State of Chinese Internet

1. Internet in China…
Misiek Piskorski
with Aaron Smith
中国
美国 Pretty Kingdom
Central Kingdom  China
USA 

2. 2© 2013 Mikolaj Jan Piskorski
There are a lot of people in China…

3. 3© 2013 Mikolaj Jan Piskorski
And it’s catching up fast…
In 2010 there were 150 cities with 1m+ inhabitants
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Shanghai
Tianjin
Shenzhen
Dongguan
Chongqing
HongKong
Hangzhou
Suzhou
Harbin
Zhengzhou
Kunming
Xiamen
Ningbo
Taiyuan
Changzhou
Changsha
Wenzhou
Ürümqi
Fuzhou
Huai'an
Lanzhou
Nanchang
Nantong
Zaozhuang
Haikou
Hohhot
Putian
Taizhou
Jiangmen
Lu'an
Huainan
Datong
Daqing
Zhanjiang
Jiangyin
Datong
Weifang
Guigang
Dengzhou
Changde
Baoji
Liuzhou
Yichang
Wuhu
Wenling
Fushun
Shantou
Chifeng
Yinchuan
Neijiang
Yixing
Yueyang
Liaocheng
Panzhihua
Haicheng
Xining
Taixing
Dingzhou
Baoding
Anyang
Shouguang
Yuzhou
Zoucheng
Huaibei
Zhucheng
Zhangqiu
Lianyungang
Xinxiang
Qinhuangdao
Wuwei
Hezhou
Xiangcheng

4. 4© 2013 Mikolaj Jan Piskorski
State-owned enterprises account for 30% of sales…
… but the state continues to invest in infrastructure

5. 5© 2013 Mikolaj Jan Piskorski
Internet in China
 Users
– many more of them
– more engaged
– and smart about censorship
 Competition on the Internet
– protected from the rest of the world
– insane… and insanely creative
 Monetization
– e-commerce is huge
– advertising is catching up fast

6. 6© 2013 Mikolaj Jan Piskorski
There are this many Internet users…
2,405,518,376

7. 7© 2013 Mikolaj Jan Piskorski
… and almost a quarter of them are in China …
Europe
North America
Latin America
Middle East
Africa
Rest of Asia
China

8. 8© 2013 Mikolaj Jan Piskorski
… or viewed differently

9. 9© 2013 Mikolaj Jan Piskorski
Only 44% penetration rate in China  lots of room to grow
Mainly Shandong, Henan, Anhui, Hunan and Sichuan
0
100
200
300
400
500
600
700
800
900
1000
2009 2013 2017e
USA
China

10. 10© 2013 Mikolaj Jan Piskorski
Growth in internet coverage in many densely populated provinces

11. 11© 2013 Mikolaj Jan Piskorski
Mobile access > PC access

12. 12© 2013 Mikolaj Jan Piskorski
People spend a lot of time on the (mobile) Internet in China!
0
0.5
1
1.5
2
2.5
3
3.5
4
Internet
TV
Radio
Print
Hoursperday
25 or younger
40+

13. 13© 2013 Mikolaj Jan Piskorski
They love to connect with celebrities, both foreign…
Sina Weibo
~250 million users
How many followers
does Tom Cruise
have in China?

14. 14© 2013 Mikolaj Jan Piskorski
… and local, such as Yao Chen with 55 million fans…

15. 15© 2013 Mikolaj Jan Piskorski
YY.com
… but they are very active contributors, too.
• 91% of online population in China has account on social media sites vs. 67% in USA
• 56% of online population in China are on one of China’s “Twitters” vs. 15% in USA
• And 75% of those online on “Twitters” actually say something!

16. 16© 2013 Mikolaj Jan Piskorski
Why does this happen?
Internet
is fun!
Official news are
“unreliable”
TV is boring. No
really.
330,000 products
introduced every
year, but brands
are scarce
Massive move to
cities breaks social
bonds
One child policy =
lots of nuclear
families
Massive changes in
wealth = people
seek new others
Numerous platform
choices:
* three ‘Twitters’
* four ‘Facebooks’
* four “meetups”

17. 17© 2013 Mikolaj Jan Piskorski
Censorship in China
 Can’t criticize the central government
– But it is ok to criticize the provincial government
– And people do it… and the central government loves it
 Chinese internet users are very smart
– State buzzword: Harmonize = 和谐 = HéXié
– But you can’t use it on the internet
– So users use a homophone: River crab = 河蟹 = HéXiè

18. 18© 2013 Mikolaj Jan Piskorski
Internet in China
 Users
– many more of them
– more engaged
– and smart about censorship
 Competition on the Internet
– protected from the rest of the world
– insane… and insanely creative
 Monetization
– e-commerce is huge
– advertising is catching up fast

19. 19© 2013 Mikolaj Jan Piskorski
Structure of the U.S. Internet

20. 20© 2013 Mikolaj Jan Piskorski
Structure of the Chinese Internet
(protected from foreign internet)

21. 21© 2013 Mikolaj Jan Piskorski
Renren
Qzone.qq.com
Kaixin001.com
Pengyou
Huge number of choices…

22. 22© 2013 Mikolaj Jan Piskorski
And the world is moving very quickly there…
Used to be the case that Renren was 20-24 vs. Kaixin for 30-34 year olds
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-19 20-24 25-29 30-34 35-39 40-49 50+
Qzone Renren Kaixin

23. 23© 2013 Mikolaj Jan Piskorski
And now we are on WeChat…

24. 24© 2013 Mikolaj Jan Piskorski
A few firms, e.g. Tencent, valued at $100bn+, have incredible distribution…
Tencent
Weixin
(WeChat)
500 million
users
Qzone
Social network
for QQ
QQ.Com
Webportal
PengYou
Social
Network
Tencent Weibo
TenPay

25. 25© 2013 Mikolaj Jan Piskorski
But there are always challengers...

26. 26© 2013 Mikolaj Jan Piskorski
Internet in China
 Users
– many more of them
– more engaged
– and smart about censorship
 Competition on the Internet
– protected from the rest of the world
– insane… and insanely creative
 Monetization
– e-commerce is huge
– advertising is catching up fast

27. 27© 2013 Mikolaj Jan Piskorski
Retail is very scattered and inefficient, so people also love to shop on-line
• 310 million online shoppers by the end of the year
• About 1.3 trillion RMB = $211 billion = 7% of retail in China
• versus $260 billion in the U.S.
• Extensive home-delivery and in 150+ cities same-day delivery services available
• Proliferation of on-line only brands (aka Tao-brands, from Taobao by Alibaba)

28. 28© 2013 Mikolaj Jan Piskorski
Social + commerce seems to be a little bit of a no-brainer:
Reckitt Benckiser in China

29. 29© 2013 Mikolaj Jan Piskorski
Advertising dollars are shifting

30. 30© 2013 Mikolaj Jan Piskorski
On-line advertising expenditure in China
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015
Percentageofonlineadspending
Search Integrated
portals
Online video Ad network Social network

31. 31© 2013 Mikolaj Jan Piskorski
Internet in China
 Users
– Many more of them
– And more engaged
 Competition on the Internet
– Protected from the rest of the world
– Insane… and insanely creative
 Monetization
– E-commerce is huge
– Advertising is catch up fast