The evidence is overwhelming: It’s beyond tough for U.S. technology companies to do business in China. Tough, but not uniformly tough, as a nuanced article in The New York Times this weekend explains. Apple has crushed it for several years in China, a beneficiary of the rapidly growing upper middle class there. In days gone by, tech stalwarts like IBM and Motorola built meaningful businesses there too.
The worst thing for an American tech giant to be in China is in the information business. Google, Facebook, and Twitter are nearly non-existent. As The Times carefully explains, LinkedIn subjected itself to the government’s information-control conditions—and still hasn’t been able to succeed. Uber famously flamed out in China, though the government wasn’t a factor in its demise. (Competitors with deeper pockets and a better understanding of mass consumer markets were.) And even Apple is moving in the wrong direction in China as it no longer has a lock on the highest-echelon of smartphones.
Two factors are at play here, and it’s important to consider both. Yes, the Chinese government makes it difficult for a Western company playing by Western information-exchange rules to succeed. But the other factor is how different this giant market is. The simple fact of dominance in messaging usage by WeChat is a barrier for services like LinkedIn or Facebook that are predicated either on email or their own messaging features. WeChat, owned by Tencent, is an obstacle for Apple too. If WeChat is the most desired feature on a smartphone in China, there’s no need to own an iPhone.
U.S. and Chinese government and business leaders met last week to discuss ways the two countries can work together. That’s a good thing. U.S. businesses need access to China’s market. Despite recent turbulence, Chinese companies crave quality investments for their capital. The way forward will be neither easy nor uncomplicated.
| Adam Lashinsky | |
| @adamlashinsky | |
| adam_lashinsky@fortune.com |
NEWSWORTHY
Online M&A action. Private equity firm KKR's Internet Brands unit is buyingWebMD for almost $3 billion. Back in February, the popular health information site said it was considering "strategic alternatives" such as a sale. The $66.50-per-share takeover represents a 20% premium to Friday's closing price.
Beyond taxi service. Lyft wants to be a lot more than just a ride hailing app. The company announced a suite of hardware and software to allow any car manufacturer to add self-driving features to vehicles. Partners including GM, Waymo, nuTonomy, and Jaguar Land Rover will be able to outfit their cars with mapping software, path planning, and other necessary components. "We want to lead the way autonomous hardware and software is built in this industry," Lyft's vice president of engineering Luc Vincent says.
Keeping it together. The loose knit community of people who process bitcoin transactions agreed on a software upgrade plan that should forestall a split of the digital currency into two factions. Bitcoin miners agreed to the compromise "Bitcoin Improvement Plan 91," or BIP 91, to speed up transaction processing times and avoid the adoption of competing plans by different portions of the community.
Bad timing. In the middle of the net neutrality debate, Verizondecided to test how it could slow down video streams to its wireless customers watching Netflix and YouTube. The carrier said the test did not effect the customer viewing experience and would end soon. Throttling of web sites or online services is prohibited under the current rules, which may be repealed soon.
Shrinking aspirations. Shyp, a startup that helped people package and send items they wanted to ship on-demand, is shrinking and pivoting to focus on small business customers, Fast Companyreported. The company will maintain service only in the San Francisco area, ending coverage in Chicago, Los Angeles, and New York.
Pay by the hand. A Wisconsin software company called Three Square Market is offering to implant microchips in employees' hands. The chip will work for mobile payments and as a computer ID, but does not have GPS or a tracking component. "It's the next thing that's inevitably going to happen and we want to be a part of it," says CEO Todd Westby.
Not quite born in the USA. Foxconn Technology, the Chinese company that assembles the iPhone, has almost decided to open a U.S. plant in Wisconsin to make display panels for large screen TV sets, the Wall Street Journalreported on Monday.
FOOD FOR THOUGHT
Former Apple executive Jean-Louis Gassée likes to shoot down the conventional wisdom of the tech world. This weekend, he took aim at a growing consensus that Microsoft might have succeeded in mobile phone software if not for Google's Android. Gassée says Microsoft could have strategized to overcome Android had it acted more astutely and quickly. The real problem? Not Android. He writes:
We know who/what killed Windows Phone, and it’s not Android. We could point fingers at one or more Microsoft execs as the culprits, but that misses the point: Microsoft culture did it. Culture is dangerous; under our field of consciousness, it sneakily filters and shapes perceptions, it’s a system of permissions to emote, think, speak, and do. In the abstract, the Windows Phone failure was easily preventable. But Microsoft culture, made it unavoidable. Now, let’s look around. Are there successful companies soon to be victims of their own culture?
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