BitAuto: A Chinese Canary in an Online Ad Coal Mine

Next Story

Punch-Out! tees from 80sTees.com contest winners announced!

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 <a mce_href="<img class="alignleft" src="http://www.ehponline.org/members/2005/113-4/image/fig1-1.jpg&quot; alt="" width="302" height="223" />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 <a href="http://www.bitauto.com/">BitAuto</a&gt;. 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. Since it's in the leading vertical, BitAuto will be an interesting company to watch to see how big the online advertising market can get in China—and how long it’ll take to develop. That’s a topic of a lot of debate right now with a lot of Web names not even trying to develop an ad-based business model.

It’s also worth noting the board has eliminated one of the biggest risks: Li’s penchant for climbing dangerous icy mountains. A board member went with him on one of his frequent trips and the kibosh was quickly put on the hobby. Li misses it, but figures he’ll build the business for the next 15 years then climb again when he’s fifty. I wonder if it’ll seem boring compared to building an Internet company in China.

blog comments powered by Disqus