France’s Viadeo has ‘headstart’ on LinkedIn in China

European LinkedIn (s LNKD) competitor Viadeo has just scored a $32 million round of funding to boost international growth. But what does the company actually plan on doing with the money?
I spoke with Derek Ling, the CEO of Tianji, the company’s Chinese arm, to find out more. Based in Beijing, he started building his service 2005 and sold to his French rival two years later. Tianji now comprises the largest part of Viadeo’s business, with 10 million users spread around China. That, he told me, meant that China was an important part of the picture when it came to using the funding.
“We are thinking of using at least a third of the money to invest into China,” he said. “And that’s in three areas; product — to get better and quicker services; in marketing, to ramp up our sales side; and the third part is to look at acquisitions.”
But before you get too excited, Ling says that Viadeo probably won’t look at buying local competitors — largely because there aren’t many who have much scale. Instead, it will look for deals that can boost its sales operation or systems.
“We’re really not looking at acquiring users,” he says. “We’d be looking at existing recruiting companies with big sales forces, that’s one reason, or there are technology plays, when a startup has a technology platform we like.”
The same pattern is likely to be repeated in the other markets where Viadeo is active: use the money to improve sales (it works closely with recruiters to make the service a hiring platform), develop the technology or acquire interesting or useful properties. That covers a lot of territories, including various European markets, Brazil, India and a joint venture in Russia. But expansion in Europe and elsewhere “is not as clearly defined yet,” meaning that cracking the Chinese market could be crucial, says Ling.
“We believe the professional social networking space is about four or five years behind the U.S. — people don’t necessarily use it as a business tool yet,” he told me. “An interesting point of reference is that in 2007, LinkedIn was at 10 million users — and in 2008 it went up to 32 million. We believe we’re at a similar juncture.”
But of course when LinkedIn was at 10 million users, there was no other LinkedIn to stymie its growth — allowing it to expand to the point today when it can claim 150 million users worldwide. Taking on a big beast that already exists won’t be easy: particularly when Reid Hoffman’s got a lot of money in the bank from the company’s IPO, and the business already has users across 200 countries.

‘Interesting competition’

Ling admits that things are going to heat up, whatever happens.
“Reid has been watching the Chinese market for quite a number of years already,” he says. “It’s going to be an interesting competition coming up. But our biggest weapon is that we’re local: no U.S. internet company has succeeded in the Chinese market. We have a headstart on users, and a lock on the elite — like university graduates.”
Plus, he says, China is not a homogenous market — something that many outsiders do not realize.
“We have about 18 percent of our users in the Greater Beijing area, about 11 percent in Shanghai and around 10 percent in Guangdong Province,” he says. “But each province in China is equivalent to a country in Europe — both in terms of size, but also cultural differences.”
One thing that the money won’t be used for, however, is to push the business towards an IPO. After plans to go public last year were shelved, Ling says that Viadeo is focusing on building out — not selling up.
“We’ve made a decision to focus on growth without the distraction of the public market,” he told me. “There’s a lot of growth that needs to take placeā€¦ so there are no plans to IPO in the near future, but it’s certainly on the horizon.”