Nascent Stages

On the World Telecommunications Day (May 17) of 1995, the Ministry of Posts and Telecommunications announced the opening of Internet access services to the public, after which Chinese citizens were able to gain access to the Internet by completing a simple application process. This announcement marked the official entry of the Internet into the daily lives of the general public. Since then, in addition to being a search and communication tool of researchers, the Internet has also become part of Chinese people’s leisure time and got increasingly commercialized in China.

Pioneer Yinghaiwei

What did the cyberspace in 1995 look like? At that time, people mainly used the Internet to browse news, chat, and send or receive emails. China’s first private Internet service provider (ISP) Yinghaiwei created a website called “Yinghaiwei Space”, which was open to the public.

There was a billboard of Yinghaiwei on the South Street of the Zhongguancun area, which read, “How far are Chinese people from the information superhighway? It is 1, 500 meters to the north.” It guided people to the Yinghaiwei Science Education Center, where visitors could have lots of fun on the Internet and learn more about it. Yinghaiwei also launched a Chinese multimedia network which was also open to the public.

Zhang Shuxin, who graduated from the University of Science and Technology of China, founded the predecessor of Yinghaiwei Information and Communication Co., Ltd. — Beijing Science and Technology Co., Ltd. — in May 1995. As the first private ISP in China, Yinghaiwei played a crucial role in making the Internet popular amongst the general public in China. However, the company failed to grasp some major opportunities later. After its product promotion campaign turned into a fiasco, Yinghaiwei eventually went bankrupt. But the rising stars in China’s Internet industry learned valuable lessons from its mistakes.

Sina and Sohu

Sina and Sohu were two rising stars in the early days of China’s Internet industry.

Sitong Lifang Information Technology Co., Ltd. (Sitong Lifang), the predecessor of Sina Group, was the first company in the Zhongguancun area to truly adopt the Silicon Valley model. From a local high-tech startup to an Internet giant listed on the NASDAQ in the United States, Sina is an epitome of China’s entrepreneurial spirit.

Wang Zhidong, founder of Sina, gave up the opportunity to study abroad after graduating from Peking University in 1989. He was employed by a small computer company in Zhongguancun. The company had fewer than ten employees at the time. In his leisure time, he designed software. Wang Zhidong, Yan Yuanchao and some other men developed the first Chinese-language plug-in software program, RichWin. The program realized conversion between different Chinese-language codes. Following the huge success of RichWin, Sitong Lifang quickly became an industry leader. In 1996, Sitong Lifang opened the SRSNET website. The website was designated as the only official Chinese-language site of the 1998 FIFA World Cup and launched a 24/7 channel to cover the 1998 FIFA World Cup, setting a record for the highest website traffic among Chinese-language websites. The unexpected success of SRSNET boosted the confidence of Sitong Lifang to explore new business models. Sitong Lifang renamed SRSNET as “Lifang Online” and introduced the concept of “Chinese-language web portal”. Driven by technology, Sitong Lifang quickly became China’s largest Internet company. In 1998, it acquired Huayuan Information and launched Sina.com which remains one of the most influential websites in China today. The International Network Division of Sitong Lifang launched a Chinese-language search engine in 1996 and started to build the world’s largest online Chinese-language virtual community. Within two years that followed, it opened forums and chat rooms around more than 30 topics and the number of its registered users reached nearly 130, 000. Lifang Online underwent a revamp in 1998 and launched a Chinese-language web portal based on its virtual community. The revamp was actually Sitong Lifang’s response to the international expansion of large portals in the United States. Wang Yan, deputy general manager of Sitong Lifang, pointed out that the revamp was a milestone in the strategic deployment of the International Network Division of Sitong Lifang and a prelude to the company’s fullon endeavor to expand its Internet business.

In December 1998, Sitong Lifang merged with Huayuan Information. The combined company was renamed as Sina and established an eponymous Chinese-language web portal.

Sohu is a typical Silicon Valley story except that it happens in China. Its founder Charles Zhang studied at the Massachusetts Institute of Technology after graduating from the Department of Physics, Tsinghua University in 1986. In August 1996, inspired by the success stories in Silicon Valley, Zhang returned to China and founded the predecessor of Sohu, Internet Technologies China (ITC), with the support of Nicholas Negroponte, a professor at MIT, and with the help of US venture capital. In China, it is the first Internet company established with venture capital. After conducting a series of studies, Zhang and his team found that Internet users spent a lot of time on the Internet searching for information and decided that navigation and search would be the core business of the company. Zhang faced many financial difficulties and hardships during the early startup phase. He also ran into other hurdles when selecting business models and recruiting and retaining talent. The measures taken by Charles Zhang in response to these hardships and hurdles were later emulated by other Internet companies. Sohu was listed on the NASDAQ on July 12, 2000, becoming a true inspiration for many entrepreneurs.

Evolution of E-commerce

The year 1999 was an eventful year for China’s e-commerce industry, with a raft of e-commerce companies springing up across the country. In 1999, Wang Juntao and his team founded 8848, a B2C company like Amazon. B2C is the acronym of “business to consumer” and refers to online retailers and other companies that sell products and services to consumers through the Internet. Shao Yibo and Tan Haiyin founded a C2C platform EachNet in Shanghai. C2C is the acronym for the consumer-to-consumer business model under which one consumer buys goods from another consumer. Ma Yun started a B2B platform Alibaba in Hangzhou. B2B is the acronym for the business-to-business model and refers to the exchange of products, services or information (aka e-commerce) between businesses using the Internet or a third-party platform to facilitate the transaction. Shen Nanpeng and Liang Jianzhang founded Ctrip.com, which provides online air ticket booking and hotel reservation services. Li Guoqing and Yu Yu started China’s first online bookstore Dangdang. Both Ctrip and Dangdang are vertical e-commerce businesses. Vertical e-commerce is online business niches where market players are specialists and serve a specific group of customers and their set of needs.

Time flies. Many online companies have failed and shut down but others have survived and become internationally competitive e-commerce giants.