MySpace's slow start in China

Media, Tech & Telecom

The social-networking site's new Chinese version faces tough challenges trying to appeal to local tastes and grab market share from many rivals

On June 13, Luo Chuan, chief executive of MySpace China, told reporters
in Shanghai that the new Chinese version of News Corp.'s (NWS)
popular social-networking site aims to launch an instant messaging (IM)
service "as soon as possible." Local scribes took him at his word. The
Chinese media began reporting that MySpace China was calling its new IM
product "ASAP." MySpace China quickly issued a clarification explaining
that the company had not actually decided on a name yet and cited a
communication failure for the mistake.

The snafu was symptomatic. After months of intense speculation, MySpace
had launched its Chinese-language site on Apr. 27, marking the
social-networking giant's entrance into the second-largest Internet
market. MySpace China may want China's 144 million Internet users to
think of it as a local company rather than just another part of Rupert Murdoch's
global media empire, but the ASAP incident demonstrated how much work
the company's executives have to do as they try to establish the site
in China's crowded Web 2.0 world.

Indifferent track record

The Chinese site is operated by MySpace China, which secured funds
from MySpace Inc. as well as Boston-based venture capital firm International Data Group and China Broadband Capital Partners, an investment firm managed by former China Netcom
CEO Edward Tian. Spearheaded by Wendi Deng, Murdoch's Chinese-born
wife, the company is run by Luo, the 38-year-old former head of
Microsoft's (MSFT) MSN division in China.

A high-powered lineup. But U.S. Internet companies don't have the best
track record in China. Despite their deep pockets and success
elsewhere, for instance, both Yahoo! (YHOO) and eBay (EBAY)
spent years vainly trying to win over Chinese users. They ultimately
gave up and entrusted their Chinese operations to local partners.

MySpace China declines to disclose the number of registered users.
However, according to a report by iResearch Consulting Group, a
Shanghai-based firm specializing in the Chinese Internet sector,
MySpace China forecasts the number of registered users to grow at an
average of 75,000 new members per month.

The biggest problem, according to Cao Junbo, vice-director at
iResearch, is that MySpace China has yet to localize its products and
services to suit Chinese users. "The current site is just a literal
translation of MySpace International," says Cao. "There is lots to be
improved in terms of localization."

Crowded field of competitors

As a latecomer to the market, MySpace China faces major challenges attracting users. Local rivals such as 51.com,
Mop.com, and Woku.com already boast tens of millions of users. Two of
those rivals, Mop.com and Tianya.cn, claimed 48.8% of user visits to
all social-networking sites in April, according to iResearch. And
Xiaonei.com, self-proclaimed as China's Facebook,
is leading the university networking sites. "The success of MySpace in
the U.S. cannot be simply copied in China," says Liu Jian, chief
operations officer of Oak Pacific Interactive, the Beijing-based holding company that owns both Xiaonei.com and Mop.com.

"We have not felt any impact from MySpace China."

Bigger names have gotten into the social-networking business, too.
Microsoft recently launched Windows Live Writer, which allows Chinese
users of its MSN service to write a post in their blogs offline and
synch it with their Windows Live Spaces, the software giant's
social-networking tool. Chinese search champ Baidu.com (BIDU) has also extended into social networking through a Web 2.0 service called Baidu Space.

MySpace seems to have a different vision of how to localize. Unlike its
rivals that build busy and content-rich home pages to attract eyeballs,
MySpace's site appears austere. "Our target audience is 18- to
25-year-old college students and graduates with less than three years
of work experience" says Julia Zhu, marketing manager of MySpace China.
"User participation and interaction are more important."

Tepid feedback

The first move of MySpace China, the instant messaging service
launched on June 13, isn't likely to wow those users. It's a
preliminary product that does not support audio and video chat and
cannot even transmit files. The Chinese IM market is dominated by Tencent Holdings'
QQ, which has 84% IM market share and has expanded services into game,
auction, and mobile IM. Though MySpace China claims that its IM aims to
serve its existing members and will not compete directly with QQ, as
the industry converges they are essentially competing for the same
users.

Feedback by MySpace China users so far has not been encouraging.
"The site did not provide me with any pleasant surprises," posted new
member "He" on MySpace. Another user, "odbc," posted "the BBS (bulletin
board system) is troublesome to use," and "Chang" said the site "does
not feel so cool probably because of different cultural habits." Others
complain the site is "cold" or "soulless."

Despite the challenges, MySpace, with its team expanded to around 36
people, seems upbeat. After all, it has the deep pockets of News Corp.
behind it. "We are not thinking about revenue yet," says Zhu of MySpace
China. "We want to focus on improving our products and services in the
next half to one year."