Why Chinese startups are copycats

Why Chinese companies copy

Landwind X7

Copycat. It’s a word that has almost become synonymous with China’s tech scene over the past decade. And while the days of China’s most blatant copying — remember when Renren was called Xiaonei and it looked exactly like Facebook? — are long gone, the so-called “Copy to China” model is still pretty prevalent in the country’s startup scene. And of course, plenty of Chinese internet companies are also engaged in copying each other!

So what gives? Why do so many Chinese internet companies copy? It’s all about risk aversion.

It’s not who does it first, but who does it best

This is true in almost every tech market but it might be even more true in China: winning the race to execute some new idea first often gets you nothing. In China’s highly-crowded tech startup scene, being first is rarely a significant competitive advantage. If another company working on the same idea launches a few months later with better execution, they’re often going to win out.

And in fact, in China, being first can actually be a disadvantage.

Take, for example, Fanfou, which was China’s first major microblogging service. They beat all of the domestic and international major players to market in China, but the government was uneasy about the potential of microblogging to spread dissent and protest, so Fanfou got shut down. That gave the major tech players like Sina and Tencent plenty of time to iterate on their on microblogging services and liaise with the Chinese government to assuage their concerns. By the time the rules were clear and Fanfou was finally allowed to relaunch, it was too late: its competitors had launched superior services like Sina Weibo.

Being first to any new internet sector in China means sticking your neck out, because generally it’s not clear how consumers will respond and how the government might want to regulate that sector. Waiting and copying someone else’s approach but executing better is often the safer and more successful path: you avoid the unknown risks and instead are free to iterate on an idea you already know can work.

Looking into the future

Historically speaking, China’s internet entrepreneurs copied Western internet businesses because they knew that they worked. Because China’s internet ecosystem was less developed than that of the U.S., looking at successful American tech companies was like looking into China’s future: a model that worked in the U.S. was likely to work in China a few years down the line. And what entrepreneur wouldn’t take advantage if they had a crystal ball that could tell them what sorts of businesses would succeed a year or two down the road? Chinese tech companies that refused to “copy” would inevitably be left behind.

But although China’s most successful internet companies almost all started as obvious copies of foreign tech giants, these days, China’s internet is pretty much its own animal. The days of directly copying foreign internet businesses to China and being confident they’ll succeed are long over, because Chinese internet users have different habits and desires than their Western counterparts. Today, a Chinese entrepreneur might be inspired by a successful internet business in the U.S., but to “copy” it to China successfully she will probably have to change it quite a bit to adapt it to local tastes.

Less risk of embarrassment

It’s also worth pointing out that historically copying other companies, especially foreign companies, didn’t carry the same amount of risk in China as it would have in the U.S. Since everyone was doing it, there was little stigma attached to using the copy-to-China model in the Chinese scene. And since western intellectual property laws didn’t apply in China, even blatant ripoffs like the early version of Renren called Xiaonei mentioned above didn’t really have to worry about lawsuits.

…but is “copy” really the right word?

With all that said, it’s important to know that today, very few blatant, direct-copy companies succeed in China. In the very early days of the Chinese web you could get away with direct copies of western services because there was no local competition — either you did it in China or nobody did. But those days are long gone. Now, it’s all about execution, and because the Chinese market is so different, anybody who directly copies a foreign company’s execution of an idea is likely to get crushed by local competitors who take that idea and adapt it better to the local market.

In other words: Copy-to-China is an outdated and oversimplified concept that no longer accurately describes China’s tech industry. Do Chinese companies still take their inspiration from successful foreign tech companies? Sure. But adapting these products to China almost always means making radical and innovative changes to the nature of the service.

Sina Weibo, for example, was often called a “copy” of Twitter when it first launched, but in fact the product differs in a lot of ways. Allowing comments on Tweets allowed Weibo to appeal to Chinese users’ desire for a more social experience, for example, and keeping the 140 character limit — even though 140 characters can express way more meaning in Chinese than it can in English — meant that users could go more in-depth. Weibo may be a microblogging service, but calling it a copy of Twitter simply isn’t accurate — and this is true for most of the “copycat” Chinese services that have achieved success in today’s market.

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Source: Tech in Asia

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