By Alvin Wang Graylin, CEO of mInfo Inc
China is by far the largest mobile market in the world with over 800 million active subscribers, over 250 million mobile internet users and over 200 million new handsets sold each year.
Even at this scale, the growth hasn’t slowed, with 8 to 10 million new subscribers are still being added each month (the size of a medium size operator in many countries!)
One of the most basic facets of the Chinese mobile market, in addition to the raw size, is the core operations/culture of the mobile carriers themselves. All three Chinese carriers - China Mobile, China Unicom, China Telecom - operate both mobile and landline networks, and are essentially state-owned enterprises, even though their shares are traded on the public markets.
Every few years, the leadership of these carriers change places in a kind of “musical chairs” movement. Major policies/strategies of these carriers are controlled by the central government ministries not to optimize profits, but rather to optimize execution of the government’s long term plans. (see this Guardian article)
Just over a year after officially starting 3G deployments in China, there are now over 30 million 3G users in the market, with ~30% of new subscribers being 3G users.
Unfortunately only accounts for less than 4% of the installed base. Lack of number portability, multiple standards, spotty coverage, higher price plans, immaturity of TDS-CDMA and limited choices of 3G handsets have all contributed to slower than expected adoption rates. 3G penetration will undoubtedly accelerate in the coming 1-2 years, but it will take at least 3-4 more years before it will overtake 2G user base.
Although behind Western markets in 3G adoption, China’s smartphone penetration is on par with most developed markets (25-30%). At the end of the day, most experts will agree that advance handsets have done more to change user behavior than availability of higher network speeds. A single handset, the iPhone, has transformed the US market from mobile industry laggard into a trendsetter.
The penetration of the iPhone in China is far below developed markets. They account for less than 1% of all handsets in the market (iPhones compose over 70% of smartphones in Japan), compared to ~40% market share for Nokia (Symbian) phones in China. The price premiums of the iPhone and lack of Chinese apps/iTunes adoption has made it less attractive in the market, but lower cost iPhone copies and Android smartphones will grow in market share in the near future.
By early next year, industry experts expect to see 800-1,000RMB ($120 to $150) Android smartphones hit the market By contrast, the iPhone was selling for 10,000RMB ($1,500) when released, though they are now available for less than 6,000RMB ($900), and less than 3,000RMB ($450) with a contract.
ShanZhaiJi (fakes/clones) of leading smartphones sell for 400-800RMB/unit ($60 to $120). Custom versions of these ShanZhaiJi phones can be turned around in a matter of weeks vs. the months or years of the big brands, and often with advanced/unique features not available in the originals.
China’s consumer behavior is also a bit different than Western markets.
In the US, people complain about spending $99 for a new phone (0.25% of average US annual salary), whereas the average Chinese consumers won’t hesitate to spend 2000-3000RMB ($300-$450 or ~10% of average Chinese annual salary) for a newly released phone. 56% of phones sold in China in 2009 were above 1500RMB.
The mobile phone is not only a communication/productivity tool but more importantly a status symbol or fashion accessory for the modern Chinese consumer, and worthy of the investment.
Well before American Idol introduced SMS to the US market, China had broad base adoption of text messages. In 2005, SMS adoption was already above 95%. And even today, SMS is still the preferred means of communication for the mobile phone (in fact, preferred over voice).
And rather than surfing the shrunken internet sites that the iPhone popularized in the US, Chinese mobile users still prefer the “mobile internet” or WAP sites (Wireless Application Protocol sites) that is viewable on even primitive 2G phones.
Although China’s mobile industry as a whole is huge, its mobile marketing spend has not yet followed. There are certainly large amounts of money flowing between consumers and carriers for telecom, data fees and value added services fees, but very little flowing between advertisers and mobile properties/agencies.
The total mobile marketing spend in China was between 100-200 million USD in 2009 (ranges widely depending on source), which represents about ~0.6% of total ad spend in the market. Given the reach, precision, richness, timeliness and influence of this medium, it’s only a matter of time before these numbers spike.
Even though the total ad budgets have not fully materialized as we’d all like, there is certainly strong interest and intent on the part of major brands to include mobile as part of their marketing mix. Unfortunately, most of them don’t know the best way to do this, and sadly, neither do their agencies of record. Some more progressive agencies have already formed mobile focused arms to service their clients, but even these organizations are understaffed/under-resourced and often included in the client’s planning process only as an afterthought.
For those brands that have tried mobile, most have found it to complement their existing marketing mix quite well and could often greatly enhance the effectiveness of their campaigns with a minimal cost impact. We have seen clients with over 10X ROI for budgets they’ve put into mobile campaigns or marketing elements. Response rates, redemption rates and conversion rates are all much higher on mobile vs. online or traditional media, and what’s more, mobile is more measurable and allow for long term communication with the target customer once they respond.
A wide range of mobile formats are being actively tried and used in the Chinese market.
No matter what technologies or mobile elements are chosen, the key is making sure that mobile elements are integrated into the overall marketing plan from the beginning while keeping mobile media’s advantages in mind and integrated with all the traditional media elements.
Secondly, it is important to focus on creating “long-term” trusted relationships with your customers via the mobile medium - don’t just spam them, give them value. The ROI on mobile spending within campaigns is proving to be quite high. We’ve seen a number of campaigns where mobile KPI can exceed that of Web portion even at a fraction of the costs.
Over the next few years, the telecom infrastructure will continue to be refined and optimized as will the handset technology the consumers buy. Mobile marketing formats will get even richer and more engaging as marketers learn what works on this medium and how best to integrate it with what they already do.
Just as users have grown to depend on mobile in their daily lives, marketing will grow to depend on mobile to enhance the effectiveness of their campaigns and tie together the disparate pieces in their marketing plans. Mobile handsets as the center of communication, computing and media consumption in China will come faster than most will expect.
For more information on China, read these MobiAD articles:
• Using Mobile To Reach Next Generation Fashion Consumers
(a Chinese mobile marketing fashion game)
• University Students Happy To Receive Mobile Ads
(a survey of Chinese students’ attitudes about mobile)