Social notwork

At the time of LinkedIn’s IPO in 2011, the company was asked questions about its China strategy. Or more specifically, why it didn’t seem to have one, especially when the social networking site was virtually nonexistent in the world’s largest internet market.

So imagine investor excitement when it was revealed that LinkedIn chairman Reid Hoffman visited China several times last year and was seen rubbing shoulders with local internet industry tycoons at firms like search engine Baidu, e-commerce giant 360Buy and social networking site RenRen. Industry insiders concluded that the social network for professionals was gearing up for a serious push into the Chinese market.

Perhaps LinkedIn should take a look first at one of its Chinese imitators, Ushi.com. The site, which was founded in October 2010, means “outstanding professionals”. At launch, Ushi boldy predicted it would have two million registered users by the end of 2012. Fast forward to today, and Ushi only claims 830,000 active members. Investors have been reluctant to put in more cash.

So what happened? When Ushi debuted, investors were excited. The timing was auspicious: LinkedIn had just posted positive net income for 2010 and it was gearing up for its much anticipated IPO. As a result, Ushi raised $1.5 million in 2010 and $3 million more the following summer, led by a strategic investor, Gerson Lehrman Group.

But Dominic Penaloza, co-founder and chief executive of Ushi, says professional social networks have grown more slowly than anticipated in China because the LinkedIn model doesn’t always fit with the Chinese context. “Chinese people are not accustomed to posting career information and networking resources on public websites. They are very protective of their contacts, they do not want to publicise their relationships, and many choose not to do business online,” Penaloza told CBN weekly. Another problem is the ‘directness’ of the career networking model – it’s worked well in other countries, less so in China. “LinkedIn users frequently get requests such as ‘I need this and this’, or ‘I need to hire such and such’. In China, it wouldn’t be cool to state those requests directly,” says Derek Ling, chief executive of Tianji, another professional networking site. “People in China have to be friends first before they can do business together.”

Ushi tried to build exclusivity with an invitation-only policy for new members. That way, it hoped that users would appreciate the high-quality, professional environment. It also invited 100 “chartered members” including executives from companies like Dupont, Microsoft and GSR Venture Capital. Within five months, the number of registered members grew from 100 people to over 50,000. But the company was under pressure to grow much faster. A year later, it opened registration to the general public, even partnering with Starbucks to offer a coffee coupon to anyone that signed up. During that period, new user numbers spiked. But then the growth rate tapered off, and the amount of activity online also went down. “This less-than-desirable outcome is Ushi’s own doing,” an employee admitted to CBN Weekly.

The company then tried to monetise the site by offering recruitment services to its clients. Staff were appointed to help recruiters find potential employees from Ushi’s database, with companies charged according to the number of resumes that they showed interest in. But recruiters were disappointed, saying that the number of qualified candidates was limited.

By then Sina Weibo had also started a business-focused social network. It released a LinkedIn-like product last year called Wei Renmai (which roughly translates to ‘Weibo Connections’) which allows users to search for people, companies and job opportunities. It also features a map that shows friends the business contacts they share, as well as how they are connected to one another.

Unlike Ushi, Sina Weibo has immediate scale to draw on: 500 million registered users.

No wonder that Ushi is more concerned about the threat from Sina than the possible arrival of LinkedIn. “So far no foreign-headquartered internet company has ever become number one in its space in China,” Penaloza told Pando Daily, a Silicon Valley tech blog.

“LinkedIn will clearly have a shot at it. But if they do it, they’ll be the first in Chinese history to become number one in their segment.”

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