|BUSINESSWEEK ONLINE : AUGUST 2, 1999 ISSUE|
|INTERNATIONAL -- INT'L COVER STORY
'We Are Building a Roof before the Foundation and Walls' (int'l edition)
Bill Waddell, chief executive officer of Zhaodaola Internet in Beijing, is a 40-year-old Arizona native who worked in marketing for AT&T before moving to China in 1996 with a U.S.-based venture-capital firm. He snagged $3 million in seed funding in 1997 from the venture-capital group controlled by televangelist Pat Robertson and also from MUI Media, a subsidiary of a Malaysian conglomerate. With that money, Waddell launched Zhaodaola earlier this year. Now, as rival portals go public, Waddell is looking for more capital. He recently spoke with Asia Correspondent Bruce Einhorn during a fund-raising trip to Hong Kong. Here are edited excerpts of their conversation:
Q: You started Zhaodaola in the spring. How's business?
A: We have around 100,000 page views a day. We're hoping for 15 million a month by yearend.
Q: You've got Pat Robertson as a backer. Does that mean that Zhaodaola is part of the Christian Coalition?
A: I know Pat Robertson as a venture capitalist. He's a venture capitalist hoping to make some money from investing in the Internet in China.
Q: Where do you see the Chinese Internet developing?
A: The first play in the Internet in China will be the portals. The portals will start, and then E-commerce will follow. Everyone in China would like to duplicate the tremendous success we have seen in the portal space in the U.S.
Q: When it comes to development of the Internet, how does China compare to the U.S.?
A: China now is so much in its infancy. It is so young, it hasn't even been slapped on its behind and started to cry yet. The China market now is at the same place as the U.S. in 1992 or 1993, when most people didn't even know what the Internet was yet.
Q: What is the biggest obstacle to running an Internet company in Beijing?
A: It is so hard to find anyone in China who can manage a company. In the IT [information technology] space, there is a big brain drain. We pay two, three times the normal income of Beijing people -- $420 to $720 a month -- to hire good people here. Even those people you're afraid they will pass the Toefl [Test of English as a Foreign Language] and go to the U.S. This is the biggest problem that China has. The Internet has put the whole world in competition for talent.
Q: If it's so hard to get people locally, can't you bring in foreign talent?
A: For China to be great as an IT country, it needs tons of foreign talent. But it's harder to get great foreign talent in China because people have to have a love for China, a passion for Asia. If they don't have that, they are not coming. They can live in nice homes in Silicon Valley, go to hip restaurants in San Francisco, go skiing in Tahoe. China is a tough sell, a hard life.
Q: Yahoo! already has a Chinese version. Aren't you afraid that some of the other big Silicon Valley portals will move in and steal your market?
A: It takes two to three years to get set up in China, to go through the rigmarole and red tape. Hiring and training a good staff in China is at least a two- or three-year job. We worked for over a year to get our licensing.
Q: Speaking of licensing, the Chinese government requires all businesses operating in China to have a license. Yet there is no specific license available for Internet content providers. How do you get around that problem?
A: People try to throw in every business they can think of into their license. You don't know where the wind will blow. You have to cover your bases. We have three different business licenses, covering a range of IT services-from hardware, software development, network services, content aggregation, info-tech consulting services. We even have a license for import/export. We have everything you can think of.
Q: That must make you a little nervous.
A: Everything is in flux in China. We are building a roof [of a house] before the foundation and walls. We don't have a solid infrastructure -- computer penetration, legal transparency, rule of law. The Internet presupposes you have a solid foundation to start. Imagine what it's like to [build an Internet business] in China when you don't have that. I'm wiring the house with the electricity on.
Q: The Internet contains so much information that the Chinese government doesn't like. How can you run a business without getting the authorities upset?
A: We take all of our political news from official Chinese sources. But business news, IT news, lifestyle news we do whatever we want. There is one area where we have to be careful, and this is politics. We have librarians and every site is "spidered," we make sure the site is in line with government policy. We also have chat editors. If they feel something is out of line, they can it.
Q: The online advertising market is tiny in China. How can you make any money by selling ads?
A: We don't feel very excited about our chances of early ad revenue in the short term. We have to look at alternatives. We're going to figure it out, how to make money [through] a blending of E-commerce and advertising. People are going to figure out how to create hybrid revenue streams in their portals much earlier than in the U.S.
Q: But so few people in China even have credit cards. How can you make E-commerce work in China?
A: We have to solve the payment problems. People don't have credit cards, the financial system is underdeveloped. But a lot of people have debit cards now. Within the next six months [there will be a solution.]
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China's Web Masters (int'l edition)
INT'L COVER IMAGE: China's Web Masters
TABLE: The Heavyweights of Chinese Cyberspace
Online Original: Viewing Chinese Sites: A How To (int'l edition)
Online Original: ``We Are Building a Roof before the Foundation and Walls'' (int'l edition)
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