Revenue models...HEARD ON THE STREET: Smart Phones Turn China's Internet Revenue Mobile
Last Update: 5/23/2012 2:26:55 AM
By Tom Orlik
A DOW JONES COLUMN
Smart phones are making the giants of China's telecom and internet look a little
slow.
The number of 3G subscribers has risen to 159 million in April, more than three
times higher than the level at end 2010. Affluent consumers accessing the web
through their mobile threaten to disrupt revenue flows across China's telecom,
search, and social networking sectors.
Amongst the biggest losers could be the telecom companies. HSBC analyst Tucker
Grinnan estimates that SMS accounted for about 15% of China Mobile's (CHL)
revenue in 2011. That's under threat from internet-based messaging systems like
Tencent's Weixin. From zero users at the beginning of 2011, Weixin grew to 100
million in March 2012. It's no coincidence that China's SMS traffic per
subscriber declined 7% over the same period, or that Internet giant Tencent is
reorganizing its business to focus more on mobile.
The search market is also being shaken up. Baidu (BIDU) - China's Google -
commands what appears to be an unassailable 78% of China's search by revenue. But
its real dominance is in the PC segment. When it comes to mobile, Baidu's share
of total unique website requests is just 35% according to Analysys International.
The launch of their low-cost smart phone, and partnership with manufacturers to
make Baidu the default option on handsets, are part of Baidu's strategy for
claiming a bigger piece of the mobile market.
Even if that succeeds though, mobile is a less lucrative market than PC. It's
more difficult to place adverts on a three inch mobile screen than it is on a PC
monitor. That's not just bad news for Baidu, but for everyone who relies on
online advertising as a source of earnings. China's social networking and portal
sites like Renren and Sina Corp. (SINA) are also struggling to monetize a growing
number of mobile users.
For established giants like China Mobile and Baidu, the risk from smart phones is
that it chips away at existing sources of profitability. For the relative newbies
in social networking, it could push profitability further down the road. |
