News from China: Happy Chinese New Year, Especially to Palm

Happy Kaixin001.com :)
Poor Palm :(

Chinese New Year just took place over the past three-day weekend. According to Chinese customs, this holiday lasts for two weeks after New Year’s Day on the Chinese lunar calendar, and people will celebrate each day with different celebrations and rituals. Right now the entire country is still immersed in the holiday spirit.

Besides the New Year festivities, there has been some other interesting news coming out of China. About a week ago, there was much speculation that Palm's mobile phone business was in trouble after news leaked out that Palm was going to halt manufacturing of their Pre and Pixi phones in China for at least the next two weeks in February. Yes, Palm has been facing strong competition in the mobile market, but their situation is not that dire yet. Palm had to release a press statement to clear up these rumors, and state that the pause in production was simply because it was Chinese New Year in China, and their workers were getting the holiday off. Seeing this news, I had very mixed feelings, and also suddenly had the urge to start a weekly column to write about news from China, hoping this would provide a window for viewers to get to know more about Chinese culture and the business environment there. In the future if you see speculation similar to what Palm had to deal with, maybe you can laugh at it, since you already know this time of year is Chinese New Year.

One other tidbit about China came my conversation with a friend who is currently doing research about the Chinese Social Network environment. She interviewed the founder of the “Chinese Facebook”, Kaixin001.com, and she was told that during the past two years since Kaixin001.com was launched in late 2007, the user base has been growing exponentially and reached 90 million at the end of 2009. Growing up in China, I was fully aware of the huge population and the hot market there, but I was still very astonished by this figure.90 million in two years! People must be rushing to this website, and this number is for sure going to multiply in the next couple of years.

Another popular Chinese social network site, Renren.com, which targets a younger demographics like college students in China, has also gathered tons of people. What is more, it has also successfully monetized its huge user base. Besides the revenue generated from traditional ads and selling virtual goods, it also limits the number of friends people can add for free to 1000; anyone who wants to have more than 1000 friends must upgrade to a VIP account, which costs about 10 RMB per month (less than 2 US dollars). With the VIP account, you can add as many friends as you want and incorporate personalized backgrounds and other features to your page. Many of my friends are spending the 10 RMB each month on their accounts. Also for all the brands and companies that want to target more than 1000 fans, they have to pay for this VIP account as an entry fee.

Right now, the two biggest social network sites in China have also been proven to be worthy of investment, and have successfully attracted many brands and social groups either through fan pages or through creative means like embedded game elements and charging you for adding more friends. After five years of existence, Facebook finally reported profits last year. And if people are still skeptical about how social network sites can make money, they should look no further than China. Even though these Chinese social network sites were originally copycats of Facebook, I think they really have built something that their western counterpart may want to take a look at now.