On Barry Diller's China plans

Posted by: Bruce Einhorn on November 26, 2007

On Friday, Barry Diller announced that his company plans to make a big push into China. Diller says that his company, IAC/InterActive Corp., will be putting $100 million into the country. “We’ve certainly got enough capital to do damage,” the mogul said. That may be. But we’ve heard this story and the magical $100 million number before. It was only two years ago that Meg Whitman made headlines when talking about eBay’s plans to charge into China with a war chest of about $100 million. Unfortunately for eBay, local rivals weren’t scared off by talk of deep-pocketed Americans entering the market. Taobao, owned by local e-commerce pioneer Alibaba, so thoroughly took over the Chinese consumer-auction business that eBay last December threw in the towel, giving up on its stand-alone Chinese venture and forming a partnership with Li Ka-shing’s Tom Online.

Diller, to his credit, acknowledges that lots of other U.S. companies have, like eBay, tried and failed to make a dent in the Chinese Internet world. The same year that Whitman unveiled eBay’s China strategy, for instance, IAC took control of ELong, a Chinese travel service site. And with Diller’s company at the helm, ELong went nowhere, falling far behind local rival Ctrip. IAC’s in good company. So far, no U.S. Internet company has scored a big success in China. Amazon might be the one exception, since the company controls one of the biggest online retailers, Joyo, but it’s still very early in the e-tailing era. Others, including Google, Yahoo, and Microsoft, have struggled. (For more on emerging e-commerce in China, see this BW story).

Do Barry Diller’s folks know something that the others don’t? We’ll see. Diller says that IAC has learned from its ELong mistake. “I think we, in our imperialistic way, made some early dumb decisions and hopefully we’re making smarter ones now,” the AP quoted Diller saying on Friday.

Reader Comments

Steven

November 26, 2007 1:10 PM

This is a very good example to show that the failures of American internet companies were caused by their lack understanding of Chinese, Chinese culture and Chinese rules, Not the gov's censorship.

CHRISTINE

November 27, 2007 3:59 PM

I was the Director of Marketing in China for the joint venture tv shopping company that IAC's HSN partnered with in 2001.

I had friends working at Eachnet during 2004 when eBay bought them and remember Meg Whitman's now infamous quote "Whoever wins China, wins the world" never realizing that 2 years and $300 million dollars later, she probably wishes no one heard that.

In both cases, failure was not due to the usual PR spin of China being too difficult to operate in...the key to succeeding in China is having the Meg Whitmans and Barry Dillers of the Western world understand China by lending support to the local team there at the highest levels. China is too important a market for any MNC's CEO to allow layers of corporate politics to screw up their strategy.

My advice to Barry Diller, have your guy in China report directly to you and not some VP at IAC who knows nothing about China but doesn't want to lose his job at headquarters so will pretend to know a lot about China and hope no one notices. Those of us who have spent the past 20 years on the ground in China have seen the same mistakes repeated over and over again. Hopefully this time around the $100 million is in good hands.

There's an excellent podcast interview on The China Business Network with Eric Rosenblum, GM of Global Strategy for RealNetworks who breaks it down on Why American Tech Companies Fail In China.

Barry Diller should have a listen:

http://thechinabusinessnetwork.com/Hot-Topics/Why-American-Tech-Companies-Fail-In-China.html

Paul Denlinger

November 28, 2007 5:41 PM

I would venture to say that it is impossible for an IT venture to succeed in China without the main decision-maker (in this case, Barry Diller) being in China on a constant basis.

Success in China is heavily dependent on understanding the context of the decisions which need to be made on a day-to-day basis. If headquarters is in NY or somewhere else, and the China country head has to spend more than 50% of his time explaining the rationale for his decisions to headquarters, then he will soon run into a local Chinese competitor who does not have to deal with that time and effort package. Instead, he is just launching products for the Chinese market, as Taobao did when competing with eBay China.

I have talked about the issue in an article on the blog at:
http://www.chinavortex.com/2007/08/why-most-us-market-entries-fail-in-china/

On the other hand, if IAC brings in $100M looking for a Chinese entrepreneur, then the question for any smart Chinese business person becomes "In addition to the capital, what does IAC bring to the table?"

This is a tough question which IAC needs to think through carefully.

Christine

November 29, 2007 6:49 AM

I had the opportunity to interview Shaun Rein, Founder and Managing Director of the China Market Research Group (and regular contributor to Businessweek) regarding the recent announcement by Barry Diller.

$100 Million Dollars Worth of China Advice For Barry Diller.

You can listen to it at:
http://thechinabusinessnetwork.com/Finance-and-Investing/100-Million-Dollars-Worth-Of-China-Advice-For-Barry-Diller.html

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