blog how many American Internet JVs had driven on the rocks of China over the last 5 years. I was reminded of Bill's thoughts last week when I watched an interview of Qunar co-founder, Fritz Demopoulos, who recently sold his Chinese travel business to Baidu.
His reasoning was pretty simple. Even six years ago, China's infrastructure was pretty immature vs. the U.S. Remember that was the time when Jack Ma sold 40% of his company for $1 billion to Yahoo! ( YHOO). Baidu and Tencent were early days. Sina ( SINA) was a boring AOL ( AOL)-type company. When big U.S. brands came to China -- whether MySpace or Google ( GOOG) -- they brought capital, know-how and coolness.
Know-how is not really an advantage either for U.S. firms. Quite often, they know nothing about how to win in China. They assume their model, which made them successful in the U.S., can be simply grafted on to China. But it can't. Ask eBay ( EBAY) that turned tail and ran after getting beaten badly by Alibaba Group's Taobao. Ask MySpace China. Ask Groupon how their joint venture is going in China. In fact, what seems to hurt the American companies the most in China is their over-confidence and laziness. Is there a coolness advantage for American firms? Maybe. In the Facebook example, there might be some validity to that. Many Chinese have lots of friends outside of China they want to connect with and who are likely already on Facebook. It is unlikely that many of them are going to set up accounts on Sina Weibo or RenRen ( RENN). Therefore, if Facebook was to strike a JV with Baidu, I'm sure there would be many Chinese who would be interested because of the coolness factor.
And then there are all the regulatory requirements to contend with in China. Google came to China and ended up doing quite well in search -- simply because the quality of its search was quite good compared to Baidu. Yet, Google left China because its co-founders couldn't accept dealing with the onerous regulatory requirements.