Silicon Hutong

E-tailing: Report on E-Commerce in China

Starbucks Guomao 1

Deleting Spam. Again

1034 hrs.

Paul Denlinger over at China Vortex points us to a new report from the Research Institute Data Center of China Internet, which claims that online spending in China passed US$37.5 billion in the first six months of the year, representing a 58.2% jump over the same period in 2007. The report goes on to predict that overall spending online in China will surpass $86 billion for all of 2008.

Given that the report supports my belief that electronic retailing in China is on the verge of really taking off, I was pleased to see it. But I have reservations about the report nonetheless.

The first is a small thing. There appears to be no distinction made between "electronic commerce," which can cover business-to-business transactions along with business-to-consumer and consumer-to-consumer, and "electronic retailing," which is primarily business-to-consumer but also includes a large chunk of consumer-to-consumer.

This is important because business-to-business commerce in China is huge (remember the Alibaba IPO?), and could well be skewing the numbers. Let's set that caveat aside for the sake of argument.

The second concern the research itself. I used to conduct market research seminars for foreign students coming to China, and I noted that, with apologies to Mark Twain, there are lies, damned lies, and statistics, and that this holds trebly true in a country where there is a long history of massaging numbers to serve political, economic, and commercial purposes. I am concerned this might be the case here.

I didn't manage to find the organization that produced the report online, nor have I actually seen the report and reviewed its methodology, so I it is hard to judge the veracity of the numbers. What is more, AFP notes that the Data Center of China Internet is an industry group, so I worry that the report may have been influenced by its sponsor.

If you can get your hands on the report, give it a read, but have a full salt shaker close at hand.

The way I normally handle reports of this nature is to give more credibility to the overall trend than the actual numbers. The real takeaway from this is that e-commerce in China is - as Paul Denlinger says - hitting the bend in the hockey stick.

China's Coming E-Tail Renaissance: The Payment Myth

In the Hutong

Oh, look, the sky is leaking

0104 hours

One of the most persistent myths about the slow growth of electronic retail in China has been that the scarcity of credit cards have held the business back. There are still less than 70 million credit cards in circulation, one for every 20 or so adults in the country, and, more to the point, one credit card for every 3.5 internet users. 

No credit card, goes the thinking, no electronic retail. The ubiquitous Shaun Rein, CEO of Shanghai-based China Market Research Group, echoes this sentiment in an otherwise excellent editorial in Forbes magazine:

"Our findings suggest it is a lack of credit cards and other payment options, rather than a cultural aversion to buying online, that has curtailed the growth of e-commerce in China."

About half-right, I would say. The cultural aversion issue is a canard, and we will take that up in another post.

Yet elsewhere in his article, Shaun notes that 70% of the 500 18-to-32 year-olds he had interviewed had already purchased online, but "would use a credit card for purchases if they had one." In other words, all of these folks were already buying online without credit cards.

Hmm.

I don't mean to pick on either Shaun or CMR, but the implicit truth coming from their research supports a somewhat different conclusion. Coming from a research organization of bright and talented people, this illustrates a larger point: despite what very intelligent analysts are telling the world, electronic retail is growing in China in spite of the low numbers of credit cards in circulation, and it will continue to do so whether there are credit cards in China or not.

Money, like love, finds a way

Electronic commerce has grown in China over the past ten years because companies and consumers have found other ways to complete transactions that don't require a numbered sheet of plastic. 

A number of methods have been used over time. Postal money orders, prepays, local counter pickup, and company credit have all been tried. Most have been discarded because they required the consumer to physically go someplace to place an order. 

To date, the most successful has been that old reliable method, cash on delivery, or COD. 

COD is superb because it allows the company to ship a product from their warehouse, via either express mail service (EMS) or regular post, to almost any city in China. Back when I developed this system for electronic retailers with the China Post's EMS division in 1996, they originally promised to deliver any package to 100 cities within 72 hours. The number of cities grew to 500 within 18 months, and the delivery times - while 72 hours was always the promise - dropped near to 24 hours. 

Consumers love COD in China because it allows them the assurance of actually seeing a product before they pay for it. That's not such a big deal when you are selling small things or your company is well known. But if you are a new company, or you are selling RMB 10,000 digital camcorders, COD offers everyone one more level of assurance. 

Is it a pain to have to be somewhere to wait for something? It can be. But that can be an issue no matter how you are paying - delivery services are rightfully reluctant to leave packages unattended on door stoops.

COD is extremely popular among electronic retailers in China, but frankly few do much to promote it. The biggest culprits in this regard are the EMS and postal services, both of whom should be heavily promoting COD to consumers. They aren't, and in the face of the widespread myth about "no credit cards," a perfectly workable solution has to spread by word-of-mouth.

Why do I need that funny little plastic thing?

But COD is by no means alone. Online payment systems are growing with incredible speed in China. Take Alibaba's Alipay system for example. As of March of this year, there are more registered Alipay members in China - 80 million - than there are credit card holders, and the number continues to grow. Annualized transaction volumes are in the tens of billions of US dollars per year. 

And there are other means of payment on the way. We haven't even entered the discussion of the mobile phone as a payment device yet, but that is a business that China's carriers are studying with special interest. The cool thing about using mobile phones for payment is that apart from paying via your phone bill or a prepaid card, the phone becomes a credit card with a direct internet connection. No need to type anything in. Just push the button. 

Porter Erisman at Alibaba suggested to me that payment systems in China are evolving beyond credit cards. I'm not any more ready to consign credit cards to the dustbin of China's development than I am COD. 

Alipay and COD alone, however, underscore that regardless of how the credit card industry evolves in China, electronic retailing will boom. To what I am sure is the chagrin of both analysts and credit-card companies, the electronic commerce industry is not waiting for the day when your average Chinese has a credit card or three in his or her wallet. 

And a good thing, too.

Serving the customer - and the merchant

There are actually problems using credit cards in China for electronic payments. First, many banks, fearing fraud, remain hesitant to allow purchases using their credit cards or debit cards unless the cardholder is present and signs a receipt. While this is improving, it is still a challenge. 

Second, and perhaps most important, is that credit card companies are hard on merchants in China. Apart from having to bear onerous transaction fees, electronic retailers can often wait for weeks or even months to get payment, and disputes are almost uniformly settled on behalf of the consumer.

COD isn't perfect. All of my experience with COD using the EMS service was superb - we were paid within a few days, a week or two at most. Unfortunately, I'm starting to hear that some payments are dragged out for as long as six months. That's not acceptable, and the postal folks need to get their collective stuff together or they are going to lose the opportunity. 

Services like Alipay need to become more ubiquitous and flexible over the long term. Dominating payments on your own site is fine, but the real promise is being able to take payments from as wide a range of services and sites as possible. 

When organizations dominate a niche, they tend to get exploitative. China is no different. The good news about payments for both merchants and consumers is that there is competition among the different methods. The wise e-tailer would do well to enlist as many as possible.

Welcome to Planet Plastic

Among the many things Shaun and I agree on - and I'll be coming back to his article in future posts - is that the business of consumer credit in China is going to continue to grow, and that banks will find ways to put more plastic into wallets in the same way they have popularized home and auto loans. 

What will be different in China, however, is that even when credit cards manage to reach a sizable portion of China's population, they will face competition from a far wider range of payment options than they do elsewhere. 

In the meantime, electronic retailing is on a roll. 

The online video Hail Mary

Jiaodaokou Road, enroute to Gehua Dasha

No sign of the Olympics here

1221 hrs

Steve Schwankert at IDG covers off on Youku's recent US$ 30 million capital infusion, and treats the event with an appropriate dose of optimistic caution.

China video sites have been taking in a lot of cash lately, over US $100 million total in the past few months. The digerati have been understandably cynical: the State Administration for Radio, Film, and Television (SARFT) and the Ministry of Industry and Information Technology (MIIT) have done little publicly to hearten investors in the sector. Regulations passed last year make it seem at first glance that the sector is closed to all but state-owned broadcasters, while not documenting an alleged promise that current web video sites would be "grandfathered."

More ominously, a recent list of licensed broadcasters was issued, but Youku, Tudou, 56.com, and YouTube were conspicuously absent, and 56.com has found itself shut down, with no word as to why or when (if ever) it will return. When you put all of that against what is arguably the most conservative media regulatory environment in a decade, you can start to understand the cynics.

I have to admit, my first reaction was something like "I wonder what they were putting in the bottled water at the negotiating table."

Who knows what?

But there are indications that the investments - while certainly not on the "low risk" side of the portfolio - are not as ill-conceived as they might appear. (Disclosure - I have zero interest in any of these sites, and have no client relationships with them or their investors.)

First, my informal poll of the media people in the capital suggests that Youku and Tudou will get licenses at some point in the not-too-distant future. Chances are pretty long against it happening before the Olympics or even before the annual Party meetings in the fall, but I'd say it is in the offing.

Second is what I call my "wiser fool theory." We who have lived a long time in China have a tendency to believe that anyone who has less experience in China than we do is more likely to be taken to the cleaners on a given deal. Annoyingly, we're usually right. But not always.

One of the things that keeps China so interesting for both investors and business people is that unlike more transparent societies, information flows unevenly here. I'd say it is possible - if not likely - that the investors who just put their cash into Youku have information that is germane to the regulatory situation that is not public. They may have received what they feel is adequate assurance that a license is forthcoming.

At this point, you are probably remembering Samuel Goldwyn's legendary line that "an oral contract isn't worth the paper it's written on." You would be right to do so. Assurances from policymakers - however high in government - about future events are only good if the situation does not change in the interim. But a senior official in a position to know - or even decide - may well have helped (unofficially, of course) to assuage investor concerns. I would be floored if this was not the case.

There are also probably some other mitigating factors, such as agreements with local broadcasters, that give Youku additional regulatory air-cover.

The point is this: I'm willing to grant the investors the benefit of the doubt because they see the little picture more clearly. I only hope they're seeing what they think they are.

Contrarians at the gate

Third, the subjective value of Youku as a company is probably pretty low right now. This is the ideal time to invest, when Youku needs cash and the hardware to manage its growing traffic, when there is no license, and when a similar site has been forcibly shut.

I find it fascinating that no mention is made in Schwankert's coverage or the press release about what the VCs are getting in return. I'd bet Maverick Capital, Brookside, Sutter Hill Ventures, Farallon Capital, Chengwei Ventures, and Western Technology Investment all cut a pretty fair deal for themselves.

Playing the long game

So I figure licenses are coming, and the investors got in at a good time. None of that eases the uncertainty around the sector in the longer term, however.

This remains a profoundly sensitive environment for media - especially foreign-invested media - and the Internet is no exception. Among all types of Internet sites, the government is most cautious with online video: giving the people the power to broadcast makes conservative officials (who are used to total state control over the communication of information) feel like they're getting a wedgie.

No matter how much care Youku, Tudou, Ku6 and others take with what gets posted, a cold northern wind - a "crackdown" in response to a political crisis of some sort - could spell an instant change of fortune.

There is also the implicit competition problem. Broadcasters are state owned, these sites are not. Some very desirable viewers with money to spend are spending more time watching Internet stuff and less watching TV, and few broadcasters have demonstrated much skill in creating compelling online video offerings of their own.

At some point, broadcasters are going to begin howling about these sites that are showing video, are not state owned, and who are taking away their most prosperous viewers (and their advertising revenues.)

Either a change in the political environment or broadcasters falling into dire straits might be enough to foment a change in policy. But if both happened at the same time - and if that situation coincided with one or more of the sites running a video or two that stepped beyond the pale - you would wind up with a perfect storm that would see the government "re-examining the structure of the industry."

Caveat investor

None of this means that the VCs made a bad investment. I am certain they do not think everything to be smooth sailing after getting past the license problem. After all, we have not even discussed the problem of actually turning all of those unique visitors into ordinary cash.

What it does mean is that they - and we - should expect there to be problems in the future. What will determine the ultimate fate of the companies is how well they (and their investors) prepare themselves for and respond to The Perfect Storm when it finally does come.

China's Coming E-Tail Renaissance: Schereck's Five Logistical Challenges

In the Hutong

Updating OS X

1706 hrs.

There are many commonly accepted myths as to why electronic retailing has had such a hard go of it in China to date. Of those, perhaps the most persistent myths revolve around the logistical issues of actually getting something to the customer - logistical issues that do not exist in, for example, an America with pervasive credit cards, FedEx, UPS, and DHL.

The best summary of the issue comes from my old boss Bill Schereck, who led the creation of TVSN as a Sydney-based Asia-Pacific clone of QVC International back in the mid-1990s. Even though he was originally thinking of television shopping, the Five Logistical Challenges he isolated apply neatly to electronic retail.

Schereck's Five are:

1. Reaching the Customer - the first challenge is actually building a channel to the customer so he or she can find you and find the merchandise you are selling. That seems like a non-issue for electronic retail, until you realize that a) creating a decent, trustworthy-looking site is harder than it looks, b) most Chinese don't have Internet access, c) even if they do, how are they going to find you?  

2. Taking the Order - in the case of e-tailing, this means creating a system to take orders, actually getting someone to stick something in their shopping cart, then having them actually place the order. This is a challenge no matter where you do business, not just China. 

3. Getting Paid - getting the customer to promise to pay, and then actually collecting on that payment. This is usually the first issue people jump on about China - how do you get paid for an order when a tiny fraction of the populace even has debit cards, much less credit cards, and the banking infrastructure to clear online payments is not up to global standards?

4. Delivering the Order - ensuring that the right product is delivered to the right customer at the right place in the promised time frame. This is usually called "fulfillment." FedEx, UPS, and even DHL have limited rights to deliver products from one part of China to the other, and direct shipping from overseas is complicated (thank you, Customs) and prohibitively expensive for your average Chinese. Not only does actual delivery pose a challenge, but you need an onshore warehouse as well.

5. Processing the Return - people in the trade euphemistically refer to this issue as "reverse logistics." This is what happens when something is broken, is the wrong size, wrong color, or when the customer just changes his or her mind. How do you refund the money, get the product back to warehouse, restock it, and put it into a condition to resell or dispose of without incurring a financial loss? Surprisingly few novice e-tailers think this bit through, or even get it right, and it entails such issues as "what IS our return policy?" It is especially tricky in China. 

I would add one more that actually belongs between the #1 and #2 that has proven especially sticky in retail in China:

6. Stocking stuff people actually want to buy - merchandising - the art and science of choosing which products to sell in a store and how to stock, display, and promote them - is in its infancy in China. Most retailers are actually in the real estate business, leasing space to manufacturers or manufacturers reps who handle the merchandising functions. What that means is lots of look-alike stores with salespeople who are pathetically uninformed about their product. It also means that China lacks people who understand how to turn consumer trends and local preferences into a winning combination. 

So there you have the challenges. 

Challenges 1, 2, and 6 are perceived as largely micro issues: they can be solved by the individual company. Payments and delivery, on the other hand - and the related issue of reverse logistics - are seen as systemic deficiencies in China, and thus the most serious barriers to electronic commerce.

Our next installment will demonstrate that these aren't really issues at all in China - and haven't been for over a decade.

Xiaonei and the Illusion of Social Networking

Starbucks Lido Beijing

Body now rejecting caffeine

1308 hrs.

Kaiser Kuo of Digital Watch delivers an erudite, subtle, and telling analysis of social networking site Xiaonei's cautious steps toward adding third party applications to its site. 

If you are not a regular user of social networking sites, applications and widgets created by third party developers are really what makes these sites fun and engrossing to a wide range of people, and make it possible for you to maintain contact with someone for the cost of a few clicks. Taking a more macro, analytical view, third party developers are playing the main role in turning social networking sites from mere toys to something approaching an operating system for your online life. 

A Timid Effort

Xiaonei is, to the casual (and semi-formal) observer, an effort to create a Facebook with Chinese characteristics. What has been lacking to this point is third party applications, so the site has lacked much of the mojo of Facebook and Friendster. 

Facebook has an immense selection of third-party applications already, numbering over seven thousand. Friendster, for it's part, is not only already extremely developer friendly, it is helping to drive the Open Social standard that will make it easier for developers' widgets and applications to work on a wide range of social networking sites. Facebook is arguably the global perceptual leader, and Friendster has more users in Asia than any other social networking service. 

All of which makes Xiaonei's baby-steps into the world of third-party developers all the more perplexing. Certainly the company's managers, their investors at Oak Pacific Interactive, and (most important) the company's users must know in their guts that Facebook and Friendster are coming. Why aren't they putting more into the effort to get it moving forward faster?

Cannot, will not, or don't want to?

Four possible answers:

1. The Xiaonei team does not feel that third party applications will be important in China. I'll grant that this is possible, but one would think they'd err on the side of caution.

2. The Xiaonei team understands how important this is, but lack the managerial or technical skill to pull this off much faster than they already are. 

3. The Xiaonei team believes that as a local site they, like Sohu, Sina, and Baidu, are going to be the winners by default over the foreigners anyway, so why bother working hard on a third party developer program? Just make a few noises in that area so you can stick it into the prospectus. 

4. Xiaonei is less about creating an "insanely great" (to borrow Steve Jobs' superlative superlative) social networking site than it is about creating a vehicle to increase the wealth of its investors. 

Landing craft on the horizon bearing 090, Sir

Of those four answers, three suggest hubris, and one questions competence. Xiaonei can afford neither. International web players succeeding in China is no longer the laughable prospect it once was, and the SNS horde are learning from the mistakes of their predecessors in China. They'll be here soon.

I actually think we will see a more determined effort on Xiaonei's part in the future. Oak Pacific now has its own adult supervision in the form of Masayoshi Son following Softbank's $430 million cash injection. Mr. Son has a reputation for impatience with half-measures. He will not accept the idea that he has invested in a company that has created the illusion of social networking rather than delivering on the full promise of a "China Facebook.". 

The coming China e-tail renaissance

In the Hutong

Woke last night to the sound of thunder

1608 hrs.

Retail in China has come a very long way in the last two decades, from a time when the state-owned Beijing No. 1 Department Store was the absolute pinnacle shopping experience in the country, to a day when every major brand and luxury marque in the world seems to have opened storefronts in Shanghai, Beijing, and often elsewhere.

But few who have been overseas would suggest that the process of discovering, finding, getting to, buying, and using stuff you want or need is a particular pleasure in China. Not yet, anyway. 

Electronic commerce landed on China’s shores over a decade ago, and while a handful of companies engaged in online retailing (like Joyo, Dangdang and others) have done reasonably well, l e-tailing in China has not grown with the kind of vigor that it has in the United States, Europe, and Japan, or even with the sort of explosive growth of China-focused wholesale and trade e-commerce sites like Alibaba and Global Sources. 

A series of public legends have grown up to explain this phenomenon, but in practice most of the logistical barriers have not proven quite as severe as many analysts suggest. In short, they’re hogwash. 

And the biggest problem - trust - has been all but ignored, or twisted into a systemic reason why e-commerce "won't work" in China.

For most areas in the online world, all you have to do is mention the name of a successful online company and the word “China” in the same sentence, and the world’s electronic herd of investors will fight each other to give you cash to make it come true. Think Baidu (“Google + China = $$$”), think Sina and Sohu (“Yahoo! + China = $$$”)) etc. 

That has never been the case with electronic retailing (“Amazon + China = ????”) A decade on, electronic retail remains depressingly undeveloped.

But If you take a careful look around China now, you will discover that even though the buzz and hot air has long since leaked out of the China online retailing balloon, things are happening around here that suggest that China’s e-tailing boom is yet to come, and it will not be that long in coming. Not least of those factors is the stubbornly mediocre bricks-and-mortar retail experience on offer even in the toniest of stores.

Over the next few weeks, the Party Secretary and I are going to take a look at what we see in the market that is driving e-commerce forward. We will not simply be working from an academic or consumers perspective: we’ve actually built and run two non-traditional retailing ventures in China, and we have a reasonably good idea of what is possible. 

At any rate look forward to your thoughts as we post more.

The Education of a Mogulette

In the Hutong
Ignoring American Idol while the Party Secretary watches
0001 hrs.

Wendi Deng has told Vogue that she will be collaborating with her pals Zhang Ziyi and Florence Sloan to establish a new film production company based on the DreamWorks model. The first project of the unnamed venture is apparently an adaptation of Shan Sa's novel The Empress, and Ms. Deng dropped the name of Ridley Scott as a possible director.

Let us set aside for a moment the fact that DreamWorks SKG was built on the collective talent, track records, and Hollywood street credibility of Steven Spielberg, Jeffrey Katzenberg, and David Geffen. Ignore for a moment that whatever the strengths Deng, Zhang, and Sloan bring to the table, they are simply not in the same league as the the DreamWorks founders. All of that doesn't matter: with the support of Rupert's money and Zhang's screen success, they will likely get some movies made.

You may also remember that MySpace China was publicized as Ms. Deng's deal. From Joseph Kahn's piece in The New York Times last June:

Wendi Murdoch has stepped up her role in China. She plotted a strategy for the News Corporation’s social networking site, MySpace, to enter the Chinese market, people involved with the company said. The News Corporation decided to license the MySpace name to a local consortium of investors organized by Ms. Murdoch.

There is a pattern to all of this, an internal logic.

Ms. Deng is not a News Corporation executive. She plays no official role in the business. When she helped put together the MySpace China deal (assuming, of course, that her participation was real and not some form of positioning), she was basically doing it as The Boss' Wife, as News Corporation laobanniang. That would probably rankle anyone who had an MBA from Yale and a little ambition, so it probably rankled Ms. Deng.

The venture with Zhang and Sloan - let's call it QueenWorks - gives Ms. Deng more than a project on which to occupy her time. It is her first real job since marrying her husband, and her first shot at running her own gig. It is also her shot at a lasting piece of the action, a legitimate business she can build independent of News Corporation that she can use as the foundation of her own media organization. It makes her something more than Mrs. Murdoch, and yet she carries that cachet into every meeting she walks into.

Providing she is serious about it, providing it is not simply a toy for a bored wealthy housewife, she could actually make something out of the organization. Either way, what we will have will be a litmus test: given a wealthy backer (her husband) and interesting partners, is Wendi capable of running a successful business?

This is an important question to News Corporation. If Wendi can prove herself an able executive in her own Hollywood operation, it gives her considerably more credibility at a later date when the complex issue of Rupert's succession comes up. It is one thing for the spouse of the boss to seek a role in the business. It is another entirely when that spouse also has made her bones as a successful businessperson.

This new venture will bear watching.

Internet or eSludge?

Jingshun Road, inbound.
Any bets on the first sandstorm?
1028 hrs.

Living in China one gets so used to long lead times for web pages to load and email to download that when the Internet really slows down you don't trust your own senses. You sort of think to yourself, you know, the Internet is really slow today. Or maybe I just drank too much coffee.

But when the CTO of one of my clients grabbed my arm the other day and ask me if I've noticed that the Internet in China had slowed considerably lately, I had all the confirmation I needed that the issue had nothing to do with caffeine-induced impatience. The net IS slower, and not just with overseas connections.

There could be several explanations for this, some quite sinister, like "they're upgrading the GFW." (Part of the joy of living in China is that government conspiracy theorists who would be regarded as crackpots anywhere else tend to start sounding like realists here. It doesn't mean they're right about things, just that people actually have to consider what they are saying before discarding it as paranoia.)

But there are a lot of things going on in and around Beijing that could be contributing to this: network upgrades, Olympic-related projects, construction cutting cables.

Or, indeed, more careful and deliberate scrutiny of the Internet in the weeks ahead of the coming opening of the 11th National People's Congress.

Either way, it's making surfing more painful than it has been in years.

I want my VPN...

Interesting...

In the Hutong
Experiencing Sunday night paranoia
2043 hrs.

So, sitting here behind the firewall, the fledgeling Baidusucks.org is blocked.

The GoogleSux.com site, on the other hand, is readily accessible.

This might just be a problem with my connection.

Anybody else here in China getting similar results?

Microhoo China

Hiding in the International Club
Is it CNY yet?
1328 hrs.

The prospects of Microsoft buying up Yahoo! are providing considerable titillation for those of us who love industry gossip, are suffering election fatigue, and who dream about being flies on the wall of Yahoo! board meetings.

What few of us have started to consider is what such a combination is likely to mean to China. Certainly, MSN will probably continue to operate as the #2 chat application (far behind Tencent's QQ but a growing fave among office workers). Where it gets interesting is when we start to think about Yahoo! China.

Readers of this blog will need scant reminder that Yahoo! China is owned and operated by Alibaba. Along with a whole lot of other interesting things, Yahoo! owns 39% of Alibaba. If Microsoft buys Yahoo!, it becomes Alibaba's largest shareholder.

Assuming Jack Ma and Steve Ballmer got along (there is no reason to think they wouldn't), the Alibaba investment could be very interesting for Microsoft. In fact, it would provide them several potential avenues - the LEAST of which is the Yahoo! China property - for building their (indirect, but very real) opportunities in China.

Taobao.

Alipay.

Even Alimama.

Think for a moment what it would mean to have these properties backed not only by Jack Ma's savvy dealmaking, but by the sheer muscle of Microsoft.

And think what it would mean to Microsoft to have Jack Ma as its leading advocate in China.

Finally, here is a question - what about Jack Ma as non-executive chairman of Microsoft China?

All very interesting possibilities that, if Microsoft takes the time and brainpower to focus on China in this process, make for some really interesting opportunities.