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Story URL: http://www.silicon.com/research/specialreports/china/0,3800011742,39160107,00.htm

Breaking China: ChinesePod takes on language learning
Language lessons served up daily

By Dan Ilett

Published: Tuesday 11 July 2006

In the second of his interviews with entrepreneurs from overseas making their way in China, silicon.com's Dan Ilett catches up with a Canadian whose passion - and future prosperity - is all about language.

(Pictured - one of the ChinesePod team gives a podcast)

Language learning is about to change - at least that's what Hank Horkoff hopes. With his company ChinesePod staff picking up some serious media attention around the world, more than 20,000 people have subscribed for free, podcasted Chinese lessons and 2,000 are paying for the company's full package.

Every day the Shanghai-based ChinesePod team dishes out a fresh lesson of Chinese, on subjects as diverse as ordering food, Mao Zedong's impact on China and the World Cup.

Horkoff is now beginning to focus on EnglishPod, which he will market to the Chinese.

silicon.com: Why are you giving away your product for free?
Horkoff: We realised last year that language training is extremely inconvenient - some people here have to travel across town in China for three nights a week to attend a class. There's a different culture of language learning here.

What we do is on-demand training. We use web-based systems and community platforms. And we also have a subscription-based model.

To be honest we didn't know how to design or service this. We had no real model to build it on. We put out a daily podcast and then we have a supplementary model too, that you pay for.

We're seeing the model resemble an open source business, one with a free Creative Commons approach at the heart of the service. Meanwhile we find ways to make money on the edges with additional services and products.

The premium subscription has a scroll-over mouse option - over the Chinese characters. We have exercises, tests and a vocabulary builder. We give a one-week free trial so there's no real risk to people seeing if they're interested. The podcasts we give you forever - those are free.

Do you get annoyed that people rip your material off?
No. We encourage people to use our Creative Commons-licensed podcasts as it assists us with our product development and helps push our brand into the community.

We've had all kinds of crazy stories about how people are using it. There's this hypnotist in the UK. He says he can increase memory retention by adding a hypnotic audio layer into the podcast. So he's mashed up ChinesePod with his own hypnotic stuff to create his own version. There's one guy in France who just cut out the English intros and put in French ones.

As long as you say it's ChinesePod, at the end of the day you're driving people back. We don't have that much of a problem with it. I'm still waiting for the first thing to come out that violates the rules. We've found that people have come up with some really innovative uses.

So now you've been going for six months, what's next?
The core part of the service is definitely online. Most educators treat technology simply as a supplemental add-on to their existing services. They throw up a simple website and charge their students an additional fee.

We believe that this ignores a lot of opportunity for improvements in business processes and information flow. So we plan to invert [that] by putting IT at the core and then adding on various services.

ChinesePod was always designed as an initial product. We figured it was a smaller market than the English learning market. There are so many Chinese people that there's no way all the English teachers could satisfy that demand.

That's where the big dollars are. The largest players don't have the ability to set up everywhere over here. There are a number of reasons but there a lot of them are regulatory. If you want to set up a school you have to go around all the provinces and invest your [using your] liver - by having to attend seemingly endless banquets with local partners.

But the market for Chinese is maturing very rapidly and we are focusing on that. Once you get over the initial pronunciation it's not that hard. With the Olympics and the Expo [in 2010] there's a lot of potential.

Aren't you tempted to move into other podcast training areas?
Our focus is clear - we're sticking with Chinese-language training. Trust me, that was a hard decision to make and it gets harder every day. We get a lot of enquiries every day. We're having a great time with it though.

Where's the money in this for you?
I like the subscription model. We're delivering more value for that subscription every day. We've only been doing this for six months. People who learn Chinese are generally between 25 and 40 years old. We're really trying to do this on their terms.

We have also had a lot of people suggesting a shift to an advertising model but to be frank a subscription model is working well for us right now, so why change? As we move forward we will look to add new subscription levels and continue to deliver more and more value to the user.

Why did you leave Canada for China?
You want excitement and you want to be an entrepreneur? It's perfect. If you want a nice middle-class life, Canada's good.

And what problems have you encountered?
Stress. Language. Culture. And more stress.

Here you have to learn to live with ambiguity - things are rarely black and white. It takes time to get on here. You have to pay your tuition. Then you learn how things work and you keep going.

What about the horror stories?
The clear answer is 'yes, they exist'. I heard one where a foreign guy was about to sell a publishing business. The government at that time said 'we shouldn't be rewarding foreigners by letting them sell and make a profit on this' so they revoked his magazine licence when he was about to sell.

Some people can see the relationship in us-versus-them terms but it is more nuanced than that. The key is to align interests. Quite often a foreign company will come to China and set up a joint venture with a local entity. I believe these typically are unsuccessful as the foreign company sees the JV as the centrepiece of its China strategy, while the local partner, who already has existing, separate operations, treats the JV as an opportunity to adopt global best practices.

And what about the good things?
The exciting part though is that it's so under-developed here that you come across so many opportunities you wouldn't imagine. Sometimes they're a bit too good to be true. So you're a bit cautious but you still try to take them on.

That's really where the excitement comes in.

Why is it difficult for foreigners to break into the Chinese market?
First and foremost, lack of local market understanding. As a result, many of the initial success stories were manufacturing operations outsourced to China with the product sold in Western markets. This is slowly changing as foreign managers gain a better understanding of the market but it takes a long-term commitment and a lot of stubbornness to succeed.

Second, there is some institutional discrimination but for most industries this is becoming less and less of an issue.

Would you recommend setting up in China?
With everything except perhaps politics in flux, China can be an amazing experience to start a company. If I was to give advice, I would probably suggest spending a couple of years working for an established company here in China to get an understanding for the local market and how business works, then start something more entrepreneurial.

This is probably a good rule of thumb in any country but business practices in China are still in the process of being internationalised so there are quite a few unique characteristics.