Thomas Crampton

Next Beta: Social Media's Evolution, Globally

10 Predictions for China’s Internet in 2011

Mar 29, 2011

Been meaning to post this list of prediction for China’s Internet from Dick Wei of JP Morgan for a while. Although published in January, all the predictions look valid still in late March!

Any predictions you would add (or change)?

(1) eCommerce to see wider adoption, driven by convenience, lower-price alternatives to traditional retail, and improved trust & safety. Gross merchandise volume (GMV) is expected to reach Rmb723B in 2011, or less than 4% of retail sales.

(2) Social commerce. Expect social sites to be an emerging and important traffic generator for eCommerce companies. Synergistic relationship between social networks and commerce merchants will fuel growth for both segments.

(3) Gaming segment likely to see re-rating with good game titles launch. Highly anticipated games in 2011 include Duke of Mountain Deer, World of Warcraft Cataclysm, etc., which could generate greater player interest and, as such, sector rerating.

(4) Video advertising to prompt ad dollar shift from TV to internet. With the recent IPO of Youku, a broader range of online video content, growing online video user base, and a familiar ad format, TV advertisers are likely to accelerate the ad budget shift from offline to online.

(5) Mobile Internet to see increased competition. We expect Internet leaders like Baidu and Tencent to formally launch middle-ware products that could include third party application distribution platforms; compete with existing players UCWeb other mobile game platforms.

(6) Search continues to see solid growth, with wider market adoption. Baidu still maintains dominance, other players such as Soso and Sogou still unlikely to gain meaningful market share.

(7) Solid consumer spending trend supports good advertising segment growth. Expect continued good macro environment to support consumer spending. We believe the sector growth story remains intact: Internet usage growth, particularly in lower-tier cities, to drive ad budgets online.

(8) Expect transition from time-base pricing to CPM-base pricing to accelerate in 2011, but remain gradual, driven by user-segregation and better online adserving/tracking technology. Yet, leading portals will still benefit from their own brand influence.

(9) 2011 Rmb appreciation to improve sector profitability. Expect sector margins to have very slight improvements from Rmb appreciation, as only a small portion of costs are in US dollars (game licensing fee, overseas video/sports content fee, and some servers, etc.). Benefits to come from translation gains from Rmb-denominated EPS to US$-denominated EPS.

(10) More IPOs likely in 2011. We expect investors will likely continue to look for growth investment opportunities in 2011. We think China’s internet segment offers good secular growth, as well as a number of sizable private companies. We believe more new listings are likely.

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View Comments for “10 Predictions for China’s Internet in 2011”

  • Lots of thanks for information, I can observe I did the matching thing once I got the equal crisis as the one that is talking.

  • All those 10 predictions seems to become to happen, or in transition to happen...

  • Spikehumer

    "Making strong decision making powers that help to make
    surety and effectiveness of imagination"

  • Today I asked Shantanu Narayen, Adobe CEO, a question about " educating clients" to open a new market. What do you think? Is it another tread for high-tech or internet business in China?

  • Both points 4 and 7 might not look that solid anymore. Video hosting is still having a hard time to generate revenue, and even US investors seem to have noted that - while they are mostly pretty blind for anything happening in China. And some advertisers have announced they are cutting back expenditure, only earlier this week. China is anyway a fast moving target.

  • But I think there is another way for Chinese video ad. Some creative and moved ad shorts are widely spread through internet. For example, the "Mengniu蒙牛”-----"心情spa“ serious ad shorts are successful.

    I think for video ad, the trend will be more combine with movie and TV show rather than a simple commercial. And the connect between Youku and Renren/Kaixin will be more easier for those ad to reach their audiences.

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