KrASIA Weekly: The internet is a double edged sword

2018-10-28

Hi there, it’s Robin.

Early this week, a Chinese travel startup Mafengwo ( 马蜂窝, meaning hornet’s nest) was being accused of copying travel reviews from its rivals like Ctrip, eLong, Meituan, just to name a few. Despite the initial denial, the firm eventually caved in and admitted that at least a part of the content has been taken from other platforms.

This is a classic example of how the internet is capable of bringing you fame and high growth as a company, but also negative publicity at the same rate.

While the WeChat-based self-media report said that 85% of the reviews on Mafengwo’s site had been stolen from its competitors’ platforms, Mafengwo still insisted that the scale of this ‘plagiarism’ has been grossly exaggerated.

One important point to note through this saga is the pressure that startups today actually face, especially after taking in investors’ money whether it be from a venture capitalist, a seed capital firm etc. There is a strong onus on the team to continue their stunning revenue growth to justify the investments, which could have led to the ‘mistake’ Mafengwo made just to keep the numbers going to keep valuation up.

After all, the biggest driver of revenue comes from the number of paying users which ultimately begins with online traffic, and this could be just why Mafengwo is determined to have countless reviews to flood its website to keep users engaged.

Still, people close to the matter have expressed their view that this scandal would have a limiting impact on Mafengwo’s valuation. However seeing the changing stance of the company – from a flat denial to a partial admission, it is likely that the inevitable damage to its reputation has already been done.

This case where the very technologies that drives fast-growing businesses actually comes back and bite them back is nothing new. In fact, Pinduoduo, Alibaba, and Douyin all have endured the ‘ugly side’ of things like unhealthy content, fake goods etc even as they win big time as fast-growing internet companies.

It is thus imperative to be aware of how this double-edged sword can leave tech companies vulnerable to public scrutiny that could easily affect their ability to thrive in this ever-changing market. Didi’s two murder case that led to the removal of one of their ride-hailing service is one illustration, and this can easily be the much-awaited opportunities for other players like Meituan and Ctrip who are vying for a share in China’s ride-hailing space.

These could serve as a warning for the still nascent and booming tech scene in Southeast Asia. The region has seen venture capital investments exploding by 16% from end-2017 to $3.16b by August 2018, according to the Singapore Venture Capital and Private Equity Association.

One major vertical that Southeast Asia can’t match China at the moment is this – mobile payments. It seems that the dominance of Alipay and WeChat Pay is unrivalled at the moment. But this sector will only get more complex over time as regulations have to step in and it can easily lead to more intense scrutiny, just like the banks that we know of today.

In essence, that is technology at work – changing the way traditional things are done in a seamless, efficient and effective way, made available for more people, especially the unbanked with little or no credit histories.

Read on to find out more interesting stories from last week, and feel free to tip us if you have news clue or you just want to talk with us, email us at hello@kr-asia.com and we are looking forward to hearing from you.

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