the Web Chef's e-Bytes

Global Nibblets - China and elsewhere

ClickZ reports on research by Point Topic reports that China has now passed the U.S. in terms of the number of broadband subscribers.  This isn't surprising given the relative population size of each country, but is an interesting indicator of the changing web penetration rates around the world. 

ClickZ also reported on Nielsen data showing that active Internet users actually declined between August and September 2008 in the U.S., Switzerland, Japan, Germany and the U.K.   It will be interesting to see the October and November statistics, which should reflect the intense worldwide interest in political news and the Obama campaign and subsequent win.  

Global Tastes - Chinese e-Marketing

iResearch reports that China's e-marketing expenditures rose 44% with online advertising (game ad revenue, e-mail revenue, online advertising revenue, digital magazine ad revenue and misc) spending increasing to 4.66 billion RMB (renminbi) and search engine marketing increasing to 1.35 billion RMB in 2006.

Meanwhile the CNNIC reports that 144 million Chinese are now online with 77 million broadband subscribers among them as of the end of 2006 according to Internet World Stats.

Bad Baidu Beats Google in Beijing, Shanghai and China...

PC World reports on how Baidu has out-gunned and outmaneuvered Google to become the number one Chinese language site in the world and number one search engine in China with 62% of all searches on their site.  In a rare setback, Google the world's number one brand according to Millward Brown and number one visited site according to ComScore (reported at SFGate.com) has some lessons to learn to get China right. 

So what are the factors that have made Baidu successful?  One key to Baidu's success is reported to be their .mp3 search capabilities, a feature that due to copyright reasons has not been pursued by Western search engines.  Another success factor might be the simple user interface that Baidu seems to have borrowed from Google.  Yet another is reported to be that their search results are heavily weighted towards advertising rather than organic search results according to the New York Times.  A final reason is their willingness to allow search results to be heavily censored, a factor that leads to government support for the search engine.  

The Baidu IPO on August 5, 2005 was the "hottest" since Google according to Investor's Business Daily with an initial offer price of $27 a share that rose to $122 by the end of the day.  Today it is trading at $127.39 following first quarter results showing that advertising revenue had led to a profit jump of 143% in the first quarter of the year.

With only 10.7% or 137 million Chinese now online according to the China Internet Network Information Center (CINIC), there are still immense opportunities for growth for Internet players in the world's most populous nation as Internet access continues to expand.  CINIC published their 17th survey on the status of the Interent in China in January.  You can download the 83 page report from their site.

Global Tastes - Chinese Internet Bar Crackdown

China Daily reports that 14 ministries within the government have decided to clamp down on "Internet Bars".  No new bars will be allowed to open in 2007.  With the Ministry of Information Ministry reporting that there are about 113,000 bars, there is a concern that the facilities are leading to Internet addiction among China's 18 million Internet users under 18.  The laws state that the bars can not allow in anyone under 18 and that there will be consequences up to and including forced closings for those that are found not to be in compliance with the rules.

The report claims that a Beijing juvenile refrorm agency found that 33.5% of delinquency crimes (robberies, rapes) among youth were attributed to violent and erotic web sites. Meanwhile, the China National Children's Center claims that 13% of Internet users under 18 are Internet addicts.

Global Tidbits - Forbidden City Blog Attack

The Wall Street Journal (see video interview above) and Times online report on the growing strength of Chinese bloggers.  They site an example of a Chinese blogger who has attacked Starbuck's outlet in the Forbiden City.  The blogger Rui Chenggang posted about why the outlet was out of place and within days over half a million Chinese Internet users had agreed with his position.  This groundswell of citizen anti-marketer's could lead to a decision to close the small outlet.   

With the number two position in the number of Internet users (following the US) at 132 million, the 20 million estimated blogs are providing an important outlet for unhappy Chinese consumers to vent and complain according to The Wall Street Journal.  The nationalistic feelings and inherent conflict between the old and the new that are evident in this response could be an indicator of future problems for other multi-national companies.  In fact The WSJ reports that other companies that have faced consumer attacks include KFC, Dell and P&G.

Global Tastes - Chinese Ganging Up for Web 2.0 Apps

Business Week has an interesting article describing the challenges of Web 2.0 start-ups in China, as they try to capitalize on the 130 million Internet users (up 30% in 2006).  Joining the pressure they face from government censors requiring self censorship and careful content monitoring are pressures from deep pocket foreign investors like Google and MySpace, who see a rapidly growing market.  The challenge for the start-ups will be how do they grow their brand, differentiate their service offering and prepare the foundation for regional or even global expansion like other successful Chinese brands (Haier, Huawei and Lenovo). 

Among the web 2.0 sites referenced in the article are:

• Mojiti - add text and graphics to video clips
• Mop.com - social network
• Mofile, Tudou, Yoqoo, Xunkei - YouTube type video sharing sites with Google having a financial stake in Xunlei. 

Beyond these video sharing sites referenced in the Business Week article, here is a list of additional Chinese video sharing sites.

So how are these sites making money? 

The article states that the monetization aspects of their business models are in their infancy as evidenced by the infancy of the online ad market in China (estimated at $800 million in 2007 compared to $19 Billion in the United States).

Mobile Marketing - US Mobile Web

Rareplay.com has released a study (PDF) of the top 1000 US brands mobile web presence (selected from 2005 Brandweek rankings).  The survey results found that of the top 1000 US brands only 8% were supporting mobile web access.  With the Cellular Telecommunications & Internet Association (CTIA) reporting that in September 2006, 72% of Americans had cellular phones and an increasing number of them are looking to use their phones to access content and services, the number of free mobile ready web sites is disarmingly low.  The research compressed brands into one of 15 categories and found that selected industry categories were doing better at offering mobile web sites, with the following leaders:

1. Internet/ISPs - 23%
2. Travel - 18%
3. Insurance - 17%
4. Entertainment - 17%
5. Electronics/home appliances - 16%

The laggard industry sectors with less than 1% having mobile ready sites included retail, pharmaceuticals and education.

A mobile ready web site will typically be less than 5K according to the report.  The brands were evaluated by looking at their websites and also looking at whether the brands used at least one of nine known mobile domain formats.  The research report includes screen shots of several of the mobile sites.

According to the research report, Alexa results show that 42% of the top web sites have a mobile version.   

According to comScore Networks Research 19% of U.S. Internet users over 15 are accessing the Internet using mobile phones.  This compares to a greater penetration of 34% in Germany and Italy.

Global Tastes - Chinese Instant Messaging 295 million or 120 million?

eMarketer has a new briefing (limited time free access) on the size of the Instant Messaging market in China and the leading providers of Instant messaging services.  According to the report describing research results from Analysis, there are now 828 million instant messaging accounts in China with 295 million of these being active.  These numbers sounded way too high to me, so I did a bit of research and came up with an iResearch report that forecast the number of instant messaging users in China at 120 million in 2006.

Shanghai Research, Co., Ltd meanwhile reported that MSN Messenger is running a distant 2nd with 13% market share compared to the leading Tencent QQ, with 78.8% market share in the November - December 2005 period.