China has 1.3 billion people, 320 million TV sets and only 2.1 million Internet users. Even a low-cost PC will cost the average Chinese city-dweller several months' wages. So Venus, designed specifically for the Chinese market, "will bring entertainment, education and communication technology into the homes of many families that couldn't otherwise afford it."
Low-cost family computing is not a new concept in China, though. For many years now, every major department store has sold simple educational computers for as little as US$50. These computers use technology similar to video-game consoles of five years ago, but have full-sized keyboards, and display Chinese characters on a common television. They have the ability to run a wide variety of educational and entertainment software cartridges, and are marketed to parents eager to give their child a high-tech advantage.
Local companies also produce modern operating-system software. For example, the popular RichWin97, produced by SRS Information Technology, converts Windows 95 into a Chinese-language operating system. The combination of English Windows 95 plus RichWin97 is more popular in China than Microsoft's own Chinese version of Windows.
The building blocks for a "Venus" product have existed for some time in China, but so far only Microsoft has tried to build one. A closer look at the market can help explain why:
What this implies is that cost is not currently the primary obstacle to Internet adoption in China. One of the obstacles is social. The reason Beijing has the highest Internet penetration is because it is the educational, cultural, and high-tech center of China. Beijing simply has more people who can appreciate the "Web lifestyle," as Gates calls it.
Another obstacle is the low quality of content available for the mainland market. Currently, Internet access is most attractive to young, educated, English-speaking Chinese who can use it as a window to the outside world and a means to communicate with friends and classmates now living abroad. The Internet in China doesn't offer much today for the conservative lifestyle of the "lao bai xing" (common people).
What, then, does Microsoft hope to gain by a well-publicized plunge into a questionable market? The answer probably has much to do with Windows CE. Windows 95 has dominated the desktop market through compatibility: users buy the system that has the most third-party software, and third-party developers produce software for the system that has the most users. Windows CE, on the other hand, is targeted at the handheld and embedded systems market. For handheld computers, ease-of-use and functionality are more important than third-party software compatibility; Windows CE so far has managed to capture only 25% of the handheld market, far behind the 40% share of PalmOS.
Embedded systems, such as the proposed Venus "information appliance", are self-contained by nature, meaning almost no third-party software, and no requirement for compatibility. This leads to much more variety and to stiffer competition. The embedded systems industry site, www.embedded.com, lists over 30 different commercially-available embedded real-time operating systems; Windows CE isn't included.
That's the situation Windows CE faces at home. In China, though, the situation is somewhat different. China is still a country where relationships and status are often more important than the bottom line, and none of the vendors of competing systems have the resources or prestige to line up the top Chinese hardware manufacturers behind them, as Microsoft has done with Venus.
Even if the Venus project never makes a significant impact on the Chinese Internet market, the very act of embedding Windows CE into millions of Chinese consumer products will create momentum that can only help the marketing of Windows CE elsewhere. In other words, when Bill Gates comes to China, he may not be asking what he can do for the country, but asking what the country can do for him.