The tip of the mobile data iceberg in China


You’ve probably read lately about how the mobile market in China is blowing up, but let me put those headlines into perspective for you: China ended 2011 with 356 million mobile Internet users, up about one-third over the previous year, according to statistics released this week from the China Internet Network Information Center. The country has 190 million smartphone users who spend an average of 109 minutes a day on the mobile Web.

Compare those numbers to the U.S., which claims a mere 100 million smartphone users and where the monthly mobile Internet penetration recently reached 114 million people, Forrester recently estimated. And Flurry recently said the average U.S. mobile user accesses the Web for 72 minutes per day on their handheld device.

You may not be surprised to learn, then, that China now accounts for more Android and Apple activations than the U.S., and that the country is poised to become the biggest smartphone market in the world this year.

The tip of the iceberg

Amazingly, though, this is just the tip of the iceberg in China. The mobile penetration rate there stands at about 73 percent, the China Daily recently reported; the U.S. wireless penetration rate is just shy of 100 percent. And the 3G penetration rate – 3G!is just 14 percent. That figure is particularly noteworthy because the rollout of 3G networks has been a key development in the surge of mobile data consumption, just as the evolution from dial-up connectivity to mobile broadband spurred traffic on the fixed-line Web. So just as there’s still tremendous room for growth in terms of networks and handsets in China, we’ll also see a dramatic increase in the usage of apps and the mobile Web.

The question for overseas players is how to tap that market. Here’s a quick look at some of the biggest challenges for outsiders looking to gain traction in three mobile segments:

Handset manufacturers. Fake stores and knockoff handsets remain a serious problem in China, and nobody knows that better than Apple. The market teemed with counterfeit handsets even before the iPhone become available, and one group was busted last year after reportedly making knockoff iPhones using real components. Meanwhile, Chinese authorities busted nearly two dozen stores last year that were using Apple’s name and logo. The lesson for manufacturers is simple: Work with carriers as closely as possible to build retail distribution chains, and encourage government officials to investigate pirates.

App developers. While carrier app stores have yet to make any sort of dent in Apple’s App Store or Google Play, China Mobile has built an impressive audience of 150 million registered users for its branded app retail outlet. So rather than simply relying on uploading apps to the dominant worldwide outlets, app developers targeting Chinese users must investigate carrier app stores and tweak their offerings to make them available through as many home-grown distributors as possible.

Mobile advertisers. Advertisers can find all sorts of data to help them target users in massive  cities like Beijing and Shanghai, but precious little information on businesses and user demographics is available in smaller cities, as AKQA’s Jia Zheng discusses in this short video. So in addition to traditional data sources, advertisers would be wise to tap social networks in those markets to understand how consumers are using their phones and to extend the reach of their brands.

And despite the rosy near-term outlook for mobile data in China, it’s worth noting that the country isn’t likely to even issue licenses for LTE build-outs for another two or three years. Those new networks will give an added boost to mobile data usage, just as the evolution from 2G to 3G is currently providing. That’s just one more reason companies are rushing to tap the market in China despite the country’s unique – and sizable – challenges.

Question of the week

What are the biggest challenges facing outsiders looking to tap the booming mobile data market in China?

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