The hardest thing about being an American journalist in China is discovering local entrepreneurs. Part of the reason is that there is just so much going on. There are so many intriguing expats and returning Chinese nationals in Beijing’s start-up scene, you could spend months just meeting with them. But the bigger challenges are the language and cultural barriers. China has no shortage of fascinating local entrepreneurs, it can just take some time for Americans– with very, very poor Mandarin– to find them. Local entrepreneurs will definitely be a bigger focus in my next trip to China, as will seeing some more of the country. And, ahem, learning a bit more Mandarin before I arrive.
But as a sneak preview, I had a meeting yesterday with William Bin Li, the 35-year-old founder of BitAuto. Like most local entrepreneurs he’s squarely focused on China’s massive domestic market, and local guys like Li will always have a leg up on returning Westerners zealously eying that same prize.
BitAuto is like Cars.com, AutoTrader and Consumer Reports rolled into one and sitting smack dab in the massively growing Chinese auto industry. It operates a Web site that sells new cars, one that sells used cars, and is also powers the auto verticals of major Chinese portals like Tencent, Sina, and even Yahoo. It also produces a one-hour-per-day car-themed radio show that’s syndicated on 200 stations, a car review magazine, and a one-hour-per-week car-themed TV show that’s syndicated on 20 stations. And if that weren’t enough, a sister company places $400 million RMB (roughly $56 million) in car-related advertising around the Web every year.
I asked Li why not focus on just one of those major categories and he replied, “This is China.” By that he explained, through a translator, that in China car adoption, Internet adoption, online ad markets and car-related media were all growing from a standing start at the same time. So there was no dominant entrenched leader in any of those categories. Why not take on all of them?
Li is plenty ambitious. He started his first business doing Web hosting in 1996 while a student at Beijing University, studying computer engineering. At 20, he was part of the original team at DangDang, known as the Amazon.com of China. In 2000, he founded BitAuto. He got a $1.5 million investment from a state-run car dealer and started to build out his team. Then the Internet bubble burst. (Yep, the whipsaw was the same over here.)
Li’s backers didn’t want him to spend the money, but trouble was, he’d burned through $600 million of it. So he took out a personal loan and gave the whole amount back. (And took back 100% ownership of the company in the process.)
Li and six other guys worked without pay out of Li’s apartment for the next four years or so. To pay the bills, they came up with an OpenTable-like inventory software program for car dealers, followed by an ad serving product for dealers advertising online. That got them about $500,000 in revenues through the end of 2004— enough to stay afloat. By then the Chinese car market was surging, the Internet was hot again, and the market was finally ready for what Li had set out to build back in 2000.
Fast-forward to today: Li has raised about $30 million from Lenovo’s venture arm, Nippon’s venture arm, and DCM’s China office. He admits he was way too early back in 2000. Not only was the consumer Internet more nascent, but there were only half a million cars in Beijing and only 5 million in all of China. Today, there are 3.6 million cars in Beijing and 40 million in all of China, and the market is still growing at a rate of between 20%-30% per year.
And while people are fond of saying online advertising isn’t a real business yet in China, automobiles are the number one category of spending, to the tune of 1.3 billion RMB a year. For such a young online ad market, that number holds up surprisingly well next to 5 billion RMB spent on newspaper car ads and 4 billion RMB for television. I asked Li why and he said that car dealers have told him that their customer surveys have shown that more customers learn about different car brands online than on any other single medium. In addition, the demographics of people in the market for new cars dovetails nicely with the people who are using the Web already in China.
There are clearly some risks to Li’s business. He’s trying to do a lot at once, and many Web companies succeed when they focus. (Ahem, Google.) He’s managing a whopping 1,200 employees throughout China. Much of his time is spent building out a local sales force for the huge country’s fragmented market of auto dealers. That’s about double the employees of Facebook, for some perspective. Needless to say, the company isn’t profitable yet, but so far 60% of its revenues come from the seven largest cities, so a far-flung sales force in second and third tier cities could yield substantial growth over time. And because BitAuto gets a lot of traffic by powering the auto sections of major portals, its own brand isn’t as prominent in China as Li would like.
But Li has conviction. Like a lot of Chinese entrepreneurs, when his company stumbled he didn’t just scrap it and move on to the next idea. This was it, and he’d
Sarah,
Your image isn’t loading in this article.
Ya it is. Image works fine.
Hopefully Li’s network talks about how the Chinese are ripping off designs left right and center, and don’t recognize copyrights. Not criticizing – just sayin…
Why should they recognize copyrights? They practically own the US now.
The image isn’t working for me either.
Fixed.
“Li’s backers didn’t want him to spend the money, but trouble was, he’d burned through $600 million of it.”
Was this supposed to be $600k or was the previous investment to the tune of $1.5 billion?
The rest of the article is pretty interesting, good work.
Although I might find the article interesting, I would hope that authors on TechCrunch would at least proof read their articles once.
I encountered 3 before I decided it is not worth it to read this:
- he had burned $600 million of the $1.5 million that his investors gave him?
- $500,00 of revenues at the end of 2004
- market was finally ‘read’ for for what Li had…
Having a very English domain name targeting chinese domestic market…no more comments.
If I puke, don’t worry, it’s a good thing!
Interesting read, looking forward to your book with more of this stuff. That will be proof read, right? I kid, I kid.
Li’s sister Ling moved to the UK many years ago and founded: http://www.lingscars.com/
wow. u can tell that she’s chinese: http://www.lingscars.com/
UK site but the it’s alive! haha! maybe just chinese people use it!
Shi Lei, or Harry Shi, a younger schoolmate of mine, also a TsingHua and Stanford graduate, who returned to China in 2004 has built a leading online car insurance company in China called cars.net, he is based in Shanghai. I thought Sarah maybe interested in this space as well.
sorry, It’s Cars.cn (not cars.net)
We indeed cannot under estimate the importance of cultural differences, and communications in Chinese.
Learning Mandarin Chinese has become easier with new online tools over the years. ChineseTeachers.com try to help by bringing real native teachers and Chinese professionals to learn Chinese but also better understand the cultural differences.
China has so many entrepreneurs that are eager to partner with companies abroad, some have good Chinese but it is always helping to have more appreciation of these entrepreneurs to find the optimum win-win deals.
Well, I am Ling as referred to by theDarkSide above. I am certainly no relation. The car market opportunities in China are exciting, but I do not play there. I am Chinese human being, but I am solely UK-based, moving £35m of new cars at retail value per year (all from my website).
Big difference between us, apart from BitAuto scale, is that I have always been profitable. I build a business that makes money every year, not one that waits to get snapped up for RMB Billions.
It may be interesting to see if there is any common ground between us, as I move >1,000 new cars of all brands in the UK each year, simply from a website. The good thing is that using my model, I have been unaffected by the current (terrible, 25%+ down) car trading conditions in the UK.
Ling!
I was like OMG when I went to your website… but it turns you’re doing a nice job.
Good luck!
“like OMG” hahahaha! Are you American?
I have lots of discussions about this approach. If you want some boring site, visit another. If you want to see something worthwhile (that no one else bothers to do) check http://www.ling...com/sitemap.php
That shows all the live visitors in real time, plus customers online, plus there is a singing cat and a Pump up the Jam Jar (Jam Jar is a competitor owned by Royal Bank of Scotland – booo, hisss, greedy banks).
Cars should be fun. Intelligent customers find their way around and I sell loads of new cars. Website is only route to market.
Unlike BitAuto I do not have 1200 employees, but I do have over 1200 attributed customer testimonials.
Ling
Ling can you explain about your business model in a blog or some where . Would like to see how you compare with bit auto and are you fighting for same turf.
But I must .. that is interesting site of yours
Sarah, I thought you said you’re not a journalist in one of your previous articles … changed your mind?
Very interesting and inspiring article. Great work Sarah.
Geekevaluation;
There is tons of stuff on my site about my business model.
No, BitAuto (I have looked) are providing portal for Chinese dealers to develop their sales. Traditionally (still) Chinese do not have a vibrant auto market; they are learning what to do with used cars. This BitAuto is a central repository for all things car.
I am surprised that Auto Trader has not established in China. However, BitAuto provides more than them (which may actually mean less focus). In the growing market they should be safe, but if at 1,000 employees they are still losing money – sheesh! You wonder if they will ever make any? That number of employees seems excessive, but then that’s how they do everything in China – throw numbers at it. In the UK I think profitability would have to kick in before that stage. Would probably do what they do with <50 people.
Me, I lease new cars of all brands to credit-worthy customers in the UK. I am the UK’s favourite car leasing website.
Plus, I am a Chinglish bird!
Ling
Honestly, I’d much rather read an article on your business than a lot of what I see on TechCrunch. It’s a fresh and very different approach to a saturated market that seems to be working – I wish you continued success.
1) image doesn’t load
2) editorial error- how can he spend $600m when he raised $1.5m?
Cool story. BitAuto is tackling a ton!
Taking on so much work is very difficult especially in a fast moving ever changing market
I myself started a car leasing company in the Uk around 5 months ago, right in the middle of a recession, one of the biggest ressions ever known, i must be mad, but what inspired me was Ling, even though she is one on my competitors you have to hand it to her business model, compare her site to the traditional site in the car leasing market in the uk and you will get many different takes on the site, youl either love it or hate it.
Hopefully in the near future Ling may move her business into china and leave me some room to grow in the uk for my car business
I agrre with Ling that in China it is normal to employ this quantity of people and it offer some Kudos to the company. But my internet company that also focuses on car lease is based on having as few employees as possible and let the search engines bring the people and let technology do as much work as possible.
There was a time when to advertise on Autotrader, you needed an employee to come out to tke the picture. Now we do it ourselves, just like Ebay. technology is the key to reduce the costs here.