Localize or Fail

I used to think that localization meant translation. As someone who has lived in the US my entire life and has no experience with international business, I didn’t know any better. I assumed that to enter a foreign market, all a company had to do was slap up translations, register a local domain, hire a US celeb to pimp the brand, then boom—10 million new users.

I wasn’t that naive of course, but I never knew what localization really meant. I never knew until I learned how unsuccessful US consumer internet companies have been at entering China. Google, Amazon, eBay, Facebook, Yahoo, Twitter—all the giants. They all tried and failed.

For someone who didn’t understand what localization meant, these failures were genuinely puzzling to me. They’re fantastic companies, how could they just fail in China? Did somebody grab the wrong translation dictionary?

On Geeks on a Plane Asia, one of the recurring topics has been Chinese copycat companies—companies that copy ideas and business models from successful US companies and execute them in China. Companies like Baidu (Google), Weibo (Twitter), Renren (Facebook), Youku (YouTube), and Taobao (eBay).

There’s been a lot of debate about these companies. Are they really innovating? Or sharing? Copying? Stealing? Whatever your opinion is, there is one hard fact: the Chinese copycats have been wildly successful in China compared to their US counterparts.

There are a lot of reasons for this of course, including government regulation. But a major reason why Chinese companies have succedeed is that they iterated on the original product vision to fit the Chinese market. They didn’t make a Chinese version of Facebook and Twitter, they reinvented Facebook and Twitter for Chinese users. They didn’t translate the product, they localized it.

Chinese internet users behave differently than Americans. Take a look at a Chinese landing page. It’s a giant wall of text and links on a page that scrolls forever. To my Western eye, it’s atrocious. It’s hard to sift through. But for them, it works.

Is that because Chinese users don’t appreciate clean, minimalist design like Westerners do? No, it’s more complicated than that.

Chinese people prefer their mouse to their keyboard. They prefer browsing to search. Because most don’t know how to use a Western keyboard. They don’t like search because it involves typing, which is complicated.

A lot of Chinese people smoke—indoors, near their computer. How do they type searches and URLs with a cigarette in their hand? They don’t. They click links with their mouse.

Localization doesn’t mean translation. It means understanding the culture and adapting the product to it. Chinese companies succeed because they understand Chinese culture and build their product around it. US companies fail because they don’t.

In 2002, eBay acquired Eachnet to expand to China. Ebay absorbed Eachnet’s Chinese user base and migrated them to Ebay’s US platform. Consequentially, the Alibaba Group decided to launch a competing company, Taobao, to focus on developing the same service specifically for Chinese users.

Taobao was the underdog, but unlike eBay, they could be agile. While eBay was dumping marketing spend and herding Chinese users to their US platform, Taobao was adapting their product to the fast-changing Chinese market.

Taobao studied their demographic. They knew most Chinese people didn’t have credit cards, so they built an escrow-based payment system. They knew most Chinese people were new to online commerce, so they removed listing fees and shifted their business model to ads. They knew most Chinese people liked to barter and talk with merchants prior to purchases, so they built an instant chat program in their website.

In 2006, eBay China shut down. Taobao is now the undisputed market leader in China.

Ebay expanded their service to China. It failed. Taobao reinvented the service to fit Chinese culture. It was a wild success.

The idea of expanding a company to China is sexy. Why wouldn’t it be? it’s the largest and fastest-growing consumer market in the world. We all want a piece.

But expansion is the wrong way to think about it. It shouldn’t be an expansion, but a reinvention of the product built around the culture of its users. Any attempts otherwise will fail.