Reading a post about the Top Web Apps in China I discovered that the Portuguese Web market is very similar to China’s Web market.
Big companies still dominate the market
so far there are no outstanding small startups that have successfully gained the attention of ordinary internet users. For example, in the blog hosting market Blogcn, Bokee and Blogbus were among the first movers. But after big companies Sina, Sohu and Baidu entered the scene, they won market share quickly
Portugal: SAPO has the biggest share in the market and although there are are a few startups they haven’t gained the attention of ordinary internet users.
Chinese startups often copy the Silicon Valley model
Sometimes, just a copycat even without any change.
..but as usually more than one company does this, it eventually results in tough competition to differentiate and gather/lock in users as quickly as possible. Some are making use of China’s unique characteristics in terms of mobile penetration, labor cost, cheap logistics and lack of credit cards.
Portugal: There are small innovations here and there, but still, companies prefers to follow industry trends and try to apply them to the Portuguese market.
M&A (Mergers & Acquisitions) is rare in the China market
Tangos says M&A is rare in the China market, which makes it more difficult for China’s startups to raise funding and find an exit.
Portugal: M&A in the Web industry are rare (if existent).
China’s mobile sector has more innovation than the Web sector, because of the high penetration rate of mobile handsets and highly developed short message, ringtone and ringback tone services.
Portugal: I wouldn’t say that the mobile market has more innovation than the Web marktet but is does have much more users and there’s also a high penetration rate of mobile handsets and highly developed short message, ringtone and ringback tone services.
…in the general Web sector the big companies – Sina, Sohu, Baidu, Netease, etc. – seldom acquire startups, unlike what usually happens in Silicon Valley. In China the bigcos “just build new services by themselves.”
Portugal:: This could be the description of the Portuguese market. Big companies like SAPO (where I work) never buy startups and most of the time prefer to just build the new services.
In my opinion there are several reasons for this to happen. Most of the companies, SAPO could have used, in the past, to get market share by acquisition didn’t seem to have enough users / quality. On the other hand there’s a strong technical team than can deliver great results (and it does).
Foreign companies find it difficult to compete
language barriers, difference in culture and government policies and regulations make it difficult for foreign companies to compete in China’s market.
Portugal: foreign companies either have an general worldwide strategy for countries like Portugal (think of hi5, google and MSN Messenger) or they just don’t care about the Portuguese market since it’s quite small (think Amazon, Yahoo! or eBay) and it would too expensive to enter the market and compete with the leader – SAPO.
Going through the other Web Market Overviews (Germany, Holland, Poland, Korea, United Kingdom, Russia, Spain, China, Turkey, Italy, Brazil, France, Japan and India) you can see that China and Portugal have much in common and both are very different from other more open markets (like the French Web market) where the values of startups (risk, flexibility, creativity) is driving innovation and bringing new ideas to the market.
“both are very different from other more open markets (…) where the values of startups (…) is driving innovation and bringing new ideas to the market.”
As you pretty much summed it up when you said that the market leader doesn’t buy startups it just creates the same stuff by itself, why should a startup spend some serious ammount of money only to have one of the 800lb gorillas flex it’s muscles and drive it out of business? Just for fun? At least at the other side of the pond, given the much larger market, you have both the options of growing or get bought. Either way there’s money to be made if the service is any good.
That isn’t exactly the case over here, is it?
You’re right Celso. It’s a tough thing to invest if you see no exits.
But nevertheless like you said there’s money to be made and you can always run a business and stay with it. Just not exit through sale.
Portugal: M&A in the Web industry are rare (if existent).
Rare yes… but it happens. They are low profile, some niche and not so niche portals changed hands and nobody talks about it.
Big companies like SAPO (where I work) never buy startups and most of the time prefer to just build the new services.
“Never” is not true. Sapo tried to buy some companies in the past (.com bubble era). It succeded in some, failed in others.
On the other hand there’s a strong technical team than can deliver great results (and it does).
True, but look at the latest products. Were they developed in-house ? Nopes…
it would too expensive to enter the market and compete with the leader – SAPO.
Leader in what sense ? Among the local sites, ?… because overall it doesn’t lead in search, IM, email, and social networking sites for example.
One reason for the relative scarcity of startups creating webapps for the local Portuguese market is that it doesn’t make a lot of economic sense, at least for me.
The one amazing thing about the web is precisely that it cuts across political borders. What matters is the target culture, in particular which language you’re targetting.
Why tie your webapp to a market consisting of 10 million people, instead of going for the whole web, or at least the English-speaking or Chinese-speaking segments of the web?
Sure, there might be interesting webapps that fulfill a nation-specific need, but generally speaking, if I was innovating in the web space, I would never artificially limit my potential customer base to a single country, other than perhaps the US, China or India.
Startups are risky business, so you owe it to yourself to go after the largest available prize: the whole international web.
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