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Rise: Why China’s Internet is Bigger.. And Different

By Admin / Published On Wednesday, 11 Jul 2018 21:09 PM / No Comments / 83 views

Abundant capital, rapid change, and growing sophistication are the key characteristics of China’s Internet landscape. So too is the guiding hand of the central government.

Published Tuesday at the Rise tech conference in Hong Kong, the China Internet Report shows that China already counts 772 million Internet users and 753 million mobile Internet users. While larger than the entire population of the U.S., representing just over 50% of China’s 1.4 billion population, those numbers are expected to grow further.

The report – published by the South China Morning Post, Abacus News and 500 Startups – shows even greater disparity in the numbers using mobile payments. China counts 527 million, representing 37% penetration, while the U.S. has 48 million users, or just 15% of its potential market.

The report points to four key trends of the Chinese Internet. The three largest players Baidu, Alibaba and Tencent, have diversified across ten or more sectors ranging from ecommerce and content, through to autonomous vehicles, gaming and education, to become platform companies. (Baidu trails the others in its diversity, being absent from the esports and social media sectors.)

Internet penetration of 35% outside urban areas is empowering, informing and including China’s rural population. Some 50% of the rural population is expected to have e-commerce facilities by 2020, while 55 million students are reachable for online distance learning.

In a contrast with U.S. and European markets, social media is the pillar for e-commerce, education and streaming in China. The report points to 46 million daily average users for Paopao, the social media unit of video streaming service iQIYI.

And, while some Rise participants praised Chinese government’s support for development of key online sectors, the report described the role of regulators as a “visible hand.” The government has outlawed cryptocurrencies and driven thousands of smaller players out of the peer-to-peer lending businesses.

The government is notably interventionist in terms of content. The report cited examples of quiz apps and news aggregators being ordered to scrub their sites of certain content and commentary. It also told online stores what apps would not be tolerated.

Such government intervention has not stopped a massive increase in audiences for short form video, and for online to become a dominant form of news delivery. The number of users of short form video apps double d in 2017 from 203 million to 414 million. Kuaishou and the trio of services from Toutiao were China’s top four short video services last year. Tencent News is the country’s dominant news app with 259 million users, ahead of Toutiao, though Toutiao and NetEase News claimed longer daily usage times by subscribers. That has put a large proportion of the news industry outside the operation of state-controlled media, and so attracted regulatory interest.

The report shows Toutiao to be the best funded news and content startup company in China. It has attracted $ 3.1 billion of capital from investors including SIG, DST, General Atlantic and Sina Weibo, several multiples more than second placed Ximalaya. Among financiers, the report finds Tencent to be the biggest investor in the news and content sector, ahead of IDG Capital, Zhen Fund, Matrix Partners and Sequoia Capital.

A very similar cluster of tech investors has strengthened China’s online and mobile gaming sectors, which now account for 28% of gaming software revenues worldwide. (The U.S. stood at 22% in 2017, according to the report.) Tencent and NetEase dominate the sector.

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Variety

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