Sunday, November 22, 2009 23:24 - 0 Comments

Sino-U.S. Media Model Carry Trade

How Internet social media entrepreneurs in the US and China learn from each other and make a profit

Apparently the idea of arbitrage is not confined only in the world of finance.

Social media entrepreneurs are busy “stealing” successful business models from other cultures. China and the U.S. are one pertinent example of this carry trade.

One year after Facebook’s launch in 2004, a similar social media website Xiaonei.com was launched by a US-educated electronic engineer in China.  Xiaonei shares almost the same features as Facebook does and was very well received by the Chinese college students. Recently Facebook has started selling virtual gifts that can be purchased with credit cards. This kind of micro transaction financed by virtual gifts model has been actively used by China’s biggest online IM program QQ for more than five years. QQ has already developed a quite sophisticated system of online membership, downloads, virtual goods that are all brilliant models monetizing social media services.

These are just a few examples of how Internet entrepreneurs captured the gap between the two markets and swiftly transplanted good media business models locally.

Right now one thing has caught the eyes of both: on-line gaming. Both China and the US are pushing hard on that front. Online gaming seems to be the ideal place where they can experiment selling virtual commodities, conducting micro transaction, introducing ads and sponsorship as well as collecting users’ data for market research.

As of now online gaming developers in both countries are investing heavy resources teaming up with social media platforms such as Facebook and QQ. Carry trade opportunities often disappear over time. It would be interesting to see if globalization will one day lead the two giants to join hands to bridge users and services and close the carry trade between the two countries.