My first enterprise in China back in 2009 was a social community website for fashion-oriented, affluent Chinese. Together with three partners, one of which was a Chinese, we had developed the concept and launched a first version of the website.

These were the days of Kaixin and Renren but we felt we had a chance to start something unique and new in a clearly defined niche. China seemed the ideal place for this adventure: the Chinese middle class was emerging (these were the days when the Sanlitun Village was just becoming the new Mecca for this crowd), programmers were cheap, and venture capital firms were eager to invest in promising start-ups. In short, it was the new Eldorado for internet entrepreneurs – or so it seemed.

One and a half years later, we closed shop. The Chinese competition had proved to be formidable on their home turf. In spite of the fact that we had been onto a nice concept for a social community (think Pinterest for China), we had failed to attract critical user numbers. And a second round of investment we badly needed to boost our growth never materialized.

After three years of bootstrapping and an angel investment, we simply ran out of the means to sustain ourselves and to constantly add new features to the site (a necessity to remain competitive). We had spent three wonderful years pursuing our dream but now it was clearly time to wake up and move on.

This is, of course, easier said than done. Besides the psychological challenge of having to overcome “defeat,” my three partners and I were facing very real issues: how are you going to pay your rent? What about these open student loans that need to still be paid? What about China – is it still the right place to be?

Luckily, I had placed my bets on the right people: with one exception, our core team remained intact and we decided that we wanted to continue working together. I can’t stress enough how important it is to find the right people (and retain them) when starting your own business. After the quality of your actual business idea, it is easily the single most important factor as regards success and failure. Moreover, I was blessed with a great network of likeminded entrepreneurs and had two business coaches who helped me tremendously.

Then there was the question what kind of new business to start. After our grandiose idea had failed, we all were in the mood for something more ordinary but stable. So we decided to make use of the resources and connections we still had and to open a web agency in Beijing and Hamburg, Germany. To be sure, this was a different business altogether: first of all we needed to find clients.

Fortunately, there was (and still is) a considerable demand for quality web design and development in China. And as more and more Western companies realized that they needed to establish a web presence in China, there was also a growing demand for our services in Europe. More recently, there has been a surge in requests for mobile applications, SEO and social media marketing. To be sure, demand in China (from both Chinese and Western clients) is not the real problem.

But that doesn’t mean it is easy to run a profitable service business here in China. First of all, you have to ask yourself what core services you can provide and what kind of market you are actually operating in. For instance, it makes a big difference if you are offering web development services or if you specialize in digital strategy.

My recommendation would be to always focus on niche markets that require creativity, a keen sense of taste, and a theoretical foundation. You do not want to compete against an army of cheap labor. Second, you should always try and sell your working methods as much as your actual service. It is very challenging to be a service provider for Chinese clients, unless you find a way to guide your client through the process. You need to find a way to show your Chinese client the added value of approaching a project with a professional, Western methodology and workflow.

At the end of the day, no matter what creative service you are providing, you will need quite a bit of stamina to make it here in China. After four pretty intense years, we are finally able to choose the jobs we want to take on and to decide when to say no.

Today, we run a boutique web agency that does not only provide us with a stable income, but allows us to pursue other business ventures as well. We have managed to carve out a niche but only after we learned some important lessons the hard way. The good thing in China is this: there are plenty of entrepreneurs and professionals who are willing to share their China experiences and to help aspiring entrepreneurs. Do get in touch with these people. It may help you avoid some of the China traps and is certainly time worth spent.

Dr Johannes Kadura is the managing director of digital agency AKRYL, which maintains offices in Beijing and Hamburg. He is also a business coach at The China Expert.

The growing usage of social networks is generating business opportunities across many industries. As the country’s labor market is experiencing a fierce war on talent, we as an advertising agency specialized in employer branding and recruitment marketing, wonder how social media is playing a role in the industry.

To gain understanding on social recruitment in China, MXMM has conducted a first-ever study on the use and perception of social media among the country’s HR professionals. The results derived from this study show that 51% of the respondents already use social media for employer branding and recruitment purposes.

The most used channels in 2011 were Renren and Sina Weibo mainly because of their user demographics. The infographic below shows our key findings of ‘The 2011 China Social Network Employer Branding and Recruitment Survey’.

As with online recruitment in Western countries, there is a similar trend occurring in China with social media ranking fifth as the most used channel for employer branding and recruitment. The time of print media as newspapers and magazines seems to have passed, as the majority of our respondents perceive these channels as the least important ones for near future investment. However, some HR professionals still remain cautious as they indicate the main reason not to use social recruitment is due to their lack of knowledge within the organization and proven best practice cases on social recruitment in China.

As the penetration rate of internet usage continues to grow, we see many opportunities for this industry to further develop social strategies for recruitment and employer branding. To keep updated on the latest status on social recruitment, MXMM is conducting an on-going research study that looks into the broad (social) media landscape in China. Every year, MXMM will be publishing a report on the use and perception on (social) media according to HR-professionals in China. Keep an eye on http://socialrecruitmentchina.com and follow us on Weibo (SocialRecruitmentChina) or Twitter (SRChina) for more information on upcoming studies.

About the author

Jidi Guo started her career at employer branding and recruitment advertising agency MXMM in Shanghai after graduating with a Master’s in New Media at the University of Amsterdam. “The China Social Network Employer Branding and Recruitment Survey” is one of her current ongoing projects. Email jidi.guo at mxmm.cn

While ostensibly there to help visitors navigate the web, the evolution of the Chinese Internet has turned this otherwise benign footer element into a commodity bought and sold by savvy web entrepreneurs and shifty SEO consultants for their own gain and to the detriment of the Chinese Internet as a whole.

While it’s easy to blame shortcomings in the algorithms, a more well-rounded explanation for their persistence is a fundamental attribution error by search engines toward an individual expression that doesn’t deliver the same utility when applied to China.

Search engines are prone to see “friendly links” as paid links, fraudulent votes in an otherwise natural election of how people link to each other on the web.

Scores of PhDs and very bright engineers work tirelessly to recognize and rid their indexes of this scourge of paid links – otherwise, searchers wouldn’t know who to trust, who to listen to, and have a sickening feeling that all the blue links being waved in their face are being manipulated.

The quality and impartiality of search results are of utmost importance lest searchers switch engines. “The goal is always the same: improve the user experience,” says Udi Manber, VP of engineering at Google in charge of Search Quality. “This is not the main goal, it is the only goal.”

Search engine algorithms, with slight differences, are based on the notion that the quality and quantity of links, in combination with lesser signals, determine if and when a site should rank for a given search query. Although the easiest way to get links is simply to buy them, this is universally against search engine guidelines and those caught buying or selling links risk a penalty.

Search engines operating in China must overcome yet another obstacle: the impact of collectivist culture. Baidu and Google both got their start in America, an individualistic culture, indexing and ranking web pages written by and with links to and from Americans – Baidu in New Jersey at IDD Information Services and Google for a Ph.D. thesis at Stanford.

The essence behind their algorithms is that the importance of a web page can be determined by counting its number of citations, or backlinks. In other words, the more people talk about a web page, the more useful it must be for whatever anchor text they used in their link.

The Chinese, however, express opinions and transmit word-of-mouth differently than Americans, whose link graph and algorithms Baidu and Google are both based on. Despite Baidu’s dominant market share and Google’s valiant effort, neither search engine in China has overcome the deficiencies in their algorithm to make sense of the link graph in a collectivist culture.

Motivational factors and social benefits play an important role in self-expression online and the likelihood to link. In individualistic cultures like the US, writing about something online is often a means of gaining attention and showing connoisseurship.

Americans talk about something to reinforce their self-concept. On the contrary, members of collectivist cultures like China are under the high pressure of the group and are less likely to write about something online to gain attention and praise, even about something they generally like and are knowledgeable about.

For stuff they don’t like, there’s risk of shame in bringing it up and little social benefit for breaking the social hierarchy just to express your subjectivity. Compare the case of Mr. Chow of New York v. Ste. Jour Azur S.A. in America to that of this food blogger in Taiwan.

In the former, the court said “Mr. Chow could prove that the reviewer’s personal tastes are bizarre and his opinions unreasonable, but that does not destroy their entitlement to constitutional protection”, while the latter ended in detention, fines, and a stern warning to other opinionated bloggers.

Furthermore, members of collectivist cultures are more likely to attribute positive and negative outcomes equally to themselves rather than a service provider.

There’s subsequently less impulse to post something online about an experience since there are no strong feelings toward the service provider either way (as they’re in the same collective).

The graph below is from a Kansas State University study showing how Koreans, who are also collectivist, and Americans, individualists, reacted to getting a great deal vs. being overcharged for airline tickets.

Koreans are more likely to feel “meh” toward an experience so aren’t likely to recount it publicly online.

Citations then are not the best way for search engines to look at the relative importance of web pages in collectivist cultures. The differences in the American and Chinese link graphs can best be witnessed through the linking patterns surrounding the topic of wine.

Knowledge of a bottle of wine can tell others that you are a person of sophistication and good taste, or that you are pretentious and waste your energy discussing a drink – that is, wine often elicits strong responses.

The top websites in the US and China for wine-related keywords, winelibrary.com and yesmywine.com respectively, demonstrate the effects of collectivist culture on the Chinese link graph and the consequences for the individualistic-biased search engines.

Links to winelibrary.com come from social media, blogs, and news websites, while yesmywine.com gets its links rather furtively from directories and “friendly links” in footers.

While both websites have enough high-authority links to boost them near the top for wine-related search queries in their respective countries, getting there took them down completely different paths.

Search engine algorithms work best for people like Gary Vaynerchuk, the man behind winelibrary.com, who exudes a charismatic outgoing personality and finds himself popular with lots of people linking to his site.

American society highly values those who are loud, fast, and active in most settings, and search engines – invented in America – reflect that. Chinese SEOs and website owners find they must re-arrange their world to put themselves in front of you.

Attaining top rankings can be seen as a race to get the most people riled up about your site from other sites, so to overcome the problem of Chinese netizens not expressing themselves online and linking like those in the West, link building in China through directories, paid links, and other low key methods of obtainment will persist.

Website owners with the deepest pockets for paid links consequently have the greatest odds of top rankings. With the current bias of the algorithms and rampant manipulation, it’s impossible to know if the search results returned to you are really the most relevant pages.

Burberry launched its first luxury social retail store, empowered by WeChat

This is a guest post by Doug Pierce, the Co-Founder and Head of Research at Digital Due Diligence, a boutique Internet equity analysis firm.