Article provided by EIU
China internet: Going everywhere fast
From the Economist Intelligence Unit, Technology Briefing & Forecasts, August 4th 2011
No doubt, social networking has become the biggest internet phenomenon since the search engine. Facebook, the most popular site, now boasts some 750m users, half of whom check their status on any given day. Twitter, the micro-blogging site, has managed to attract 200m users around the world and the number continues to grow. Even smaller, newer social networks have attracted millions of users. Foursquare, a so-called "geo-tagging" network, has seen customer numbers pass 10m this year, while Google+, which was launched in July on an invitation-only basis, has already signed up 20m users in its bid to challenge Facebook.
Yet in China these household names are notable by their absence. Google's withdrawal over censorship issues is well known. But Chinese authorities have also prevented others from providing a service, most notably blocking Facebook, Twitter and Foursquare on the twentieth anniversary of the Tiananmen Square massacre. The absence of these international players has left a vacuum that China's own social networks have been quick to fill. While some are little more than copycats, others have adapted social-networking innovations to suit Chinese tastes.
1.3bn people can't be wrong
Enthusiasm for these sites means that China, a country of 1.3bn people and 485m internet users, can now boast of social-network consumption on a scale matching the rest of the world. Tencent Qzone, the leading social network in terms of registered users, reported some 480m active accounts in March 2011. Although users with multiple accounts may have bolstered this figure (something common in China, but also a factor in global networks), it shows that a leading network in a particular country can compete with the global giants. Tencent's success is largely down to its integration of a number of different social media, such as its instant-messaging service Tencent QQ.
Renren.com, often dubbed the Chinese Facebook, recently claimed to have 160m registered users, although this was later amended to 31m active monthly users. Renren competes for space alongside Kaixin001.com (which recently claimed to have 120m users) and 51.com (which claimed to have 178m users in August 2010). These Facebook-type services also reflect a difference in Chinese social-media usage. Kaixin001 appeals more to white-collar workers from wealthier, urban areas, while 51 targets consumers in lower-tier cities and rural regions. When combined, the Facebook-type networks serve around 458m accounts in total, almost two thirds the number of Facebook users worldwide.
The success of Chinese microblogs is largely down to the ease with which they can be used. Users can not only post comments via the internet, but also using smartphones, WAP and normal SMS text messaging. This is critical in a country like China, where more sophisticated technologies are unavailable to many people. Chinese developers have also been quick to recognise the marketing potential of microblogs: accounts known as "incubators" have been created specifically to garner a large number of followers before they are subsequently sold on for marketing purposes.
As in mature markets, however, geo-tagging networks are still in their infancy. What's more, the penetration of smartphones, needed for geo-tagging services, is low by European and North American standards, estimated in September 2010 at around 180m users, or 11% of the population, by Sapient Nitro Asia, an advertising agency. Nevertheless, the market has strong potential for precisely this reason. Jie Pang, dubbed "the Foursquare of China" and a possible acquisition target for the American site, signed up its millionth customer in June. As well as being compatible with the iPhone and WAP, Jie Pang is available through an Android app that is preloaded on to HTC, Sony Ericsson and other smartphones accounting for an estimated 70% of China's Android phone market. Jie Pang is also explicitly commercial in its dealings, announcing tie-ups with domestic and global brands to offer discounts or coupons to bargain-hungry customers.
Working for all
If Chinese adoption of traditional social media has been impressive, the country has also played a pioneering role in services that have a lower exposure elsewhere. The Groupon idea of crowdsourcing users to buy goods and services at discounted rates is only now catching on in North America and Europe, despite having been conceived as far back as 2008. In China, integrating social networks with coupons or business discounts is established practice.
The first "Group Buying" or Tuángòu site appeared in China in January 2010. By the end of that year there were 1,215 such sites, according to the China e-Business Research Center. Since then growth has continued to soar. The number of group-buying site users in China is now about 42.2m, while sales from these sites are expected to reach some Rmb1bn (US$155m) this year. This compares with Groupon's 35m users worldwide, generating revenues of US$750m.
Even more intriguing is the rapid growth of specialist "crowdsourcing" sites that supply a pool of people ready to buy and sell services and information. The sites, known as "Witkey", work by gathering large numbers of users for work that can be done remotely. People bid for work by offering the rates at which they will perform different tasks, and businesses make use of them to outsource specific jobs. In other countries these crowdsourcing sites tend to be quite small, and based in niche areas such as web design. But a much bigger pool of labour is on offer within China. Market leader Zhubajie is considered to be the largest crowdsourcing site in the world, with more than 4.5m registered users. During the first World Witkey Conference, held in Chongqing in late 2010, annual trading volumes on Chinese Witkey websites were reckoned to exceed Rmb300m.
While Chinese internet users have shown an insatiable appetite for homegrown social networks, these sites could quickly disappear if authorities decide they pose a threat to national stability. But a lot has changed in China since Beijing began shutting down social networks en masse two years ago. For one thing, take-up has risen from millions to hundreds of millions of users over that short period. If China now chose to shut down networks, it would be attacking well-established and highly leveraged businesses and risk a backlash from a substantial percentage of the population.
But just as important a consideration is the willingness of homegrown social networks to play by Beijing's rules. Meng Bo, deputy editor-in-chief of Sina.com, told China Daily last year that "Sina is playing by the rules as they are laid down, with strict word filtering in operation". While this may dismay civil rights groups, it will go some way towards ensuring the future is bright for China's burgeoning social media empire.