China’s Innovations on the Web

China’s Innovations on the WebLearning from China’s new media

Yiqun Bo, Consulting & Research Manager | +8* | www.plus8star.com

The China Media Landscape| EU-China | August 2009

BO Yiqun

薄益群

Clément

www.plus8star.com

China | Japan | South Korea

Cross-Market ConsultingMobile & Internet Innovation

29 events | +100 speakers | +3,000 members | ~1,500 companies

Agenda

1. Why look at China?

2. What does online media bring to China?

3. Sources of innovation?

4. Some examples


#1 market in terms of users

Source:Plus Eight Star,

2009.4

Internet usersmillion

Penetration%

Mobile usersmillion

Penetration%

China300 24% 640 49%

US225 73% 260 85%

Japan100 >70% 110 >80%

Chinese Internet Players Enjoy Higher Margins than Global Peers

Source:Plus Eight Star, 2009.4

Operating Margin Company Operating Margin

Chinese American

NetEase 62.1% eBay 24.3%

Alibaba 39.7% Google 30.4%

Tencent 45.4% Yahoo! 0.2%

Sohu 38.2% Amazon 4.4%

Shanda 40.4% IACI -4.3%

Baidu 32.8% EA -13.3%

Sina 20.2% VeriSign 7.4%

Ctrip 27.7%

51job 11.2%

Average 35.3% 7.0%

China’s media market is catching up with the west

Year 2008 (source: Plus Eight Star, 2009.4)

US China

Ad market (bln USD) 293.3 29.5

Ad market YoY growth 3% 15.9%

Online ad market (bln USD) 25.8 2.5

Online ad market YoY growth 21.7% 60.4%

Online ad / Total ad market 8.8% 8.4%

Baidu: Box Computing

User requirements

Box

Semantic analysis

Human-computer interaction

User behavior analysis

Massive computing

Internet applications(Search, Game, Online shopping,

Virus scanning, etc.)

Open platform

• Decomposed into 20 semantic elements

• 300 mln times computing

• Search in 10 bln WebPages

• Deliver result within 1/10 second

• Deal with 1 bln this kind of requests per day

Sentences describing happiness


China has the world’s largest online

population and is catching up with the West,

sometimes even leading!

Part 1 Conclusion

2. What does online media

bring to China?

Internet GDP

9% 49%

China Internet/Media: Enjoying the Highest Margins

Note: e = Morgan Stanley Research estimates

Source: Morgan Stanley Research, 2008

Average operating margin (2008E)

“Mice Love Rice”

Backdorm Boys

Enjoy the Olympics online

Quote: “I am so excited about the drummers,

the view is so grand that I cannot type.”

Time: 19:56

PV: 2,601,435

Replies: 2,649

MSN rainbow signature

• MSN and Toyota donated to the relief efforts that took place after the Sichuan Earthquake on May 12, 2008.

• 6,216,469 MSN Messenger users participated in the campaign.

Internet as a channel for collecting disaster relief donations

Taobao.com homepage

promoting the donation

The symbol of online benediction launched by QQ,

32,754,656 QQ users participated in the campaign.

41 mln RMB from Alipay and Tenpay within 10 days

Grey websites and no commercial ads for Mourning Day

People seeking 2.0

2. What does online media

bring to China?

Internet not only creates heroes, but is largely

impacting the China’s society as well!

Part 2 Conclusion

3. Sources of innovation?

5CTM of Chinese innovation

1. Copy


“Benchmarking”

“Inspiration”

“Best practice”

“If I have seen farther it is only by standing on the shoulders of Giants.”

(Isaac Newton)

A quick look at Germany …

vs.

vs.

vs.

Source: Web2Asia

Rest of Europe …

Most popular website and SNS in Poland/

Most popular website and

Search Engine in Czech Republic

Largest SNS in Finland

Largest SNS in France

Largest SNS in Spain

Largest SNS in the Netherlands

Source: Web2Asia

2. China


China is learning from the West

2008| 179,800 students abroad

1978-2008| 1.39 million students

390,000 returned to China

China’s local features

• Unbalance of development

– 1st tier cities vs. 2nd / 3rd tiers

– Urban vs. rural

• Single child policy

• Internet café

• Entertainment-centric

Attention threshold

=

1 billion dollars?

3. Combination


Will it blend?

Tencent (1998)

Registered users

Revenues 2008

(E)

Profit margin 2008

Note: Mixi, Gree and DeNA are Japanese social networks. Both Gree and DeNA are purely mobile.

Market Capitalization(August 2009)

27 bln

4. Competition


What happens when you have

20 YouTube

10 MySpace

5 Match.com

4 Facebook

3 Yahoo

…

4 Twitter

5. Constraints


Low GDP/capitaSmall transactions / making millions from cents

Limited advertisingAlternative business models / B2B toB2C

Few credit cards, Low trustAlternative payment systems, escrow system,

mobile, virtual currencies

4. Some examples

Lihua| Order food over IM

Alimama| Ad exchange + Micro-retail

Babytree| Vertical for young parents

Qifang| P2P Micro-lending

Taojianghu: convergence of SNS and shopping

• Beta launch: Mar 31, 2009

• SNS with regular features for all of Taobao’s buyers and sellers (about 100 mln in total)

• Upgraded from community service inside Taobao.com

• Two strong shopping guide features:

• Favorites: “my favorites” and friends’ favorites.

• Votes: online survey system.

• Gaming applications

“Favorites”, “Votes” – two key points of Taojianghu

representing online shopping guide features

Two applications with strong gaming features to

accelerate popularity and stickiness

Taojianghu: SNS within Taobao.com

Ucenter Home: “Facebook” maker

• Long tail in SNS

• Thousands of thousands of standardized “Facebook”

• It’s free!

Powered by Ucenter Home

URL: http://home.ebigear.com/network.html

An English learning SNS

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About +8*

There are more ideas outside your country

than inside

Tom KelleyCEO, IDEO

The 10 faces of Innovation

About +8* | “Innovation Arbitrage”

• About us– +8* | Plus Eight Star is the leading cross-market and cross-cultural consultancy in Asia.

– We provide local expertise & global perspective on mobile and Internet innovation from China, Japan and South Korea to add value to and accelerate the development of our clients’ businesses.

• Our services– Analysis of proven best practices and business models from Asia

– Other services: executive study trips, market entry strategy, M&A advisory, partners identification, negotiation support.

• Founder & CEO: Benjamin Joffe– 9 years experience with mobile & Internet in Asia

– Selected among “China’s Top 100 mobile industry influencers” in 2007 and 2008

– Regularly quoted in international press and keynote speaker at numerous telecom and Internet events

– Fluent in English, Japanese, French with working knowledge of Mandarin, Korean and Spanish

Our Clients

EUROPE USA

ASIA

http://www.vectis-intl.com/index.html

Selected Projects• Adidas | E-commerce and mobile commerce market analysis and strategic

recommendations for China, Japan & Korea

• Bouygues Telecom | Cases studies of leading Asian Web 2.0 services and virtual worlds

• Deutsche Telekom / T-Online | Benchmark of Korean mobile & Internet convergence strategies

• EU-China Information Society | Research on e-commerce and virtual worlds to support the regulatory dialogue between the EU and Chinese authorities

• Microsoft | Analysis of Japan’s key players and market catalysts for mobile commerce market positioning in China

• DeNA | Benchmark of leading SNS in China and South Korea (DeNA operates Japan’s leading mobile social network)

• China Mobile | Benchmark of Korean leading online communities

• Sands Capital Management | Evaluation of investment opportunities in social networks in China

• MIH / NASPERS | Analysis of leading online verticals in China (MIH is the largest shareholder in Tencent, China’s leading online community)

• IMVU | Benchmark of monetization and engagement best practices in Asian virtual worlds & SNS (IMVU is a leading US-based 3D virtual world & chat)

Social Contribution• Mobile Monday Beijing

– Founder of the Beijing chapter of Mobile Monday, the leading global network of mobile industry professionals.

– 30 events inviting over 100 speakers and attended by more than 3,000 professionals from the telecom value chain.

• Media

– Quoted regularly by various news and research outlets such asThe Economist, CNN, Ad-Age, Asia Venture Capital Journal, etc.

– Monthly column on Asian innovation with the leading Chinese business magazine Asian Business Leaders and news site Interfax.

• Speaking engagements

– Regular keynote, speaker & moderator in IT, Media & Investment events.

– Selection of speaking engagements in 2008/09

• PICNIC (Amsterdam), Lift Asia (Jeju, Korea), Infinity Ventures Summit (Sapporo, Japan), Ad-Tech (Shanghai), O’Reilly’s Graphing Social Patterns (Washington, D.C.), eComm(San Francisco), Red Herring Asia (Hong Kong), Asia Venture Capital Forum (Hong Kong), China Mobility International Summit (Beijing), Media 08 (Sydney), Wireless Developer Forum (Beijing), Open Web Asia (Seoul), XMediaLab: Virtual Worlds(Seoul), Mobile Monday Global Summit (Kuala Lumpur, Helsinki), ITU Asia (Bangkok), EU-China Virtual World Conference (Beijing), Startonomics (Beijing), UnConference(Singapore), BarCamp (Shanghai), Mobile 2.0 (Paris), La Cantine (Paris), Mobile Focus (Stockholm).

Published reports

• Inside Tencent– #1 online community in China

– #1 profitable SNS in the world

– Free sample available to download in +8* website

• Inside Cyworld– #1 online community in Korea

– over 30% of South Korea’s population, and 90% of Korean netizens in their 20s have a personal page on the service

– Free sample available to download in +8* website

• Inside Alibaba (coming soon!)– #1 e-commerce empire in the world

http://www.qq.com/

Thanks!