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Dissecting China’s App Market

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Posted by Adella Tan on August 24, 2015
Dissecting China’s App Market

China has a total population of 1.3 billion, and as the second-largest economy in the world, offers unprecedented opportunities for many app developers. According to Statista and WeAreSocial, China has a total of 1.29 billion registered mobile users, 62% of whom own a smartphone and 42% of whom are active mobile internet users. Yes, that means every man, woman and child in China has a mobile phone. eMarketer reported that in 2016 there will be more than 2 billion smartphone users worldwide and over one-quarter of them will live in China alone. Has that piqued your interest yet?

If you’re a publisher looking to quickly jump onto this rolling bandwagon and immediately break into the Chinese app market - well, think again. There are as many challenges as there are opportunities in this market. In this post, I attempt to shed some light on the China app market.

OPPORTUNITIES 

Growing affluence among Chinese people

China is a very densely populated country. Smartphone users and mobile internet ad spending are both forecasted to rise over the next few years. The demand for smartphones with larger screens seems to be exceptionally high in Asia. With reference to a report released by IDC, the shipments of smartphones with screen sizes between 5 and 7 inches constituted about 60% of total smartphone shipments in China as compared to around 40% globally and in the United States. App developers are eager to explore the market, and with games being one of the most popular app categories, it’s not surprising that many want to have a slice of a big economic pie.

The country is also becoming increasingly wealthy. The South China Morning Post reported that China’s affluent population is set to rise to 15.28 million by the end of this year, with investible assets of between USD 100,000 to USD 1,000,000. With that in mind, Apple’s launch of iPhone 6 and iPhone 6 Plus last year was a smashing success in China. iPhone sales went up by 72.5% during its release, making Apple the number one smartphone vendor in China. The price for an iPhone 6 ranges from USD 830 to USD 1200. We all know Apple handsets don’t come cheap. With Apple tops in sales, one can imagine the growing affluence of China’s population. This boosts the appeal to advertisers and app developers as they try to break into the market, hoping to target consumers at the right place at the right time.
 

Booming mobile game & streaming video industries

According to TalkingData, by June 2015 the total number of devices with access to mobile games stood at 1.28 billion, of which 910 million devices had active mobile games installed. The number of mobile devices in China is more than the combined populations of Singapore, Indonesia, Malaysia and Thailand! The mobile game industry is also witnessing stable growth in revenue, with an approximate forecast of USD1.9 billion. Beyond that, Chinese video streaming apps in particular have also seen a huge jump in growth figures. With reference to the App Annie Q2 2015 Market Index, Youku, the top video streaming app, reported a staggering 900 million daily video views and consumer revenues from subscriptions and pay-per-view growth of 649% year-over-year. The industry still has tremendous room for growth, and e-commerce giant Alibaba’s upcoming subscription-based streaming service, Tmall Box Office (TBO – think Netflix) could further accelerate the streaming video market.

Having brought you to heaven, it’s now time to bring you back to earth. Everything seems rosy and opportunities are aplenty in the land of the Red Dragon but (yes, we always hate the buts) we cannot turn a blind eye to the many obstacles that foreign app developers are presented with should they decide to venture into the China market. Here’s why.

 

CHALLENGES

Device and marketplace fragmentation 

Foreign developers interested in entering the Chinese market must either employ locals to fill the positions of country managers, business development etc., or work with a local partner for distribution. Collaborating with a local partner is essential for doing business in China, especially in the mobile app development industry. The marketplace is extremely fragmented. The Google Play store is non-existent. Instead, it is being replaced by more than 500 different app stores, headed by major technology companies like Tencent, Baidu, Qihoo360, UC and many more. The top 3 app stores in China are 360, 91 and Wandoujia. Tying up with a local partner or publisher is ideal as they can assist in selecting the best app store for your app, and it also helps to bargain for deals at these different app stores. However, it’s important to note that most app stores take the regular 30% cut of your revenue. Some of the larger app stores also serve as channel partners, handling your app distribution and advertising, in which case they could take a cut of more than 70% of your revenue earned.

Piracy is also a concern to app developers. Most of the popular apps have duplicates available in app stores, and this can certainly affect your revenue. A local, market-savvy partner can help ensure that these duplicates are removed from the app stores while your official app remains.
 

Localization is not an option, it’s mandatory

English proficiency is low in China; therefore, it is important to translate your app to Chinese. You’ll also need a product that resonates with locals. Therefore, successful adaptation is the crux of doing business in the country. Everything has to be made in a way that caters specifically to the people in the country. From the dialogue to the instructions to the entire aesthetic positioning of the app, it needs to be made with Chinese users in mind. Chances for success are dismal if you fail to localize.
 

Monetization options

The way users purchase, and their motivation behind those purchases, are totally different from those of people in the West. The Chinese face high inertia when it comes to paying for an app, no matter how insignificant the price of the app might be. App developers have to come up with alternative monetization options such as providing ad inventory or offering in-app purchases. There are many ad networks and mobile advertising platforms that aim to help foreign app developers and advertisers reach their target audience in the market. Some examples include, yes, Smaato, as well as Admob, Inmobi, Avazu, YeahMobi and more.

As you can see, China is indeed a complex landscape that isn’t the easiest to navigate when it comes to app promotion. There are great opportunities for developers due to the large volume of smartphone users, users who’ve proven to have a voracious appetite for downloading apps. Yet on the other hand, there are challenges which may impede your success as a developer. At the end of the day, choosing the right partner and localization of your app to cater to the palate of the Chinese people is what will contribute to the success of your business venture in China.
 

Written by Adella Tan

Adella is Smaato’s marketing and PR lead for the APAC region. She handles all events, communication and marketing activities in her region.

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