China Research Report June 2007. China Office 1 employee: Reno Peng We’ve been busy setting up...

China Research ReportJune 2007

China Office

• http://trac/wiki/InternationalTeam/China

• 1 employee: Reno Peng

• We’ve been busy setting up the legal structure, establishing our physical office, and doing research on not only the China SNS market but also Japan, India and Korea

• http://trac/wiki/InternationalTeam/ChinaReqts

• http://trac/wiki/APAC

Executive Summary

• China SNS Hot, but Internet Advertising and e-Commerce Weak• Total 200+ SNS, $100M+ USD funding, 19 SNS in China Top100, 12 in Alexa Top500 (10

clones of YouTube, 2 of MySpace)

• 2006 Internet Ad Rev : China $750M USD (YoY 44%+) vs US $16.8B USD (34%+)

• Easy Public Networking Features and Mobile Hot• Flash not a problem: Broadband penetration 75.9%, among which Webcam 60%

• Easy Features Facilitates Networking: Social Reference Links, Visit Trackback

• Mobile Hot: heavy SNS usage, WAP penetration at 13%

• No Real Geni Competitor Right Now, but Cloning Fast, but Innovation Low• BabyTree.com offering Parenting Networking, growing fast since launch in March 2007 (see

appendix)

• Jzoom.com cloned Geni/ Genebase, but too weak w/ little $; 2+ genealogy sites trying Family Networking (see appendix)

• Chinese Family-Oriented, but See Limited Value in Genealogy• Little genealogy discovery value: 72.1% Internet users young than age 30s

• Family communications not hard: Mobile users 487M, 38% of China population

• Genealogy research limited, but many records lost during Cultural Revolution; only tracked male side

• Privacy Concerns Significant; Users’ Main Activity is Entertainment• Real Name % < 10%, users fear of being spammed instead of ID theft

Agenda

• China Internet background

• China SNS status– Top10 SNS Research Methodology– Top100 Websites– Top10 SNS– Key findings on success of Top SNS– Successful features of Top SNS

• Issue in China and Next Step

China Internet Summary: Hot industry, Huge user base, Entertainment the #1 Application

• Infrastructure Solid– *Penetration: broadband 75.9% (104M), among which webcam 60%+; WAP 12.4% (17M)

• User Base Huge, but Quality Low, Entertainment is #1 purpose– *72.1% young users (<=30s), out of total 137M users (10.5% of population, YoY 23.4%+)– *Key usage: 65.9% News, 62.2% Game, 56.5% Multimedia, 53.5% Entertainment, 43.2% (60M)

Community/BBS, 44.8% on Email, 44.1% on IM

• Privacy Concerns Huge and Real Name Few– “Users aren’t serious on most Web2.0 sites, not to say on traditional ones, and just play around

not doing real work, usually don’t use real name, not seriously treating SNS as well” --- Keso, #1 China tech blogger

– User fear of being spammed instead of being stolen of ID

• Innovation Low, Cloning Fast– Contents eye-catching on celebrity gossip and porn-like multimedia

• YouTube clones are featuring gossip on homepage & portal ad to bring up traffic• Gouzai.cn 2 times tripled traffic in last 6 mons since launch

– Features complex, times of clicks relatively high• but features itself doesn’t matter too much to the site’s popularity when it catering for users’ swank mentality

– Design busy, only to 1) show plentiful/substantial content 2) reduce times of clicking for fearing of losing users

– $ mostly spent on 1) strengthening servers to facilitate many resource-consuming features 2) branding

• Internet Ad and e-Commerce Weak– *2006 Ad Rev: $750M USD (YoY 48.9%+) vs US $16879 USD (YoY 34%+)

* Source: CNNIC, iResearch

China Web2.0 and SNS Summary

• SNS Hot in Size, Low in Profit– Total 200+ SNS, $100M+ USD VC on 16 SNS (total VC

pool: $5B+)– User Base of Top3: 51.com 60M, Tudou 18M, Wangyou

10M– 10 clones of YouTube, 2 of MySpace and 2 of Facebook in

Alexa China Top100 sites– 19 in China Top100 (19%), 12 in Alexa Top500

• Biz Model a Problem– Estimated Market Value: $45M USD ($21.75M on

Marriage/Dating, $23.25M on Others)– Several purchase, but No IPOs like Mixi in Japan, XING in

German

• Tencent Dominates IM and Accumulated Huge SNS Potentials, All local SNS Face This Pressure

– IM (QQ) Market Share 84.4%, 70M+, among which 9.95% shared w/ MSN

– QQ.com the #1 Community for Entertainment

• Biz Models Hard to Find in China SNS– Most offer Advertising but Rev Low– Few offer Premier Membership or Virtual Goods

SNS User Forecast # (MM)

61

83

104.4

0

20

40

60

80

100

120

2006 2008 2010

IM Market Share

84.40%

13.80%1.80%

QQ MSN Others

Top SNS Research Methodology

Alexa China Top 100 Websites

1. Leads generation:-Scan each site and mark its Category, SNS attributes, US equivalent, Function description-Select each category’s top2

Top 10 SNSIndividual Research

2. Experience and deep dive:-Explore key features of each-Summarize key differentiator of each, as well as find User# and Funding$, thro blogs/industry or VC event news

Final Report 3. Summarize:-Distill key success traits from Top10 SNS-Distill key indicator from CNNIC 2007 report-Analyze SNS market status

Top 100 China Websites per AlexaAlexa China Name

AlexaGlobal Category

US Equiv.

1 Baidu 7 Search Engine

Google

2 QQ 11 Portal MSN3 Sina 13 Portal4 Sohu 20 Portal5 NetEase 21 Portal6 Yahoo

CN32 Portal

7 Taobao 29 Auction Marketplace

8 Google CN

35 Search Engine

9 TOM 51 Portal10 Xunlei 76 Music &

Movie Portal11 Vnet 87 Music &

Movie Portal12 SoSo 89 Search

Engine13 East

Money110 Industrial

Portal14 126.com 122 Mail Service

Provider15 Alibaba 95 e-

Commerce16 Sogou.co 155 Search 17 Xinhua

News Agency

150 Portal

18 ZOL 168 Portal19 51.com 172 SNS

CommunityMySpace

20 Tudou 178 Video Sharing

YouTube

21 TianYa 173 General Community

22 China.com

193 Portal

23 ChinaRen 198 General Community

24 Yesky 226 Portal25 mop.com 241 General

Community

Alexa China Name


US Equiv.

26 Blog CN 319 Blog Service Provider

27 JRJ Finance

207 Vertical Portal

28 cmfu.com

227 Online Reading

29 Phoenix TV

237 New Media

30 PC Online

266 Vertical Portal

31 Hexun 240 Vertical Portal

32 SouFang Vertical Portal

33 Uusee 189 Music & Movie Portal

YouTube

34 Pomoho 496 Video Sharing

YouTube

35 YouKu Video Sharing

YouTube

36 21cn.com 335 Portal

37 56.com 476 Video Sharing

YouTube

38 51Job 305 Online Service

39 5show 267 Video Sharing

YouTube

40 IT168 380 Vertical Portal

41 China Finance

355 Industrial Portal

42 17173 469 Online Gaming

43 PCPOP 333 Vertical Portal

44 3721 426 Search Engine

45 PaiPai 450 Auction Marketplace

46 PPLive 395 Music & Movie Portal

47 IT.com.cn 412 Industrial Portal

48 Qihoo 363 Portal49 CCTV 432 New Media50 China

Webmasters

357 e-Marketing

Alexa China Name


US Equiv.

51 Stock Star

383 Online Service

52 Focus.cn 378 Online Service

53 CNNIC Internet service

54 Bala Music

494 Community

55 HC360 374 e-Commerce

56 Ku6 594 Video Sharing

YouTube

57 4399.com 605 Online Gaming

58 ICBC 370 Non-Internet company website

59 Wangyou 351 SNS MySpace

60 China Mobile

459 Non-Internet company website

61 eBay EachNet

471 e-Commerce

62 People.com.cn

420 New Media

63 VeryCD 393 Online Service

64 1Ting Music

466 Music & Movie Portal

65 Zaobao Newspaper

457 New Media

66 MSN China

434 Portal

67 Xiaonei 657 SNS Facebook

68 Qianlong 552 New Media69 6rooms 623 Video

SharingYouTube

70 ChinaHR 322 Online Service

71 BBVod.com


72 HuBo TV Music & Movie Portal

73 Mofile 479 Online Service

YouTube

74 10jqka Finance


75 5fad 617 Music & Movie Portal

Alexa China Name


US Equiv.

76 GuTX Stock


77 Oeeee.com

568 New Media

78 iPart 742 SNS Community

Second Life

79 ZhanZuo 554 SNS Community

Facebook

80 OuOu.com

384 Video Sharing

YouTube

81 KooXoo Search Engine

82 PPStream


83 Zhaopin.com

562 Online Service

84 Love21CN

613 SNS Community

Dating85 263.com 929 Mail Service

Provider86 Ynet.com 543 New Media87 CN

Webmasters Affl

647 Online Service

88 Enet 635 Vertical Portal

89 Wo99 Music & Movie Portal

90 iAsk.com 671 Search Engine

91 Autohome.com.cn

743 Vertical Portal

92 BT China 722 Search Engine

93 YouTube 4 Video Sharing

YouTube

94 China ACC Assos.


95 DangDang

729 e-Commerce

96 Beareyes.com.cn

820 Vertical Portal

97 Teein 788 Search Engine

98 China Cars

700 Vertical Portal

99 9You 497 Music & Movie Portal

100 XXSY 717 Online Reading

Top 5 Chinese SNS

# Name User #Area

Category US CopyKey

Audience

Alexa Rank

(China)

Alex Rank

(Worldwide)

Reach 3 mos. %

Online Since

1 Tudou Daily video click: 10M+

times

Video Sharing

YouTube Young people eager to express themselves

20 143 33%+ Apr-2005

2 51.com #total:60M#daily new:

100K. Actually

0.9M+. Daily online: 0.2M+

Friendship, personal space

MySpace Young generation eager for dating

25 149 23%- Aug-2005

3 56.com 9M+ (2006 Sep);

2.1M+ of videos.

Video Sharing


17 204 32%+ Apr-2005

4 WangYou 4.8M+ Friendship Friendster

Young people eager to express themselves

61 333 58%+ 05-Jun-2003

5 ZhanZuo 2M+ SNS Classmate/Alumni

Facebook Students/Alumni

55 554 42%+ Apr-2006

Also track key features, financing, team background, and other notes

Rest of Top 10 Chinese SNS

# Name User #Area

Category US CopyKey

Audience

Alexa Rank

(China)

Alex Rank

(Worldwide)

Reach 3 mos. %

Online Since

6 Love21CN

#total: 5M#daily new:

15K

Serious Dating

Match.com

Single people

91 616 20%- 25-Sep-2003

7 XiaoNei 0.3M+ Classmate Facebook Students, alumni

65 678 38%+ 19-Nov-2005

8 Douban 0.45M+"578,518"

from statistics at

douban homepage

Social Reading

N/A People of all ages active in writing review of book, movie, music, and fond of reading/learning

203 1471 23%- Mar-2005

9 Wealink 0.8M+ Business Relationship

LinkedIn Business professionals

961 7545 31%- 25-Mar-2004

9 Babytree 0.4M+ SNS Parenting/Family

BabyCentre

New families, young parents

2424 25930 441%+ 08-Mar-2007

10 UUSee 40M+ (20M+ active user, supposed to

increase 30M+ after

2nd VC)

Video Sharing


35 247 7%+ 21-Jul-2004

Key reasons for Top SNS’ success

• Focused on Entertainment as User Demand– All Top10 are offering featured entertainment content thro public features– Not Requiring Real Name Registration

• Built a Hot Community

• Small but Frequent Product Innovation Helps 1st Mover Secure User Stickness, but Low Brand Loyalty

– Facebook clone Zhanzuo, YouTube clone Tudou still have biggest daily PV in category– First Mover Clone from US Help To Boost Traffic Fast

• New Marketing Idea Helps To Boost– Wangyou: Video competition– Zhanzuo: ‘Occupy Deskmate’– Douban: Social Recommendations– Wealink: Forward Listings to Connections– 56.com: Picture Slideshow

• Partnership w/ Influential Resources Helps To Dominate Market– Zhanzuo & Xiaonei both have strong relationships w/ universities and ministry of education– Wangyou partners w/ TV/Radio Stations

• Rich $ Funding Affords for Server Improvement

• Partnership w/ Big Portal Helps To Boost Traffic and Attract New Sign-Up

Love21CN MSN CN/ Sina

56.com NetEase

Youku/ Ku6 Baidu

Free Public Easy-to-find Networking Features Hot in Top SNS

• Hot Public Networking Features Facilitates User Activities

– Visit Trackback/Pingback - who recently visited you

– User-Generated Social Recommendations Link or Site Recommended Link by user tastes and activities

– ‘Occupy Deskmate’ - recommend or make user partners to increase networking opportunity

– Hot List of discussion/featured items

– Tag Weight

– Copy-paste-able Viral URL/Widget

• Other Hot Private Features• News feed (Facebook-like), News push

(forward-able sharing/wanted listing)

• Feeding Personal Listing/Blog

• Network location/distribution statistics (LinkedIn-like)

• Interactive Wish List

• Lunar Calendar & Fortune Prophesy

Kijiji: Fortune Prophesy w/ Lunar

Calendar

Recommend or make user partners to increase

networking opportunity

Tudou: today his and her interest matches

Zhanzuo ‘Occupy

Deskmate’: today they

two are ‘deskmate’

Who recently

visited you

People who love this item also interested in the following items

People in this group also

interested in the following groups

Hot Networking Feature: Visit Trackback and Trackback Widget

Who recently

visited you

Widget of this feature for other blog/viral usage

Hot Networking Feature:

Reference/Recommendation Link

People who love this item also interested in

the following items

People in this group also

interested in the following groups

Recommendation based on your activities and interests

News feed of other users/friends

He and she shares same interests in these content

Issues in China for US Internet Companies

• Performance

• Global decision making and global product– Microsoft, Apple, Yahoo, eBay, Google…

– MySpace CN has been granted local control

• Crazy competition– Cloning

• PR may not be enough; may need marketing to build brand

• Limited revenue opportunities

• Government regulations

Perfomance Test in Shanghai 1 2 31st time visitor

Homepage 21 16 25

Return user using Alan's tree Reno's tree Reno's treeLogin page 10 4 12Login (Profile view) 10 15 16Login (tree view - see photos in browser view loaded)

15 15 25

Homepage (tree view) - 1st time 40 16 36Tree size 54 out of 386 44 out of 62 44 out of 62Homepage (tree view) - 2nd time 8 20 25Edit Profile (from tree) 7 12 14

Appendix

1.1%

Tianjin 1.9%

West China17.2%

Coastal China57%

1.2 %

0.1 %

0.3%

5.0%

2.0%2.7% 13.4%

3.7%

7.1%

Shanghai3.7%

7.5%

8.2%

3.5%

2.0%

2.7%

1.0%3.0% 2.1%

3.9%

3.8%

2.5%

1.1%

2.8%4.6%

2.9%

0.9%

Beijing3.4%

0.3%

Source: CNNIC

• Geographical concentration

• Chinese users concentrated in coastal areas (57% of total, 2006, CNNIC)

• Top 4 cities contribute 50% plus of advertising sales

• Top 5 cities accounted for 60% of Ctrip’s hotel sales and 80% of its air ticket sales volume, 2004

• Geographical dispersion

• IDC estimates that 80%+ of online gamers came from non-top tier cities (2003)

Distribution of Chinese Internet Users

China Regional Focus Can Vary

数据来源：中国互联网络信息中心（CNNIC）

男性58.3%

女性41.7%


18岁以下17.2%

18～24岁35.2%25～30岁

19.7%

31～35岁10.4%

36～40岁8.2%

41～50岁6.2%

51～60岁2.2%

60岁以上0.9%


未婚57.8%

已婚42.2%


大专23.3%

本科25.8%

高中(中专)31.1%

博士0.4%硕士

2.3% 高中(中专)以下17.1%

17.2% (<= 18yr-old) = 85.21% teenage

66.53% of their parents surf

China Internet User: Young men of high education Level accounts for big percentage

65. 2%

62. 2%

56. 5%

52. 5%

46. 3%

45. 7%

44. 8%

44. 1%

41. 1%

39. 9%

30. 5%

24. 4%

24. 0%

23. 8%

23. 2%

16. 4%

15. 6%

14. 5%

12. 6%

12. 2%

11. 2%

10. 4%

65. 9%新闻一般浏览

游戏下载音乐娱乐信息

下载工具搜索引擎电子邮件

QQ/ OI CQ/ I CQ

( I RC)聊天室工作

学习 MSN微软

医疗信息 (BBS)论坛

旅游信息股票购物

(Bl og)博客专业培训网上支付

网上银行网上拍卖

使用电子邮件的频率（N=1167）

总是5%

有时22%

偶尔24%

经常18%

从不31%

63.0%

66.6%

68.7%

43.9%

44.8%

29.5%

电子邮件

ICQ/OICQ/QQ

聊天室（IRC）

微软MSN

论坛（BBS）

博客（Blog）

Internet Usage more on play and Communications ways can vary

63.0%

66.6%

68.7%

43.9%

44.8%

29.5%

电子邮件

ICQ/OICQ/QQ

聊天室（IRC）

微软MSN

论坛（BBS）

博客（Blog）BlogBBSMSNIRCQQ

Email

Communications ways among typical users

China Market Monopoly of Instant Messenger: Tencent, no public API

market share

Office user distribution & market share

High-level user distribution & market share

Penetration by city

(others) (others)

(Video Sharing)

Zhanzuo.com, more focus on Alumni/Campus Networking

56.com

tudou.com

Youku.com

Pomoho.com

(General Community)

(Blog Service Provider)

(Friendship)

Top Community sites weekly ranking & volume change from iWebChoice*/Alexa

CategoryRankingamong

AllChinaSites

Wangyou.com

iPart.cn

ChinaRen.com

Love21cn.com

(Biz Relationship Networking)

(Marriage/Dating, little-SNS)

(Alumni Reconnecting, non-SNS by 07Q1)

Tianya.cn

Mop.com

Ku6.com, part of volume colluded from mumayi.net, a life SE

Reachweekly

Reach3 mons

ago

3 monschange

PV

1

3

2

Hot SNSCheating Suspicous Notes * iWebChoice.com is a subsidiary of iResearch.com, a MR, in China1 SNS rank

Traditional Community

BabyTree.com

Jzoom.com

China Research Report June 2007. China Office 1 employee: Reno Peng We’ve been busy setting up...

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