Online firms clicking for mobile users

Mainland web companies seek to cash in on the increasing use of smartphones but analysts say it will be a while before they can make money

PUBLISHED : Wednesday, 02 October, 2013, 12:00am
UPDATED : Wednesday, 02 October, 2013, 4:30am

Nearly half of the urban residents on the mainland own smartphones and 60 per cent of them would give up their television sets rather than their phones, a report says.

The report, "Our Mobile Planet: China", conduced by Google and research firm IPSOS, said 69 per cent of the respondents said they accessed the internet every day on their smartphones and 38 per cent said they never left home without their phones.

Beijing has said the licence for high-speed 4G networks will be issued by the end of the year. Meanwhile, the improvement in telecommunications infrastructure together with new gadgets launched every other day are expected to encourage users to spend more time on mobile devices in the future.

"There is no doubt that traditional internet operations must have mobile platforms in the future," said industry observer Xiang Ligang.

But Xiang said the question was how soon could mobile business really generate income. "I think it will still take a long while."

Even the most successful product in the mobile era, WeChat, developed by internet giant Tencent, has only just taken its first step to cash in on its user base. The popular social-networking application launched the latest version in August with several payment services.

Although WeChat does not have a revenue stream, shares in the Shenzhen-based Tencent have risen 63 per cent this year on expectations that it soon will.

Xue Yongfeng, an analyst at research firm Analysys International, said internet companies were now likely to highlight their mobile business. "Everyone knows that it's the prospect of the mobile business that lures investors now."

Last month, Guangzhou-based Web games developer Forgame said it was changing its business focus to mobile games as it launched its initial public offering in Hong Kong to raise HK$1.72 billion. Trading in the stock will start tomorrow.

Forgame announced ambitious plans of launching by the end of next year 35 new games, of which 18 will be mobile games. The company has launched about 30 games since it was founded in 2009 but only three are mobile.

While Forgame said mobile games would be the company's "next important strategic growth point", Xue said that expanding into the mobile market was one thing but making money out of it was a different matter altogether.

"Forgame told investors it will develop and launch more mobile games without saying how much these games will generate," he said.

Xue also questioned the market share estimate of Forgame. The company said it was the No1 webgame developer on the mainland with a market share of 24 per cent of net revenue from the web game development industry last year, citing data from domestic market research firm IResearch.

Xue, however, estimated the market share of Forgame to be just about 10 per cent. "It is neither No1, nor does it have a quarter of the market."

He said Forgame's ranking would depend on internet firms such as Tencent and Qihu360, which Forgame does not include in its estimate of market shares of web game developers.

Xue said he would still recommend Forgame to investors because the firm was an important player in the web game market. "Although it is not the No1 company, it is among the top five. Its market position should be acknowledged."

Smartphones have become an indispensable part of people's everyday life and the industry is still growing on the mainland, studies show. Market analysis firm Niko Partners' projected in its latest report that about 500 million smartphones would be in use by the end of this year, from 100 million in the beginning of last year.

Xiang said that while everyone was talking about going mobile, most internet companies only just talked rather than really developed a new business model for mobile operations.

"It's not enough to understand mobile internet only as an extension of traditional internet because mobile internet requires its own distinct business model," he said.

Web game developers were simply moving their games from computer screens to mobile phones, Xiang said. "They have no new story to tell."

All heavyweight players in the market have expanded aggressively into the mobile business. E-commerce giant Alibaba Group acquired an 18 per cent stake in web portal Sina's microblogging service, Weibo, for US$586 million in April. Search engine company Baidu paid US$1.85 billion for 91 Wireless third-party app store in July, the biggest announced acquisition of the company.