger, cut off Sina's search interface. The media thought Baidu was insane — that Sina, the internet overlord, could crush Baidu in a minute. This was also one of the main reasons Li Yanhong slammed down the phone and resolved to build his own users.
12. There was once a longing: when would China's internet produce a giant with a market cap exceeding $1 billion? Heh.
13. When Baidu went public, its market cap was nearly $4 billion and its P/E ratio exceeded 1,000. At the time, essentially all domestic analysts said Baidu was severely overvalued.
14. "Making money from games in China is impossible; no Chinese person will pay for games." This was the industry consensus before 2002. The "games" in question were mainly PC games; games from Taiwan and Japan were very popular on the mainland. Then Shanda suddenly rose, and everything changed.
15. The group chat feature was first launched by Langma UC (朗玛UC). The market feedback was excellent and user growth was extremely fast, so Sina immediately acquired it. At that time, Tencent wanted to monetize its users, so it removed PC-based QQ registration and allowed registration only via SMS verification code, charging 1 yuan per registration. When it saw Langma UC threatening to replace it, it immediately restored free registration and launched QQ Groups at the same time. After that, Sina's investment basically failed.
16. Baidu once launched a chat tool called Baidu Hi and an e-commerce platform called Baidu Youa (百degreeYes啊), but most young people today have never heard of them. My avatar comes from the Bubble Bear (气泡bear) sticker pack from Baidu Hi. I think the most valuable achievement of Baidu Hi was that the Bubble Bear stickers were indeed well made.
17. Netscape Navigator was once seen as a revolution, with a market share above 80% at one point. At the time, Netscape was extremely ambitious — it wanted to use the browser to build a network terminal operating system. The market strongly embraced this, and its stock price and market cap soared. Many investors believed Netscape could be the Microsoft of the internet age. Then Microsoft bundled its browser. Netscape sued Microsoft for monopoly, and the lawsuit dragged on. Microsoft's browser market share kept rising. Then, before the lawsuit was finished, Netscape was finished. But what's interesting is that today, there's the 360 browser in China, and abroad there's Firefox and Google's Chrome — all with considerable market share. So why did the Netscape model fail then, yet third-party browsers have emerged again now? Instead of blaming Microsoft's monopoly and bundling, perhaps it's better to think more about your own problems.
I'll give you an answer: Netscape's mindset was that of a software company on the internet, whereas today's third-party browsers are completely following the internet model. If you run it as a software company, Microsoft strangling you is a matter of minutes.
18. Around 2000, Microsoft launched a search engine — not Bing yet, but MSN Search. Domestic analysts almost unanimously thought Google was doomed. Everyone figured Microsoft had strong technical strength, money, resources, and the ability to reach every terminal. But at the time, Yu Jun insisted that Microsoft fundamentally didn't understand search and wouldn't threaten Google. I specifically went back and dug up the old posts, and from then on I became a diehard fan of Yu Jun.
19. When Wu Jingchuan explained the search arbitrage model to me more than ten years ago, I didn't understand it at all. A few years later, I suddenly understood after reading some news cases — and then I lamented that the market window had passed. It wasn't until recently that I realized the market window has actually always been there; only the entry barriers have been getting higher and higher. I became aware that I was simply hopelessly stupid.
20. Local telecom portal sites and their affiliated resources and communities once occupied half of internet traffic. Well-known ones include Shanghai Online (Top海热Line), Guizhou Info Port (贵州Information港), Bihai Yinsha (碧海银沙), and so on.
21. NetEase was originally just a personal site. Ding Lei was China's biggest personal webmaster. At the time, Ding Lei wanted to build a free email service, so he went to Guangzhou Telecom to discuss cooperation, saying Telecom didn't need to spend a cent — they would jointly set up an email platform, and Telecom only needed to contribute bandwidth resources. (Back then, bandwidth was very, very expensive, but for Telecom the cost was extremely low.) They would cooperate, and future advertising revenue would be split and so on. Zhang Jingjun, the director at the time, listened and didn't quite understand, but she couldn't stop thinking about it: no money out of pocket, and still a share of the money? Could there really be such a good thing? There must be huge benefits hidden here — and she couldn't let Ding Lei hog all of this good deal. So she said, "Tell you what, I'll just buy your system directly." Thus 163.net free email was born — the first free email service in China. User numbers indeed surged, because there was no other one. Yet after running it for a long time, it still didn't make money. Later, this email service was sold, and it even involved things like "loss of state assets." Zhang Jingjun later went out to start her own business and was at one point considered an internet big shot. Go ahead and keep saying "heh." Of course, Ding Lei was also quite sly — he sold 163.net to Telecom and kept 163.com for himself.
22. Tencent's original domain was tencent.com, and Baidu's CDN has long had a redirect domain called shifen.com (tenDivide). Every one of them is "one mao" (10 fen). Where can you seek justice for this? America's giant is called Micro-Soft; China's giant is called One Mao.
23. Li Yanhong, Zhou Hongyi, Ma Huateng, Lei Jun, Ding Lei, and Shi Yuzhu were all originally programmers — and quite good ones at that. Not to mention people like Zhang Zhidong. In fact, this list could be stretched much longer. Many listed-company bosses who aren't as famous were also programmers, such as Ctrip's boss Liang Jianzhang, and so on.
24. Personal websites
"Yang of the South, Gao of the North" were the earliest legends of personal websites. Gao Chunhui's personal homepage was once ranked in the top 10 of domestic website comprehensive rankings. Yang Zhenting, a first-generation webmaster who started out as a car salesman, has now emigrated to Canada, and few local Chinese know about his glorious past. Gao Chunhui, meanwhile, is still continuously starting businesses — a living fossil of grassroots internet entrepreneurs in China. Few people may know that the first boss of Joyo.com (卓越net) was Gao Chunhui, and at that time, Joyo.com was a download site.
Li Xingping — a secondary vocational school student who hid away in Meizhou, almost never traveled far, never accepted interviews, and never attended any summits (in fact, he attended only one) — created the biggest miracle of grassroots websites. Relying on a small local team of a few people, he successively built three websites that once ranked among the top 20 in domestic traffic: hao123, qq163, and 4399. In addition, a bunch of other sites such as 3533, ip138, and oicq88 also each brought in substantial traffic. At the craziest time, a music-site webmaster with a good personal relationship with Li Xingping could easily get referrals of 100,000 to several hundred thousand visits per day from him.
Of course, today, the era of the personal webmaster is over.
25. About embracing change
Baidu was initially a search technology service provider for portals and had no intention of building its own traffic gateway;
Tencent initially wanted to build a network paging system for telecom and had no intention of building its own users; at the time, it wanted to develop some users as samples for testing the system. As it turned out, telecom ignored it. Fortunately, telecom ignored it.
Alibaba started with enterprise yellow pages;
Shanda started with a community; after it failed, it used the last of its remaining money to license The Legend of Mir (传odd). At the time, everyone thought China's game market had no potential, so the licensing fee was extremely low;
JD.com started as a stall vendor in Zhongguancun — no explanation needed;
Vipshop started with luxury goods and lost disastrously; it only turned itself around after switching to second-tier brands;
Chen Ou of Jumei made his first entrepreneurial endeavor in a game advertising platform, then pivoted to selling cosmetics;
Qihoo initially did community search. To spite Alibaba, it created 360 to kill off 3721 — little did it expect the unintended success;
Sina started as the Stone Rich Sight (four通利方) forum, acquired an overseas Chinese portal and pivoted to the portal model, then pulled off a comeback with Weibo;
NetEase went from virtual community, to email, to portal, to mobile SP (wireless value-added services), to gaming;
Sohu went from portal to gaming;
Now you tell me: you've spotted a major direction and can guarantee it will be highly promising in the future??
You can treat it as gossip, or you can think more deeply about the why behind the vicissitudes of time. Then think, what will the future be like? Will we once again misjudge and choose the wrong path?
Commentary: With the God's-Eye View, You Could Do It Too
Shen Nanpeng said that China's mobile internet has surpassed the United States in many consumer-related fields. Of course, many people may not believe that. I haven't been to the US, but from my experience of traveling around and eating out in recent years, it's certain that internet business models in the consumer sector are ahead of developed countries like Japan and Singapore, let alone the developing countries of Southeast Asia.
When we read web novels and time-travel stories, we often see a scene where the protagonist suddenly returns to the past and, relying on their knowledge of history, opens a God's-eye perspective. Thus they never miscalculate and conquer the world. Many people may fantasize about how great it would be to travel back in time. Not too far, say, back to 2000, register a few good domain names, and then sell everything you have to madly buy Tencent stock. Something like that.
Unfortunately, such awesome time-travel technology can only remain in fantasy novels for now. But information asymmetry—yes, I'm repeating this term again—information asymmetry makes something like time travel possible in reality. If you have such a perspective and vision, in certain fields you too can open a God's-eye perspective.
Looking back at the development of China's internet, in the earliest days, copying models from the United States to China was especially popular. Of course, not every project could succeed, but when the internet first started, many returnees saw American models and development paths, then returned to China to start businesses or invest, and most got considerable returns. We can even say that returnees and overseas funds were the biggest beneficiaries of China's early internet. (From an entrepreneur's perspective, this may not be obvious enough, but from an investor's perspective, it is clearer.) At that time, looking at China's internet from the US was indeed opening a God's-eye perspective. You knew what would become popular, you knew where the internet's next step would go. You might not be good at specific operations, but simply investing in the leading projects in the next explosive field would give you a frighteningly high success rate.
Of course, we have to admit that China still has some special national conditions and characteristics. That's why QQ actually broke far beyond the ICQ pattern, why hao123 had no template in the US, why Ding Lei managed to create his own path through SMS and games, and why eBay, after acquiring EachNet, was still defeated by Taobao. Yes, a God's-eye perspective is not universally effective in China, but those overseas venture capital funds that earned riches in China's internet wave have already proven a lot. You don't actually need to never miscalculate; you just need to see a little more than those with narrow vision.
Now, China's mobile internet, in terms of consumer-side experience and progress, has begun to shift from being a follower to a leader. (Forgive me for saying something vicious: if it hadn't been for supporting the so-called national standard TD-SCDMA, which was actually foreign junk, and missing an entire four years of 3G network launch time, I even suspect China would already be dominating the global mobile internet, from hardware to software, sweeping away everything except Apple. I won't expand on that today.) When we go overseas, especially to some emerging regions and countries, I truly feel as if I've opened a God's-eye perspective.
Many Southeast Asian countries have cultures and customs close to China's, with internet development far behind China, yet their development speed is not slow. Nowadays, many Chinese companies, Chinese investors, and Chinese entrepreneurs have set their sights on this, with remarkable results. For example, Kunlun Wanwei dominates the mobile game bestseller charts in Thailand and Vietnam. Tencent and Alibaba, through investments, are respectively gaining control of Southeast Asia's largest gaming platform (Garena) and a top-three e-commerce platform (Lazada). In addition, popular chat tools around Southeast Asia, such as Zalo, BeeTalk, and Link, all have Chinese manufacturers behind the scenes. More and more startups with Chinese capital backgrounds are emerging too. What is the most obvious feeling then? Local companies and local capital are too slow to react to the market! Their judgments about future development are far too conservative! This reminds me of China 15 years ago—faced with the impact of the Western .com trend, weren't so many so-called practitioners just as slow and conservative?!
It is only at this moment that I truly experience the perspective and feelings that overseas capital had when it rushed in and swept across China's internet market 15 years ago. And only now do I realize how much this gap in vision and perspective impacts decision-making.
Last year, I saw that Wei Fangdan had built an overseas community. Feeling it had huge potential, I urged him to leave his job and start a business. This year, the Beluga Community has developed very well, and the wave of Chinese internet companies going overseas is already in full swing. But many people still cannot see clearly or accurately. Actually, if you use history to view the future, many things become transparent. (Using history as a mirror, you can understand the rise and fall of dynasties—Li Shimin said.)
For example, one of my common judgment methods is to look at a country's mobile app free charts. What do I look at? The distribution of app categories in the top rankings. What is the significance? From the distribution of a country's popular app categories, you can know what stage they are at and what stage they will move to next. In broad terms, both PC internet and mobile internet have gone through three stages, but PC internet took a long course while mobile internet took a short one. The first stage is tool-type. You have a computer or a phone, you don't know what to do, so you install things and play. Around 2000, what websites were hottest? Download sites and cracking sites. Back then, Poluo Gao's personal website was among the top ten in domestic traffic—that was truly a hard need. Mobile internet started the same way: all kinds of tool apps became popular first. Then came entertainment: listening to music, playing games, reading novels. Almost simultaneously, social apps rose up. Then came life services: all kinds of e-commerce, discounts, group buying, ticket and hotel bookings, health, wealth management, and so on. From PC internet to mobile internet, it follows this order. Of course, there are finer sequences and logics within this (for example, as bandwidth and data charges changed, hot areas went from audio to video). Interested friends can dig deeper on their own.
When you look at other countries' charts, you know what stage they are in, and then you know what will become popular next. If you go invest and make decisions at that point, isn't that just opening a God's-eye perspective? Take Indonesia, Malaysia, and Singapore—they are all Southeast Asian countries, but a quick glance at their charts tells you they belong to different stages.
Actually, this is not only true for overseas markets. Within China, too, there are enormous market stratification and information gaps. Not just in mobile internet—in many fields, advanced and backward often coexist, and that remains the norm. Some entrepreneurs come to talk to me about ideas, and I often say bluntly: why are you only now realizing principles that should have been understood ten years ago? Many people in traditional industries only think of using the internet to transform when they have been squeezed by the internet and have no choice. Where were they earlier?
In the next twenty years, the internet's cross-boundary integration and penetration into various industries will deepen further, and the opportunities and market space generated will far exceed the current scale of the internet. (Don't disbelieve it; just internet finance alone is enough to cover the current scale of the internet industry.) You may not be able to foresee everything in advance, but if you can appreciate the differences between markets and the huge gaps in information asymmetry, follow closely behind the advanced players, and do a little brick-moving into lagging fields, then opening a God's-eye perspective and reaping generous returns is not very difficult.
Author: Cao Zheng, originally published on caoz's Dreamtalk (ID: caozsay)