Creating Consumer Value In Digital China: Meeker’s At It Again

After a blockbuster 200-page report on China’s Internet sector in April last year, Mary Meeker (and her team) is at it again, covering the same sector again…the 118 page report and 75 page presentation are here. The report comes on top of heated competition among US. players, with eBay, Yahoo and Google already slugging it out there.

Some key points from the MS team:

– Online gaming is our favorite segment pick. Local players with self development and distribution capacity may emerge as long-term winners.

– We believe competition is breaking out in online brand advertising, which faces inventory oversupply and a secular shift toward performance-centric models. Paid search, on the other hand, is poised for robust expansion.

– We view mobile value-added services as an overlooked opportunity. Despite regulatory concerns, entry barriers are rising and a segment recovery is in sight.

The top 10 trends in the market:

1 – Growing Faster Than Other Markets…with More Potential

2 – Internet Brings About Cultural Evolution

3 – Unlike the Rest of the World, China Internet is Mobile-centric Rather Than PC-centric

4 – Foreign Interests Accelerating

5 – Hotspot for Mergers and Acquisitions

6 – A League of Big Players…

7 – Leadership Position May Not Necessarily be Secure

8 – Purer Plays Tend to Have Higher Market Share

9 – Regional Focus Can Vary

10 – Content Becoming King

On that 10th point, these points below are good;

- Content providers gaining pricing power

– TOM Online paying out 40-50% of revenue to music companies for distribution rights

– KongZhong paid 5x more for wireless distribution rights for leading blockbuster movie
vs. 2 years ago

– Foreign game developers, such as Actoz and Blizzard, command multiple fold higher
licensing payment vs. several years ago

- Rollout of new wireless and broadband services creates demand for
quality content


– China Mobile’s color ringtone users have expanded at quarterly compound rate of 90%
over past 1.5 years

– Most popular song, ‘Mouse Loves Rice,’ downloaded 5MM times in 2004 with potential
profits exceeding the best-selling CDs

– Content providers, such as MTV, may produce more revenues from MVAS than from
pay TV in a few years

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