China Internet Market 2012 - Executive Summary

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China Internet Market 2012 - Executive Summary

  1. 1. China’s Internet MarketExecutive SummaryThe Most Up-To-Date Insights ToHelp Understand The World’sMost Important Internet Market #cim12 #internetLange & Manes #growth #china2012
  2. 2. 2 11/29/2012Sources1. Asia Digital Marketing Yearbook 20122. CNNIC: China Internet Report No. 30 (July 2012)3. Individual Research by the authors
  3. 3. 3 11/29/2012China Is An Unbelievably Large And DynamicInternet Market• 537 million Internet users in June 2012, representing an increase of 53 million from June 2011• Internet penetration rate of only 38.3% ▫ Huge upside potential in the future• China’s Internet population is expected to exceed 700 million by 2016• The Chinese e-commerce market grew to USD 1.113 trillion in 2011 ▫ 46% y-o-y increase• Total revenues from online shopping reached USD 123 billion in 2011 ▫ 68% y-o-y increase
  4. 4. 4 11/29/2012China Has Almost Doubled Its Internet Users Since 2008 Development of Internet Penetrationin million Users800 50% 45%700 39.9% 38.3% 36.2% 40%600 34.3% 31.8% 537.0 35% 513.0 28.9% 485.0500 457.0 30% 25.5% 420.0 22.6% 384.0400 25% 338.0 298.0 20%300 15%200 10%100 5% 0 0% 2008/12 2009/06 2009/12 2010/06 2010/12 2011/6 2011/12 2012/06 Internet User Penetration Rate
  5. 5. 5 11/29/2012Sadly Enough, Most Internet CompaniesFail In China• They lose against Chinese competitors, because they know less about… ...why Chinese customers go online …what Chinese customers expect from their products …where Chinese customers buy online …how Chinese customers make buying decisions …what determines Chinese customers’ buying decisions …what advertising channels are most effective for reaching their target groups …how Chinese customers perceive online advertisements
  6. 6. 6 11/29/2012Companies Need To Begin Understanding TheMarketWe have put together the most up-to-date insights for the Chinese Internetmarket in… Demographics User Behavior Online Advertising E-Commerce Mobile Social …to help companiesbetter understand China’s unique market characteristics and increase thelikelihood of success.
  7. 7. 7 11/29/2012Demographical Key Facts • Low purchasing power: more than 90% of all Chinese Internet Users earn less than RMB 5.000 (USD 790) per month • Almost as much Internet users access the Internet via mobile devices (69.3%), compared to PCs (73.4%) • China’s Internet users are young: almost one third are students (30.2%) • Only 36% of all Internet users shop or have at least shopped once online (estimated to increase to 47% in 2015)1 • Only 20.8% of the total e-commerce transaction volume has been generated through e-payment solutions in 20102 (cash-on-delivery still the most popular paying method in China)1. Boston Consulting Group (2012)2. iResearch (2012)
  8. 8. 8 11/29/2012User Behavior Key Facts• As of June 2012, an average Chinese Internet user spends 19.9 hours per week online (USA: ca. 9 hours)• 415 million Chinese Internet users go online to chat, 325 million to watch videos• 41.3% of all online video viewers in China watched 4 hours or more of online videos per day (on the weekend)• In 2011, 324 million Internet users went online to play games• More than 50% of China’s Internet users have played games via their mobile devices• Only 21% find consumer product reviews on company websites trustworthy• People between 18 and 27 represent the heaviest user group in China, averaging on 5 hours or more daily for surfing the Internet
  9. 9. 9 11/29/2012Online Advertising Key Facts• China’s online advertising spend reached USD 8.11 billion in 2011 ▫ 57.3% y-o-y increase• In 2011, online for the first time exceeded print in terms of advertising spend generated• By 2015, China’s online advertising market is expected to be worth USD 11.3 billion• Online video advertising has generated more than USD 260 million in Q4 2011 alone• Youku and Tudou, the two biggest online video portals, together account for 35.5% of total market share (now merged to Youku Tudou)• The search market was worth USD 3 billion in 2011 ▫ 70% y.o.y growth
  10. 10. 10 11/29/2012E-Commerce Key Facts• Today the average Chinese online shopper spends about USD 500 annually; it is expected that this number doubles within 5 years to USD 1.000, which equals the number of US spend• At the end of 2011, online retail accounted for 3.3% to the total retail market (2015: 7.4%)• The number of online shoppers is expected to increase to 329 million by 2015• B2C transactions generated USD 38.03 billion in 2011 ▫ 130% y-o-y increase• The online gaming market was worth more than USD 1.5 billion in Q4 2011 alone• E-commerce sales are expected to generate a transaction volume of USD 2.86 trillion by 2015
  11. 11. 11 11/29/2012Mobile Key Facts• 1.013 billion mobile subscribers at the end of March 2012• 356 million mobile Internet users in 2011, marking a mobile Internet penetration rate of 36.5%• 90% of mobile Internet users access the Internet only via mobile devices• At the end of November 2011, the number of 3G subscribers reached 118 million• Taobao, the #1 e-commerce company in China, generated USD 1.9 billion in turnover through mobile in 2011• The number of mobile Internet users is expected to reach 712 million in 2015
  12. 12. 12 11/29/2012Social Media Key Facts• Social network services in China are highly diversified, several platforms serve different customer segments (e.g. Kaixini001  white collars; Renren  students; 51.com  rural; Qzone  teenagers)• The online video market is also very fragmented, but about to consolidate (started with the merger of Tudou and Youku)• Chinese Internet users mostly watch longer form content, such as news reports and TV series (especially due to the distrust against state-produced content!)• The average Chinese spends about 1 hour on online video platforms (USA: 15mins)• 70% of online video content in China is professionally produced
  13. 13. 13 11/29/2012Lessons Learned• Chinese customers are young, educated and mobile• Mobile is very popular in China (especially in rural areas, where smartphones substitute laptops and PC’s)• Mobile shopping and mobile payment have increased heavily during the last six months• Online shopping acceptance is still low but steadily rising, so is the acceptance for e-payment solutions• Because Chinese customers don’t trust unfamiliar online shops, referral from friends and existing customers is even more important than in Western markets• Chinese Internet users consume more online video content than in Western markets; mostly because they see such content as another, more reliable, information source compared to state-owned media
  14. 14. 14 11/29/2012What Does This Mean For Your China Business?• Understand how and where Chinese customers perceive your ads ▫ Internet firms reach their customers in China through different channels than in the West; this includes for example a higher focus on mobile and portals• Make referral marketing your top priority ▫ Chinese customers are extremely cautious when buying online; make use of happy existing customers to show you are trustworthy• Offer the right payment methods ▫ Although online shopping rates are lower in China, the right payment methods help to increase sales on your platform; researching the e-payment market is essential in China• Employ local staff - also in top-level management ▫ It is a mistake to believe that Western management expertise can offset lesser local market knowledge; there are enough Chinese young professionals with diplomas from the US or UK by now anyway
  15. 15. 15 11/29/2012About UsDavid Lange • B.A. in Chinese Studies, M.A. in Corporate Management & Economics • 1.5 years of academic and professional experience in China • Advises e-commerce startups on expanding to ChinaSteffen Manes • Fund Manager @cfpff - venturecapital.de • 2-times Entrepreneur • Specialized in business development for start ups • about.me/manes

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