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2 Rising fortunes in China's
electronic world By Daniel
Allen
Young, profligate and tech-savvy,
they currently have Western and Chinese marketers
drooling. The growing generation of "Chuppies" -
Chinese yuppies - is surfing China's wave of
rampant commercialism, pushing the electronic
envelope as they express their newfound freedom.
Aiming to connect with and control this multitude,
companies across the board are increasingly
relying on digitized products and promotional
strategies.
It is estimated that Chinese
youth will become the most powerful
purchasing force in the world
within the next 20 years. In China's current
environment of evolving technologies and media
fragmentation, these consumers are in command of
their buying behavior and entertainment choices
more than ever before. As increasing numbers of
Chinese go online to work, play and offload their
disposable income, China's e-revolution is
throwing up fresh opportunities and challenges to
marketers, and spawning new ways for the nation's
netizens to escape the mundane reality of
non-virtual life.
China now has an
estimated 140 million Internet users, spending
nearly 2 billion hours online each week. The
country experienced a 47% increase in total online
spending in 2006, surging to 276.8 billion yuan
(US$35.5 billion), according to a survey recently
released by the Beijing-based Internet Society of
China. Hu Ying-ping, lead researcher at the
society, commented: "The most important trend in
2006 has been the role played by Internet users.
They are the driving force behind all Internet
service applications."
China's Internet
market really took off in 2005 after it reached an
8.5% penetration rate, fueling acceleration in
advertising spending and the diversification of
online services. Chinese Internet users are now
spending an average of 170 yuan a month online,
including payments to online service providers,
retailers and game providers. Revenues from online
advertising (4.98 billion yuan) and online gaming
(5.96 billion yuan) in 2006 were up 51% and 62%
respectively over 2005.
Game on It doesn't have the fanfare of digital music
downloads, nor does it attract highly visible
public controversy like Internet gambling.
However, as sales of "boxed" games at retail
outlets plummet, online gaming has quietly become
the monster of the Internet, with global revenues
expected to top $10 billion this year. Already
attracting more than $300 million a year in
advertising investment, the gaming industry is
seen as the next big marketing opportunity -
nowhere is this opportunity bigger than in China.
Internet gaming in the Middle Kingdom has
become a huge business in the blink of an eye,
with the industry expanding sevenfold in the past
five years. As fierce battles rage on the computer
screen, few of China's online game junkies are
aware of the corporate battles being fought for
their attention, and for an end-game now worth
billions of yuan a year. Safa Ratschy, an analyst
for investment bank Piper Jaffray, predicts that
China's gaming population could soon jump to 80
million. Over the next four years, sales are
expected to see compound annual growth of 16%,
surging from more than $800 million last year to
nearly $1.8 billion by 2010.
In a recent
move to increase revenue, many Chinese game
providers are now offering games for free, aiming
to generate income by charging for other services
such as "in-game items" and "premium features".
The move by Shanda, China's top online-game
provider, to stop charging gamers for game time
initially backfired, with the company reporting a
huge loss in the fourth quarter of 2005. However,
by late last year the company was posting record
profits.
The world's largest publisher,
Electronic Arts (EA), was recently rumored to have
bought a 19% stake, worth $200 million, in China's
The9 Ltd Media, which distributes the massively
popular World of Warcraft series. The deal, when
confirmed, would represent a huge investment by EA
into the Chinese game market, with the vast
majority of its revenues coming from online
gaming.
'Gamevertising' growth As advertisers recognize a growing need for a
closer interaction between the brand and the
consumer, the search for any potential
touch-points that can effectively deliver the
brand message is ceaseless. In-game advertising,
or "gamevertising", gives access to the elusive
18-to-34-year-old affluent male market, as well as
teenagers and a surprising number of women.
China's best known in-game advertising
company is Captiv8, founded by former ESPN China
ad executives in 2004. The company recently
received its first round of venture-capital
funding, and has already proved its advertising
platform in real-life testing. Last September,
Tencent's popular QQ Game used Captiv8's platform
for hosting China E-Sport Games (CEG). Tencent's
instant-messaging platform QQ regularly sees more
than 25 million concurrent users, and its
integrated QQ Game platform saw a peak of 3
million concurrent users this March.
Upstart Shanghai-based game provider T2CN
has also teamed up with corporate sponsors to
embed advertising in its games. T2CN
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