Here’s the thing about China: It’s very, very big. And although the Great Firewall cuts its citizens off from many popular U.S. web services, those citizens still exist. In fact, there are more of them 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.
It should come as no surprise, then, that the companies serving the country’s 1.3 billion people with their social media, e-commerce and information-discovery needs are very, very big, too. Here are some statistics that demonstrate their scale.
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 (or approximately $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 posted $3.4 billion in revenue for the entire third-quarter this year. Amazon.com, 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.
That type of business means Aliaba needs a lot of servers. In a single year not too long ago, Jian told me, the company bought more servers than it had in 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 (behind Facebook Google, YouTube and Yahoo), which is evidence of its popularity. All those users, I’m told, result in an annual server growth approximately equal to the previous three years combined. It has been reported that Baidu 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.
Somtimes compared with Facebook in the United States (although it’s actually quite different), Tencent 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.
Weibo, 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 me, 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.
Not (yet) innovators
However, despite their sheer scale, Chinese internet companies are, by most accounts, less technologically inclined than their American counterparts. The biggest reason — one I heard time and time again — is that these companies tend to view themselves as traditional businesses rather than technology companies, and that employees often strive to work up the management ladder rather than 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.
As an example, one might look at the server situation within China’s big four internet companies. Alibaba’s Jian told me that although his company is running all white boxes in its data centers now, it had a lot of legacy IBM gear in its data centers five years ago. I heard the same thing about Baidu. Tencent, someone told me, had 10,000 webscale servers fail in six months last year and is considering a move back to traditional boxes.
However, maybe 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, that 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.
One has to assume that a closer working relationship between engineers at American and Chinese internet companies will spur even more changes in the tech culture there. Although technical talent comes relatively cheap in China, perhaps they’ll realize that highly skilled, forward-thinking engineers (and data scientists, for that matter) are something worth hanging onto and rewarding with high salaries.
As Facebook VP Frank Frankovsky told PCWorld in July as the Open Rack designs were unveiled, “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 from 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 technological prowess.