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Home/Magazine Archive/April 2005 (Vol. 48, No. 4)/The Internet Enlightens and Empowers Chinese Society/Full Text
Transforming China
The Internet Enlightens and Empowers Chinese Society
Charles Zhang is founder, chairman, and chief executive of Sohu.com, a company incorporated in the U.S. state of Delaware with headquarters in Beijing. In 2004, Sohu took in more than $100 million (U.S.) in revenue by providing online information and services. Zhang established the company in 1996 as Internet Technologies China and two years later launched the first Chinese-language search engine Sohu, or "search fox." Sohu.com was listed on the NASDAQ stock exchange in July 2000; its market capitalization topped $1.4 billion in 2003 before declining in 2004.
Zhang pioneered the Silicon Valley model of entrepreneurship in mainland China and is often referred to as China's Bill Gates. In 1998, Time Digital named him one of the world's Top 50 Digital Elite, and the World Economic Forum identified him as a Global Leader of Tomorrow. In 2003, he was featured in Time magazine as one of its 15 Global Tech Gurus, and in BusinessWeek as one of 25 global e-business CEOs. In 2004, he was selected the Distinguished Executive of the Year by the (U.S.) Academy of Management. He spoke with me during and after the 64th Annual Meetings of the (U.S.) Academy of Management in New Orleans, August 2004.
MM: You returned to China in 1995 after completing a Ph.D. in experimental physics at the Massachusetts Institute of Technology. How has China changed since then?
CZ: The differences are as stark as night and day. China is trying to compress 500 years of evolution to become a modern society. The Internet is accelerating this transformation. It is helping Chinese society become more enlightened and empowered.
MM: According to Alexa.com, Sohu ranks as the fifth busiest Web site in the world, in terms of online traffic frequency.
CZ: Actually, if we combine Sohu.com with two other Web sites that we ownchinaren.com and 17173.comwe collectively rank as one of the top four in the world, alongside Yahoo!, Google, and Microsoft.
MM: What role has Sohu played in China's recent changes?
CZ: We have been a catalyst for change for China, accelerating the path of reform toward modernization and making China a more open society. With greater access to information, the Chinese people have become more sophisticated, more independent thinkers, and more likely to be active on issues that affect them. Sohu.com has become indispensable to millions of Chinese for news, search, email, wireless messaging, instant messaging, browsing, games, and shopping.
MM: Why and how did you start the company in the first place?
CZ: I started my company because I saw two major trends: the economic development of China and the Internet revolution. I recognized the huge potential of the Internet in China. I didn't have the money to start a company and found it difficult to get funding. I finally got $225,000 in seed money from three MIT people who shared my vision of the Internet's potential in China.
MM: How did you come to develop the world's first Chinese-language search engine?
CZ: I started by building a small Web site. We tried to develop content, but I quickly noticed that most of our visitors went to other Web sites. I realized that instead of building our own content, we could prosper by guiding people to sites built by others. I decided to quickly develop and launch a Chinese-language search engine.
MM: What did you learn in the U.S. that has been most helpful in your return to China?
CZ: I followed the exhortation of Deng Xiaoping [former paramount leader of China] to go to the West and learn about science and technology. I was glad to be at MIT in 1994 just as the Internet became commercialized. However, in retrospect, my most important lessons in the U.S. were about can-do spirit and commercialization. I learned about the importance of communication, public relations, and management in a highly developed commercial society. Watching American election campaigns, I also learned about the importance of being in touch with the masses.
MM: How has your leadership of Sohu.com changed over time?
CZ: I did not have any formal training in business administration. I have learned to manage by doing. In the early years I spent a lot of time meeting the press and taking part in marketing events to promote Sohu.com. As a result, we became very strong in terms of marketing and branding. After much soul-searching, I realized that we were weak in terms of technology and product offerings. To rectify this, I am now devoting most of my time to working with engineers and programmers.
MM: What can we expect in the coming years from both Sohu.com and the Internet in China?
CZ: As state-owned enterprises restructure themselves and deregulation continues, there will be more intense competition in the Chinese market. Chinese companies will also become stronger and look to expand. The purchase by Lenovo [formerly known as Legend Computer] of IBM's PC business [for $1.75 billion in December 2004] is an example of how a Chinese firm with a strong domestic position may expand overseas. Yet China has plenty of opportunities due to the fundamental changes that have occurred over the past 25 years. These changes will bring about sustained growth and development.
MM: Thank you very much for sharing your experience and insights.
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