The Chinese Internet market
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The Chinese Internet market

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From our local office at Beijing, we are glad to release an introduction to the Chinese Internet Market. ...

From our local office at Beijing, we are glad to release an introduction to the Chinese Internet Market.

With the chinese economy still growing fast, the internet market has experimented an incredible growth in recent years. And what is more promising, every analysis foresee what is seems to be an unprecedented boom for the years to come.

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The Chinese Internet market Presentation Transcript

  • 1. The Chinese Internet market2013
  • 2. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Key takeaways8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 2
  • 3. IntroductionOur local team at the office in Beijing has put together this brief introduction to howinternet works in China.Presenting the habits, demographics and growth forecasts. But also providing a glimpseabout the tailored services that have made local internet so special and different fromthe western online services. Introduction to the chinese internet market 3
  • 4. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Key takeaways8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 4
  • 5. Internet in numbersBy early 2013 China has already 564 million Internet users(1).That’s approximately 25% of all users online worldwide. Morethan double the number of users in USA and by far more than allEuropean countries together. It is said that it could be around750 million by 2015.With a 39,9% penetration specialists says it will keep growing inthe track of developed countries as UK or USA with 84% and 78%of penetration respectively.The state development plans and the fast reaction of the localindustry has developed the Chinese internet to become a realityin the daily life of Chinese citizens, specially in urban areas.Considered to be a developed market this days in terms of timeinvested online and average spend per user online, there arestill some concerns about the speed, stability and transparencyof communications. (1) CNNI, statistic report http://cnnic.cn/ Introduction to the chinese internet market 5
  • 6. Internet in numbersWith 242 million online buyers(1), ecommerce transactionsvolume is growing steadily by 60% every 12 months.Nearly 40% of internet users watch online TV content regularly.Being a reasonable rate there is still room to grow comparedwith other countries. The two main video platforms, Tudou andYouku merged to unite forces during 2012 .There are currently 309 million registered accounts in microblogplatforms like Twitter. 49% of internet users are registered insome sort of social network.40% of online buyers say they have read and posted customerreviews, twice than in USA. The new gold rush. Internet services and e- commerce will continue to thrive as China keep developing it’s domestic economy. (1) CNNI, statistic report http://cnnic.cn/ Introduction to the chinese internet market 6
  • 7. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Key takeaways8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 7
  • 8. Demographics, devices and connectivityThe Internet population in China is young. Up to 25% of totalinternet users are currently students, mostly at high school. Youngpeople identify internet their first source for reliable informationagainst TV and Newspapers. And they spend an hour more everyday online than US users.According to CCNI1 90% of internet users earn just 5.000 RMB orless (600 €). Despite this buyers don’t go online just for good pricesbut willing to fill the absence of determinate products in theirsurroundings.Genres are equally represented and in terms of location, urbanareas represents 72,4% of the total, being the other 27,6% ruralpopulation. A significant rise of budget. By 2015 the average shopper will spend $1000 online, what US consumers are registering today. (1) CNNI, statistic report http://cnnic.cn/ (2) New Media Trend Watch – http://www.newmediatrendwatch.com/markets-by-country/11-long- haul/49-china Introduction to the chinese internet market 8
  • 9. Demographics, devices and connectivityChina has become the first market for PC and mobile phones withLenovo leading worldwide computer sells.Although western brands as Apple, Nokia or Dell are still wellrecognized, local market is heavily price sensitive and local brandsusually play their cards at this level.Smartphone sells were up 199% by 20121 in comparison with 2011. Thisexplain the big growth in app and games sells. Chinese people are knowto be enthusiast buyers of virtual goods. Local players move fast. With plenty of resources companies like Alibaba or Baidu are already working on their own smartphones and cloud services. (1) Canalys - http://www.canalys.com/newsroom/stellar-growth-sees-china- take-27-global-smart-phone-shipments-powered-domestic-vendors By Heinecke, Flickr Introduction to the chinese internet market 9
  • 10. Demographics, devices and connectivityBy penetration and frequency of usage, China is already thelargest market for mobile services and applications. 75% of theonline population access internet through mobile phones.The old idea that chinese consumers don’t pay for apps isvanishing with 2 from every 3 smartphone user having purchased apaid aplication during 2012.Google Play not able to accept payments in China for apps isgiving plenty of space to local app markets: Baidu App Store,China Mobile’s Market, Tencent App Gem and many others.Surprisingly many users are still connected to internet through2.5G devices. The market for services and contents adapted to lowprofile phones is still hot and represent a significant industry. Android, the king. It’s currently the unbeatable leader with 90% of market share in mobile OS. Introduction to the chinese internet market 10
  • 11. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Key takeaways8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 11
  • 12. Payment methodsThe Chinese society strongly rely on cash but regarding ecommercecash on delivery payments have been gradually replaced byelectronic methods in recent years.Today up to 73,9% of ecommerce payments are processed online.Being paid on delivery just 11,6% of purchases. (1) But far fromwhat it could be expected Paypal don’t play a major role in China.More than 100 companies have currently licenses for third partypayment operations, but the market is mostly shared by 5 bigplayers(2):-Alipay-Tenpay-China Unionpay-99Bill-China PnR (1) Online Payment and E-Commerce in China 2012. Maverick China Research (2) Online payments report 2012 by Innopay BV http://bit.ly/NjnYkX Introduction to the chinese internet market 12
  • 13. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Final advice8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 13
  • 14. Main playersTencentTencent is the fourth internet companyby market capitalization, right behindGoogle, Amazon and Ebay.QQ a desktop messenger application iscurrently the most used communicationtool in China, far more used than email.QQ.com, a generalist portal is also oneof the top 10 most used websitesworldwide.Wechat the new promising child, aninstant message application forsmartphones similar to Whatsapp, hasalready 200 million users. Introduction to the chinese internet market 14
  • 15. Main playersAlipayProperty of Alibaba Group, Alipayrepresents around 50% of marketshare.Claiming to have over 500 millionregistered accounts(1) offers creditcard and banking account payments.The company provides also the abilityto pay for basic home utilities aswater, electricity, mobile bills, etc.Already in conversations withMastercard(2), is aiming to expand itreach globally in the following years.(1) Online payments report 2012 by Innopay BV http://bit.ly/NjnYkX(2) Tech in Asia http://bit.ly/WDNP7s Introduction to the chinese internet market 15
  • 16. Main playersAlibaba GroupAlibaba group, with Taobao and Tmall isthe ecommerce giant in China.Around 800 millions articles areavailable in Taobao(1).More than 60% of buying searches bychinese internet users starts directly inTaobao homepage.During 11/11/12, a big discount day,Alibaba’s platforms sold US$3.06billions in just 24h. (1) Taobao company overview http://bit.ly/2iLgcP Introduction to the chinese internet market 16
  • 17. Main playersCtripFounded in 1999 is the leader in onlinetravel booking with 42% of marketshare, followed in the distance byelong.net with a 13%.With an year on year growth of 15%,Ctrip registered US$198 million of totalrevenues in Q3 of 2012.The company reinforces the onlineservice with 24h free call service andsales offices in 45 cities across thecountry. Introduction to the chinese internet market 17
  • 18. Main playersNetease Inc.One of the earliest internet portals inChina, founded in 1997 has evolved tooffer many services. From emailaccounts, and classifieds to multi-playeronline role-playing games (MMORPGs).Today keeps being one of the mostused online services, having recordedUS$129.2 million of net profit last Q32012. (1) Netease corporate website http://ir.netease.com/ Introduction to the chinese internet market 18
  • 19. Main playersBaidu.comUnbeatable since it beginning in thesearch engine industry, Baidu has nearly80% of market share offering manyother services including “Zhidao” acompetitor of Wikipedia and “Wangpan”a rival of Dropbox.Baidu recently revealed that is building acloud computing center aimed on mobilemarket. Working in the same directionthan it’s branded smartphone made byTCL.The company declared US$858.8millions in revenue(1) from onlineadvertising in Q2 2012. That’s 60%more than the previous year.(1) Baidu Investor relations http://bit.ly/cRSzPd Introduction to the chinese internet market 19
  • 20. Main playersSohu Inc.Similar to Netease, but with around halfit revenues comes Sohu. Also aninternet company offering news, linksdirectory, online games and many otherservices.As it happens with Tencent andNetease, the main revenue source areonline games(1).Sogou, a search engine servicedeveloped by Sohu have been the maincompetitor to Baidu until it was recentlysurpassed by Qihoo 360 search tool(2). (1) Tech in Asia http://www.techinasia.com/comparing-revenue-chinas- major-internet-portals-tencent-kicking-ass-sina-872/ (2) http://hao.360.cn/so/index.html Introduction to the chinese internet market 20
  • 21. Main playersYouku Tudou Inc.Youku.com and Tudou.com, two of themain video platforms merged lastAugust.The new company called “Youku Tudou”have 310 million users and 1.6 billionhours of video are served monthly.Together they account for 80% of totalonline video demand in China.The company forecast a revenue around$100 million for Q4 2012(1).(1) AP - Yahoo News http://yhoo.it/Ubgv5F Introduction to the chinese internet market 21
  • 22. Main playersRenren.comRenren is the leader “facebook alike”social network in China. Formerly knownas Xiaonei (on-campus network) hasover 172 million registered users.From $50 million earnings in 3Q 2012,almost half came from online gamerevenues(1).(1) Renren 3Q 2012 Financial Results - http://ir.renren- inc.com/phoenix.zhtml?c=244796&p=irol- newsArticle&ID=1758393&highlight= Introduction to the chinese internet market 22
  • 23. Main playersShanda Interactive EntertainmentShanda, stablished in 1999, is the mainonline game player in China.With over 70 game products is listed inNASDAQ stock market since 2009.With 90 million active users Shandarecently declared $170.4 million in netsales during Q3 of 2012(1).(1) Shanda games report Q3 2012 http://ir.shandagames.com/releasedetail.cfm?Rel easeID=723214 Introduction to the chinese internet market 23
  • 24. Main playersWeibo.comSina Weibo is the main microblogplatform in China, a Twitter equivalent.Recently announced to achieve 400million account registered, by businessand individuals, doubling it nearestcompetitor Tencent Weibo.Up to 72% of the user base access SinaWeibo through mobile devices.Revenue in last Q2 reported to be US$22 million from a total of $152 in allSina services. With 15% of advertisingcoming from mobile access. Introduction to the chinese internet market 24
  • 25. Main playersDouban.comDouban is one of the most popular usergenerated content website in China.This service of opinion sharing onbooks, movies and music recentlydeclared to have 100 million uniquevisitors a month(1). And it’s ranked byAlexa in the top 20th of chinesewebsites.(1) The next web http://thenextweb.com/asia/2012/08/17/chinese-social- network-douban-almost-profitable-expected-2012- revenues-13m-100m-monthly-visitors/ Introduction to the chinese internet market 25
  • 26. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Final advice8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 26
  • 27. Legal frameworkChina has an old history of laws and rules. Traditionally basedin the Confucian approach of social control through moraleducation, it’s nowadays similar to western style legalsystems.Current regulation on internet contents and services is tight.The government considers that within Chinese territory theinternet is under the jurisdiction of Chinese sovereignty(1).Topics such as violence, critics to the social system, spreadingrumors or injuring the reputation of state organizations areforbidden. Service providers are legally responsible forcustomer activities so in order to avoid sanctions they tendto assume an editorial role over content published by users.Since 2010 individuals and businesses willing to register a .cndomain are required to provide their respective national ID andlicense.Starting in 2012, also users of microblogs (Twitterequivalent) are required to identify themselves with IDnumber and mobile phone to use these services.(1) Chinese Government´s official Web Portalhttp://english.gov.cn/2010- 06/08/content_1622956_7.htm Introduction to the chinese internet market 27
  • 28. Legal frameworkForeign companies looking to open a local branch in Chinahave mainly three options:-Find a local partner for a joint venture. A good option so yourpartner can access local resources for you. However, storiesof joint ventures between foreign and local companies in Chinaare frequently problematic and taking advantage of foreigner’sknowledge or financial resources does not necessarily goagainst local work ethics.-Create a Wholly Owned Foreign Enterprise (WOFE) in Chinamainland. Been there by your own is probably a conservativeand more reliable way to start operations. Be aware that thebureaucracy of the process can be exhausting. It’s good to finda proper local advisor.-Establish in Hong Kong. The fastest way to become fullyoperational and the clear option for many foreign companies. Introduction to the chinese internet market 28
  • 29. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Key takeaways8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 29
  • 30. Key takeaways 1 Domestic team and resources are vital. They have a first hand understanding of how everything works and what’s happening in the middle country. 2 Being small in China usually equals to be really big by western standards. Don’t think it twice. 3 Mobile is key. Mobile phones have never been the second screen in China. 4 Take advantage of the early adopters. The internet user base is among the youngest worldwide.5 Fill the quality gap. Many local services lack of quality due to excessive focus on growth.6 Don’t underestimate Chinese culture. It affects everything in unpredictable ways. Introduction to the chinese internet market 30
  • 31. Index1. Introduction2. Internet in numbers3. Demographics, devices and connectivity4. Payment methods5. Main players6. Legal framework7. Key takeaways8. About The Cocktail Visure / IRQA Introduction to the chinese internet market 31
  • 32. About The Cocktail• Founded in 2003, The Cocktail has fast developed to become one of the most known digital consultancy southern Europe.• More than a hundred employees giving shape to an unique innovation culture. From design, business, marketing and programming to research passionate specialists.• We’ve being fortunate to define and develop some of the most complex and challenging services in internet.• We deeply understand the digital business, our clients accounted 7000 daily transactions and 100€ million in sells last year.• We are proud of our rock solid methods and own technology. Great results, in time.• Some of our clients includes: Mercedes-Benz, LOréal, MTV, Google, Microsoft, Paypal, Real Madrid, Movistar, AEGON . Introduction to the chinese internet market 32
  • 33. About The CocktailWe know it’s hard to move abroad. If you are consideringChina as an option for your digital business we can give yousupport with:•Research and competitor analysis.•Cultural adaptation of your digital service and products.•Strategy, development and management of online presence,ecommerce businesses and mobile apps.•Getting support for local implantation for your digital company. Introduction to the chinese internet market 33
  • 34. Want to known more?Madrid México D.F. Beijing BogotáC/ Salamanca 17 Av. Sonora, 166. No.1. No.4 Daxue Alley Cra 11 Nº 81-26 Oficina 30128020 Madrid (Spain) Colonia Condesa Dongcheng District Bogotá, Colombia Delegación Cuauhtémoc 100009 Beijing, China 06100 - Mexico D.F.+34 91 567 06 05 +52 55 55013299 +86 010 6407 4392 +57 3108776790info@the-cocktail.com mexico@the-cocktail.com beijing@the-cocktail.com colombia@the-cocktail.com Introduction to the chinese internet market 34
  • 35. March, 2013http://www.the-cocktail.com