5 Things Mobile Companies Need to Know to Succeed in China
By 2020, China mobile app revenue will gross for and estimated $30 billion dollars. Currently it is on pace to make $11 billion dollars. To even have a chance at success, you need to know a few things about China…
1. Fragmentation
Experience Fragmentation. In general the markets are fragmented, as well as experiences. Over the Chinese New Year, a popular document was circulating around WeChat of observations from hometowns when they visited China (h/t Adora Cheung). The observations range from — packed restaurants, expensive cars to ghost towns and everything in between. I couldn’t answer if China’s economy was doing better or worse for the normal Chinese citizen.
Technology Fragmentation. For mobile companies, it is estimated that China has more than almost 1 billion mobile users. This is split among 400 handset brands, across Tier 1, Tier 2 and Tier 3 cities. This means the technology varies from 2G all the way to LTE, despite amazing efforts to upgrade the technology across the country .
Incentive to remain fragmented. Many Chinese companies do not think about expanding out side of China because the market at home is so big. If your company has 25% market share, that is about 500 million people (assuming a population of 2 billion people). That is still a great business. This leaves for incentives for companies to remain fragmented, especially for those that have an offline component.
Marketplace Insight: China has leapt frog into the mobile world with their apps and ecosystem supporting it. The adoption of mobile payments have penetrated deeper than mobile payments in Silicon Valley — the earliest adopters of technology. This means working to have your app successful in China, you must think of a mobile-only context interacting with the offline world- “mobile-first” or “and-mobile” is the wrong mindset to apply here.
2. Platforms
Well, who owns these platforms on these handsets? For iOS it is easy — Apple manages their own store and working with them is in many ways similar to working with them in the US. But Android is a very different story.
Android has an estimated over 200 app stores, and Google Play is not there (although rumor is that it is launching soon). The top 3 represents about 60% of the market, pretty evenly split up between the stores. Therefore, just focusing on the Top 3 may not help you distribute as wide as possible. In teh future, app stores on Android will consolidate as smaller app stores will have a harder time staying alive. However, consolidating into one big one (like Google Play) on Android seems unlikely. The likely scenario is the Top 3–4 would remain evenly split on the lion share of the app ecosystem.
3. Partnerships
Partnerships become a key to managing this fragmentation. In China operate closer to middle men. They partner with you to share in the upside and take a cut with the promise you can get wider distribution. With so much fragmentation, many companies look to partnerships to help consolidate and navigate. And, there are many partners ready to take the opportunity and challenge.
Societal Insight: Due to censorship, the written word may not be as easily used for information gathering as it is in the west. Finding out who the players are requires effort in building and maintaining relationships through a lot of face to face time.
Partnerships (or relationships) are certainly something that becomes necessary when entering the murky waters of China. Not only is the ecosystem, but society and culture is incredibly complex. Knowing the subtleties of gaining trust and respect can be different and difficult to decipher if you have not invested time in it.
Cultural Insight: Did you know that in Chinese when you address a relative, the title takes into account older/younger, male/female, mother’s side/father’s side, and generation? The titles then change depending on context from the person addressing. Even, many local Chinese even get confused and can never remember the appropriate titles, so it is incredibly complex.
Layering together complexities and fragmentation of the economy, ecosystem and society — relationships (or partnerships) are necessary to succeed.
4. User Acquisition
In the Western world, the US in particular, the web has become the dominant way to advertise for technology. The low density of the population has encouraged and found this to be the most effective way to reach as many people in a spread out across many miles. In China, leveraging density becomes key.
Offline. Over 9 million people ride the Beijing Subway system, and is the highest annual ridership of 3.41 billion trips. This is just Beijing, not all of China. Media and TV is highly regulated. This means with few players in the system the large density of people will go to very few sources of information . Therefore, launches leverages this type of density and consolidation with large offline and media events using PR.
We-Media. Outside of traditional media the rise of WeChat (China’s Messaging/social network) and Weibo (China’s Twitter) has enabled a new kind of social media that is leveraged in acquiring users. This new media is commonly referred to as We-media. On Weibo, the #1 celebrity has over 80 million followers within China alone. Wechat has over 1.1 billion accounts, with 650 million monthly active users . Many celebrities have been born using social media to influence and converse with their followers.
Media Insight: After spending much of my time making sure the links were correct and our website was ready for the first article we published for the Chinese media, I found out that most news publications will not link outside of their site. A whole post can be dedicated to why, but it is indicative to how information sharing is done and brokered.
Digital Marketing. There is still room for this, but this by far is the smallest part of the budgets, in particular for mobile games.
5. Commitment
Lastly, and the most important key to success is a commitment to China. Demonstration of commitment in time and money. The highest levels of the organization, the CEO and executive team, need to put it as a priority to even get a shot at the $11 trillion dollar marketplace.
On a Saturday morning I got a call from a Board member of a gaming company in the West. He had all these questions about the Chinese market place and what it took to succeed. When I asked him: How come he was calling on a Saturday to learn about China versus the CEO? I knew from that moment their chances were doomed.
China needs to be seen first, and then it can be heard.
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I am the co-founder and Chief Development Officer of Kabam. I am currently in Beijing, China.