Apps & China: How to Penetrate the Market, and What Lessons to Learn
A report released last October noted that “China hit an industry record with the highest revenue quarter the iOS App Store has ever seen”. The numbers were impressive.
In fact, the study states that not only does China hold a 15 percent lead in revenue generation over the U.S., but also China’s growth “is projected to climb further by 2020.” That’s because, according to TechCrunch, “Today, Chinese consumers spend more than 5 times the amount they were spending compared with just two years prior.”
- What’s driving this growth?
- Is it sustainable?
- And, importantly, how are players in the Chinese mobile industry are interacting with markets in the rest of the world?
To learn more, we spoke with Jon Tan, StartApp’s Director of Business Development, APAC.
To begin: What are the key drivers behind the exponential market growth in China?
Jon: The biggest driver for growth in my opinion was the affordability of well-made smart phones for $200-300. Xiaomi is a good example of a company that has built a multi-billion dollar business manufacturing relatively cheap smartphones for the masses. With more people using smart phones, they are able to consume more content, download more apps, and play more games.
Are app publishers there making money… or just gaining market share?
Jon: The strategy for China’s app developers is to first buy users – to gain market share and then start to monetize with ads. At the end of the day, it’s all about making money in the shortest period of time. Chinese investors are very impatient and would like to see returns ASAP.
What monetization strategies do you see in China? For example, eMarketer writes: “Mobile devices have helped bring the Internet and digital media to more people in China than ever before. But 2015 research suggests that users in the country are less receptive to mobile video ads than their counterparts around the world.” Does this guidance hold true for apps?
Jon: I’m seeing video as a huge potential monetization opportunity in China. As the article mentioned, Chinese users are not receptive to it. But that’s because no company has been able to do it well yet. Also they are afraid that watching videos will use up data on their phone, as in China there is no unlimited data plans. Splash ads are super popular in China right now as the most popular apps in China: dianping, (like Yelp), eLeMa (a food delivery app), and taobao (Amazon) are all using it.
Can any of these strategies be exported to other regions?
Jon: Yes I believe most other countries would be open to it as well.
Games are the most popular apps in China, according to TechCrunch, followed by “Entertainment, Social Networking, Books and Photo & Video applications were the top-grossing categories beyond games, and have seen their revenues more than triple year-over-year.” Which of these categories should be poised for biggest growth?
Jon: Social apps are going to be huge in the next coming years for China. Currently there’s a huge popularity of live broadcasting apps (yinke, Bigo Live) and dating apps (TanTan and MoMo). The culture in China isn’t as open as the West; men are shy to approach women and they would rather do so over the phone first before meeting in person.
Venture Beat recently looked at the exponential growth of apps and smart phones in China and, talking about “Western marketers, app developers, advertisers, and publishers” concluded: “But while the market is attractively big, and certainly growing fast, taking advantage of the opportunity isn’t going to be that easy.” Do you agree? Why/why not?
Jon: I agree the potential is huge. But for Western companies to succeed here, they must localize for the Chinese market – preferably with a local partner. A lot of gaming apps want to enter the China market. But you need to change the whole game around, from the characters to language, to fit the local market.
Similarly, Jeff Kim, CEO of Neumob, wrote in Venture Beat: “I see something far more daunting than an internal localization program and having to learn how to submit to Baidu and Tencent’s app stores, and it’s a problem that affects virtually all mobile apps, from mobile commerce to travel to games. It’s what happens when a combination of government firewalls, rapid network build-outs, a surging user base, legacy smartphones, and plain-old internet-to-mobile network handoffs result in sluggish app performance, app time-outs, and highly frustrated users.” Do you agree?
Jon: I agree about the app churn, and I think it’s happening in all markets not just China. China seems to have less patience with poorly made apps as a lot of companies with money are releasing products that aren’t fine-tuned compared to the states.
Can the trend sustain? Do you see China as a prime growth market still — or is saturation a concern?
Jon: I still think there’s room for growth, as there are 1.2 Billion people and only 500M active smartphone mobile users connected to the Internet.
What about the rest of Asia Pac? Is China evidence of future growth across the region — or are there attributes unique to China that would not be transferrable offshore?
Jon: I think the success of Chinese app developers in China means folks are looking more and more into investing abroad starting from South East Asia. This goes for games, social apps, utilities, etc. India is a huge opportunity for Chinese app developers as they see India much like China was 8 years ago. APUS is a good example of a company investing huge resources into India.
Cheetah Global Lab recently reported that Chinese mobile games are growing in popularity abroad. Why is this? Do you see this as a growing trend, or simply Chinese developers gaining an initial foothold overseas? Also, what attributes from Chinese developers do you see that developers in other regions should note? Are Chinese developers more likely to gain ground in BRIC countries — or are Western markets also up for grabs?
Jon: In the past, Chinese developers have been copying successful Western games such as Game of War. The first really successful game by a Chinese developer abroad was Clash of Kings, which was developed in house by Elex and is very similar to Game of War. Chinese developers are getting very good at copying games and making their own twist on successful games, as they have cheap development overhead and tons of money to spend for marketing. If a game isn’t doing well, they will scrap it and develop a new one in very little time until they are successful. I think they are going to gain more and more ground especially big developers such as Tencent and Netease, which are huge developers in China looking to develop games for a global audience, not just BRIC countries.
More generally, what tips would you have for Chinese developers looking to access Western markets? Similarly, what should Western markets consider when bringing over Chinese apps to compete locally?
Jon: I’d say to spend more time in developing quality games that can engage the user right off the bat. A lot of times Chinese developers are so focused on making money that they force the user to spend money too soon, which turns off a lot of users. A great example would be Supercell’s games freemium model, which lets you play comfortably and allows you advance far into the game without spending money. For Western markets considering to bring over Chinese apps, it’s key to localize with a local product and marketing team.