In China, the internet of things is a social phenomenon

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Chinese e-commerce provider Alibaba may be popular this month because of its blockbuster IPO, but it and several other big Chinese web properties such as Baidu, Sina Weibo and Tencent are keen to expand beyond e-commerce or social networking and into the internet of things.

In conversations with companies doing business in China on the IoT front, the picture that emerged was clear. China is adapting to the internet of things like it adapted to mobile — by leapfrogging earlier infrastructure efforts and letting the consumers adopt services with rapidity not seen in the U.S.

Ayla CEO Dave Friedman, whose company provides cloud-based services for the internet of things, explained that Ayla has been investing in the Chinese market and expects the company’s revenue from the Chinese market to surpass spending from the rest of the world by 2015. “This is the year of the announcement in China, but by 2015 and 2016, there will be services,” said Friedman.

obtained a license to serve as an Internet Content Provider (ICP) in China,

When it comes to the Chinese consumer, the established Chinese web brands rule. "The social networks become the hub," Friedman said. "They are the channel, and major manufacturers are talking to the social networks to make your thing work with their service." While the social networks with their billion plus users are the sales channel to the Chinese consumer, there's still a significant enterprise play for Ayla as well, mostly around energy efficiency. Ayla is being used as the back end for building management automation, where the Chinese are exploring a variety of different business models around the data that devices send.

Chinese firms also noticed the Google acquisition of Nest for $3.2 billion, which got many of the industrial manufacturing partners excited not just about the local Chinese market, but about building connectivity into their products for shipments abroad.

“This is how the Chinese business model works,” said Phillip Chang, VP of Greater China for Ayla. “They look at the internet space and then localize it for Chinese needs and even mobilize it to make it better. For [company]Yahoo[/company] there is a [company]Sina[/company], and for [company]Google[/company] there is a Baidu. And after [company]Nest[/company] and [company]Dropcam[/company] interest in the internet of things just flared up and every wants to be the expert now.”

But it’s not just Ayla that’s excited. [company]Cisco[/company] is making investments in the Chinese market as well. Chee We Ng, a Cisco investment professional based in Shanghai, explains that there’s not as much strategy behind some of the excitement in the sector in China, but a lot of vision and movement.

“People don’t know what will stick but they know they want to be left behind,” he said. “In the U.S. especially, these big firms will go out and do market research and try to understand what the internet of things will mean for their business, but in China, there’s less worry about the implications.”

Which means we might see novel partnerships and business models emerge there ahead of here in the U.S. As for regional differences in consumer demand for smart products, both Chee and Ayla’s Chang say that environmental sensors such as air quality and purifiers are big in China where there is little trust in the government’s reported stats.

There’s also a big push for energy conservation driven by the high cost of energy in China and a desire to reduce pollutants. But the picture emerging, is one where anything goes, from [company]Baidu[/company], better known for internet search launching a pair of smart chopsticks that can detect contaminants in food to a deal that let’s Weibo users turn on their air conditioners via the microblogging service.

4 Comments

dnnielsen

I think something will hold back the Chinese adoption of IoT – the lack of startups going to market in China.
As a hardware startup although all your stuff is probably produced in China or it’s backyard(s), it seems very few actively engage the Chinese market.
Google, Cisco etc. has the manpower to break through, but the Kickstarter funded hardware startup has no chance to break through.

What’s your take Stacey? Do you think we’ll start seeing startups from China crossing into international markets, or will distribution/GTM strategies develop to the point where “western startups” can effectively market to the Chinese consumer or business?

Stacey Higginbotham

I think a U.S. small hardware startup isn’t focused on China today, but the back end service providers like Ayla, ThingWorx (PTC) , and even Amazon are. I tend to see the Chinese influence on U.S. startups more in their admission that they won’t be in the hardware business for long and plan to focus mostly on software (Oort is one of these) after using hardware as the entry into consumers’ homes.

raincoaster

Reblogged this on The Cryptosphere and commented:
What would happen to the political landscape if China became king of the Internet Of Things? If your toaster oven reported to Beijing instead of to San Francisco (those are your choices, really). Would it ultimately provide an intelligence database for diplomatic or even imperial actions? Some disturbing questions, for toaster oven software.

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