China’s internet companies are spurring growth by transforming online business models, said this year’s internet trends report by venture capitalist Mary Meeker.
China has solidified its position as the world’s largest online population, at 21% of the global internet users, though it lags the US and other Western countries in internet penetration rates. India is catching up, accounting for 12% of global internet users. It is also a promising market for growth, since internet penetration rates are lower.
Alibaba and Tencent are among the top 10 most-valued public tech companies in the world, and Meituan Dianping, Baidu, JD.com, NetEase, and Xiaomi are in the top 30. But the market capitalization rates of Chinese companies have seen less year-on-year growth than other leaders on the list. Alibaba grew the most, jumping 106% but still falling short of Netflix at 366% and Microsoft at 146%.
However, online business models in China continue to evolve. US banking behemoth Citibank said Wednesday that it was looking to Asia, particularly Ant Financial, to build a digital strategy for the future.
“Super apps” consolidate online consumption
Internet business models are transforming consumption in China. Platforms that began as single function are evolving into one-stop “super apps,” including life services platform Meituan. Its offerings include more than 30 types of services such as food delivery, movie tickets, hotel and travel bookings, and payments, the equivalent of combining US peers like Yelp, OpenTable, Fandango, Booking.com, and Airbnb.
Ant Financial’s Alipay evolved from a payment app to a life services platform with more than 200,000 mini-programs offering food delivery, healthcare, public transportation fares, and utility bills. Alipay’s transition to a super app is facilitated by the broader Alibaba ecosystem, which covers virtually every emerging internet sector in China.
Entertainment elements boost growth
China is a pioneer in adding entertainment elements to e-commerce, messaging, payment services, and online education platforms.
E-commerce platforms drive growth with gamified shopping features or more interactive in-app live-streaming functions. Pinduoduo is as an example of how gamification can play a role in driving online sales. Users earn discounts on a price by sharing with friends, who can then play a game to nab discounts. Also, users can grow virtual fruit trees in the app and real fruit is delivered to their homes at “harvest time.” This combination of social shopping and gamified discounts helped the company achieve rapid growth in the past two years.
Livestreaming is another main driver for the e-commerce sector in China. Taobao Live, the live-streaming unit of the mega marketplace, sold $14 billion in livestreaming gross merchandise volume (GMV) in 2018. Similarly, short video apps such as Kuaishou and Douyin are also adding e-commerce features.
WeChat’s mini-program game, “Jump Jump,” has helped build the mini-program ecosystem in WeChat, allowing brands to better engage users. Alipay meanwhile is using gamified experiences to boost consumer engagement. Alipay Ant Forest packaged philanthropy into a game-like system, where users can accumulate green energy points by completing tasks that reduce carbon emission such as walking and using public transit. Users can collect energy points from friends and donate them to plant real trees.
Games have also made their way into education. A number of education apps have incorporated games and competition with classmates to motivate students to learn math and coding.
Short videos driving surge in internet usage
In 2018, China’s cellular internet data usage grew 189% year-on-year and total daily time spent doubled to 600 million hours in April 2019 from 300 million hours in April 2018. The two biggest short video platforms, Douyin and Kuaishou, are both approaching 250 million daily active users, with Douyin ahead.
With contributions from Tony Xu and Eliza Grkitsi.