(Chinese Version)

Editor's Note:

On December 6th, 2015, Wang Xiaochuan, CEO of Sougou.com, attended the China Entrepreneur Summit 2015 and delivered a keynote speech on his insights towards the present and future of the Chinese Internet industry.

The following is a summary of his pseech, edited by TMTpost:

Good morning, ladies and gentlemen,

In this speech, I would like to share with you my thoughts on the present and future development of the Chinese Internet industry.

Recently, I noticed that four out of the top ten Internet companies were based in China. Four out of ten! I felt quite proud about this. Although China left far behind in many other industries, we are on a par with the US in the Internet industry. In the foreseeable future, I predict that much more Chinese Internet companies will enter the top ten list. At that time, China and the US will end in terms of the development of the Internet industry. I really want to remind you of how much progress have been made in the Chinese Internet industry within the past several years.

Why did the Chinese Internet industry develop so rapidly in the past?

First of all, it has to do with the huge demographic dividend China enjoyed. The larger the population is, the more users of Internet services. I do see examples where Internet companies did a good job in less-populated countries such as Israel and Japan, yet nobody can deny that a larger population will make it easier for Internet companies to succeed. In addition, the more users Internet companies have, the lower the operation cost will be, and the better their services will be.

Secondly, the Chinese Internet industries boomed since the traditional industries failed to do a good job. When we look back, we might find that since traditional newspapers failed to do a good job, Internet news portals soon caught up and outperformed traditional newspapers. Likewise, since shopping malls and supermarkets didn’t do a good job, online retailers seized the opportunity and became quite popular among Chinse consumers, as can be seen in this year’s Double 11 shopping festival. Today, when Chinese people are losing faith in traditional hospitals for high cost, bad service, many netizens will easily turn to the Internet as substitute. In a word, the Chinese Internet industry boomed because Chinese entrepreneurs seized the opportunity and filled in the gap of traditional industries.

Thirdly, Chinese people are crazy about ideas such as entrepreneurship and mass-innovation. In Europe, people have become accustomed to an easy life, working four or five days a week and having afternoon tea every afternoon, and lacked the incentive to try new things. This is also true for young people in Taiwan and Singapore. It seems that everybody is talking about Internet thinking and mass-innovation nowadays in China.

The above three factors might help explain why the Chinese Internet industry boomed in the past several years.

Yet, more fundamentally, the Chinese Internet industry boomed because it significantly released productivity and reduced the information asymmetry by linking online and offline channels and by embracing innovation and openness.

When I say “linking online and offline channels”, I mean that since the era of Internet news portals, the Chinese Internet industry has always been encouraging the spirit of sharing in China. 2014 witnessed the start of the O2O industry in China, which will further link online and offline channels. In the future, with the development of sensors, IoT, this trend will certainly continue here in China.

When I say “embracing innovation and openness”, I mean Chinese Internet companies succeed by encouraging openness and holding an open attitudes towards mergers and acquisitions.

As far as I’m concerned, there are mainly four types of thinking in the Chinese Internet world:

1. Mergers. When the top two Internet service providers compete with each other to a certain degree, they will choose to simply merge with each other to save resources and promote efficiency.

2. Alibaba’s model. Alibaba established its ecosystem by fully purchasing Internet companies that had social values but failed to succeed commercially, such as Amap, UC, Sina Weibo, etc.

3. Tencent’s model. Tencent chose to establish its ecosystem by investing in other Internet companies and leaving their founders full control, so that it could best keep their devotion and innovation.

4. LeTV’s model. LeTV established its ecosystem by doing everything on its own.

There are merits and demerits in all the above four models. I do admit that openness won’t always better promote innovation, and that on the contrary, shutting oneself from the outside may be a good thing for Internet companies, as can be seen in the success of Apple and other major Internet giants around the world, yet personally I still liked Tencent’s model most, since it struck a good balance between openness and seclusion and can best keep the devotion and innovation of entrepreneurs.

Three trends of the Chinese Internet industry

What about the future, then?

If you ask me who can replace WeChat in the near future, I will answer you that none can replace it as long as we are still in an era of mobile Internet. Likewise, nobody overran Tencent QQ in the era of PCs. In the future, if Chinese Internet companies seized the opportunity and do a good job in areas such as wearable hardware, human-computer interaction technologies and big data technologies, then China will certainly be on a par with the US in the Internet industry.

Wearable hardware

The past years witnessed the popularity of PCs and smartphones. In 2016, I predict that wearable hardware products for kids will become the new fad. How come? At present, humans are connected to information and the Internet, while things such as TVs and fridges are also connected to the Internet. Kids, however, can’t use smartphones and aren’t connected to the Internet yet. So wearable hardware such as smart watches and even robots might be the new fad next year.

Human-computer interaction

If I can compare to the evolution of the Internet to a football match, then PCs were at an advantage in the first half of the game, smartphones overran in the second half. However, this is not an end. In the extra time, smart glasses will catch up and outperform. Smartphones outperformed PCs because they are more convenient and users could interact with their smartphones via speech. However, with the development of virtual reality and artificial intelligence technologies, smart glasses will certainly provide better user experience and more diversified channels for human and computer to interact. At that time, we no longer need to hold our smartphones. Instead, we might be able to do everything through wearing smart glasses.

The weakness

Nowadays, computers and machines are increasingly replacing human beings in various sectors. The day will finally come when we have to sit down and figure out a way to best interact with machines.

Although four out of the top ten Internet companies are based in China, merely two out of the top 100 universities around the world are based in China, yet neither of them are in the top 20 list.

This exactly what I am worrying about. Although the Chinese Internet industry developed rapidly in the past, I am worried if such trend will continue when China is falling behind in terms of key universities and talents and Chinese scholars are still rushing to publish their paper in American magazines and are far short of innovation. At the same time, however, universities and college students are playing a key role in the development of American Internet industry. The inconvenient truth is that only when universities and Internet companies join together can the Chinese Internet industry enjoy a continuous rapid development in the future.

Thank you very much.

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[This article is published and edited with authorization from the author @TMTpost-Chinese, please note the source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.