China’s Web Innovations

Learning from China about new media

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

The China Media Landscape| EU-China | April 2009
 薄益群
BO Yiqun
Clément
www.plus8star.com
 Cross-Market Consulting
Mobile & Internet Innovation
China | Japan | South Korea
27 events | 101 speakers | 3,321 members | 1,452 companies
 Agenda

1. Why look at China?

2. What does online media bring to China?

3. Sources of innovation?

4. Some examples
1. Why look at China?
 #1 market in terms of users

Source: Internet users Penetration Mobile users Penetration

Plus Eight Star,
2009.4
million % million %

China
300 24% 640 49%

US
225 73% 260 85%

Japan
100 >70% 110 >80%
 Chinese Internet Players Enjoy
Higher Margins than Global Peers
Source: Operating Margin Company Operating Margin
Plus Eight Star, 2009.4

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 US China
(source: Plus Eight Star, 2009.4)

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%

 Sohu: twice on NASDAQ
• Changyou, online gaming
subsidiary of Sohu lists in
April 2009 with a market
cap over 1 bln USD.

• It is the first IPO on Nasdaq

since November 2009 is a
Chinese company doing
online games

• More about it on The

Economist:
– http://www.plus8star.com/?p=195
 Part 1 Conclusion

1. Why look at China?

China has the world’s largest online
population and is catching up with the West,
sometimes even leading!
2. What does online media
bring to China?
9% 49%

GDP Internet
 China Internet/Media:
Enjoying the Highest Margins
Average operating margin (2008E)

Note: e = Morgan Stanley Research estimates

Source: Morgan Stanley Research, 2008
“Mice Love Rice”
Backdorm Boys
 Enjoy the Olympics online

Time: 19:56
PV: 2,601,435
Replies: 2,649

Quote: “I am so excited about the drummers,

the view is so grand that I cannot type.”
 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
The symbol of online benediction launched by QQ,
32,754,656 QQ users participated in the campaign.

Taobao.com homepage
promoting the donation

41 mln RMB from Alipay and Tenpay within 10 days

Grey websites and no commercial
ads for Mourning Day
People seeking 2.0
 Part 2 Conclusion

2. What does online media

bring to China?
Internet not only creates heroes, but is largely
impacting the China’s society as well!
3. Sources of innovation?
5CTM of Chinese innovation
 1. Copy
5CTM of Chinese innovation
 “Benchmarking”
“Inspiration”
“Best practice”

“If I have seen farther it is only by standing on

the shoulders of Giants.”
(Isaac Newton)
 2. China
5CTM of Chinese innovation
China is learning from the West

2008| 179,800 students abroad

1978-2008| 1.39 million students
390,000 returned to China
Attention Threshold
=
$1 billion?
 3. Combination
5CTM of Chinese innovation
Will it blend?
Tencent (1998)
Registered users
Revenues 2008 (E)
Profit margin (E)
Market Capitalization
(March 2009)
 4. Competition
5CTM of Chinese innovation
What happens when you have
20 YouTube
10 MySpace
5 Match.com
4 Facebook
3 Yahoo
…
4 Twitter
 5. Constraints
5CTM of Chinese innovation
 Low GDP/capita
Small transactions / making millions from cents
 Limited advertising
Alternative business models / B2B toB2C
 Few credit cards, Low trust
Alternative 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
iNezha| RSS-to-IM
Qifang| P2P Micro-lending
Taobao| Incubating 500,000 mini-Taobao
 Contact Us

www.plus8star.com

boyiqun@plus8star.com

boyiqun +81 | Japan

+82 | Korea

bo_yiqun@hotmail.com +86 | China

Telecom & Internet

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About +8*
There are more ideas
outside your country
than inside
Tom Kelley
CEO, IDEO
The 10 faces of Innovation
 “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
 Selected References
• Adidas | E-commerce strategy 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

• Hemisphere | Analysis of mobile marketing best practices in Japan and

South Korea (Hemisphere is a leading digital advertising agency),
analysis of leading social platforms (SNS, virtual worlds, online games).

• Microsoft | Analysis of Japan’s key players and market catalysts for

mobile commerce market positioning in China

• DeNA | Case studies of the best practices of leading social networks in

China and South Korea (DeNA operates Mobile Game Town, Japan’s
leading mobile SNS service)

• China Mobile | Benchmark of Korean leading online communities

• Sands Capital Management | Evaluation of China’s investment

opportunities in social networks in China
 Social Contribution
• Mobile Monday
– Founder of the Mobile Monday forum in Beijing since 2006 (3,000+
members, 27 events, over 100 presentations).

• Media
– Monthly column on Asian innovation for Asian Business Leaders
(one of the leading Chinese business magazines), numerous interviews in
international media.

• Events
– Regular keynote speaker and moderator at Internet, Telecom, Media and
Investment events
e.g. eComm, ITU Asia, Asia Venture Capital Forum, China Mobility International
Summit, O’Reilly’s Graphing Social Patterns, Red Herring Asia, Media 08
Conference, Wireless Developer Forum, Open Web Asia, XMediaLab, Mobile
Monday Global Summit, etc.)
Thanks!