What’s Happening in the China Internet and Mobile Sectors
By Philip Ma, Managing Director, MergerTech Advisors
This week I was in Beijing for the TMT China 2010 Internet & Mobile Forum organized by China Entrepreneurs. The keynote speaker was Kai-Fu Lee, former president of Google China and now the head of Innovation Works, a seed-stage VC fund/incubator for startups. He spoke about opportunities in E-commerce and Mobile Internet in China.
Lee noted many differences between Chinese and American Internet users, pointing out how most of the U.S. Internet giants have not succeeded in China because they have not adapted well enough to Chinese tastes and behavior patterns. Some key differences:
- Chinese users tend to like ‘busy’ web pages that are loaded with content. Americans prefer a clean, simple interface like the Google home page, for example.
- The most popular Internet applications for Chinese users include instant messaging, accessing music, and online gaming. For American users, it’s all about email, search, and e-commerce.
- For online search, Chinese users spend an average of 3 to 6 times longer on search results pages than Americans. They tend to look and click to multiple results pages, but not to type in new search terms.
Lee sees a new wave of Internet growth and adoption coming in China, driven by 3 major technology and usage trends:
- Mobile Internet: mobile phone penetration is already high in China; now the carriers are rolling out 3G services and applications, giving users more convenient access to information and entertainment on the go.
- E-commerce: while some websites like Taobao (an Ebay equivalent) are growing in popularity, today e-commerce has relatively low penetration in China compared to the US. But with the development of a more robust online payment and fulfillment ecosystem, Lee sees tremendous growth potential for e-commerce.
- Cloud Computing: with the industry trend toward a utility computing model for providing IT infrastructure and applications, many more individuals and businesses will have access to flexible computing resources with the ability to scale up or down based on user demands.
Some other key takeaways from various panel discussions at the Forum:
- The Apple iphone and Google Android platforms are not really accessible to most Chinese mobile phone users because smartphones are too expensive. Platforms for lower-end phones like Nokia’s Symbian will continue to be popular for app developers and users.
- Mobile gaming, mobile search, location-based services, and mobile advertising all have huge growth potential as mobile phone users become more sophisticated; these are also focus areas for local venture capital investment.
- Look for M&A activity to pick up as consolidation continues among local players in the Internet and Mobile sector. At the same time, larger Internet and IT companies in China are also looking to do foreign acquisitions in other parts of Asia, North America and Europe as they position themselves to go public, either locally, elsewhere in the region, or in the US. Growth via M&A is a key strategy for many of these up-and-comers.
I’ll keep you posted on developments out here in the Asia-Pacific region. Stay tuned for a post on the Shanghai World Expo going on right now until October 31…