In a recent chat with a leading figure in one of the global internet giants, he threw me this thought:
“To be a global player, you need to win either US or China,” he said. “And maybe India, but we are not so sure yet.”
In other words, not much chance for aspiring players from other regions – Southeast Asia, Middle East, Europe, Brazil etc.
This actually makes sense.
If you look at the giant internet or ecommerce companies jostling for global dominance, you would surely realize one things: they are either American or Chinese.
We are not talking about niche vertical champions, but true conglomerates that cover multiple verticals, such as Google, Facebook, Amazon, Alibaba and Tencent.
Why only US and China
So why did this happen? During many of our consulting projects for investors and tech companies in the emerging world, we were constantly asked about this.
Why not Southeast Asia? India? Europe or Brazil?
I would argue that the reason is very simple. Just think about the following common factors between the two countries:
- Large population with numerous metropolitan areas,
- big middle class, with disposable income and big consumption power
- single market,
- homogenous language,
- relatively homogenous consumption habits
And naturally, if there is demand, there will be the availability of capital to fuel the growth.
For China, there is also one important factor, which stemmed from the Chinese Cultural Revolution.
Case Study: Good side effect of the Cultural Revolution
Before the Cultural Revolution, China was a very fragmented market. You might not believe it, but during World War II, Chinese army regiments from different provinces could not communicate with each other on the battlefield because of unintelligible dialects.
In China’s case, this is partially a side effect of the catastrophic Culture Revolution. While bringing much havoc to the country, the Culture Revolution dismantled lots of old guards, such as clan loyalty, disparate local beliefs, (many) local customs, among others.
Education system was made homogenous, and mandarin was enforced as a common language.
Long gone are the days of disparity. Everyone speaks (or understands) mandarin. This has helped spread cultures which used to be only in one province all across China. Shanghai dumplings, Beijing roast duck and Qingdao beer can be found all over China.
Because of this trend, an internet business can acquire users from Harbin in freezing Northeast to Sanya in the tropical island of Hainan with exactly the same product and language.
In the next part of this article, we will examine the potential and challenges of India to achieve the same, and what is left for the others.