Linkedin and Social China

To be the "X of China" is a coveted position, in a country that has seen explosive Internet growth--450 million online today, more than the entire U.S. population. There's Renren, for instance, the Facebook of China, and Weibo, the Chinese Twitter. In the wake of LinkedIn's barn-burning IPO, though, a question comes to mind: Who will be the LinkedIn of China? The answer to that question could have a huge impact on LinkedIn's future--like whether it lives or dies. Let's explore why.

Online professional networking in China is a slightly different game than friending and tweeting, it turns out. The original Facebook and Twitter have been banned in China, blocked by the censors standing guard atop the Great Firewall. But LinkedIn, unique among the major social networks, has so far been allowed to operate in the Middle Kingdom. In other words, while Facebook can't be the Facebook of China, there's a fighting chance for LinkedIn to become the LinkedIn of China.

It has stiff competition, though. Take Ushi, for instance. Pronounced "you-shee" (which means "outstanding professional"), the site is the first major online professional network "made in China, made by Chinese, made for Chinese," as its CEO told Reuters yesterday. Ushi, which launched in invitation-only private beta in March of 2010, had grown to 60,000 users just by user invites by October. Today, it has 300,000, and CEO Dominic Penaloza, a Filipino-Chinese raised in Canada, projects hitting 10 million users in two years. (Here's Penaloza's, um, LinkedIn profile, in which he writes that he's "building a social Internet service that really words." Awkward...)

Why does the "by Chinese, for Chinese" conceit matter so much? Because business is done differently in China, of course. Some of the norms on LinkedIn--the sort of free-for-all egalitarianism, where the guy in the mail room can potentially send an InMail to the CEO, if he ponies up a couple bucks--won't necessarily fly abroad. Penaloza told Reuters that in Chinese business, face-to-face meetings are greatly preferred, and doing business with strangers is distrusted, meaning a large part of Ushi's mission is actually leveraging the social network to facilitate offline connections (making it something like the MeetUp of China, too). Ushi raised $1.5 million in a first round of funding, and about 5% of its user base are chief executives--a demographic key to monetizing the site.

Ushi, though, isn't even the leader in the race for the "LinkedIn of China" mantle. Currently, the front-runner looks to be Tianji, first founded in 2005, and now a part of the French company Viadeo. As Viadeo's CEO recently explained to Fast Company, its strategy has been to address the cultural sensitivity issue by acquiring leading LinkedIn-like companies in various markets and letting those folks on the ground navigate questions of cultural tact in building up the service. Tianji told Reuters it intended to hit the 10-million-user mark by the end of this year--about a year and a half sooner than Ushi projects. (Ushi does have a head start on monetization, though; whereas Tianji hasn't yet begun, Ushi already charges for some features.)

The rise of Ushi and Tianji should be especially troubling to LinkedIn, since the site has singled out international competition as a source of worry in the section on risks and challenges in its S-1 filing.

"Expanding internationally may subject us to risks that we have either not faced before or increase risks that we currently face," reads the document, "including risks associated with…increased competition from local websites and services, that provide online professional networking solutions, such as Germany-based Xing and France-based Viadeo, who may also expand their geographic footprint."

And there is also, of course, the possibility that the Great Firewall, which has proved to be semi-permeable in LinkedIn's case, might suddenly go rigid against the American interloper. In fact, the company got a brief taste of what that might be like back in February. The site temporarily was blocked to users in China. It was widely speculated that Chinese authorities feared that communication features on LinkedIn could facilitate the so-called "Jasmine Revolution" that some Chinese were calling for in the wake of the unrest across the Arab world.

Unless LinkedIn feels like accommodating an enduring element of the Chinese way of doing business--kowtowing to censorship--its days behind the Great Firewall could be numbered altogether.