Chinese Internet firms going global
China is the world's biggest manufacturer of goods. But with an ageing population and rising labor costs, big challenges loom ahead. So what's the next big driver of China's economic development? We take a look at a new burgeoning front where the country has turned from a student into a global leader. Watch Video
More of our lives are being spent on a small screen. Paying bills, keeping up to date with the latest news and entertainment and making appointments - we do it all, on our smartphones.
"It's scary just how much time we spend on our phones. This might be a frightening number for some, but for others, it is inspiration," said Daniel Epstein.
Last year online business contributed US$131 billion to China’s economy. 22% of that was generated on our phones. Three giant companies – Baidu, Alibaba and Tencent, often abbreviated as BAT – have redefined the internet in China. But you can add to this almost 6 million new startups, just in the first half of 2015 alone, all vying for a piece of China’s ever-growing e-commerce market.
And within this market one of the fastest growing sectors is 020, or online to offline, meaning the blending of e-commerce and traditional retail and services. And 020 competition isn’t just in the digital space.
Here in a commercial district of Beijing, stands are packed with drinks, toys and tea sets. But they’re not for sale.
Every day these 020 startups take to the street, trying to attract new users, the old fashioned way.
An example of what can be achieved by these young startups looms overhead, just across the street. On the top floor of this landmark building, entrepreneur Li Tao runs Apus. It’s just a year old but is already being touted as one of China’s most successful startups.
"I knew the problems users were having and how to solve them. But I didn’t expect the product to grow so fast. After a year, it can already reach more than 200 million users worldwide. Much faster than I expected," said Li Tao, Founder & CEO of APUS Group.
The users Li Tao is referring to, are Android users. The problem is that Android can run slowly and be tricky to manage on older devices. His product solves this by making the device more user-friendly and in turn reducing its energy use – making older Androids look and work like newer ones. The key to his success has been tapping into developing markets, where cheap phones are king.
"The internet markets in both the US and China are pretty mature now. But we’re seeing poor growth in countries like Brazil and India, and in Southeast Asia and the Middle East. This creates a huge potential market for us. We’re thrilled, because we can offer a service to users in these emerging markets and increase our market share," said Li.
But Li Tao’s ambitions extend beyond improving the functionality of phones. Ellen Schaft, a recent communications graduate from Chicago, helps run APUS' online campaigns.
"So every week we make new campaigns that its really be captivating and exiting for our global audiences, we got a lot of feedbacks, we’re just trying to engage to conversation with our users," said Ellen Schaft from Digital Marketing Team, APUS Group.
"A key point in the internet industry is to catch new users. When new users appear the services you offer them will define their future internet experience and choice. We often mention being innovative, but we shouldn’t be innovative only in terms of tech-innovation. Rather, we should be innovative for our users, taking user value as the key consideration," said Li.
It’s no secret that if you want to capture a big audience, you make your product fun. Hence, the rise of mobile gaming. ELEX is the biggest mobile game developer in Asia and the 5th biggest in the world. It’s perhaps best known for Clash of Kings, a mobile game now with over 65 million players. At the company's HQ in Beijing, the offices are named after countries, reflecting their global ambitions.
"We include regional cultural elements in our games for certain countries; users find this really appealing. As a result, we have better coverage than the US-based companies. And we have a better international reputation," said Hyde Hao, VP of Elex Technology.
Elex now has 7 games and over 50 million monthly active users. Although Elex is a notable force in the mobile gaming world, it still lags behind US companies in the English-speaking markets. So, they’ve had to be more strategic in their approach.
"For the moment, we just avoid competing on their key markets, such as the US. Our strategy is kind of like“Encircling the cities from the rural areas”, i.e., encircling the US from other countries. Once our global results are good enough we can return to the US market and take them on," said Hyde Hao.
In 1999 China launched its ‘going out’ policy, a way of encouraging Chinese companies to look beyond the domestic market. Since then, China’s outbound investment across almost all industries, from natural gas, to construction, to telecommunications, has skyrocketed. And more recently, all eyes have turned to China’s e-commerce companies, who despite having a home market base of almost 800 million internet users, have ambitions far beyond that.
So, if you’ve made it as an app developer in China, how do you penetrate the overseas market? To find out we go to Xi’an, the city that’s home to China’s app marketing giant, Yeahmobi.
Peter Zou started out in internet marketing in the US, where he observed US companies repackaging Chinese-made goods and selling them for many times the price. He realized that if Chinese companies could simply market themselves better, they could be successful independently. So he began chatting to a friend back home. Together they conceived of a company that would help other companies go abroad. It was at this time that he began to see the massive potential of the mobile sector.
"At 2010, we already can see the big trend of mobile, but there was no successful company, so at that time, we need going to bet. We need to flip a coin whether we should cut the other business and focus on mobile," said Peter Zou, Chairman of Yeahmobi.
Fast forward 5 years, and yeahmobi is one of the biggest mobile marketing companies in the world. Through a global network of offices they not only help companies like Baidu and Alibaba expand overseas; they’ve also helped companies like Uber enter China.
"So right now I’m in the yeahmobi ,office.hope those clicks turned into downloads."
Kevin Dang, who used to work for IBM, now heads Yeahmobi’s R&D. Their not-so-secret weapon is big data.
"We gather day to day data, also plus those history data, so we can see what kind of app could be accept by what kind of people, with that kind of data ,we can predict what kind of app, if we deliver this ads to the customer, what kind of possibility this user can accept this app, or further to purchase this app," said Kevin Dang.
But for an app to be successful you can’t rely on good marketing alone.
"So basically if you have a good product, and the product can really gave the user benefits, then we can very quickly expand the product to the global market. And we can let the ppl from all over the world can benefit from ur business model, your innovation," said Peter Zou.
"What about innovation?"
"It’s a hard question for me, I think its not about the ability it about the culture .At least now there is not that enthusiasm of innovation; they are just copy the mature business. And to be successful," said Peter Zou.
But others are more optimistic about China’s potential for innovation.
"I’ve met and talked to many CEOs or funders of US or US based Israel high tech startups in Silicon Valley, most of them recognize China’s ability of innovation," said Li Tao.
The US and China are two leading countries now in the industry. American culture are more aggressive. Like facebook, twitter and google, they deliver the exactly same product to the world under one culture. To them, they are the future, they are leading the whole world.
"But I think users don’t care where does the app come from, as long as it solve problems, they don’t care if it comes from China or Japan. Internet is born to be global," said Peter Zou.
"The core value of the Chinese internet industry lies in its innovative business model. China has a market of 800 million internet users. The competition is brutal. Chinese internet firms have learnt from this and become more competitive by focusing on localized services. We’re happy to offer customized products and services, even single functions," said Li Tao.
Amid concerns over the economic slowdown, some worry that China’s startup capital will diminish, in turn knocking confidence in its newly-emerging startup culture. Li Tao interprets the economic slowdown as something natural and healthy – the start of a new phase.
"During the past 30 years, China’s export trade has relied on manufacturing. I think in the next 20 years, China will become the largest global digital goods and internet products export base. We’re switching to e-commerce and e-culture exports. In this sense, China’s economy isn’t slowing; we’re just in a period of industrial shift and strengthening our foundations," said Li Tao.
While China's tech industry has in many ways been playing catchup with the West, when it comes to e-commerce and specifically mobile tech, the competition is on a more even playing field.
"China’s no longer a student of the US internet industry. We now have our own concepts and innovation technology," said Li Tao.
And already examples of China's massive influence on our small devices is right at our fingertips.
"Like I said, utility tool, 9 out of 10 (are Chinese). I believe more and more Apps will be created by Chinese companies," said Peter Zou.