In­ter­net giants eye­ing over­seas mar­kets

Sat­u­rated de­mand at home pushes them to in­vest more else­where, seek­ing bet­ter re­turns

China Daily (USA) - - WORLD - By MENGJING mengjing@chi­nadaily.com.cn

Chi­nese en­tre­pre­neur Jiang Tian­peng was amazed to find out that own­ing a lap­top com­puter in India may well be equal to own­ing a ma­chine that can pro­duce real cash.

In a re­cent sem­i­nar about Chi­nese in­ter­net com­pa­nies go­ing global, Jiang shared with guests a pic­ture of an In­dian man who makes a liv­ing by set­ting up his com­puter on the street and charg­ing passersby for copy­ing files or down­load­ing mu­sic and videos from the com­puter to their own gad­gets.

“Own­ing a lap­top com­puter can still work as a means of pro­duc­tion. This used to be a sit­u­a­tion in China years ago, but now it is still a pop­u­lar busi­ness in India. You can find these ser­vice providers in gro­cery mar­kets, en­trances of schools, or any places with lots of peo­ple, ” said Jiang, the chief ex­ec­u­tive of­fi­cer of Xen­der.

His startup com­pany Xen­der de­vel­oped an app that al­lows users to trans­fer and share files with­out an in­ter­net con­nec­tion, a tool that may not have much de­mand in China nowa­days, but en­joys great pop­u­lar­ity in India, where peo­ple’s thirst to get their hands on dig­i­tal con­tents is chal­lenged by poor mo­bile in­ter­net con­nec­tions.

Xen­der is one of the grow­ing num­ber of Chi­nese in­ter­net com­pa­nies which in­tend to carve out a place for them­selves in over­seas mar­kets by lever­ag­ing the in­ter­net de­vel­op­ment gap be­tween China and un­der-served re­gions out­side China.

“When we look at the world’s top 10 in­ter­net com­pa­nies, six of them are from the United States and four from China, none of them from Europe or other Asia Pa­cific coun­tries. In a way, this cor­rob­o­rates the fact that China is al­ready a pow­er­ful in­ter­net coun­try,” Derek Shen, global vice pres­i­dent and China pres­i­dent of LinkedIn, the largest pro­fes­sional net­work­ing sys­tem head­quar­tered in the United States, said to China Daily in a re­cent email in­ter­view.

Ac­cord­ing to him, China’s enor­mous lo­cal mar­ket, big enough to con­tain tremen­dous busi­ness op­por­tu­nity, is one of the ma­jor rea­sons for the pros­per­ity of in­ter­net com­pa­nies in the coun­try.

Fu­eled by the pen­e­tra­tion of cheaper and cheaper smart­phones, apps that are pow­ered by the mo­bile in­ter­net have catered to an as­tound­ingly wide va­ri­ety of hu­man needs, from shop­ping, ride and hail­ing to tick­ets book­ing.

Since 2011, China has been the largest mo­bile in­ter­net mar­ket in the world. In 2015, the num­ber of in­ter­net users in China reached 710 mil­lion, which is 57 per­cent of its pop­u­la­tion and twice the en­tire pop­u­la­tion of the United States. But the rapid de­vel­op­ment of the in­ter­net in­dus­try in China is ex­pected to reach its ceil­ing as the ma­jor­ity of the coun­try’s pop­u­la­tion are al­ready mo­bile in­ter­net users.

Large en­ter­prises like e-com­merce gi­ant Alibaba Group Hold­ing Ltd and so­cial net­work­ing leader Ten­cent Hold­ings Ltd and even star­tups, such as Xen­der, have started to set their eyes on mar­kets out­side China. India, which boasts the world’s fastest-grow­ing econ­omy, emerges as an at­trac­tive, al­most ir­re­sistible propo­si­tion for Chi­nese in­vestors. India is one of the most pop­u­lar des­ti­na­tions for Chi­nese tech in­vestors, sec­ond only to the United States.

Ac­cord­ing to a re­port from itjuzi.com, a web­site ded­i­cated to data on tech in­vest­ments, In the first half of 2016, Chi­nese in­ter­net giants and ven­ture cap­i­tal firms in­vested more than 42.1 bil­lion yuan ($6.26 bil­lion) in 60 tech-re­lated projects over­seas.

Zhang Lei, founder of YeeCall, a Bei­jing-based startup that of­fers an instant mes­sag­ing app in India, said that any en­trepreneurs in­volved in an in­ter­net busi­ness would want to choose a mar­ket with a huge in­ter­net pop­u­la­tion.

“Ma­ture in­ter­net mar­kets, such as the United States and China, are big mar­kets with well-es­tab­lished play­ers. They are quite sta­ble mar­kets, but dif­fi­cult places for late movers or small play­ers to make big changes,”

“If you are bet­ting on a big fu­ture, you need to choose a mar­ket with a huge po­ten­tial for grow­ing users and a strong mo­men­tum in busi­ness. So, India is the place to be in,” said Zhang, whose one-year-old YeeCall claims it had more than 10 mil­lion users by the end of June, half of them in India.

“India and South­east Asia are just like China five to 10 years ago,” said Liao Yuan­ling, who works for 36Kr, a com­pany that started its busi­ness in tech me­dia and ex­panded its wings to ven­ture cap­i­tal in­vest­ment and startup in­cu­ba­tion.

“We think some of the startup com­pa­nies there have big shots to grow into uni­corn com­pa­nies, that is, tech com­pa­nies that are val­ued at $1bil­lion or more,” she said.

India had about 300 mil­lion smart­phones by the end of 2015, she added. The num­ber is on track to un­dergo a fast growth till 2020 as the coun­try has more than 1.2 bil­lion peo­ple. More­over, the av­er­age age of the India’s pop­u­la­tion is about 27, which is about 10 years younger than China’s.

A much younger pop­u­la­tion sig­nals stronger de­sire to try out new tech­nolo­gies, said in­dus­try in­sid­ers. A re­cent re­port from For­rester Re­search Inc said metropoli­tan cities in India and China are pro­gres­sive pi­o­neers that lead the de­mand for new prod­ucts and in­no­va­tion in the Asia-Pa­cific re­gion.

Li Tao, CEO of the Bei­jing­based Apus Group, which pro­vides launch­ers, browsers and other apps for mo­bile phones run­ning on the An­droid op­er­at­ing sys­tem, said that un­like peo­ple in the US and China who grad­u­ally made the tran­si­tion from us­ing per­sonal com­put­ers to ac­cess the in­ter­net to us­ing mo­bile de­vices, In­di­ans don’t need to go through the process. “They can di­rectly jump into the era of the mo­bile in­ter­net,” he said.

Founded in 2014, Apus Group ex­pects to have 80 mil­lion users in India by the year-end. The com­pany set up a ven­ture cap­i­tal fund in late 2015 with its part­ners. With an ini­tial in­vest­ment of 3 bil­lion ru­pees ($45 mil­lion), the fund fo­cuses on in­vest­ing in In­dian mo­bile in­ter­net star­tups.

De­spite the spir­ited de­sire to test a big over­seas mar­ket, the bru­tal fact is that India’s poor fi­nan­cial in­fra­struc­ture and the low per-capita in­come make it dif­fi­cult to earn good re­turns on in­vest­ment in the near term, said in­dus­try in­sid­ers.

Tang Cailin, prod­uct di­rec­tor of Baidu Inc’s global busi­ness unit, said the on­line search gi­ant has tried al­most ev­erymethod to make money in over­seas mar­kets. “The big­gest prob­lem is that less than 3 per­cent of our over­seas users are will­ing to pay for the ser­vices or pay to down­load the prod­ucts,” he said, adding there is also the chal­lenge of copy­right in­fringe­ment.

Jiang of Xen­der echoed by say­ing that it is very dif­fi­cult to es­tab­lish a fea­si­ble busi­ness model in India. “Most of the Chi­nese in­ter­net com­pa­nies rely on on­line ad­ver­tis­ing to make money, but the poor in­ter­net con­nec­tions in India make that not an ideal op­tion there,” he said.

“The good part is our com­pany is still a small-sized com­pany. Even if we can­not make big money, we can make ends meet. We are pa­tient and we can wait for the spring­time of the busi­ness to come,” he said, adding that both set­ting up busi­ness and go­ing global are longterm in­vest­ment.

“Once you make a de­ci­sion, you need to stick to it. Go big or go home,” he said.

PHO­TOS PRO­VIDED TO CHINA DAILY

Li Tao (mid­dle, front row), CEO of Apus Group, en­joys a mo­ment of happiness with In­dian del­e­gates at a fo­rum in India on Nov 8. num­ber of in­ter­net users in China in 2015 num­ber of smart­phones in India at the end of 2015

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