Hutong Weekend: Top Ten Signs that it is Time to Leave Foursquare

In the Hutong
Mid-Autumn Festivus
1515 hrs.

After much angst and contemplation recently, I gave up on Foursquare.

I wasn’t stalked, and it has nothing to do with something the company did to offend me. I just woke up one day and realized that I was probably putting a lot more into the service than I was getting out of it, and that of all of my social media outlets, it was giving me the lowest return on my investment.

I do not think I’m alone in this predicament, but as a public service in order to help you assess whether you should give up on the service or stick with it, I have prepared the following list of signs and symptoms indicating that you no longer need Foursquare in your life.

10. You have not earned a new badge in six months, despite regular use.

9. You have not only created a spot for your home, you have checked in there at least 50 times.

8. You realize that do not care where the latest B-grade actor or actress had dinner last night.

7. The highlight of a night out at a new restaurant with your significant other becomes checking in at a new location

6. You keep swapping mayorships at the same half dozen places with the same half dozen people

5. You start asking your spouse to drive so you can do more “drive-by” check-ins.

4. You start doing “drive-by” check-ins – while flying in an aircraft.

3. You stop reading the “specials” because you know you cannot qualify for them.

2. You start wondering when Foursquare is actually going to evolve the experience

And the number one sign that it is time for you to leave Foursquare:

1. You realize that, since you are not Lady Gaga or POTUS, nobody cares where you are at every minute of the day.

It’s Media, Chief, But Not As We Know It

In the Hutong
Hoping rain will clear the air
1224 hours

In late July I noted in “The Alipay Warning” that an overlooked editorial from Xinhua might be an early warning to foreign investors in many Chinese online companies that the party is almost over. My point was that the government is signalling that virtual ownership structures have run their course, and are now more liabilities than assets. Signs that this is the case have become more common in the time since, as Bill Bishop notes over at DigiCha:

In the space of a few weeks we have heard from various official or semi-official media about the dangers of online rumors, the risks from excessive foreign ownership of China’s Internet companies, new rules that could potentially invalidate the corporate structure of most Chinese Internet companies, rumors of a real name registration policy for microblog and other social media users, and the launch by Sina of new rumor busting features. Tightening is coming, the question is how far it will go.

In other words, while the hammer has still not fallen, evidence is growing that the blacksmith seems ready to strike.

I am betting that the hammer is coming for several reasons, but one important one: the way China’s regulators look at and understand internet companies has changed.

Laissez Tech-Faire

Ever since the early days of China’s internet in the late 1990s, regulators have seen a distinction between online services and media. Internet companies tended to be stuffed with engineers, work closely with the computer and telecommunications industries, and offer services just slightly beyond the comprehension of cadres in their 50s and 60s. The bureaucrats were not entirely credulous: they enacted regulations restricting foreign investment in Chinese online firms. At the same time, though, they turned a blind eye to companies that used highly contrived investment structures to channel foreign capital and expertise into China’s online giants.

I see three reasons why they allowed a high degree of virtual foreign ownership of these companies. First, they saw foreign investors as unwitting accomplices in a government plan to ensure that local companies dominated the Chinese internet. Foreign capital and the Silicon Valley-sourced know-how that came with it would create local champions in an industry that was unlikely to get much support from state-owned policy banks. Indeed, with time and a little luck, some of these local companies might even turn out to be global players.

Second, ever since the start of reforming and opening, the government’s approach to new developments has been to allow a new practice, a new industry, or a new kind of company to grow first, and then step in and regulate only when such experiments got out of hand. Did the foreigners want to invest a little through a multi-layered ownership structure? Hmm. Let’s see how that works out – we might come up with something that can be used elsewhere in the economy.

Third, though, is that many regulators saw online services as, to borrow from Douglas Adams, “mostly harmless,” the technological playthings of a young generation out to find love, diversion, and a little shopping. Sure, the potential for misbehavior was there, but the people running the services were near at hand, easy to rein in if things started to go awry. They were not, therefore, like film or television.

Not Your Father’s Media

Imagine the reaction of these leaders in late July, in the wake of the train wreck, when they wake up and realize that there are a half billion Chinese citizens online; that a quarter billion spend more time watching TV online than watching state-owned, Party-controlled broadcasters; and that a quarter billion now get at least as much “news” from Weibo and QQ as they get from newspapers or TV. What must have been even more sobering was realizing that the demographic most affected by online services is the very demographic that has driven every popular rising in modern Chinese history.

Suddenly, these aren’t “telecommunications value-added services,” or “online sites,” or “technology companies.” They are media, privately-owned media in a country where media must be state-owned; partly owned, influenced, and controlled by foreign interests in a sector where foreign ownership is explicitly forbidden; and influential media largely outside of the control of the Party. Such a situation calls for a change. But what?

The Art of the Possible

The question that faces China’s regulators, then, is not merely whether to continue to allow variable interest entities to exist, but whether an entire sector of the telecommunications and technology industries has been transmogrified by growth and events into media, and thus whether and how to extend Party control and state ownership into the hearts of these companies. What stays the hammer is not, I would argue, any hesitation about whether to make a change, but how to unravel the ownership and control issues without destroying online properties that are of immense potential value to the nation.

Politics complicates matters further. There are powerful people and entities in China with a vested interest in the outcome, and in a nation governed by consensus these interests must be addressed rather than ignored. That this is all taking place on the cusp of a generational change in national leadership is sauce for the goose.

Together these factors mean that action taken will be more incremental than sudden. That is both good and bad. It is good in that it offers foreign investors who catch the wind soon enough to work through the problem, create new and fair structures that recognize the value of the investments, and possibly even to influence thinking in Beijing on the problem. But it is bad in that the heat will build slowly, allowing many companies and investors to deny that anything is changing until they find themselves completely boiled.

“Hope,” Bill Bishop correctly notes, “not an investment strategy, and given the current political climate, including the buildup to the 2012 leadership change, investors would be justified in wondering if something bigger is going on.”

Something bigger is going on, and the appropriate strategy if you are invested in any of these entities is to go out and learn all you can, accept no easy answers or placation from the executives of the companies in question, and start thinking about what you will need to do to ensure the best possible outcome.