Derrick Harris, writer for GigaOM recently gave us a peek inside China’s Internet giants and their massive scale. The author describes China’s big four internet companies as huge, but not technological innovators like their American counterparts – yet.
China’s Internet market
The Chinese Internet market is very, very big despite the Great Firewall that cuts Chinese citizens off from many popular U.S. web services. The article states there are more Chinese netizens than all the citizens of the United States and European Union combined. And they use social media and e-commerce just like the rest of us. The author gives some examples of the scale of the companies providing social media, e-commerce, and information-discovery needs to China’s 1.3 billion people.
Taobao, the eBay-like e-commerce line of business from Chinese internet giant Alibaba Group, does a lot of business. On a single day — Nov. 11, 2011 — the company did a whopping 19 billion yuan (about $3.05 billion) in sales. According to Alibaba Group CTO and Alibaba Cloud Computing President Wang Jian, the company site surpassed the 1 trillion yuan (about $160 billion) mark for 2012 revenue at the end of November. Alipay, the company’s version of PayPal, handles about 3 billion yuan (about $480 million) in transactions every day.
By comparison, eBay (EBAY) posted $3.4 billion in revenue for the entire third quarter this year. Amazon (AMZN), with which Taobao also competes (although Alibaba also has a business-to-consumer division called Tmall), closed its third quarter with $13.8 billion in revenue. Of course, Taobao and Alipay are just two of Alibaba’s expansive portfolio of services, which includes a troubled partnership with Yahoo (YHOO).
That type of business means Alibaba needs a lot of servers. In a single year not too long ago, Jian told the author, the company bought more servers than it had in the previous five years combined. If you charted Alibaba’s server count now versus five years ago, he added, the previous number would look like zero. How big is its database? Enough to store data for more than 800 million items for sale.
The Chinese search giant is ranked fifth in the Alexa internet rankings, which is evidence of its popularity. All those users, I’m told, result in an annual server growth about equal to the previous three years combined. It is reported that Baidu (BIDU) is planning possibly the world’s largest data center — spanning 120,000 square meters, costing $1.6 billion, housing 100,000 servers (totaling 700,000 CPUs and 3 million cores), and storing 4,000 petabytes of data.
Sometimes compared with Facebook (FB), Tencent (TCEHY) boasted more than 717 million users for its popular QQ messaging service as of September 2011. That number has surely grown. The company says its highest-ever number of concurrent users was more than 176 million, although there are often tens of millions (if not more than 100 million people) using it at any given time. An individual with some knowledge of the company’s infrastructure told me Tencent adds about 100,000 servers per year.
The Twitter-like platform from internet new-school internet company Sina had more than 400 million users as of April 2012. That’s about twice the number Twitter claims. And the Chinese use Weibo a lot, for everything from micro-blogging to self-publishing. It might actually be a more important tool in China than Twitter is in the United States, sources told the author, because while the government can censor official news outlets, it can’t possibly control the stream of information coming off Weibo. And that will mean even more growth.
Mr. Harris concludes that, despite their sheer scale, Chinese internet companies are, by most accounts, less technologically inclined than their American counterparts. The biggest reason, the author says is that these companies tend to view themselves as traditional businesses and not technology companies. Another factor mentioned is that employees often strive to work up the management ladder not remain career engineers. This inevitably affects R&D budgets, makes companies less willing to take risks, and reduces the pool of employees that really, deeply understand complex systems.
The blog cites the server situation within China’s big four internet companies. Alibaba’s Jian told the author that although his company is running all white boxes in its data centers now, it had a lot of legacy IBM (IBM) gear in its data centers five years ago. The same thing is reported about Baidu. Tencent, had 10,000 webscale servers fail in six months last year and is considering a move back to traditional boxes.
Open Compute Project
The article speculates that these companies are coming around on innovation beyond just buying more efficient gear. Tencent, Baidu, and Alibaba, for example, are all members of the Facebook-led Open Compute Project for designing webscale hardware. Tencent and Baidu actually created their own rack-design specification, called Project Scorpio, which is being merged into Open Compute’s Open Rack design in 2013. They still don’t build their own servers like Google and Facebook do, preferring instead to push their custom specs on server makers, but many innovative American companies, including eBay, do the same thing.
Facebook VP Frank Frankovsky told PCWorld, “We compete with those guys, but on the infrastructure side, if we can make our infrastructure more efficient, it makes everyone that much better. Where we differentiate our business is in the service we provide to our end users.”
That differentiation comes in large part from an incredible investment in research and technology. If they want to be considered thought leaders in their field — and if they want to expand significantly into cloud computing (as Alibaba and Sina clearly want to do) — China’s internet companies will have to start matching their immense scale with demonstrated technology.
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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.
The global internet economy is huge, really huge, and growing. Online provider of market and consumer data, Statista says that retail e-commerce sales worldwide will top 4 Trillion dollars in 2020. Right now the worldwide internet economy takes in an incredible $3.9 million every 60 seconds.
