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PE Interview With Daqi.com CEO Ma Xiaolin
Chinese bulletin board system (BBS) and blog content aggregator Daqi.com (formerly ChinaBBS.com) is attempting to organize the massive amount of information from these types of sites in China. BBS, or online forums, are incredibly popular in China and serve as an important channel for information for millions of Internet users. China's leading search engine Baidu.com has a dedicated BBS channel called Post Bar, which is heavily trafficked. University BBS are extremely popular and serve as a way for students to share information on classes, sell used items as well find roommates and jobs.
Daqi aggregates content from China's 1.3 million BBS sites, as well as blogs, and organizes the content into channels on its website. Daqi also plans to focus more on BBS and blog search services in the future. Daqi has been a frequent subject of investment in China's Internet industry, with Google mentioned among Daqi's possible suitors. The company is now in contact with several VCs for a potential investment. Pacific Epoch recently spoke with Daqi CEO and editor-in-chief Ma Xiaolin about the company's business and future strategy.
Pacific Epoch: Can you give us a brief introduction to Daqi.com?
Ma Xiaolin: We launched Daqi.com (formerly ChinaBBS) on October 28, 2004. We started out with a team of just four people and we have now grown to 170 employees. Early on, our team worked from home and now we have a 1,700 square meter office. Our website once almost hit number 70 on Alexa in the last three months, and reached a high No. 13 among Chinese websites. Our ranking was reset by Alexa recently when we changed our name.
PE: What is Daqi's shareholder structure?
Ma: IDG invested several million US dollars for a stake in Daqi. The remaining shares are held by the management team and several independent investors. IDG's investment was the first round of outside capital were raised for Daqi.
PE: Do you have any comments about recent rumors that Google will invest in Daqi?
Ma: We have heard the rumors that Google will invest US$30 million in our company, but it is just a rumor. Many investment institutions are now looking at us. However, we are not contacting these VCs because we do not lack funds now. For one thing, we do not need to invest a lot in R&D and operations; our major costs are human resources and renting servers. Raising capital is not an imperative for Daqi; however, we have decided on an investor and are expected to announce the investment within one month. The news you have heard so far are all rumors, since we have not revealed anything publicly yet.
PE: What is the background of Daqi's management team?
Ma: Our chairman is Wang Dingbiao, who graduated from Tsinghua University and has started five companies (including Daqi.com). Each company he has started has received an investment from IDG. Wang¡¯s most successful startup to date is online advertising company Allyes. Wang once also worked as sales director of Dell East China branch. He was also the founder of campus LCD advertising company Channel Campus and campus networking website ChinaY. He also planned an instant messaging alliance called IMU, and a consumer goods information portal 2288.com. These two projects have been shelved, for we want to focus our strength on Daqi.com. I worked as editor-in-chief of Globe Magazine run by Xinhua News Agency. Before that I was an overseas correspondent for Xinhua. Mao Zhao, our executive VP, once worked as deputy general manager of China Netcom's 116.com.cn, and also vice president of Xinhua News Agency's website Xinhuaonline.com. Ye Lin, VP of Daqi.com, once worked as technical director for online community Xilu.com and 116.com.cn. Ye is now in charge of our product development and IT. Deng Wei, another VP, is in charge of sales, marketing and business development. Deng once worked under Wang Dingbiao at Allyes. She helped Allyes get the company's first advertising contract from Sina. We have many executives with experience in media companies, sales, marketing and business development.
PE: Why did you focus on BBS and blog search?
Ma: We are just a small company in comparison to big search portals like Google and Baidu. However, their search service does not focus on content from blogs and BBS. However, we found that there is as much content and as many web pages from blogs and BBS as there are from traditional websites. Therefore, our R&D team focuses on search and aggregation services for BBS and blogs. BBS and blogs are more difficult to classify and recognize than traditional websites; hence, large search engines have not put much of an emphasis on these sites, which has given us an edge in this sector.
PE: How do users use the Daqi website?
Ma: Currently users do not use our blog and BBS search too often. Usually they visit our website and find interesting content [from what we aggregate and place on the website], and then do secondary searches using our search engine or traditional search engines. Daqi.com is developing a new smart search system, which will allow users to get more accurate results. We will promote our new search system later, but currently it is still in stealth mode.
PE: What is Daqi's daily traffic?
Ma: We have recorded up to 50 million daily page views and five million independent IPs. The peak daily page view statistics exceeds 60 million.
PE: What is Daqi's major source of income?
Ma: We are now still focusing on developing more users, since we know that the more users we have, the more value Daqi possesses. We are not yet focused on business models yet. Currently, the majority of income comes from advertising. We can generate more than one million Yuan from online advertising. We are also working on plans for other business models, including publishing online articles offline, paid registration and customized subscription services. However, the most imperative task for Daqi.com now is to become more and more popular.
PE: Why did you change the company's name from ChinaBBS to Daqi?
Ma: The change in the name was primarily to make remembering our company name easier. ChinaBBS is harder to communicate than Daqi for Chinese people. Some Chinese users may also find it difficulty to type ChinaBBS in the address bar, while Daqi may be easier. Moreover, ChinaBBS¡¯ corresponding Chinese name - Quan Qiu Zhong Wen Lun Tan Wang ¨C is really long. While we have tried our best, we failed to register this name. It made it difficult for us to do marketing and promotions with such a long Chinese name. Plus, if we keep using the name ChinaBBS, users might think we only do BBS search and aggregation. However, in the future, BBS will be just one of five services. Currently we offer BBS and blogs services, but we will also develop another three services, which I can not disclose now.
The name Daqi, which means big flag in Chinese, has very positive connotations; it refers to our company having a flagship position in the web2.0 market.
PE: Have you promoted the new name at all?
Ma: We held a large press conference to mark this milestone for our company. We have also organized several media interviews to convey our future strategy and promote the new domain name. We have also put advertisements on several large Internet portals.
PE: How many employees does Daqi have?
Ma: We have a total 170 employees now, with nearly 50 editors. Others work as technical, sales, marketing, public relations and administration employees. Our R&D team has around 40 employees.
PE: Who are Daqi's partners?
Ma: We have established partnership with hundreds of thousand BBS and blog sites. They are our content providers and we provide a platform for them to promote themselves. We choose content from those sites and categorize into different topics on our website, which saves our users time. When users view content on our site from one of our partners, the traffic is credited to these websites. On many occasions, when we select a good article from a small website and put it on our website, the high traffic generated for this site crashes the small site¡¯s servers. These websites have somewhat mixed feelings about us. On one hand, they appreciate that we select articles from their websites, for it can bring them popularity and recognition. On the other hand, these websites usually do not have many servers and go down easily when too many users are visiting them. Plus, there are some sensitive articles posted on these websites, and once we select these articles, they have to delete them in order to avoid regulatory problems. We also partner with some websites to jointly launch promotions and other activities.
PE: How do you establish partnerships with these blog and BBS sites?
Ma: We have launched a "web master" alliance. These web masters can recommend articles to us and allocate corresponding positions for these articles. We also have a system to search for good articles on these websites.
PE: Do you have to get approval from these websites to display their content?
Ma: No. Daqi works as a tour guide for Internet users. We do not face copyright issues for using other websites' content.
PE: Do these websites have to pay Daqi any fees to get their articles posted on Daqi's website?
Ma: No, because Daqi.com's value only occurs when Internet content is provided, so we will not charge our partner sites any fees.
PE: Who are Daqi's competitors?
Ma: Daqi.com is the only player in the BBS and blog search sector. We position ourselves as a web2.0 original content aggregation portal. We are not a competitor to large Internet portals like Sina and Sohu. The content we use all comes from Internet users. As regards search, it has not been our major service yet. We currently focus on web2.0 content aggregation.
PE: What kind of challenges do you think Daqi will face in the future?
Ma: For one thing, it depends on how the web2.0 market develops. The more successful the web2.0 market is, the more successful Daqi.com will be. Another challenge will be how we can maintain market share in the face of intense competition frm traditional Internet portals. Also, as I mentioned, Daqi.com is growing very quickly, which will also present management challenge as we grow into a larger company.
PE: What kind of challenges will Daqi face in the future from new competitors?
Ma: To be frank, to start a business like Daqi.com is not very difficult, since technology demands are not very high. Daqi.com's advantage lies in its human resources. China's Internet circle is not very big in terms of human resources. Daqi.com already has a really good team with extraordinary experiences and talent. To set up another team like ours would be really difficult. Also, Daqi.com has taken a leading role in the BBS and blog aggregation market. For investors, it is unnecessary to invest in a new company that provides the same service as an existing, well performing company. Under these circumstances, the chances that a new company with the same strengths as Daqi.com would come along are slim. For traditional Internet companies, their business model and income sources are mature and stable. It is unnecessary for them to invest a lot in a still uncertain sector. As far as I am concerned, competition between big Internet companies like Sohu, Sina and Netease is already very intense and these companies will further develop their current services instead of venturing into new ones. Emerging companies have ideas and visions, but time, money and human resource is needed for them to develop to the level that Daqi has.
PE: How do you see China's web2.0 market developing?
Ma: As far as I am concerned, as web2.0 develops, media will become more and more individualized. Every Internet user may become a producer of online content. I think the Internet industry is on the brink of another revolution. The amont of information generated in the web2.0 age will be astronomical. Right now there are around 1.3 million BBS in China and everyday Daqi.com captures 500,000 web pages from these websites, not to mention content from blogs. How to develop a way to provide Internet service in an effective way will be the key concern of every Internet company. Successful players will be those who can organize the huge amount of information and contents and provide them to users in a convenient way.
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