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CEO Interview: Dr. Li Song, CEO of Digu.com

Dr. Li Song is an investment banker-turned serial Internet entrepreneur, and founder of Zhenai.com, China’s largest online matchmaking service, as well as Digu.com, one of China’s leading location-based social check-in services.

The latter is aiming at the current check-in services craze  in China, offering a very intuitive graphical platform for social interaction between users in one location.

Q:  What is the direction of Digu in terms of product and future development?
A:  We think LBS alone is one dimension too small, which is why we added interest information and also a social network.  There are currently three types of social networks: simple social networks like Facebook, interest-based maps, e.g. Douban.com, and location-based maps like Foursquare.

We will focus on location-based services with interest information. Within these two parts, we concentrate on two services: food and fashion. That is, checking into restaurants to share photos and comments, and doing the same with shoes, for example, in a shop.

So no matter if the iPhone adds LBS capabilities or China Mobile introduces their own location-based services, we can rely on our two combined services. And we will always be able to work with third-party LBS platforms.

Q: Is the Digu platform your own development or do you use third-party technology?
A: It is our own development, but we are an open platform. If other parties are interested then we can give them an API to connect. We also broadcast location info to third parties which means the user can easily share his current location or review on Sina Weibo.  If Sina itself launches a LBS-enabled platform, then we can easily integrate it into ours. For us this would not be a threat but an opportunity.

Q: How do you acquire your user base? Are you using viral marketing?
A: First, we work with social networks, including micro blogs. Second, we rely on user invitations.  LBS itself is only a basic service which lets the user use his current geographical location. If the platform is big enough, it will be a commonly used one. Our biggest difference compared to other big enterprises is that we search for local commerce. In essence, local food or fashion shops all can become our customers, our clients. Our emphasis is the mobile phone.

Q: What do you think are the biggest challenges for LBS in China? Or for you personally, the biggest difficulties?
A: One of the challenges is low smartphone penetration rate. The rise of location-based services in the U.S. is based on the success of iPhone and Android platforms. Strictly speaking, the user base for the iPhone is already enough for a service to be become successful.

China has to cope with the problem that the specs from phone to phone vary greatly.  Another challenge is that China’s social networks are all PC-based.  All mobile SNS are just extensions of such environments, e.g. by developing a mobile client for it, but do not allow real mobile interaction between users. On the other hand, this is a problem which can be solved.

Q: You mentioned the problem of payment services at the GMIC conference. Where exactly is the problem, and with regards to what?
A: One important part is the fact that monetization of LBS services (besides ads) rely on impulse purchasing. If an application does not allow you to buy a product or service instantly, then location-based mobile commerce does not make much sense. The money currently goes to the operators, carries and businesses, so there is no value for the actual service. Mobile payment services in China have not yet solved this problem; unlike in the US, Chinese customers are not yet used to pay with credit card.

FourSquare in the U.S. for example establishes partnerships with Groupon-like daily deals, and itself becomes a location-based platform, receiving commissions for successful deals. The reason for this is that FourSquare does not want to integrate on-line and on-the-ground sales like Groupon, but rather position itself as supporting platform for third-party group buying sites. This type of model is not yet suitable for China as such money transactions simply do not work. The ideal model would be to first receive the money and afterwards pay the selling shops, if possible with a middle man doing the transactions. Or, for example, to establish one as a distribution platform, hoping to hire a lot of people for on-the-ground-sales like a group-buying site. But the costs for such a model are very high.

Q: Doesn’t Digu plan to work in a similar model?
A: No, we don’t.  Unless you are a group-buying site, raise millions of U.S. dollars in funding, and solve the problems with mobile payment, this is not an option as it raises your cost higher than similar services on the PC. This is why we decided to be a pure information platform that supports the merchants. We are collecting all the information ourselves, but hoping that, in the future, the local merchants come forward themselves to submit their offers to our platform – just like Foursquare. But we might specialize late on.

Q: How do you look at the trends in mobile Internet within the coming five to ten years? What kind of changes will take place, regarding the topics mentioned?
A: I am very optimistic. I believe that there will be three general aspects, changing the mobile Internet.  Google predicted that everything will be browser-based in the future, and uses spiders to become a main portal to the web. But Apple changed a lot, mainly about the user experience on mobile phones.

  • First: Mobile application usage exceeds the usage of browsers on the phone – users rely on apps to search for certain content, and not on search engines.
  • Second: Touch screens and gestures, enabling much more natural, intuitive operation of mobile devices.
  • Third: Cloud computing. The computation will be more and more on the server-side, and the devices become basic, ‘stupid’ clients controlling the servers. Light client, heavy cloud.

Big thanks to Dr. Li Song for taking time to speak with us.  Check back with mobiSights for more member interviews in the future!

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