×

Rise: Why China’s Internet is Bigger…And Different

Abundant capital, rapid change, and growing sophistication are the key characteristics of China’s Internet landscape. So, too, is the guiding hand of the central government.

Published Tuesday at the Rise tech conference in Hong Kong, the China Internet Report shows that the Middle Kingdom already counts 772 million Internet users and 753 million mobile Internet users. While larger than the entire population of the U.S., those numbers represent just over 50% of China’s 1.4 billion population and are expected to grow further.

The report – published by the South China Morning Post, Abacus News and 500 Startups – shows even greater disparity in the numbers using mobile payments. China counts 527 million, representing 37% penetration, while the U.S. has 48 million users, or just 15% of its potential market.

The report points to four key trends of the Chinese Internet. The three largest players, Baidu, Alibaba and Tencent, have diversified across 10 or more sectors – ranging from e-commerce and content to autonomous vehicles, gaming and education – and become platform companies. (Baidu trails the others in its diversity, being absent from the e-sports and social media sectors.)

Internet penetration of 35% outside urban areas is empowering, informing and including China’s rural population. Some 50% of the rural population is expected to have e-commerce facilities by 2020, while 55 million students are reachable for online distance learning.

In contrast to U.S. and European markets, social media is the pillar for e-commerce, education and streaming in China. The report points to 46 million daily average users for Paopao, the social media unit of video streaming service iQIYI.

And, while some Rise participants praised the Chinese government’s support for development of key online sectors, the report described the role of regulators as a “visible hand.” The government has outlawed cryptocurrencies and driven thousands of smaller players out of the peer-to-peer lending businesses.

The government is notably interventionist in terms of content. The report cited examples of quiz apps and news aggregators being ordered to scrub their sites of certain content and commentary. It also told online stores what apps would not be tolerated.

Such government intervention has not stopped a massive increase in audiences for short-form video, and for online to become a dominant form of news delivery. The number of users of short-form video apps doubled in 2017 from 203 million to 414 million. Kuaishou and the trio of services from Toutiao were China’s top four short-video services last year. Tencent News is the country’s dominant news app with 259 million users, ahead of Toutiao, though Toutiao and NetEase News claimed longer daily usage times by subscribers. That has put a large proportion of the news industry outside the operation of state-controlled media, and so attracted regulatory interest.

The report shows Toutiao to be the best-funded news and content startup company in China. It has attracted $3.1 billion of capital from investors including SIG, DST, General Atlantic and Sina Weibo, several multiples more than second-place Ximalaya. Among financiers, the report finds Tencent to be the biggest investor in the news and content sector, ahead of IDG Capital, Zhen Fund, Matrix Partners and Sequoia Capital.

A similar cluster of tech investors has strengthened China’s online and mobile gaming sectors, which now account for 28% of gaming software revenues worldwide. (The U.S. stood at 22% in 2017, according to the report.) Tencent and NetEase dominate the sector.

More Digital

  • Vobile - ZEFR acquisition - Yangbin

    Zefr Sells Its Copyright-Flagging and YouTube Channel-Management Businesses to Vobile for $90 Million

    Vobile Group, a video protection and measurement company, announced a deal to acquire Zefr’s RightsID copyright-management and ChannelID YouTube channel-management businesses for about $90 million. According to the companies, Zefr’s RightsID and ChannelID together generated over $40 million in revenue in 2018 and were profitable. The deal stands to more than triple the revenue for [...]

  • Justin Connolly

    Disney Merges All Media Sales and TV Channel Distribution Under Justin Connolly

    Disney promoted longtime ESPN exec Justin Connolly to the new role of president, media distribution, overseeing a single organization that combines all of the company’s media sales and TV channel distribution operations. Connolly previously served as EVP, affiliate sales and marketing, Disney and ESPN Media Networks. Based in New York, he will report to Kevin [...]

  • NASA - International Space Station

    Hulu Is Getting NASA TV in Time for the Moon Landing Anniversary

    Hulu’s live TV service is getting NASA TV just in time for the 50th anniversary of the Apollo 11 mission. In addition to a live feed, which is available only to subscribers of Hulu’s live TV tier, Hulu is also gaining access to select NASA TV series on demand. The live TV deal was announced [...]

  • iheartmedia logo

    iHeartMedia Stock Drops in NASDAQ Debut

    Shares of iHeartMedia, the U.S.’s biggest radio network, fell as much as 7% after they commenced trading Thursday on the NASDAQ Global Select Market, and ended the day down around 3%. Last month, after exiting a year-long bankruptcy reorg, iHeartMedia announced it was approved for listing on NASDAQ, instead of pursuing an IPO. The company’s [...]

  • iHeartMedia-Pride-Media-TheOutcast-Logo

    iHeartMedia, Pride Media to Co-Produce Slate of LGBTQ+ Podcasts

    iHeartMedia is teaming with Pride Media, the media company whose brands include Out, The Advocate and Pride, to co-produce a slate of LGBTQ+ podcasts in 2019-20. The partnership will kick off with “The Outcast,” an iHeartRadio original podcast co-produced with Out Magazine. Hosted by Out Magazine deputy editor Fran Tirado, the weekly podcast will explore [...]

  • Netflix Reed Hastings

    Netflix Shares Dive After Q2 Stumble: Just a Hiccup or Sign of Bigger Trouble?

    Netflix badly undershot its subscriber forecasts for the second quarter of 2019 — posting its first net U.S. customer decline since 2011 while growth slowed considerably overseas. The company added 2.7 million subs worldwide, almost half as many as the 5 million it had projected. With the big miss, Netflix shares took a predictable hit, [...]

More From Our Brands

Access exclusive content