How has the Chinese government 's regulation of Internet content affected the business models for Chinese Internet companies?

In China, regulations on content are very strict. Broadcasting news or personal information is considered state business. As the Weibo case shown, relying on eyeballs and viral content is a bad idea in China. Government’s involvement will only increase as your user base grow, and that will make your investors and clients very unhappy. Only a handful of heavily regulated companies can afford this.

For US Internet companies, most business models evolved from media and creative industries. In China, early discourses about Internet by Jiang Zemin and his son framed Internet as a public infrastructure emanating from the telecom industry. It was never really introduced as a “media”.

The ad-based models did not fit with China’s market political constraints and regulations, so companies focused on having customers instead of users. Tencent started in the 2000s to charge users, and back then even issued its own currency (QCoin) to sell custom avatars and online games services. Today, it has grown from a chat application to one of the largest bank and payment processor on earth.

To sum it up, I will say that most companies in China had to rely more heavily on sales because they could not afford the political costs of doing business in the media sector.

This text was originally published in quora.

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