Market review

China Market review

Unilead.net / 2017 / China Market Review

Religion

Atheism 52,2%, Buddhism 18,2%, Christianity 5,1%, Islam 1,8%, Local folk religious beliefs 21,9%

Population

1 379 000 000 (2017)

Market volume

$2.59 bn for 2017 (from mobile apps, according to App Annie forecast)

GDP

$10,84 billion

ARPU Mobile users

Largest Publishers, by revenue

Tencent, NetEase, OurPalm, Meitu, Duoyi, Longtu Game, Perfect World, Momo Technology, Baidu.

$25

According to App Annie

75% of population (1.03 bn users according to Statista, 2017)

Major mobile carriers according to the number of subscribers

OS share

China Mobile 867 mln, China Unicom 276 mln, China Telecom 230 mln.

Android 78,4%

(source: Business of Apps) samsung

2

iOS 21,6%


China is the largest smartphone and app market in the world. It is Chinese market which dictates the mobile industry development trends on the global scale. The People’s Republic of China covers the area of 9,6 mln km2. It is the largest country in Asia, and it is the third in the world after Russia and Canada. Its territorial scale correlates with the market volume. In 2016 App Annie estimated the economy of Chinese iOS apps at 790 bn USD (advertising and in-app purchases). There are six times more Android users in China than those sticking to Apple smartphones, but App Annie had no access to these devices in previous years. After gaining access to the data in 2017 the company issued 2,59 trln USD revenue forecast for all OS for the end of the current year.

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Up to December 2016 there were 731 mln Internet users in China, which is 42,99% mln more than in 2015. Internet penetration level was 53,2% in 2016.

Number of Internet users in China and Internet penetration rating 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Number of mobile Internet users in China as compared to the total number of Internet users

16%

21000

2007

22,6%

29800

2008

28,9%

38400

2009

34,3%

45730

2010

38,3%

51310

2011

42,1%

56400

2012

45,8%

61758 64875 68826 73125

2013

47,9%

2014

50,3%

2015

53,2%

2016

4

5040

24% 39,5%

11760

60,8%

23344

66,2%

30274

69,3%

35558

74,5%

41997

81%

50006 55878 61981 69531

85,8% 90,1% 95,1%


Why mobile games are such a big hit in China? For long 10 years, up to 2015, gaming consoles were banned in China. During that time China turned into the most profitable country for mobile and browser game developers. The developers and market professionals mastered Free-to-Play model easily and then integrated it into their browser games and mobile apps. Its wise use and accelerated development of local mobile platforms created perfect conditions for consumption of specific game types across the country.

Terminator 2: Judgment Day

Onmyoji

Honor of Kings

Honor of Kings

Wilderness Action

Fantasy Westward Journey

荒野行动

Cross Fire: King Shootout

Dream Journey

Happy Landlord

Happy Doudizhu

异世仙缘™ 手游:异界修仙快意恩仇

Cally’s Caves 3

天天玩水浒—3D 卡牌游戏匠心之作

Clash of Clans

剑侠传奇剑雨江湖中的热血战歌！

Anipop

Xianxia Novel

Miracle Nikki

Happy Elimination

Werewolf

风云仙侠

开心消消乐®

5


1 8

August 2009 Google and China Mobile agree on the first Android smartphone launch in China

September 2013 Chinese search giant Baidu publishes Chinese version of Plants vs Zombies 2, exclusively in Baidu app store

9

2

7

June 2016 Publishing giant Tencent purchases 84% of Finnish Supercell shares (Clash of Clans creators) for 8,6 bn USD

3

October 2009 China Unicom enters into official partnership with Apple in China and starts marketing iPhones

6

August 2013 WeChat messenger starts supporting mobile game launches for games integrated with its services

10

July 2016 Tencent merges with Glu to launch WeFire, later renamed to Rival Fire, in the West

6

March 2010 Disagreement between Google and Chinese authorities. After that alternative Android app stores appear

December 2012 Yodo1, a Chinese publisher, launches Ski Safari mobile game, which is fully adopted for Chinese gamers

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4 5

October 2010 AppStore is translated into Chinese, all app publishing functions are localized

November 2012 Share of Android devices in China grows from 58% to 90%

November 2017 Gaming brought about 4,95 bn USD within three months (July – September) to Tencent making up to half of its total revenue


Legal issues related to games Starting from July 1, 2016, China adopted a new law requiring approval of the State Administration for Press, Publishing, Radio, Films, and Television (SAPPRFT) of China to publish a game in the country. Starting from 2016 only 22 non-Chinese mobile games have been published in China, including Temple Run, Candy Soda Legend, Angry Birds, Subway Surfers, Fruit Ninja, and Monument Valley. The law states that Chinese companies must be the holders of intellectual rights to the games published in China. And SAPPRFT clearance for a non-local company will cost from 2,000 to 5,000 USD (depending on monetization system potential and brand equity for the game in question). This law imposes serious limitations, but at the same time it helps to get rid of pirates, who remain one of the major issues in China.

In addition to that there are several more important rules in the country – break one, and the company will be banned. The publisher must: • Ensure that their registered users are real people (mobile phone number verification is possible); • Refrain from copying their competitors’ products without due consent; • Obtain user consent for personal data collection; • Regulate user content in their apps (in-house censorship, etc.); • Store user data for 60 days.

$27,5Bn #1 Total game revenues

$564,8M

China Mobile users

Number of gamers 13%

11%

23%

27%

9%

7

Market in the world

67%

67%

Players

Payers

17%

10-20

10-20

21-35

21-35

36-50

36-50


Uber Comes to China The environment is quite harsh for non-gaming apps as well. For example, on August 1, 2016, Uber announced the sale of its assets to Didi Chuxing, its Chinese rival. The US ride hailing smartphone app had come to China in 2013. And it had been losing a 1 bn USD a year for all these years. But the deal wasn’t about an acquisition – Uber and its local partners got 20% share in Didi. The situation wasn’t a coincidence. Didi controls 80% of the taxi app market, it had 43 mln users comparing to 10 mln Uber had. Didi was supported by Chinese Internet giants, Tencent and Alibaba, which had become its shareholders. And Apple announced plans to invest 1 trln USD in Didi Chuxing in May 2016.

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Top-10 Chinese Android app stores There are more than 400 alternative Android app stores in China. Top-25 of them generate 95% of all app installs in the region. Google and other large corporations left the country due to legal issues. App stores compete for user attention and each of them offers various exclusive apps on regular basis. TalkingData, together with Newzoo, even keep a separate rating to help publishers navigate the market. The rating considers installs base, or reach, of each app store. The data is constructed from behavior data sets collected directly from end user mobile devices.

It’s not just about China having a lot of stores. Most of them have different app publishing policies. For example, MyApp store owned by Tencent retains 70% of revenue, transferring only 30% to the publisher. Other stores can feature 50/50 or 30/70 rates; scrutinize each store before adding your APK there.

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Myapp (Tencent)

腾讯应用宝

24,7%

360 Mobile Assistant

360手机助手

14,9%

Xiaomi App Store

小米应用商店

12,1%

Xiaomi Game Center

小米游戏中心

11,5%

Baidu Mobile Assistant

百度手机助手

10,3%

Huawei App Market

华为应用市场

10,3%

Oppo App Store

OPPO软件商店

7,8%

Sogou Mobile Assistant

搜狗手机助手

4,2%

Vivo App Store

VIVO应用商店

3,5%

Google Play Store

谷歌应用商店

3,5%


To get featured or get an exclusive launch in a Chinese store you should simply negotiate. You can discuss all terms and conditions, and even get a better share of profits if your app is a worthy one. Specific Chinese business culture opens some opportunities in this case. Just write to several stores and ask what they can offer for an exclusive launch. WeChat platform is yet another way to reach the audience. Chinese users used to multi-function apps. Knowing that, WeChat offered brands to build their “apps inside app” into the messenger. The company will help with integration and allow use its functionality, such as payment server, object and sound recognition tools, AI, with WeChat doing all the processing. It’s up to you to decide what you want to do with these functions.

2013-2020 chinese games market Revenues per segment 2013-2020 Mobile

Other

Total market

39%

+13,6%

CAGR 2013-2020

47%

42%

$32Bn

37%

$33,7Bn

$29,9Bn

$27,5Bn

54%

$24,6Bn

67%

75%

$21,2Bn

$18Bn According to Business Wire there were 503 mln mobile gamers in China in 2016, and the number will grow to 699 mln to 2021. Country market amounted to 8.4 bn USD in 2016, and it will grow to 14.4 bn USD to 2021.

63%

53%

58%

61%

$14,6Bn

$11,2Bn

17%

25%

33%

46%

$17,2Bn

$19,5Bn

$21,3Bn

$4,5Bn

$7,1Bn

2013

2014

2015

2016

2017

2018

2019

2020

83%

$13,8Bn

$2,5Bn

10


Mobile Payments Mobile payments are soaring in China. According to Ant Financial, financial partner of Internet giant Alibaba, number of people using their smartphones to pay is higher than 520 million. In the second quarter of 2017 Chinese banks processed 40,5% more mobile payments than in the last year, meaning that Chinese used their smartphones for payments more than 8.6 bn times. Average check is also growing. Total amount of mobile payments amounted to 6 trln USD, which is 33% more than in 2016. According to surveys 84% of locals don’t take cash when going out, because they have an opportunity to pay via smartphone.

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How do you publish an app in China? There are 4 legal ways to hit Chinese market with a mobile app. 1. Game publishers If you are thinking of publishing your product via a local publisher, here are the companies you might consider: • iDreamsky; • CocoaChina/Chukong Technologies; • OurPalm; • LineKong. These companies are trustworthy; they will take on publishing, provide a sensible promotion, get their own traffic to your product, and offer publishing on popular platforms. In some cases, such publishers are willing to purchase a license to market the app in China. However, it’s good to keep in mind that these large-scale players will have a comprehensive list of requirements for your app. If you are not ready to overhaul the product to meet the local publishers’ requirements and not ready to pay 50-70% share of sales, you might consider other options.

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2. Agency with a publisher If you had no luck approaching local publishers directly and the terms were unsatisfying, it may be the time to look into agencies. They offer distribution and intermediary services, and sometimes they do the job for a percentage of sales and the rest comes for free. But in many cases promotion will be limited to an existing contact database, so just remember that agencies have limited resources and they lack funds to unfold larger campaigns. Don’t be disappointed, though, such partners are good at localization, customer support facilitation, etc. These agencies are quite large, and they work with our and other regions extensively: • Yodo1 • Smartions • WizQ Partnering with such agencies gives an opportunity to integrate with local platforms (WeChat, Sina Weibo) via API. The platforms grant access only to local companies, so the benefits are obvious. Also, agencies will help master payment SDKs for the top Android stores. This approach requires careful management of game nonpopularity risk. In such cases the agency, most likely, will abandon the product or will transfer a part of promotional activities to you without sparing you the contract payments.

3. Automated publishing platforms One more way is here specifically for foreign companies willing to enter Chinese market. Automated publishing services for Android stores will ask you to register, integrate payment SDKs (manuals are available), and to upload your game build via a console. After that your product will be submitted for approval, and if everything works out, it will be published in selected alternative stores automatically. AppTutti and Kii China are examples of such services. Upsides are obvious: the lowest revenue share fee after store commissions, but there may be a fixed fee for additional services. If the launch is successful, the services provides free promotion. However, if the launch doesn’t go well, you will find little options for additional PR. But if everything goes fine from the start the services will be there to help with extra campaigns. 4. Independent entry to the market To master this option, you must publish at least one game in Apple App Store for China first. It’s the easiest way but be aware of the “first time” risks. Having published your product for the iOS store you will pay a revenue share only to Apple. Just be sure to make good localization and quality ASO for the product ordering it from Chinese agencies. Read about localization nuances further in the review, and we have provided the list of recommended Android stores in the previous chapters. 13

For example, after its launch at Chinese market Monster Strike received 40 mln installs for the period from August to November 2017


App Localization The main thing to remember when making a localization of mobile app texts – use simplified hieroglyphs for mainland China and Singapore, and traditional hieroglyphs for Hongkong and Taiwan. There may be lexical differences too since different countries may use different gaming terms.

app more social.

Eleme, a food delivery startup, allowing friends to order their food together in one order via chat is integrated with WeChat

Stick to Casual in Localization This rule is true not only for the language of localization but for higher marketing and positioning approaches for Chinese users as well. The best Chinese App Store apps address their users personally in a comfy and casual way. Do not use standard machine translation when translating headers for creative materials. It is better to contract a reliable local agency, which is familiar with Internet slang currently used by people. Go Social Even when not classified as social networks, the most successful Chinese apps give their users some social functions. Most people in China don’t use Facebook or Twitter because of the ban introduced by the government (banned websites are available via VPN, but that’s too expensive for most Chinese). It’s important to add options of interaction between users to the app. WeChat, Weibo, WhatsApp are a great way to make your 14


Respect Local Traditions Local traditions and culture are of crucial importance in localization process, especially in China. Some things, quite common in Western countries, such as Tinder, are a taboo in China. Momo app, which is an equivalent to Tinder in some degree, takes a totally different approach. It doesn’t feature provocative pictures of attractive men and women. Instead, there are balanced gender groups at the App Store page, and the app is positioned as a way for people to communicate.

popular topic in Chinese society, they are found guilty of unnecessary display of their riches, so that Chinese even labelled golden iPhone 5S and iPhone 6 tǔháo gold. With such a buzz around tǔháo no one wants to be called that name, so, for example, Alipay, largest mobile payments platform, insists in its creative materials that purchasing the company’s services is not a sign of wealth. Alipay services are affordable to anyone, not only to tǔháo.

Local trends matter if you want to make a successful localization. For example, term tǔháo, initially reserved for wealthy Chinese land owners, now refers to an ill-mannered Chinese show-off. This evolution of the word shows how young Chinese perceive money. Jokes made tǔháo a

Chinese dubbed golden iPhone 5S and iPhone 6

Momo app – a kind of equivalent to Tinder

tǔháo gold

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Ad Networks efficiency report for iOS in China (Appodeal data) To show average efficiency of creatives run by ad networks in China we turned to Appodeal, mediation and ad optimization platform. Appodeal team provided us with data for November 20-26, 2017 for iOS. Android data is hard to collect due to large number (more than 300) app stores.

Advertising Network

Ad Type

Fillrate

CTR

eCPM

Anonymous RTB Exchange

Interstitial

3%

8,37%

$3,91

Anonymous Network 160

Interstitial

40%

19,67%

$0,30

Advertising Network

Ad Type

Fillrate

CTR

eCPM

InMobi (CPI)

Interstitial

55%

11,02%

$0,73


Banner

4%

0,62%

$0,65

Chartboost (CPI)

Interstitial

51%

12,20%

$0,63


Banner

72%

0,15%

N/A


Interstitial

61%

21,60%

$2,04

InMobi (CPI)

Banner

24%

0,29%

$0,10

Admob (CPC)

Interstitial

42%

5,33%

$7,43

Facebook (CPM)

Banner

0%

0,07%

$0,13

Smaato (CPM)

Banner

2%

0,21%

$0,15

Advertising Network

Ad Type

Fillrate

CTR

eCPM


Banner

11%

0,60%

$0,83

InMobi (CPI)

Video

13%

-

$0,65


Banner

0%

1,13%

$0,99

Vungle (CPI)

Video

45%

-

$2,40

Admob (CPC)

Banner

72%

0,57%

$0,25

Unity Ads (CPI)

Video

49%

-

$5,18

Test Ads

Banner

100%

0,25%

N/A


Video

61%

-

$8,93

AdColony (CPI)

Video

19%

-

$2,45

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Advertising Network

Ad Type

Fillrate

CTR

eCPM

Advertising Network

Ad Type

Fillrate


Native Ads

5%

1,01%

$0,07

IronSource (CPI)

Rewarded video

Flurry (CPI)

Native Ads

63%

0,99%

$0,08

Tapjoy (CPI)


Native Ads

57%

0,65%

$0,24


Native Ads

95%

0,45%

N/A

Above is one of the banners appearing in Flippy Knife game in China

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CTR

eCPM

52%

-

$12,65

Rewarded video

39%

-

$6,23

InMobi (CPI)

Rewarded video

17%

-

$0,82

Vungle (CPI)

Rewarded video

52%

-

$6,90

Unity Ads (CPI)

Rewarded video

49%

-

$10,65

Chartboost (CPI)

Rewarded video

16%

-

$7,19


Rewarded video

75%

-

$6,31

Admob (CPC)

Rewarded video

56%

-

$11,54

AdColony (CPI)

Rewarded video

16%

-

$10,91


Opinions from Market Players Vicki Mao, Partner Development Lead, AppsFlyer

— From marketing point of view, what is special about the Chinese mobile market? First of all, the Chinese market is massive in size. It has 724 million mobile users, representing 95% of the 751 million internet users in the country, meaning marketers have a lot of room for growth in this unique market. The mobile ad spend growth rate in China is also striking — growing by 90% between Q1 2016 and Q1 2017 - the highest rate in the world. In fact, it is a mobile market with its own unique ecosystem, with Android having multiple app stores and traffic sources, as opposed to other countries, where users download Android apps almost exclusively from Google Play. The same is true for media players. The biggest ones in China are Baidu, ByteDance and WeChat, while the rest of the world mainly use sources like Google, Twitter, and Facebook. The mobile market in China is a unique ecosystem with rules of its own, so marketers entering China

must do thorough research on the intricacies and operational nuances of the mobile market before diving in. As the potential return is massive, it is definitely worth the investment.

insights into this unique market, as well as actionable tips from the biggest local giants, and international companies who have successfully penetrated China with their app.

— What are the biggest current opportunities of the Chinese mobile market? The biggest opportunity for marketers in China is the sheer volume of the market, with 724 million mobile users. Companies will look to seize this high-growth period to develop their presence in China and try to grab a piece of the pie. Like China, many Asian countries, especially in Southeast Asia, are not only mobile-first, but sometimes mobile-only. For a large majority of the population, smartphones are the only screens they look at in their household and daily commute. This phenomenon will only become more prominent when centennials (aged 15 to 22), the first mobile native generation, become a larger part of the consumer population. App users in Asia tend to spend more on in-app purchases than any other region worldwide. We foresee tremendous growth opportunities in the region’s app market The opportunities China offers outweigh the challenges. This is one of the reasons we created the China playbook, to offer marketers everywhere 18

Source: AppsFlyer Beyond The Great [App] Wall Of China Guide


— What problems can foreign companies face when entering China? What do you think can solve them? For foreigners, launching campaigns in China is very challenging due to the language and cultural barriers, making it complicated to deal with local bureaucracy, media partners, and app stores. Having a trusted local partner could help solve many of these issues. . They will be able to handle the complex Android market, manage Android package updates, and can assist greatly with media buying services and local media (such as Tencent, Baidu) connections. Some also specialize in specific verticals such as gaming, and can take care of ongoing optimization and local integrations. There are over 300 Android app stores and traffic sources in China, making it a much more complicated journey for marketers. While Google Play ads are part of AdWords Universal App Campaign, and not directly sold by the store, China APK stores sell traffic directly, and have their own sales teams selling on a Cost Per Time (Day) / CPD (Cost Per Download), and their own revenue-share model. While this might create more competitive pricing, it also means you have to do a lot more research. Releasing to a single app store is also not an option unless there is an incredibly strong and established brand that will draw players to that store. Any single store lacks the reach to address

the broader market despite any claims to the contrary. There are also potential bureaucracy issues as Chinese authorities can be strict when it comes to gaming apps for example. As a mobile game app developer or distributor, you’ll need to set up a local entity, preloaded your game onto a handset, and send it to the authorities for evaluation. The evaluation process can take up to three months, and only after the content is deemed appropriate will you be able to publish your game. Mobile connectivity and bandwidth in China can be a potential issue for foreign app businesses, with increased latency a result of the “Great Firewall” of China. The sheer size of the country also means that many areas still suffer from poor infrastructure, and that physical distance between servers of foreign companies and Chinese end users are massive. In addition, Ad fraud is one of the biggest thorns in the sides of marketers in China. Today’s mobile fraud takes many forms and demands a multilayered approach to fraud protection, detection and prevention. While app marketers have tried to mitigate fraud in their campaigns by blacklisting IPs and the offending sub-publishers, fraudsters are constantly finding new ways to take a slice of the pie. The best way for advertisers to address the 19

ongoing challenge of ad fraud is to be equipped with a toolset that combines multiple layers of technology that tackle each type of mobile fraud blocking known fraud at its source and detecting likely fraud for further follow-up. Big data plays a massive role in fraud protection, and the more data that’s available, the larger the pool of insights you can build.

Unilead.net / 2017 / China Market Review Cathy Cao, VIP Business Development Representative, Mobupps.

We also talked to Cathy Cao, China Business Development Representative of Mobupps mobile ad agency. She states that Chinese market is quite unique. Any foreign company going to enter this market must exercise outmost care. — From marketing point of view, what is special about China mobile market? I would like to say Localization, because usual marketing tools like Google, FB are not allowed here, there are many local Android stores, also many local ads platform like Wechat, Toutiao, Youku, etc. — What are the key marketing trends in China right now? In general, the environment of mobile marketing isn’t mature in China yet, but since QR code is getting more and more popular in Chinese people’s like, you could get an app installed by scanning a code from PC, TV, or any outdoor ads, which leading multiple-screen marketing developed a lot.

— What problems can companies face when working with mobile in China? What do you think can solve them? If you mean mobile marketing, I think frauds are the most headache problem for every company. And unfortunately, there is no way to solve it as there are always new type of frauds coming out. China may have the largest amount of frauds ads all over the world, according to some reports. — Could you share with us useful metrics for mobile marketers about Iran: average eCPM, fill rate, etc.? What is the cost of an average user in China (CPI, CPA)? How does this relate to user’s gender? Regards of CPI, if it’s a gaming offer, usually 3-4 dollars, CPA 5-8 dollars. If it’s an utility, it should around 1$.

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The report is brought to you by Unilead mobile ad agency We offer services in three areas: — Agency: we help clients to develop and promote mobile products. http://agency.unilead.net/ — Product services: we drive people to mobile apps via our ad network. http://www.unileadnetwork.com/ — Information: we write about industry news and trends, take interviews and make reports like this one. https://news.unilead.net/en/

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