Raju: "Sigh. Another American wants a ride."

 Note: I'm a little trepidatious about this whole camel thing at first...

Boarding all rows...

Raju takes a break. Exhausted from carrying me around.

Back on the camel.

And, you're done Raju. Drink up, pal. You've earned it.

Being on the camel wasn't really scary at all-- it was relaxing. We're supposed to be riding elephants today after a meet up with the Jaipur Chapter of TiE, an amazing group for connecting and supporting Indian entrepreneurs around the world.

I think the elephant will be scary.

My India one is more cynical: Don't be nice to people on airplanes.

Last night, I was boarding the second leg of my flight to India-- a brutal 15 hour one. In coach. In what was supposed to be an exit row, but wasn't. In what was supposed to be an aisle seat, but wasn't. Behind two crying children. I saw the seat, and immediately made sure I'd packed either an Ambien or a suicide pill.

But it wasn't all bad. I wasn't dead-center of the row, had a tiny polite Indian man sitting next to me, and an empty seat on the other side. I can make that work.

Just then a guy came up and begged me to switch with him because he had an elderly grandfather he needed to sit next to. Everyone else in my section looked down at a magazine, hoping they wouldn't get asked in case I said no. I politely agreed to move, provided that he could find a place for my suitcase. Overhead space was at a huge premium on this flight and, as readers know, I NEVER check a bag. He said he'd just swap it with his bag. I didn't actually see this happen, he just came and told me he did and I took his word for it.

Oh, and I got to the seat-- dead center, next to a young child, in a seat that didn't recline. You've got to be kidding me.

The flight wasn't so bad, thanks to the Ambien and eight months of international travel that has trained me to go into a zen-like state even in the worst coach situation. I slept about 10 hours of it, and wasn't even that annoyed that the kid next to me pretty much slept half in my seat most of the time. Then we went to de-plane and wouldn't you know it? My bag is NOWHERE IN SIGHT. As you can see from the picture on the link above, it's a bright green bag and hard to miss. I had to wait for the entire plane to deplane, then I, the guy who I was doing "a huge favor for" and about three flight attendants searched every single bin on the plane. No bag.

They told me to leave the plane and go with an agent to arrivals where we'd try to find whoever took it. Oh lovely. In the tunnel from the plane to the gate, I looked at the guy and just said "Unbelievable." And he brushed it off saying, "Hey, it's not my fault. I put it in the bin." At which point-- after some 24 hours of travel and the prospect of nearly a month in India with no clothes-- I snapped a bit. "As far as I'm concerned this is exactly your fault. I did you a favor; I didn't see you move the bag; you were the last one to touch it and now it's mysteriously gone. That's certainly not my fault."

A flight attendant immediately snapped at me and told me I needed to take a deep breath and apologize to him. Um.....does anyone else think I was out of line? Under the circumstances, I think I'd been quite calm until this point.

Before I could cause a bigger scene, the suitcase was produced as if from nowhere by a flight attendant. "See it's not his fault!" she said.

"Where was it?" I demanded.

"In the bin where he said he'd put it," she said.

Hmm...that's interesting considering all five of us looked in that bin-- and every other bin on the plane-- and didn't see it. Reminded me of my favorite children's book "Morris's Disappearing Bag." American Airlines must have disappearing bins just to create such dramatic situations. I literally can not think of another answer. It's too bad they told me to leave the plane just minutes before it was reproduced, because I would have love to have seen that magic trick.

Anyway, I stomped off, went through customs and got in a car to the hotel. But I'm still annoyed that I gave myself a far-worse seat on a 15-hour plane ride, was essentially detained a good thirty minutes, and then got treated like the bad guy by everyone. That will teach me to be nice. 

Of course, the really sad thing is I'm such a push-over I'd do it again if someone with an elderly grandparent asked. I'd just move the damn bag myself. 

I have to add as a post-script: I hope this losing or almost-losing of bags on every trip isn't a new trend for me. I'm already on a backup backpack, borrowed camera, and spare laptop after the China-Baijiu debacle. It's particularly fitting given the working title of the book in progress is "Nothing to Lose." Pretty soon I'm going to embody it! And that's ironic because with my last book, "Once You're Lucky, Twice You're Good," plenty of reviewers mused that I may have just been lucky with the first book. I think I'm naming my third book: "I Just Won a Million Dollars" just in case there's something to the trend.

I saw this today on Twitter and it made me so happy. This is some guy dressed as Kevin Rose specifically from my BusinessWeek cover back in 2006-- one of the first national stories on a lot of Web 2.0 companies we now obsess about daily.

When the cover came out, we got a lot of semi-legit criticism over the cover language (which - love it or hate it- did its job and moved 50% more copies than any other issue that year) and a lot of dumb criticism for "inflating another bubble" by saying -- gasp!-- YouTube could be worth $500 million. (Never mind, it was purchased for more than three times that a month later.) We were also told loudly by haters that all these companies would be out of business in a year. Guess what? They're not, I got a book deal from that story that changed my life and now my the whole thing lives on in Halloween costume form. So there.

(From Sean Percival's Flickr stream)

There were a few interesting moments. One of my favorites was when Flato politely answered the question of why people would buy the Droid instead of the iPhone by saying, essentially: Well, AT&T's service is HORRIBLE FOR STARTERS. Indeed, one thing I don't miss while traveling is the constant dropped calls from all my friends with iPhones.

But first, we talked to Rosensweig about whether the Guitar Hero fad was over and about the new product, DJ Hero. I would have assumed the benefit was reaching more hip-hop obsessed youth. But Rosensweig noted it would also appeal to the house-music-obsessed Europeans, who haven't yet grabbed onto the trend-- not even when Rock Band put out its Beatles version. Another surprise: Only 20% of consoles have a music-playing game. I would have assumed it was at least 40%. I mean, that's the only reason we bought our Xbox.

Clip below, and the full show is here.

I’ve met a lot of expats in my time in China. Some decided to move during an Asian studies class in college. Others decided to move when they saw Mandarin-speaking colleagues getting a promotion over them at work. Still others may have promised a Chinese parent on his or her deathbed to return to the homeland.

For Chicago-native Brian Sloan, it was about the time he was being questioned by police for trafficking and dismembering human skulls.

Sloan seems normal. Even boring. I met him with some other Beijing entrepreneurs last week over hot pot and he refused to eat anything out of the spicy side of the pot. He has a slight build, non-descript features, and mousey brown hair. He even has a law degree from Penn State. But his life took a more interesting turn in 2004 or so when he started to scour antique shows and auctions for things he could sell for more money on eBay. What motivated him? “Making money,” he says. Not so much for the cash itself, but the chase, the deal and the challenge. Buying something undervalued—even weird— and figuring out who would highly value it.

Long story short: He starting to realize China was a treasure trove of things to buy low and sell high—among them, human skulls that he imported in a box marked “TOYS” and then boiled, cleaned, broken apart and screwed back together and detailed for medical students. A good skull would cost about $100 each and he could sell it for as high as $800. (What makes “a good skull”? Turns out it’s the number of teeth.)

It all went well until the day an eccentric Chicago puppeteer named JoJo Baby came by the house to buy some mannequins and saw some skulls boiling on the stove. He naturally assumed Sloan was a serial killer and called the cops. This YouTube video (also embedded below) pretty much says the rest. It bears noting, Sloan was never actually arrested or charged, although he still complains that he never got his “inventory” back from the mustachioed, gum-smacking Chicago brass who spent days trying to work him over Law-and-Order-style while TV satellite trucks camped out in front of his apartment.

Sloan moved to China soon after. It was considerably closer access to the things he was selling and, let’s just say after the skull incident, filled with more open-minded people. “In China, people respect what I do as a business,” he says. Which would be a boon in his next career move… making latex fetish-wear. (Link very NSFW.) And that’s where the Chinese supply chain magic came in. He was able to tailor nearly any outfit in any size and ship it at a healthy mark-up. Some outfits go as high as $800.

But even that pales next to his new business. How should I put this and still be a lady? The product is called “AutoBlow” and it has nothing to do with cars. Here’s the site. Warning: It’s very, very Not Safe For Work. (Yes, I’m spelling the letters out this time, just in case.)

Like a lot of entrepreneurs in China, Sloan is cagey about what I can and can’t say about how the operation works. That’s not because it’s illicit—it’s because it’s so incredibly lean, flexible and outsourced that he doesn’t benefit if competitors realize exactly what he’s pulled off business-wise. But suffice to say with a small army of employees peppered around the globe, Sloan—aka the “Kinky King of Beijing”—is looking at an incredibly profitable business that’s already generating more than $1 million in revenue and growing quickly. He’s exploited what each region does best: Romanians are his programmers and SEO, Indians and Brazilians do his Web design, and China does the manufacturing and fulfillment. He hired his whole staff without leaving his living room. His next act? Finding new products and following the same playbook.

My point here isn’t to write a salacious post about skulls and sex toys—as much as I enjoy watching Michael Arrington squirm. My point is that for all the talk about how much harder it is for a Westerner to do business in China, in a lot of industries there are far fewer barriers to entry than anywhere else I’ve seen in the world. And – huge 1.3 billion person domestic market aside—that’s what is making China such a Mecca for scrappy, pioneering entrepreneurs right now. You may find Sloan’s ventures distasteful, indeed he says his mother still changes the subject when friends ask what her son does for a living. But change the nature of what he’s selling and Sloan thinks just like any good entrepreneur pushing the boundaries in any pioneering market.

We like to think that outsourcing manufacturing to China or call centers to India revolutionized American business. But America hasn’t seen anything like the truly flattened, profitable, deconstructed and then ingeniously reconstructed businesses I’ve seen in China in the last few weeks.

People who say China is all about outsourcing the supply chain and not innovation have it backwards—the deconstructed supply chain is precisely what’s opened China up to a world of innovation. Imagine the way the Web democratized media and content and now apply the same ability to break a staid practice into Lego-like pieces to any physical hard goods industry whether its sex toys or iPods or pharmaceuticals.

We’ve only seen the first few innings of what this means for global business and smart entrepreneurs in China – whether expats or locals—have the advantage.

Two side notes to this post: As I was writing it i was the very picture of one of those cat-geeks, stuck inside with one cat next to me and one on my lap. Nerd! Second: What the hell are New York Publishing companies thinking not giving this company a multi-book deal? This certainly puts the trouble I had negotiating deal number two into perspective. Publishers really are looking for any reason to say no to anything these days!

Ben Huh is usually holed up in his Seattle-based company Pet Holdings Inc—better known as the company that brings you I Can Has Cheezburger?, the FAIL Blog and nearly thirty other sites that aim to make you laugh for five minutes every day. But he’s down in the Bay Area this week to promote the launch of three new books “How to Take over the World: A LOLCat Guide 2 Winning,” “Graph out Loud,” based on GraphJam and “FAIL Nation: A Visual Romp through the World of Epic Fails.” A big party is happening tonight.

Annoyingly, Huh is also running around San Francisco this week doing all kinds of media interviews. But here are some things I pried out of him yesterday that you may not know.

A word first about Huh: People almost always open an interview by asking if he has cats or if he’s always been funny, which misses the point of what he loves about his job. Huh is a businessman. Unlike a lot of media entrepreneurs, he says his job has become more fun the larger the staff, the site, and the operational worries have grown.

People frequently forget that Huh actually acquired I Can Has Cheezburger? and the FAIL Blog—he didn’t start them. (More on that purchase price below…) Since then he’s opened dozens of humor sites, about 50% of which fail, but some grow spectacularly fast, proving that LOLCats wasn’t a fluke and that Huh has an eye for what makes something funny in that specific viral sort of Internet way. Right now, he’s got a spreadsheet of 150 ideas that he’s moving around, honing and assigning to a team of writers who each curate about five blogs each.

Simply put, Huh has built a serious company out of something inherently hard to take seriously. As he frequently says, it shouldn’t work, but it does.

Now, some details I pried out of Huh with the allure of coffee and a breakfast sandwich yesterday:

1. That I Can Has Cheezburger? purchase price was probably lower than the $2 million Time and others (ahem) reported. Huh is unflappably mum on what he spent, but he’s too good a business man to have ponied up that much—even as fast as the profitable site was growing. Plus, regulatory filings show his angel round he raised to buy that blog and build a company around it was just $2.25 million. When I asked why he’d spend almost the entire amount on one acquisition, he didn’t so much nod, answer or agree as make a face that said “Yes, thank you for not assuming I’m a total idiot.” But, yeah, he won’t comment.

2. Huh has really studied what makes humor catch and made an interesting observation: Male sites and female sites grow distinctly differently. Men tend to share by gut instinct, so male oriented sites grow faster but can churn users quickly too. Women are more trust-oriented, says Huh. That means they share links and sites less frequently, but with more credibility. So the sites grow slower but maintain their audiences better.

It’s an interesting observation given how much of the early breakout Web 2.0 were so male dominated, and Huh should know seeing the traffic patterns of Hawtness (slightly NSFW) and LovelyListing. (Guess which one is for men?)

For the record I Can Has Cheezburger? is about 50%-50% male-female, but nearly 100% geeks-who-love-cats, both of which have aided huge and sustained growth. As Huh explains it, dog people go to parks, cat people sit inside on computers.

3. Just how good that traffic is. The Pet Holdings Network boasts 12 million uniques a month and does 1 billion page views every four months. Those numbers are astounding for a 26-person, user generated content company built largely on frivolity.

We all know about Cheezburger, which surpassed 1 billion page views last month. But FAIL blog went from zero to 10 million page views-per-month in just 90 days, and the recently launched ThereIFixedIt.com has matched that pace.

That said, Huh doesn’t hugely care how fast a blog grows, as long as it grows. What gets one of his sites shut down is a huge spike and then a fall.

His newest site, NotVeryTalented.com launches on Friday.

4. Revenues. Huh has done a great job making money in tough industries. While a lot of blogs are sputtering, his have 30% margins, posting CPMs anywhere between 15 cents and $8. The least profitable is clearly Hawtness, which Huh doesn’t even try to sell ads on, given the dodgy inventory. “It just hooks in readers,” he says.

Here’s the shocker: The company also makes 30% margins from book publishing deals, and advances and royalties make up nearly a third of the company’s revenues, which are in the “single digit millions.” More shocking: Huh can’t seem to get a publisher to sign him to a multi-book deal. This despite the fact that the first LOLcats book spent 13 weeks on the New York Times Bestseller List. Really, New York publishing houses?

Huh plans on releasing six books next year and – SPOILER ALERT- the third LOLCats book will be all about kittens.

5. Huh has a social network too. Even if you knew all of the above, this one must surprise you because it recently surprised Huh. Pet Holdings has long offered a log-in and profile for contributors who regularly post images and passively given them the ability to friend each other. The result? A niche social network with 1.3 million users. Huh hasn’t quite decided what to do with this revelation, but he’s thinking about it. As comparatively well as he’s done with blog ads and book sales, to really scale the company, he’d like a sexier revenue stream that can grow fast without massively growing content.

At any rate, here's the crosspost from my piece on TechCrunch today. I know most of the audience will say it's too long or why is this news, but I actually think this is a point lost on even senior executives at Web companies in the Valley.

I also know a lot of people will consider Li's approach sexist or too mechanical or offensive, but really it's not that different than the business of women's fashion magazines with a Chinese cultural filter. The biggest difference to me? We'd say "Oh there's nothing wrong with you! It's him!" These matchmakers will tell you the truth.

It's also evidence of why I spending so much time on the ground in countries. Sitting in the US, I never would have just known about this company or this entrepreneur, despite how widely respected he is in China. Enjoy.

At first blush, it seems like Song Li is one of those stereotypical Chinese Web entrepreneurs. The kind who rips off successful US sites and hopes operating in the world’s largest consumer Internet market will magically create a successful company. After all, he made a good bit of money investing in ChinaHR—a job board site that sold to Monster.com for more than $200 million over two deals –  and right now he operates Digu.com, a Twitter-clone, and Zhenai.com an online dating site that could be the Chinese Match.com.

But if you dig a little deeper into that dating site, you start to understand how differently Li thinks, and how that thinking reflects an aspect of Chinese consumer Web sites that Westerners frequently miss. Where Chinese Web entrepreneurs shine is in taking an existing business idea – ripping it off, if you like – but then completely rethinking and reinventing that idea’s business model and process. This not only makes the companies more profitable faster, it’s a big reason why home-grown Chinese versions continually beat US companies trying to expand into China.

To a Valley entrepreneur taking someone else’s idea, improving on it and taking all the credit may seem unfair or even unethical. But Google didn’t come up with the search engine and Facebook didn’t come up with a social network. What mattered was execution. Put another way: Sure the Chinese can learn a thing or two about original Web ideas from the Valley, but the Web 2.0 generation can learn a lot about monetization from China.

So what does a Chinese Match.com look like? In Li’s own words, it’s very “practical.” China has a long history of matchmaking so just going online, finding someone you like and messaging them isn’t going to appeal to a lot of the population. The ones who are comfortable with doing that will just use social networks. For those who aren’t, there are already an established off-line alternative in some 200,000 very local, fragmented companies that specialize in matchmaking, charging anywhere between 2,000 and 60,000 RMB per six months—depending on the service. Even in comparatively cheap China, they’ve got pretty high customer acquisition costs thanks to all that brick and mortar and heavy placement of classified ads to keep bringing in new singles.

That’s where the Web should come in, but it’s a bit trickier than that. Here’s the rub in China: The entire consumer Internet—along with “old world” industries like consumer packaged goods and entertainment—are all growing and developing at in parallel. In the US, you could argue social networks are the Web 2.0 answer to the Web 1.0 online dating sites. But how do you build a profitable online dating company in a world where a million MySpace and Facebook rip-offs already exist?

Li has struck an interesting middle ground: A Web site that’s free to join and free to search, with revenues provided by a 350-person strong call center of real-life matchmakers. Once you find someone on the site you like you place a call to a matchmaker to be set up on a date. Using the service costs 3,000 RMB (roughly $430 in dollars) for a six-month subscription—about the low-end of a traditional matchmaking service – and at least one person going on the date has to be a paid subscriber. The matchmaker determines whether both people want to go on the dates, or suggests an alternative date from amongst the site’s 22 million registered members (growing by 40,000 per day). The matchmaker then sets up the date, and then follows up afterwards.

The matchmaker isn’t your friend—she is doing a job. If you suggest someone out of your league, they might, ahem, guide your expectations. “We just want you to be realistic,” Li says. And in the event of a rejection, Li’s team asks a detailed questionnaire to determine exactly why one party didn’t want a second date. And then they call the other party to explain – in precise detail – where they went wrong. “At least you know why and there are certain things you can fix next time,” he says. It may sound brutal but it gives the service clear value. Zhenai.com is profitable, generating about $2 million in revenues per month, growing at double-digit rates month-over-month.

It may also sound like labor-powered, innovation-free China, but it’s not. Li has built a specific CRM system from scratch to walk matchmakers through the matching process and he’s hired a psychologist to help train them on what questions to ask, and what to say to the lovelorn. Li himself has a PHD in finance from Cornell, where he also studied evolutionary biology and molecular genetics.

And then there’s the statistics. Not even Max Levchin—the PayPal and Slide founder who has graphed everything down to his past girlfriends’ bra sizes over time— could match Li’s love for charts and stats. All those brutally honest conversations about why dates succeeded or failed have turned into a trove of statistical data that matchmakers turn into pre-date advice.

A random example? 60% of women with long, straight hair get second dates—even when the data is normalized for Chinese women being more likely to have long, straight hair. The worst group? Short curly hair, which has only a 5% second-date percentage. (Note to self: Good thing I’m married.) “We’re not telling them what to do, we’re just giving them information,” Li says matter-of-factly. Men also like black pantyhose and shiny color-less nail polish. (Li blushes a bit when he tells me about the pantyhose.)

Li has also found that men are universally attracted to women with a .7 hip-to-waist ratio—something he believes is genetically hard-coded as a reproductive trait. “I can’t do anything if a woman is fat, but I can tell her to dress so it shows off her waist,” he says dispassionately. It works both ways, by the way. Women prefer dates wear a suit and because women are predisposed to look for “good providers” Li says he can track for every extra 1,000 RMB you make a month, statistically what percentage more attractive you will be to an average woman. “It’s a math fact,” he says. “I can build you a model.”

It bears noting that Li is not some fratty chauvinist pig. He’s a brainy, bespectacled former derivatives trading executive on Wall Street and Hong Kong, and, yes, he is married. He just likes to break things down into numbers and trends in an obsessive attempt to quantify the seemingly qualitative behavioral patterns of it all. And that makes him the exact opposite of any US consumer site trying to blindly “localize” a site for the Chinese market by just changing the language.

I came home on Saturday with just a bit more than a week in between trips and nothing has gone as I'd like. My husband has had a horrific case of Swine Flu or something like it. One of my cats-- who I just took to the vet before I left town-- is making a weird clicking noise when she walks. I've really struggled to rewrite and make up all the work that I lost when I stupidly left my laptop and notes in a cab. I'm trying to toggle between book-writing, blog-writing and column-writing -- and it's all coming out like book-writing. (Which in some ways is an improvement because for a while the book-writing was all coming out like blog-writing.) And on top of that there's a lot of other bullshit that I'm not going to get into.

So I'm up at 1:40 AM trying to just physically push through my to do list because each thing I mark off puts me closer to leaving again, which is all I can think about right now. (Especially since Mr. Lacy is joining me for part of this trip, so leaving SF doesn't completely mean leaving him for once.) With any luck I'll have some fresh content to crosspost from TechCrunch in the morning, have sent my BusinessWeek editor a reconstructed column or at least gotten some sleep.

"Do you want to get a bottle of wine?"

"Well, you live in California, so any wine we get won't be very good for you. We could do baijiu-- you've never had the good stuff."

"Yeah! I haven't. And I haven't had any this trip. Let's do it!"

Let's fast forward to the next morning where I wake up in my hotel with a brutal, brutal headache. I looked to check my email. "Hey! Where's my laptop?" Must still be in my backpack. Um....Where's my backpack? Just as the cold sweat really started to break out I looked over to see my clutch purse sitting on my table. I lunged for it-- YES! Passport and credit cards are there. So where the hell was my backpack containing my camera, lenses, tape recorder, laptop, notes, flip cam and nearly everything else I use to remotely do my job?

As security camera footage would reveal later-- in the front seat of a cab. And perhaps now distributed all over China for everyone to enjoy. Just call me Gadget Santa.

There's a lot that made this not as horrible as it sounds:

1. Mr. Lacy had backed up the computer before I left and I have two other laptops at home.

2. Did I mention I still had my Passport???? Had that too been left in the backpack-- THAT would have been a nightmare to replace with all the Visas. 

3. It was self-inflicted. I'm the idiot who drank the Baijiu and forgot to pick up the bag after I put it in the front of a cab. There's really no one to be mad at but me.

The hotel-- as always-- was incredibly sweet in trying to do a range of things to recover it and loaning me a Dell for the rest of my trip. I don't mean to look a gift laptop in the mouth, but MY GOD Windows is just a horrible operating system! How do you people get anything done with those?

Of course, it wasn't the equipment that was the big loss-- it was all my notes and all the writing I did over two weeks in China, which was substantial. A lot about the book really started clicking on this trip and I wrote more than usual when I travel. I also had almost finished two BusinessWeek columns and had sketched out/half-written about five TechCrunch posts.

Can I recreate most of that? The TechCrunch posts will be the hardest. Those posts tend to be more focused on a particular company, versus 50,000-foot analysis, so they suffer most from my notes being gone. Rewriting my BusinessWeek columns will take a day or so, but doable. My book stuff? It worries me. But I think the biggest breakthrough over the last two weeks was figuring a lot of the structure, framework and themes out. It'll suck up time, but I think I can actually write it better the second time. 

Despite all this, it was with a heavy heart that I left China this morning. I love the electricity of the scene and the kindness and ingenuity of the people there. Thanks so much to everyone who made the trip unforgettable and if we didn't get to hang out this trip, hopefully next time. I can't wait to go back in March. Up next: India.

I have no idea what to expect. I've talked to people who love India and people who hate it. There's an undeniable spirit of innovation and entrepreneurship that comes out of the country, but many of the investing numbers have been declining since a few years ago when the Valley really had India-fever. And most of the story of India in the Western press has had to do with R&D centers and outsourcing, not entrepreneurship, which is what I'm interested in.

There are a zillion connections between Silicon Valley and India, so I've already got a lot of suggestions of people to meet with and people to show me around. But if you know an *awesome* startup, feel free to send me an email at sarah(at)sarahlacy(dot)com (put "India" in the subject line) or leave it in the comments. I'd also love hotel recommendations. I'll probably have two more trips to India early next year for the book, so don't think the delay means the country is getting the short-end of the stick.