Online celebrity boom to sustain China’s mobile internet sector as smartphone sales falter

Sales of smartphones in China may peak in 2016, but the amount of time users spend glued to their handset screens is getting longer.

It’s that trend that will help sustain the mobile online sector, whose offerings range from shopping platforms to lifestyle and entertainment services, analysts and industry insiders say.

Yang Weiqing, president of Chinese consulting firm IResearch, said mobile phones now account for 65 per cent of the time Chinese people spend looking at screens, and the proportion is rising despite sales growth of smartphones apparently beginning to falter this year.

Although shipments of smartphones in China recovered in the third quarter on the back of strong sales by domestic handset makers Huawei and Oppo, after sluggish growth in the first half, many analysts believe the upward momentum is faltering.

“A lot of people are pessimistic about the macro economy outlook of China nowadays, and some worry that online business has reached a bottle neck after the fast growth of the past five years, but I would say some basic trends have not changed,” said Yang on Thursday during an investment forum held by Cheung Kong Graduate School of Business in Beijing.

A sector enjoying rapid growth is the online celebrity industry. Many of its stars are self-styled content creators, who have vast numbers of followers on social media, and are making a fortune through brand marketing or paid services for information, education, and entertainment.

Online celebrities had made 11.7 billion yuan by October this year through the microblogging site Sina Weibo, according to data released by the company, seen as China’s answer to Twitter. Of that income, 10.8 billion yuan came from the e-commerce channel, 430 million yuan from advertisements and the rest from fans’ donations and reading paid content.

“A survey in 2015 found each Chinese person each day on average spent three hours on their smartphone. That means one sixth of someone’s life, excluding their sleeping time, is living on smartphones. That presents great opportunities to entrepreneurs focusing on content production,” said Wand Binpei, vice-president of Luogic Show, one of the most popular social media platforms in China.

“The essence of our business is about how to occupy users’ time – you may help them kill time by providing entertainment, or help them by making better use of time.”

Although the online celebrity economy has boomed this year, industry wide 2016 has been “the coldest winter for many internet start-up entrepreneurs in China”, because most of the private equity and venture capital funds are at their most cautious after Beijing tightened capital market control in the wake of the 2015 stock rout, said Tony Chi, founding partner of Ying Capital, a China-based equity fund.

Venture capital firms made 698 investments in the third quarter in China, down 34 per cent year-on-year, while the investment volume fell 12.5 per cent to 21 billion yuan, as they held back from injecting cash into unprofitable companies.

“Despite many start-ups struggling to survive as investors scale back from burning cash to attract customers, those with strong self-supporting ability will stand out and become sector leaders,” Chi said.