Peter Yip, Co-Founder and CEO, China.com

New Challenges and Opportunities Facing the Internet Industry in China and Asia 

By Shannon Copeland, Wharton MBA Student (WG 2001)

The following is a summary of the keynote speech that Peter Yip, co-founder and CEO of China.com, delivered to the Wharton Asian Business Conference in Philadelphia on November 18th, 2000. 

China.com’s experience and lessons learned include doing what had never been done before-an Asian Internet Company going to NASDAQ to raise capital in an IPO.  According to Mr. Yip: “It took us 4 failures before finally succeeding.  We persevered, and we learned something more each time about what we needed to be successful.” In July 1999, the firm completed the first cross border IPO of its kind.  The Company raised US$86 million and was 40 times oversubscribed. Following that- the firm split their stock 2 for 1 in December 1999, did a secondary offering in January 2000 raising US$500 million, listed the subsidiary hongkong.com on the Hong Kong GEM in an IPO in March 2000 raising US$145 million, and then split the stock 2 for 1 again in May 2000.  This fueled rapid growth throughout Asia. 

The firm believes that this successful IPO paves the way for other Asian companies to raise capital in places such as NASDAQ.  China.com has certainly suffered along with other new economy firms but Mr. Yip adds: “the most important background fact about our industry is that in Asia, it is still in its early stages.  Looking at the stock prices over the past 6 months of some Asian Internet companies listed on NASDAQ, you would think that the future is not very bright for us.  However, if you were to look at how we in the Asian Internet industry compare to the US companies in the context of which phase of Internet development we’re in, I would say that we compare favorably. The important thing is to stay focused on one’s business model.”  The firm now provides a full range of Internet services that: build e-business strategies and solutions, distribute content via its portal network (china.com, cww.com, hongkong.com, taiwan.com), and sell services through online advertising (24/7 Media Asia). China.com also invests in synergistic Internet companies throughout the Asia-Pacific region that add value and depth to its services and portal channels (china.com ventures). The Company has also invested in more than 50 Internet companies around the world. The Company has offices in more than 10 markets, including Japan, Korea, Australia, Hong Kong, Taiwan, Singapore, Malaysia, Thailand, and the United States.

In many ways, Mr. Yip explains “china.com symbolizes the future of China” – with a powerful brand, with international operations, with a diverse shareholder base, leading the way for other China companies to tap into international capital markets, manage in a transparent manner, and partner with foreign companies.  China’s ascension to the WTO, expected soon, will further accelerate growth in the industry with the expected overseas investment in the infrastructure. 

China.com like many young internet companies is confident that the Internet will have a profound impact on China; it will equalize social relationships through the power of information; it will help bridge the gap between rich and poor; its 24 hour medium, message, and chat can foster positive changes among its citizens; it will most certainly increase prosperity by lowering their costs of doing business and increasing their market reach; it will bring the outside world into China and project Chinese culture out into the world. 

The restructuring of Chinese business and society, underway now for over 20 years, will accelerate with PNTR (permanent normal trade relations) and WTO.  Mr. Yip explains that “because of our international as well as domestic shareholder base, as well as the power of the medium with which we work, we are uniquely positioned to help China find its rightful place on the world stage as television, media and the Internet converge.”  The opportunities in the China Internet space are just beginning to open up.  The underlying base is the number of Internet users.  In this regard, China is growing phenomenally.  From 2 million Internet users in January 1999, China now has over 16 million users.  More importantly, China has the largest mobile user market in Asia, with over 50 million.  With the advent of mobile Internet access, many of those mobile users will become new Internet users.

Mr. Yip summarized the his future challenges by saying that “before the Internet fulfills its potential in China and Asia include:  Broadening the infrastructure; engendering government support; forging partnerships with strong international companies; and obtaining capital market support.  By meeting these challenges, we will see in short order the economic and societal benefits of the Internet in China and Asia.” 

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An interview with Peter Yip: 

SC:  What are three ways that leadership in e-businesses differs from leadership in traditional bricks and mortar businesses? 

Mr. Yip:  1.  The work style and corporate culture is vastly different in e-businesses.  Differences in rank are de-emphasized and the ability to "make something happen" is elevated.  And, our dress code is, you dress like a dot-commer.  2.  Leadership in an e-business must be able to handle a demanding pace, because the changes dictated by the marketplace are more frequent and more severe.  3.  Leadership in an e-business is more comfortable with a much higher level of overall risk than a traditional bricks and mortar business which usually has a lower risk profile. 

SC: How do you build a leadership team? 

Mr. Yip:  I find the best people with excellent track records, the right skill sets, and who share our enthusiasm and vision of the transformative power of the Internet for this region.  Once on board, I require high performance out of every member of the team. 

SC: Could you describe a little bit of that process, what happens? 

Mr. Yip:  The process changes with each person that we bring on board; people come to us from many sources, often times from working together on projects or deals, and we come to a mutual understanding that they would be great for china.com.  At other times, we elevate people from within very quickly once they prove they have "the right stuff." 

SC: How many people did you have to have on board before you made the process more formal?" 

Mr. Yip:  Ever since the beginning of our high growth phase, after our IPO in July 1999; at that time, we had approximately 200 employees. 

SC: How do you compensate your employees? 

Mr. Yip:  Our salaries are certainly competitive and our stock options are leading edge in Asia, but I cannot over-estimate the non-material compensation, which is just as effective, i.e., a chance to be successful in a leading company, in the early stages of industry development, in the most populous (therefore, most potential) region in the world.  The cachet of being associated with this company is priceless and, I believe, valued by many of our employees. 

SC: What kind of culture exists at your company?  How did you establish this tone and why did you institute this particular type of culture? 

Mr. Yip:  We have a forward-looking, flexible, high-octane, can-do corporate culture.  This was created from learning what it takes to be successful in this industry. Being just about the most dynamic industry in the world today, the industry and capital markets demand that we have; a viable business model, excellent management that executes its business model well and manages IT, and the ability to make the necessary tactical and strategic moves in tandem with industry shifts. 

SC: How do you lead in this fast growth environment? 

Mr. Yip:  I lead by sticking with things that are tried and true, like our business model, and being brutally honest with ourselves - the earlier the better - about when we should change directions, like when to disengage ourselves from initiatives that no longer have a future and when to right-size. 

SC: What are the necessary qualities that a leader must have to be successful in the Internet economy? 

Mr. Yip:  The ability to multi-process and think multi-dimensionally, ability to say no, brains, talent, desire, ambition, discipline, persistency, capacity for hard work, empathy, and attention to detail, not necessarily in that order. Oh, by the way, it doesn't hurt to have charm, a quality that I've been accused of having. 

SC: Given some of those qualities and capabilities that you've described as being essential for leading in this environment, how or where have you been able to develop and acquire them? 

Mr. Yip:  I don't really know, you might have to ask my parents about that one. Seriously, though, it's the culmination of many diverse experiences acquired over a lifetime.  The thread running through my experiences is I approach every engagement with the attitude that anything is possible, but one has to want it bad enough and be willing to apply oneself and work for it.  And, the environments that I have chosen to put myself in have always been challenging ones so if one is observant, one cannot fail to learn the lessons of "what it takes." 

Part of this discharge of our social responsibilities involves working closely with the Chinese government, which we work very hard at.  Having a strong relationship with the government is one of our competitive advantages. 

SC: Do you have a leader that you look at as someone to learn from? 

Mr. Yip:  Dr. Sun Yat-Sen, who took on the task over a century ago of transforming China into a more modern, forward looking country.  I cannot help but think that if modern communications tools were available to him and China then, that progress toward a better-informed and more prosperous society would have been more fully realized. 

SC: Going forward, how do you measure success? 

Mr. Yip:  I would consider a person successful if he or she achieved what he or she sets out to do, that the goals were worthwhile and honorable in that those goals improved things for others, and that one enjoyed the struggles and the people associated with the efforts. 

SC: As a leader, what are your top three priorities in order of importance and why? 

Mr. Yip:  1.  Be a strategic thinker-understand your actions in the context of your overall direction and where the market is!  Without this quality, one has a high chance of wasting one's time and efforts.  2.  Get it done right! Flawless execution of your objectives gives you an enormous competitive advantage. 3. Get it done now!  In this industry, indeed, in today's business world, time waits for no one. 

Extrapolating to the organization, Mr. Yip also added in his conference speech that in order to emerge a winner in Asia, these characteristics, at a minimum, are required of any Internet player in Asia.  1.  Proven Business Model.  2.  Ability to Stay Focused.  3.  Ability to Execute and Integrate.  4.  Ability to Achieve Profitability Early.  5.  Capital Strength.  Whether you are a player, would be player, or investor:  “It takes a brave heart to accept the challenges and opportunities of the Internet industry in Asia.  It isn’t easy and there are no guarantees but for those who persevere, the rewards will be great.  Just think of those investors who bought stocks such as Yahoo or AOL when they were in their industry consolidation and stuck with their investments.” 

SC: What tools do you find necessary when seeking to motivate individuals to follow your vision? 

Mr. Yip:  Inspiration, carrot and stick, in that order. 

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Background information on Peter Yip:  

Peter Yip is a co-founder and CEO of china.com corporation (Nasdaq: CHINA), which develops a comprehensive, pan-Asian, integrated Internet business.

Mr. Yip has more than two decades of entrepreneurial experience in media & telecommunications industry. Prior to china.com, he successfully started a network integration company, guided it from scratch to major success and subsequently sold the company to SHL Systemhouse, a company since acquired by MCI Worldcom. He previously was a senior management consultant at KPMG Consulting and Senior Research Fellow at Wharton Applied Research.

Mr. Yip is a founding member of the China Internet Research Foundation, a non-profit organization whose objectives are to advance Internet development in the Greater China region in partnership with Government agencies and business community. China Internet Research Foundation is in exclusive partnership with Tokyo based Nihon Net Research Foundation of which the founding members include Tokyo Corporation, Mitsubishi Corporation and Itochu Corporation, etc.

Mr. Yip is a frequent speaker at various international conferences, including the World Economic Forum, Harvard Business School’s Asian Conference, Fortune CEO Forum, Businessweek CIO Forum, M.I.T. Enterprise Forum, U.S./Japan Symposium on Corporate Partnership, United Nations Conference on Science & Technology, Harvard University’s Conference on Internet & Society, Nikkei International Conference on The Future of Asia and Beijing International Conference on Technological Innovation and Entrepreneurial Development. Mr. Yip is often quoted by major media publications, including Business Week, Fortune, The New York Times, The Wall Street Journal, CNN and Bloomberg amongst others.

Mr. Yip is also a co-founder and vice-chairman of hongkong.com Corporation (www.hongkong.com; stock code: 8006), a public listed company trading in The Hong Kong Stock Exchange Growth Enterprises Market.  He also serves on the boards of 24/7 Media (Nasdaq: TFSM), Softbank Investment International (Strategic) Limited (Stock Exchange Hong Kong stock code: 0648), e2Capital (Holdings) Limited, Taiwan.com Corporation, and several joint ventures established under the auspices of the Chinese government.