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China's king of online dating

China's not the perfect place to try an Internet company, but Marine Ma's dating business is making slow and steady progress.

Editor's note: Cliff Miller, CEO of Mountain View Data, has conducted interviews with Asian tech leaders that will appear on CNET Miller has traveled and worked extensively in Asia for several years.

Marine Ma is not yet 30, but he's already on his third company.

Currently, he's the CEO of EFriendsNet, a social-networking company that also functions as a dating service. EFriends claims to be the market leader in China for Internet dating, in both membership numbers and revenue.

Marine and I first met in late November of 2005 at the Asian Ventures conference organized by Dow Jones, where we were both making presentations.

Recently, I sat down with Marine to talk about the ins and outs of starting an Internet company in China, the future of Internet dating, and the various issues surrounding censorship.

Q: The last time I talked with you, you told me about Fanso, the first company you started.
Marine: That was from...1999 to 2001, founded by me and some alumni from Tsinghua University. We focused on providing information such as news, (and) music downloads to the students in universities in China.

It was the first company in China that was run by students that was given permission to operate by the Chinese government, right?
Marine: Yeah. In the past if a student wanted to do some business in the university, it was...illegal. At that time the Education Ministry wanted to change something. They (had heard about) Microsoft in America (and how) Bill Gates quit his course while in university to start the company. So, we were lucky enough to get the chance.

What kind of music downloads did Fanso support?
Marine: It was all free music--illegal--but at that time no one cared. The Internet industry was not mature, so no one came to us saying, "Hey, your music is illegal." I think the basic reason is we did not charge the users.

I think China is changing--the mind, the whole system. But today if we want to do business, if we want to win in China, we have to accept the current situation, play by the rules.

So what was the downfall of Fanso? What was the problem?
Marine: In 2000 and 2001, the bubble of the Internet burst, and no more VCs came to China--there was no more money; we'd run out. But I think another reason was more fatal: That is, we had never done business before, so we did not know how to do business.

How much money did you raise?
Marine: Six million renminbi (about $750,000). It's not big bucks, but it's big bucks for students.

How many partners did you have?
Marine: We had five. We used to have nearly 80 employees within Fanso, but we didn't generate any revenue, and the worst thing is that we didn't think generating revenue was necessary.

How did you get along with the other founders?
Marine: I think every time people start up a company--at the very beginning everyone is a good guy, an angel, but when you are facing pressure, facing difficulties, problems will appear. We had a chance to sell the company for 10 million renminbi (about $1.5 million). We set up a board meeting to discuss it. After a long meeting--six hours or more--we discussed and we quarreled, and finally we decided to refuse it.

What did you personally want to do?
Marine: I voted to accept the 10 million renminbi. At that time, I was not happy with the other founders. But today, we are friends. You know, another founder of Fanso is also in my company, Efriends, now.

You mentioned that Fanso later went bankrupt. What did you end up doing next?
Marine: I joined NetEase. But first I spent two or three months at home to think about the whole deal, to think about my future. When I joined NetEase, I took charge of the wireless business. At that time, in the end of 2001, the wireless business was just an emerging market in China, and I wanted to know how to do this kind of business. I had already learned a lesson from Fanso: If you want a business to be successful, it must be a profitable business.

When I joined NetEase, I think the revenue for the whole wireless division was no more than 1 million renminbi per month. When I left two years later, our revenue was nearly 40 million renminbi ($5 million) per month.

So now you've started a new dating-services company, Efriends. What are your plans?
Marine: We have a five-year plan. For the first two years, 2006 and 2007, our target is to accumulate more users. I think there will be a chance, which is the Olympic games in China in 2008, to build our brand in Asia. When the foreigners come to China, we'll let them know, "If you want to find a life partner in China, come to Efriends."

With your dating network, do you have any problems with prostitution or other issues?
Marine: I think we have some problems in the industry in China. For example, fake problems, trust problems, paying method problems, but we have solutions.

What is the No. 1 headache for you?
Marine: I think that is the (current) bubble. The good thing is, more competitors help us to educate the whole market. The downside is that they pay employees double or triple. We will lose some of the employees. They put more money into marketing, and our marketing expenses will also increase. For example if we want to buy an advertisement (with a) newspaper, a competitor may talk with the newspaper and say, "I'll pay you twice."

Well, so why will Efriends win out?
Marine: Currently, I think only Efriends is profitable. If not, I think there only a few profitable dating companies in China. We have a social-networking database, which is totally different from the other dating providers. When you search on Efriends Net, you can find whether there is a relation chain between yourself (and another person you're interested in)--that will help you feel more comfortable and more safe.

You're a pretty young fellow. In Asia, there is the culture of respecting the older generation. Is there any problem being a young CEO in China?
Marine: You're right. In September I will be 30. I have a lot of challenges. Nearly all of my customers, my partners, for example from China Mobile, are older than me. The important guys are above 40--I'm getting used to that. In the beginning, I think they don't believe such a young guy can do something. But I think after several times of discussion (they see) I can bring value to them.

In the United States there's been a lot of discussion in the last few months about American companies providing information to the Chinese government and helping to enforce its policies. Google, for one, says that in order to do business in China, it has to cooperate with the powers that be. But a lot of Americans don't agree with that. What's your opinion?
Marine: I think China is changing--the mind, the whole system. But today if we want to do business, if we want to win in China, we have to accept the current situation, play by the rules. Sometimes, I think the best way is to help to make the rules.

Does the Chinese government regulate your business?
Marine: The Chinese government has some regulations for the whole industry. For example, they ask you to have a license to provide Internet service. But they do not have specific requirements for the dating business; they just demand that we do not provide pornography.

If your users upload something, is that your responsibility?
Marine: Yes.

Does the government ask you to provide information about your users?
Marine: No. (But) I think they have the right to ask any of the Internet providers to provide their users' information. But they will not use their power (unless) they think you did something wrong.

Recently it was revealed that the United States government has been gathering data on ordinary citizens' phone calls. Millions and millions. What do you think of that?
Marine: Although I'm not sure whether the Chinese government is doing that, if they are, I think it is so ordinary. The most important thing for the Chinese government is that the economy grows and (they maintain) the stability of the Communist Party.

Tell us about Efriends' recent acquisition by the French company Meetic.
Marine: Meetic is the largest dating provider in Europe. The deal has been partially announced. We announced that the price is $20 million plus. I think it's a good deal because Meetic is No. 1 in Europe and our vision is to be No. 1 in Asia.

What do you see as the most interesting new trend in your industry?
Marine: I think in this industry the most important trend is (that) serious dating is getting more popular. Serious means dating for marriage. In the past 10 years, most people used dating services online just for chatting, for making friends, to get together for dinner or to go on an outing, camping, like that. But I think from this year more and more people will be serious when they date...others (via an online service).

We plan to launch a special channel for serious dating users. I think that is the most important plan we have this year.

In Japan they have investigation companies that help look into the background of the person you're interested in marrying. Some people want to look into a person's family background, education, etc. and make sure there aren't any deal-breakers or red flags. Does China have that kind of thing?
Marine: I think that is a basic need, but I don't think in China we have inspectors (to do this kind of work). I think few people have enough money to pay for those kinds of services. But our solution is also a social network. You can check references from your friends.

Will you be able to charge extra for these special services?
Marine: In the past, we charged our VIP members only 15 renminbi per month for giving them an opportunity to receive a message on their cell phone when the other users leave them a message. And they can freely upload their pictures--We do not provide any modification except (in the case of) pornography.

In the future, when we provide a serious dating service, it would be more strict when a user uploads some content and pictures and photos. It will not appear on our Web site for 24 hours. We will have a team--maybe 70 to 80 people--to view all this and to screen comments uploaded by users to make sure everyone uploads his or her real photo.

Do you have any advice for foreign companies coming to China that are interested in the mobile business in China or the Internet business in China?
Marine: I think I have two (pieces of advice). The first one is to understand more about the way Chinese people do business. I think in America, I hear that people do business and after that business they could be friends. But in China, Chinese businessmen are used to making friends (first), then after that they can do business. So, if they think you just come to me to do business with me, I do not trust you.

The second one is to give Chinese businessmen more trust. China is a developing country, and I think the professionalism of businessmen is still improving. Sometimes I think, if a foreign partner does not trust the counterpart in China, they will make some decision from outside of China and ask the Chinese partner to do something, but it may not work in China. The Chinese partner will not be happy and there may be some local issues in the ways you do business in America that don't work in China. So, give more trust to the Chinese partner.