Sunday, November 27, 2011

I’ll Do That for You If You Bribe Me: Chinese Government Website Hacked?

longhushan

'Our site was hacked; we're looking into it.'

Like many local governments in China, the government of Longhushan in Jiangxi maintains a website that’s intended in part to serve as a way for the government and the people to interact. Although the site is currently closed save the front page and a short message (see image), just recently it featured a section where people could ask questions or make complaints and officials from the government would respond.

All was going well until one official, it seemed, started to go off script.

When a citizen complained about the difficulty of getting a One Child Policy document processed, the official response came through: “Bullshit [it's hard], just bribe me with money and I’ll get it done for you.”

When a citizen complained about “tofu-dregs construction” — a slang term that refers to construction of buildings using shoddy/inferior materials that lead to collapses — the official response was “Tofu dregs are my absolute favorite dish!”

Parents complaining about schools were met with sarcasm. A complaint about the quality of the school food was met with “Go down there and cook for them, then” and a complaint about the classrooms being too loud and chaotic was met with, “If it’s chaotic then it’s chaotic, [if you have a problem with that] just tell your son not to go to school at all.”

Was this the work of some overly-honest official? The government doesn’t think so. Their official site currently says that it was hacked, and government reps told Southern Metropolis Daily that although access to the site was shared among a number of different government departments, the chances of it having been an inside job, so to speak, are “very low.”

The police are investigating, but the phrases have already been embraced by netizens as the latest examples of leirenyu — shocking statements. Most leirenyu attributed to government officials are genuine quotations — China, like anywhere else, has its share of braindead politicians — but these statements seem to be resonating because although they’re almost certainly the work of some kind of prankster, there is a grain of truth to them, too.

In any event, this isn’t exactly the only problem government websites in China face. Earlier this month we ran a piece (also based on a Southern Metropolis Daily article) about how some government sites haven’t even been updated in years.

[Southern Metropolis Daily via Sina Tech]


Link to full article

“People’s Search Engine” Jike Won’t Totally Imitate Google (But Maybe It Should)

Deng-Yaping

Jike CEO Deng Yaping, via Sina Tech

Last year, state-owned Party mouthpiece newspaper People’s Daily decided to get into the search game and launched Goso.cn. Perhaps because that name was widely criticized as derivative of already-existing search services Sogou and Soso, they later changed the name to Jike.

Jike CEO Deng Yaping was in the news this morning, as she said that Google was “worth learning from” and that it “promotes American values and democracy around the world.” And although she promised Jike won’t just “blindly follow Google” and will walk its own path, she also said that Jike was planning to add search in other languages — right now it’s just Chinese — to compete on an international level.

Big words for a search engine that’s market share in China might be described as microscopic, but it got me wondering…is there anything to this Jike thing? I had tried the search engine out for kicks when it first came out — it sucked — but now they’ve had over a year to work on it.

Now seemed as good a time as any to really dig in and kick the tires, so I tried a series of searches on Jike in Chinese, and compared the results there to results for the same searches on Baidu (NASDAQ:BIDU) and Google.com.hk (which is the closest thing Google has to a China search engine these days). Who should be learning from who? Read on to find out!

(Note: all the search terms below are rendered in English, but in the actual test I was using the Chinese terms)


Test #1: Finding Food


Everyone needs to eat, and the internet is full of places that can help you do that. First, I searched for Pizza Hut, because they’re one of the few places that offers a functional online ordering service and delivers to my inconveniently-located apartment.

Jike: The first result is Pizza Hut’s official China page, which is good. After that, though, there are links to entries on different wiki sites, but no direct link to Pizza Hut’s online ordering site. Granted, I could have found that link on Pizza Hut’s official site, but it would have been nice to see it directly in the search results here. If I didn’t already know Pizza Hut offered online ordering, Jike wouldn’t have helped. Grade: B.

Baidu: Pizza Hut’s official site is the first result, the second result is a deals site, and the third result is Pizza Hut’s official online ordering service. Not sure what the deals site is doing there, but the basic links I was looking for were both in the top three. Grade: A-.

Google: Google has Pizza Hut’s official site first and their online ordering site second. That deals site above was Google’s number three result. With the official site at number one and online ordering at number two, this grade is pretty easy. Grade: A.

OK, but that’s foreign food. What about a more generic (and location-specific) search like “Beijing delivery food”?

Jike: Jike did pretty well here, linking to a number of online ordering sites and delivery services, and all of the top results were in Beijing. Grade: A-.

Baidu: Baidu performed about the same as Jike here, except that its results also included a map with names, phone numbers, and street addresses. Grade: A.

Google: Google was also similar, and also included a map. On the one hand, the map appeared to have more selections than Baidu’s. On the other hand, it seemed to include a disproportionate number of Indian restaurants. Not that that’s really a bad thing. Grade: A.

So, everybody did OK here. Jike was noticeably less good than Baidu or Google, but it wasn’t awful. A Jike user looking for food probably wouldn’t go hungry.

jike

Jike's frontpage design certainly looks familiar....


Test #2: Buying Stuff


The internet is great for porn shopping. Ecommerce is increasingly popular in China. I enjoy reading when I get the chance, so I first tried a simple search for “buy books” to see if the search engines could steer me towards a good online bookseller.

Jike: Jike pointed me to a wiki entry about a Song dynasty poem called “Buying Books”. The next result appeared to be a map of Shanghai booksellers — not so useful for a Beijing denizen like me — and then it was downhill into Douban profiles of people who happened to mention purchasing books. The front page didn’t contain any links to China’s big online book sellers. Grade: F.

Baidu: Baidu’s first result was Amazon.cn, followed immediately by DangDang, the two big booksellers people would be most likely to buy books in China from. Grade: A.

Google: Google’s results were very similar to Baidu’s, the first two results were Dangdang links and the third was Amazon.cn. Those two sites are what should appear at the top of a search for buy books. Grade: A.

But maybe Jike just isn’t good with books? I’m also in the market for some sportswear, so I tried searching for that on all three sites.

Jike: Again, Jike started off two two different wiki links, in case I wasn’t familiar with what sportswear was, I guess. After that, there were a number of random links, but the closest it got to a reliable e-tailer on the front page was a news story involving Alibaba. Grade: F.

Baidu: Baidu also led off with a wiki link, but the results after that were links to the sporting clothes sections of reliable ecommerce sites like 360buy as well as direct brand results like the official Li Ning homepage. There were also three ad results, at least one of which seemed sketchy to me, but they were all relevant. Grade: B+.

Google: Google had a mix of sketchy-looking links and links to more accepted sites like Taobao and Amazon.cn. Overall, though, it wasn’t a great showing for Google. Grade: C.

Google and Baidu were about even in this category, with Baidu’s results perhaps being a little more helpful. Jike was a very, very distant third, offering results that were almost totally useless.


Test #3: Social Networking


These days, the net is all about networking. Microblogging is China’s current fascination, so how would our three amigos respond to a search for weibo?

Jike: Jike lists Sina Weibo’s homepage first and Tencent Weibo’s second before going on to list more obscure Weibo options, but bizarrely, Tencent Weibo’s listing is entirely in English. This is very odd, and it means that non-English-speakers (i.e., most of Jike’s users) are probably going to miss out on China’s biggest microblogging service (in terms of registered users). Grade: C-.

Baidu: Baidu lists Sina first and Tencent second, and in fourth place it offers a wiki page on what microblogging is. Pretty basic stuff. Grade: A.

Google: Almost exactly the same as Baidu. Grade: A.

Very strange that Jike offered Tencent’s result in English; thus far it’s the only English result I’ve seen there. But it certainly makes their site less useful for Chinese netizens looking to ride the Weibo wave.


Test #4: “Sensitive” Content


This one is a bit unfair, since once of these search engines is based in Hong Kong, and thus able to operate with more freedom than the other two, but I figured it’d be worth checking out anyway. I started with a search for Zhao Ziyang, a former Party leader who was ousted in the aftermath of the 1989 protests and later penned a controversial autobiography.

Jike: Jike keeps it strictly official. The top three results two news stories involving Zhao on the Chinese government’s official website and a story about his remains being burned from the People’s Daily. Someone looking to learn about Zhao’s real legacy wouldn’t find much of substance here. Grade: C.

Baidu: Baidu does a bit better, offering an official biography as the first result that does refer to his expulsion from the Party in June of 1989 for “making the mistake of supporting unrest and Party splittists at a crucial moment.” Baidu is clearly being careful; there are no wiki links here, but at least someone searching Baidu could find an official biography and get some idea of who Zhao was. Grade: B.

Google: Unsurprisingly, Google fares best here, as the first result is a link to Zhao’s biography on Wikipedia. That link is blocked within China, but it also features a couple of domestic wiki links. Users looking for a complete understanding of Zhao would have better luck here than anywhere else. Grade: A-.

Google was the clear winner here, and although that’s an unfair comparison to make, it’s worth noting that Baidu was still more helpful than Jike.

pan-shuangshuang

Can Jike help you find this?


Test #5: Image Search


All three of these sites also offer image search. Since people like looking at pretty ladies, I did a search for Pan Shuangshuang, a Chinese model was in the news earlier this year after some of her sexy photos were “leaked” online.

Jike: Jike did shockingly well here. All of the images were of attractive women, and almost all of them were actually Pan Shuangshuang. Even when I restricted the search to large images only, Jike was still pretty on target. Grade: A.

Baidu: Baidu was about the same as Jike, with pages and pages of photos, most of which were actually of Pan. Grade: A.

Google: Google performed about the same as everyone else. Lots of sexy pictures of Pan. Grade: A.

I didn’t expect it, but the three search engines were about equal here. I guess everyone spends their time fine-tuning search for pretty pictures before they bother working on their algorithms for content!


Conclusions


Obviously, this is a highly subjective and unscientific test, but based on my experience, Jike varies from kind of decent to essentially unusable depending on what you’re looking for. It did well in the picture test, but completely failed in my search for book etailers and was varying degrees of inferior for every other content test.

So yeah, clearly there’s a lot Jike could learn from Google, and maybe they should consider copying them a little more closely. Innovation and uniqueness is great, but if that means your search engine can’t point people in the direction of Amazon and DangDang when they search for “buy books” then I’d prefer to use a copycat that isn’t unique but can at least help me find what I’m looking for!


Link to full article

Sina Launches Walkie-Talkie Service Sina Weiyou

It’s known to all that Tencent build its entire empire on top of QQ IM service, and we noticed many times that Sina is also trying to leverage the popularity of its Weibo service to expand it tentacles – through the introduction of Qing weibo (Tumblr-like), real-time search engine, WebIM, 3rd apps center and so on.

Not bad moves, but, all of service are still PC-based, in a time when the mobile internet is about to explode.

With the launch of Weixin and iterative improvements, Tencent has successfully established its forefront in mobile era again, this might be the last thing Sina which missed out on the IM, online gaming waves and now relies heavily on online news business want to see.

Hence, no wonder Sina is rumored to launch a Kik-like service to WeiYou (微友, translates to Micro Friends) to compete with Tencent Weixin, the rumor was later on confirmed by Sina staff.

According to people familiar with the matter, Sina WeiYou will be based on Sina Weibo, means you can import all your relationships on one of the most popular Chinese social media. The app also lets you to send free voice messages – just like walkie-talkie – through 3G/GPRS network, no extra charges and no strings attached.

Personally I don’t think this can hurt Weixin in anyway, at least not for now judging by what Weiyou offers. The one might get hurt actually would be Miliao by Xiaomi Tech as the competition grows with more big guys stepped or is about to step their toes into the market with huge user base as their backup. Tencent claims over 711.7 million active QQ accounts and Sina Weibo boasts a registered user base of over 250 million. As for Tencent Weixin, it claims over 30 million users whereas Miliao has 7 million.

 

 

Related posts:

  1. Unstoppable Tencent? 310 Millions Weibo Users and 20 Millions Weixin Users
  2. Sina Releasing Tumblr-like, Light-blogging Service Qing
  3. Sina Weibo, Don’t Be Evil! Its Kandian, a Social TV Service Is In Private Test


Link to full article

Mojing: An App To Look For Flings in China

mojing-leadMojing, which means magic mirror in direct translation, is a face recognition app created by Beijing-based Facekoo. It recognizes your face and then links you up with someone who they think is suitable for you. I’m not sure what the magic algorithm behind it is but the app sounds fun, even if it is just some hokum random logic running behind it.

To make it work, the app is persistent in asking users to upload a photo that it can detect and analyze. I tried one with my dog’s photo but got rejected — so tough luck for owners who want to use this app to find a partner for their pets!

Anyway, once you’ve successfully uploaded your own pic, you can then look for strangers and do a match up. If you’re happy with the results, you can show it off to your friends on Weibo and Renren. Unfortunately, I wasn’t too compatible with Honey, the girl I was matched with in this demo.

The app also allows you to find strangers through locations — say folks who are 1 km away from your current position — and even based on age, sex, and income (don’t you just love technology). You can also interact with strangers in many ways — send them a message, a virtual gift, or even save them for future stalking.

The virtual gift section is where the real business is for Mojing. Users can buy lollipops which cost just 3 RMB or a diamond ring at 1999 RMB to show off how rich they are.

I must say Mojing is a nicely-designed app. I do wonder how its algorithm actually works. But if you buy the “magic”, this app is surely a fun and easy way to meet new friends, if not flings.

mojinggg

 


Link to full article

News Roundup: Adidas to Launch $1 Shoe in Indian Market

In what one would call a true example of localization, Adidas is launching $1 shoe in India. These shoes will be sold under Reebok brand.

“The shoe will be sold in villages through a distribution network,” Hainer said, adding, “We want the product to be self-funding. [source]

Higher-resolution India maps by 2014

The Survey of India (SoI), the country’s apex map authority, plans to release by 2014 a series of maps that are 25 times more detailed than the current ones. This will benefit India’s nascent geospatial industry as well as the states that are trying to use three-dimensional (3D) maps to dispense public services.[source]

HDFC Bank, Vodafone India launch mobile banking product for rural coverage

Under this initiative, HDFC Bank will be able to use select retailers of Vodafone to represent the bank as sub-agents and enable anyone to send money or withdraw cash through their outlets.

A farmer can deposit cash at this outlet, which will reflect on his mobile instantly. He can choose to withdraw it later or send the money to another person by selecting one of the options available on the mobile and authenticate it with a security PIN. The beneficiary or receiver can go to a Vodafone outlet and collect the money based on the SMS he receives.[source]

Google Internet bus to begin Bengal journey

Besides Kolkata, it will travel to other towns such as Durgapur, Asansol, Kharagpur, Ulberia, Chandannagar, Haldia, Bankura and Purulia. The Internet bus has already travelled 11 States covering 130 towns and touching 6.5 million people [source]

Related posts:

  1. News Roundup – Deathblow to Mobile Grey Market, RCom to Launch ‘Zoozoo’ Challenge..and more
  2. News Roundup: Airtel Money Launched in Chennai, Sify Launches Internet Radio
  3. News Roundup: Maruti Suzuki To Launch Hatchback Online (On Facebook First), SPAM SMS/Calls To Get ‘140’ Number Series
  4. News Roundup: Yahoo India to tie up with schools for internet education
  5. News Roundup: Zenrin In Talks To Buy 24% Stake In MapMyIndia


Link to full article

Weekly Recap [Nov 27th 2011]

Best of Pluggd.in (week ending Nov 27th, 2011).

Most Popular

 

Startups/Entrepreneurship

India Online/Telecom

Technology

Related posts:

  1. Weekly Recap (Oct 30th, 2011)
  2. Weekly Recap [Sep 29th – Oct 5th]
  3. Weekly Recap: IIT Fee Structure, InMobi Funding [and more]
  4. Weekly Recap–TRAI, TRAI and FAIL
  5. Weekly Recap – [22nd - 28th sep]


Link to full article

ClickTrue gets privileged MSC status in Malaysia

ClickTRUE, a Singapore-based SEO consultancy firm, has been awarded the MSC status for its Malaysian office, it announced in a press release today.

Benefits that the company will receive include better access to communications infrastructure, duty-free importation of multimedia equipment, R&D facilities, and financial incentives like tax exemptions.

This status is given to both local and foreign companies in Malaysia, with the purpose of developing the country into a prominent infocomm technology hub. To receive the status, companies must pass a set of strict criteria which looks at the way its business is run, its vision, innovations, and development of local staff.

Jackie Lee, CEO of clickTRUE said: “We will definitely take the opportunity to work closely with Multimedia Development Corporation of Malaysia (MDeC) to embark on more Research and Development initiatives. For a start, we are excited to explore innovations in the Search, Social and Analytics space.”

The company is a new entrant in Malaysia and Thailand.


Link to full article

Starting a new company? Do industry analysis (part two)

If you are looking to sell a business idea to venture capital firms, demonstrating an understanding of your industry is important. This is the second of a two-part series on how industry analysis can take the guess work out of starting a new company and securing venture capital.

Part one defined what kind of questions industry analysis aims to solve. Here we recommend some of the best resources on the Internet to help you carry out industry analysis.

To start, look at the industry as whole, and then begin to make a study of the top three or four players. Cross reference analysis of individual companies with industry analysis to see if you can verify the industry reports and make your own conclusions.

Analyst reports

To gather this intelligence, examine free industry reports published by financial analysts from firms like KPMG and Deloitte. Analysts write reports on individual companies, and across whole industries.

The industry reports are more valuable. These reports benchmark the industry as whole, look at the key players and examine where the industry is moving towards.

Independent research reports

Research companies often publish industry reports they write on behalf of their clients. Parts of these reports are often made available for free, and you can normally purchase the entire research for around a thousand US dollars.

If you find part of a report well written and informative, buy it. It will cost you a fraction of what that research would cost to do from scratch and will save you time in mistakes later.

Prospectus and annual reports

If you can find and dig up an old prospectus of one of the top three /four competitors in your industry, you’ve struck gold. An IPO prospectus contains a wealth of information. They are written at the time when a company is trying to go public and list their shares on a stock exchange, so the reports are very revealing.

A prospectus explains a lot about an industry, why the company is in the industry and where the industry is headed. They often include a financial analysis of the industry, so competitors are benchmarked.

If you cannot find a prospectus, download annual reports. Though these are often not as detailed as a prospectus, annual reports do provide financial information.

Wikipedia

Good for cursive research. You can find out top-line information about each of the key competitors, their major shareholders, market cap and price to book ratios.

IPO listings

Are new companies entering your industry? This can be a healthy sign the industry is growing. Keep an eye out for IPO listings, and the positioning of these new firms. Their position in the value chain and level of disruption reveals a lot about the future of the market.

There are some good applications on Android and iOS to track IPOs.

Listen to news wires

If you are starting a company in a young category no older than 18 months, there may not be a lot of data available. It may be that the major players have yet to publically list. Private companies are not required to disclose their financials.

Daily deals are one such category where unless you are from the industry, understanding the implication of Porter’s Five Forces as an outsider is practically impossible.

Listen to statements made by CEOs of key companies. Track company consolidations – who is buying who? Consolidation reveals which companies are aggressive and what they value.

Monitor Twitter as a source of information. There are many analysts and industry specialists on Twitter freely conversing about juicy tweets and sharing links.

Work in the industry

Consider working for a competitor for a year. Lots of people worked at Google and Yahoo, and left to start their own businesses. They made lots of friends, gleaned valuable insights and some even got bought out by their previous employers.

Make friends from competing businesses and interview customers and suppliers in the value chain.

Go back to part one.

Anthony is the founder of Futurebooks. Futurebooks offer affordable incorporation, bookkeeping, business planning and business brokering in Singapore and South East Asia.

Anthony has helped corporate firms build subscription models, conduct industry analysis and develop brand positioning for new firms. He was founder of Firestarter, a digital marketing agency, acquired by Novus Media in 2010.

Front page image: Lumaxart


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24quan in Trouble? CEO Du Yinan Responds

du-yinan-disrupt-beijing

24quan CEO Du Yinan, at right, during Disrupt Beijing's group buy session

Last week we wrote about some of the concerning reports circulating on the net about group buy site 24quan’s, ahem, “restructuring.” Amidst the sort of things we’ve come to expect from group buy sites — branch closings, location-based layoffs — there were also reports of vendors and employees going unpaid or being threatened with withheld wages if they didn’t sign a separation agreement when their branch was closed.

24quan CEO Du Yinan was nice enough to leave us a comment on that story. In essence, he confirmed the layoffs, although obviously not using that particular word:

24Quan is undergoing transformative changes which will help steer the company to sustainability and profitability. We made a difficult decision to close down many under-performing sales centers in third and fourth tier cities and in some of these closures, admittedly, we could have done a better job with communication.

He also disagreed with my assertion that the reports of not paying vendors or employees essentially amount to theft:

24Quan is an honorable business and we pay all of our merchants and employees. At 24Quan, we do more than 10,000,000 US dollars of business per month and therefore we can assure you that we are not incentivized nor motivated to “steal” 3,000 dollars from employees or 300,000 dollars from merchants. We can confirm that people have stolen money from the company during our down-sizing efforts and hence we are taking a measured approach to reimbursements and payments to third parties, painstakingly verifying obligations and payment details. We also acknowledge that some of our ex-employees are unhappy with our decision to close down certain cities and we understand their frustration.

But — of course — we were interested in learning more, so I got in touch with Mr. Du via email. The following interview is being reproduced verbatim, with only minor edits to correct grammar and spelling. That makes it one of our wordiest interviews, but in this case, we felt it was best to reproduce my questions and Du’s answers in their entirety so that people get a clear understanding of the conversation.


Interview


CC: Certainly, there is no motive for 24quan to steal (relatively) small amounts of money, but if the company owed a debt to merchants and then failed to pay that debt within the stipulated time limits — which I believe is what happened, in at least a couple cases, correct — isn’t that a kind of theft? Certainly, it impacts merchants’ businesses in an adverse way and it’s not something they have any control over…


There is no motivation for 24quan to “steal” money from its merchants. We value our long-term relationships with quality merchants which is paramount to what constitutes our good and everyday business practices. That said, we handle a vast amount of merchant payments on a daily basis. To give you a sense of the size of our business, we have in excess of $12,000,000 of cash turnover – every month. Naturally from this kind of deal volume, we see a small percentage of irregularities. Furthermore, we reserve the right to question and to evaluate merchant claims when we spot an irregularity, as we also take quality control very seriously.

The majority of our merchants provide the services they commit to, however, there are also cases where the merchant will not provide the service they committed to offer to our customers, or there is a serious default in the service given. For example, we reevaluate claims when we are led to believe that (i) the merchant may not have delivered its services per our stated offering, which results in massive customer complaints; (ii) when the contract entered into was fraudulent (a fake chop or altered contract); or (iii) when we believe the merchant has already been paid (we paid but they claim non-receipt of funds).


CC: You said [in your comment] you could confirm instances of individuals stealing from the company. Could you elaborate on this? Has this happened only at branches that are being closed, or is it a more widespread issue? Is this one of the factors that has led to the “communication” issues you mentioned?


From time to time, there are bad apples in a basket of good apples. We employ several thousand people in China and I can say in earnest, that we generally employ good people. Sometimes, when people are let go they fail to return access cards, devices such as their mobile phone, or sometimes a laptop. These are dealt with by withholding the individual’s final severance payment, which is permitted by law. Sometimes our equipment are returned broken and we have to figure out what to do. These situations can sometimes amount to a dispute between an employer and an employee and we settle these pursuant to methods permitted by law.

We also have to manage IP and data theft by employees. We have run into instances where people are spying for a competitor. In these situations, we have to figure out ways to manage HR issues and protection of our business. These irregularities are dealt with by our professional HR team. On occasions, we uncover massive fraud where our employees are working with fake merchants who are just friends working together to scam the company. We manage these incidents and work with local law enforcement. I do not wish to comment on specific branch closures.


CC: How do you anticipate your restructuring and the communication issues will affect the trust of your brand, in terms of consumers, and also in terms of trust from merchants and even from potential future employees you might be interested in hiring/recruiting?


24quan

In our industry, it’s not uncommon whereby our brand is being attacked and vandalized by competitors on a daily basis. In 2010, our top competitors engaged in massive smear campaigns attacking us. Early on in 2011 our competitors aired testimony from ex-employees that 24quan is out of money (allegations that are false; we are not going to do what Meituan did – that is to show the CEO holding a bank statement indicating that the company has money). In August, our competitors aired “news” that we do not have any venture investors, all because we did not publicize the amount and closing of our financing.

We have seen it all, and in this highly competitive market, we’re not surprised. We have supportive investors and we are focused on the continued growth of our sustainable business in China. Running a start-up in China is like running for the U.S. presidency: filled with smear/negative campaigns and fierce competition. We do our best by communicating effectively with truth, and over time, people figure things out and recognize that we are a trusted brand and we stand behind our merchants and consumers. We are here to stay.


CC: You wrote: “we are taking a measured approach to reimbursements and payments to third parties, painstakingly verifying obligations and payment details.” Could you elaborate on this approach, and the amount of time you anticipate it taking? Does this also apply to the payment of employees?


Compensation in the PRC is complex as it is. I am not an HR expert, but I can tell you that we make payments to employees on time and pursuant to local laws. We are required to withhold social security, certain tax withholdings, and other local taxes. Often times, if there is a dispute with an employee, it is over the “bonus”. We cannot pay out a bonus for a merchant deal that has not yet taken place, or is subject to re-evaluation when a person leaves. So if a sales person leaves us and breaches the employment agreement and joins the competitor the next day, takes our contacts and laptops from us, do we pay the person a bonus? From time to time, we will see people disagreeing with us over the math and we do our best to settle these because often times, the amount in contention is under $100, but people get very worked up over it.


CC: At Disrupt, you spoke about 24quan having the highest margins in the China group buy market, how the company would be profitable within two months, and how the group buy market in China was being hurt by a few ‘troublemakers’ that were causing vendors to lose trust in the group buy model. You did also talk about the coming “winter” and how companies need to rely on profit rather than capital, but to me, there still seemed to be a sharp contrast between the impression I got of how things were going for 24quan from what you said during that event and then the “restructuring” and communication issues apparently happening now, which seems to be an echo of what we’ve seen from many other Chinese group buying companies leaving a trail of closed local offices, disgruntled employees, and frustrated vendors in their wake. Have I missed something here? What makes 24quan different from the other group buy companies experiencing similar “transformative changes”?


All companies must go through lots of “growing pain” for any meaningful transformation in a down market. Some players may choose to take a soft correction, where others take a hard correction. 24quan is not immune to that painful transformation, especially considering our intent to achieve profitability break-even next month. That, nevertheless, does not detract from the fact that 24quan maintains the highest gross margin in China group buy market, nor does detract from what the “troublemakers” have been doing, past and present, to undermine the healthiness of the market.

We are closing offices that do not generate positive margin (i.e. no deal profit). We are rationalizing our business and eliminating the offices and locations that are not profitable or have no likelihood of achieving profitability in the next 12 months. It tends to be the case that these locations belong to third or fourth tier cities, or in cities which we do not have a meaningful position compared to our competitors.

With respect to the “winter” I referred to at TechCrunch, I refer to the harsh reality that our competitors will also undergo the same painful exercise of down-sizing as capital is drying up and the cost of capital has increased since mid-2011. Merchants will have to ready themselves for deals that are arguably less attractive because our competitors no longer subsidizes deals with perks, rebates, etc. Merchants will need to give us better “margin[s]” and our employees also need to get better at selling. In the past, if their performance was mediocre, they could jump ship to a competitor. Today, there is nowhere to jump to but to get out of the business. This “winter” is really just a consolidation, but I personally believe this consolidation cycle will be felt in a way unlike any other in China’s internet history because there was hyper capital, hyper competition, and hyper growth; coming down from this will not be easy.


CC: What else do you want our readers to know about 24quan?


We want readers to know that we are a real business and we tend to think we are the “good” guys. In China, the good guys often get bullied and are beat up really badly (recall Google, Groupon, eBay and others). We are tough because we rely on resilient execution, sound strategy, effective leadership and a shared vision. Look us up in 2013.


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