Innovation Driven China’s Internet Development

Nikola Zivlak

Marko Ljubičić

Miroslav Radulović

Lifan Yang

Dr. Ming Xu

Palić, April 2010.

Content

• Why China?

• Present situation of China’s internet development

• Chinese innovative companies

• Foreign companies in China

• Conclusions

2

Why China?

“Let China sleep, for when she wakes, she will shake the world!”

Napoleon Bonaparte

3

China

• Civilization with 5,000 years of constant history

• With more than 1.3 billion people (more than Europe, Russian and USA together), China represents around 21% of world’s

population.

• During last 25 years, every 8 years China doubled its GDP.

4

“If you are not in China, you are really not in the game!“

5

Present situation of Internet development in China

• China has the largest Internet population in the world – 384,000,000 users (more than entire population of USA)

• Financial crisis started 2008 had little impact on Internet development in China

• In 2009 the number of users growth rate was 51.7 %

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Why number of China’s users grow so fast?• Chinese government introduced National

Strategy for Information Development from 2006 to 2020 and “Eleventh Five-Year Plan” for Informatization of National Economy and Social Development and invest in IT infrastructure.

• IT development, 3G, usage of mobile phones, decrease of Internet costs

• People’s living standard in China has been improving continuously.

• Due to crisis, large number of workers return home to villages and educate people about IT 7

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Chinese Internet users

• In 2009, 94.3% of Chinese users use broadband connections.

• 155 million users access via mobile phone.

• 80.2% access Internet from home.

• Users are mainly young , especially students, coming from urban area and more developed provinces near the coast.

• 26% of Chinese users shop online

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10

Internet applications in China

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5C’s of Chinese Innovation

1. COPY – Starting point– Everyone tried their luck in China

2.COMPETITION– Companies are forced to differentiate

3.CONSTRAINTS– Revenue models must be adopted to low

incomes and limited online advertising market.

– Chinese user income is around 400 USD 12

4. COMBINATION– Combining ideas in new – ex. Tencent QQ

5.CHINA– Unique market, almost 400 million users– “One-child policy”– Huge revenue by charging only couple of

cents.

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Chinese innovative companies

• Tencent– 90% of its revenue comes from its virtual currency,

only 10% from advertizing

• Taobao– Doesn’t charge commissions on C2C

– Alimama advertizing platform

• Baidu– China’s biggest search engine provider

– 9th most popular web page in the world

– Curently offers 57 different applications14

Foreign companies in China

• Most of foreign companies failed in Chinese market

• They poorly understood Chinese market and ignored warnings.

• Tried to replicate Western business models

• Google.cn just left China in March 2010

• Yahoo, Online gaming…

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Conclusions• “China innovates!”

• Future trends in China – establishing transaction channel for traditional retailers

and manufactures to start with Internet business,

– focus on local needs and situation

– focus on online brand building

– development of new applications for fast growing mobile phone Internet users.

• Capture the attention of China’s internet users and you are almost guaranteed in the top 20 most popular web sites

• Could some Chinese company become “Tencent of the West”? 16

Thank you for your attention

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Contacts

Miroslav Radulović

E-mail: miroslav.radulovic@gmail.com

Tel. (Serbia) +381 63 530 231

Nikola Zivlak

E-mail: zivlak@gmail.com

Tel. (China) +86 139 173 99749

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