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China internet

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China internet

  1. 1. China’s Changing Internet Demographics From Games to Garages Frank Yu CEO Kwestr
  2. 2. Bio /Disclosure/Disclai mer Entrepreneur 1st iPad Game from China Internet Startup Ex-MS IE7, Windows Mobile Launched Xbox in Asia 2003 First Game Team for MS in China Ex-PIMCO 1999 Analyst in #1 Internatiional Fund Morningstar Trading Desk Fixed Inxome/Equities Natwest All opinions are my own
  3. 3. The Internet World in 2011
  4. 4. China • China is the largest by population • Still has room to grow • Much larger and more penetrated than India • Korea – a model for the Chinese Internet • Where is Africa?
  5. 5. AUGUST 2012 CHINA INTERNET
  6. 6. Looking at China’s real population collapse
  7. 7. Why Real Demographics impacts Internet Demographics • China’s Internet is driven by users under 40 • After 40, users tend to spend less and save more. Newer tech may not be adopted • Even with a large population and moderate Internet penetration, usage of the internet by users under 30 is already high
  8. 8. China 2010 vs. 2030
  9. 9. China’s population slowdown
  10. 10. The Sweet Spot is slowing • China going from Christmas Tree to Palm Tree • Peak Manpower projected at 2016 • The Census Bureau, for example, believes that China‘s current TFR (total fertility rate) is about 1.5— over 30% below the level required for long-term population replacement (2.1) • Women aged 25-29 already in decline
  11. 11. China 2030 will look like Japan 2013 except much more males
  12. 12. Global Gender imbalances
  13. 13. Reversing the decline is hard • Even if China were to abolish population control, the pool of child bearing women is already in decline for 20-24 and in 2015 for 25-29 • On a plus, age of child birth is increasing so 30-35 may be a source • But as China becomes more affluent, DINCs and Yuppies will choose to have less or no kids
  14. 14. China’s Internet Demographics linked to China’s real demographics Aging Population Health Care Financial Planning Child Care Education Lifestyle
  15. 15. The two most powerful trends in the internet is driven by the young Social Mobile
  16. 16. Weibo Users are young From We Are Social
  17. 17. Mobile Internet users are young (2012)
  18. 18. China Internet in 2012 From Go Globe
  19. 19. What users do online in 2012 From Go Globe
  20. 20. From Games to Garages • Entertainment Driven Tech towards Lifestyle Tech • Entertainment > Lifestyle> Life Planning • Old: Games, Video, Chatting, Entertainment • New: Commerce, Personal and Career Development, Quality of Life • Acquisition of Property, Cars and Family • Tend to kids and elderly
  21. 21. Gaming still important • Gamers are going from Hardcore to Casual • PC and Web Gamers are turning into mobile gamers • The old Gaming companies have a terrible time converting to mobile and casual • The new Gaming companies are smaller and app driven. New Players are Qihoo and Baidu • Baidu acquires 91.com for USD 2 Billion • Alibaba introduces mobile gaming platform
  22. 22. Lifetime Value of a user • As customer base shrinks or slows, the strategy for companies is to take their users and monetize them through the lifetime of the user and their family • User affinity towards Chinese technology brands is high or higher than legacy offline brands.
  23. 23. Biggest New Field Education (most corrupt and broken) NetDragon Estate Planning and Investment Travel and Tourism Minor Luxuries (Govt Austerity and Reform) Environmental Safety (food and pollution) Wellness and lifestyle (LOHAS and Quality)
  24. 24. The Game Changer • Mobile has caused a reset • A whole new eco-system • Older educated gamers turn to mobile and tablets from PCs and MMORPGs • Legacy game companies challenged / lost their internet café channels • Smart Phone price point means 2nd and 3rd tier users can now participate and transact. Internet users flattening out to the hinterlands
  25. 25. The Big 4 to leverage online credibility and brands to go offline and in traditional product lines • • • • • • Retail Finance Healthcare Housing Local Listings Automobiles
  26. 26. Conclusion • China’s Net generation maturing • Net generation has 2 concerns (children/Parents) • The population crunch will impact companies • China’s Internet giants will use traffic and brands to go offline • WeChat Wechat WeChat • Tencent Health / Aliababa University / Baidu Motors / Qihoo Pharmaceuticals
  27. 27. Light In the Box • Take factory goods from China and sell to consumers in the US • A little bit of Alibaba and Amazon • Past Margins are being eroded away (wedding dresses) • Export related story slowing down (like Alibaba) • Acquisition of Ador and new Content strategy
  28. 28. VIP Shop • Flash Buying of old season brand stocks to 2nd or 3rd tier markets • Sold on Concession, no inventory risk • Brands needs to dump inventory, 2nd tier customers want quality brand products, VIP shop acts as a platform to connect • Part Groupon, part Last Minute, part Marshalls. Taobao and Tmall are fine but everyone loves an event and a sale
  29. 29. Tencent • Games, Communication and soon MCommerce • Great Mobile and Game Product Teams and knows how to monetize customer base • The Tencent Tentacle in 2014 will soon include finance, video and lifestyle needs like Taxis and Purchases…looking to cut into the Tmall, Weibo Pie • One Word : WeChat
  30. 30. The 4 • • • • Tencent Alibaba Baidu Qihoo
  31. 31. The Rest • • • • Youku Sohu Sina (Weibo) The Gaming Companies – Shanda – Netease – Giant – Perfect World
  32. 32. 58.Com • Known as a Craig’s List but really more like a Yellow Pages • Aggressive Sales force sells space • Online discovery for Offline transactions • Local Search and Listings • Top 5 for Real Estate, Cars and Electronics • Free listing for Consumer to Consumer classified, with fee for rank bumping
  33. 33. The Ones to Watch • • • • YY Dianping VIP Shop Xiaomi
  34. 34. The Walking Dead • RenRen • Kaixin • The9
  35. 35. Thank you Frank@kwestr.com

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