China represents a massive opportunity for app developers across the world. The gigantic Digital China hub is the world’s top mobile market, currently consisting of no less than 800 million mobile Internet users. China has now become the biggest market, ahead of the USA, in volumes of App Downloads and is one of the top three most lucrative markets in app revenue, presenting a huge opportunity for app developers.
With that in mind, there are essential facts that every developer should know before tackling China’s app ecosystem. Part 1 covered 1-6; below are ways 7-12 to to master the China app market:
7. App Stores – more fragmentation than anywhere else
It's a natural consequence of the previous point described in Part 1 of the 2-part report. Many device manufacturers implies more fragmentation, especially if they compete on the entire spectrum of specs, from the lowest and cheapest end to the highest. What's more, Google Play is not available in China for political reasons. Where there are about 400 different Android channels outside of China (covering 193 countries), there’s about the same amount within this single country. Out of these 400, the top 10 represent about 80% of the market in volume.
The three major legacy carriers matter of course, catering apps to their huge subscriber bases (China Mobile holds a 56% market-share of mobile phone subscriptions, China Unicom 31%, China Telecom 13%). Besides those, other specialized App Shops have emerged as very popular choices: 360 (from anti-virus software maker Qihoo), Wandoujia, TenCent MyApp, UC App Store, Xiaomi, Gfan Market, AnZhi Market, App China, D.cn Games Center, HiMarket and 91, which have both recently been acquired by Baidu, now operating these venues on top of its own popular store.
8. Social networks
Facebook and Twitter, being regularly blocked by the Great Firewall of China, have been supplanted by similar services from Chinese companies. The equivalents of Twitter are called Weibo and there are two of them: one from blogging host giant Sina and the other from online mogul TenCent. With 296 million active users, Sina Weibo is currently leading the so-called "micro-blogging" race.
As for Facebook, its Chinese substitute would be QQ (aka QZone), also from TenCent, which boasts over 800 million registered accounts and 600 million MAU. Its closest challenger is RenRen. Real-name based social networks such as Pengyou and Kaixin are also worth keeping an eye on. The only foreign company that is doing well in the China social media landscape appears to be LinkedIn.
9. The inevitable WeChat
Beyond desktops, the blazing dragon in the mobile social field is uncontestably WeChat. With 500 million Monthly Active Users, and around double that in registered users, TenCent-owned WeChat has evolved into its own phenomenon over the last 18 months. At its core, WeChat is essentially a mobile messenger chat app similar to Japanese LINE, Korean Kakao Talk or Facebook-acquired WhatsApp. As the audience grows, Tencent has continued to add new features and functionalities, using WeChat as its Trojan Horse to gain a bigger share of the time spent by Chinese consumers on mobile.
At this juncture, there is a lot more you can do on WeChat in addition to messaging each other, as WeChat is turning more and more into the go-to destination on mobile, the platform within the platform that blends both Apple and Google eco-systems seamlessly into one giant community in China while surpassing both in the process.
Where WeChat diversification has been the most successful is clearly as a mobile game discovery network. In the summer of 2013, WeChat opened negotiations and programming preparations with the three top mobile games distributors: iDreamSky, ChuKong and Yodo1, in order to bring four games, among which were Fruit Ninja and Temple Run 2, to the WeChat platform. Many more games have followed, including Candy Crush Saga in May 2014, and hundreds of more titles are waiting at the gate. By now, the majority of games up the top-20 charts in China are WeChat-enabled, the platform acting as a "discoverability" and "virality" booster. Everybody wants a piece of the action, but Tencent is very selective about new partners.
Tencent doesn't allow games to tap freely into the WeChat Social Graph like Facebook does. The partnering publisher must upload to channels a new WeChat-exclusive version of the game with special features, and must agree to a cut on net revenue (on top of the platform-holder 30% fee) in favor of Tencent.
10. Video platforms
If you want to upload videos and build a channel around them like you would on YouTube or Vimeo in the western world, then you will turn to Youku. Youku has merged with its competitor Tudou last year, becoming the de facto video-sharing platform in China. In preparation for its own IPO, Alibaba has acquired a stake in this key digital asset too. Noteworthy competitors in the field include LeTV, Sohu Video, QQLive and Baidu-owned iQiy.
11. IP protection
Jeff Lyndon from iDreamSky explained this impeccably during a Pocket Gamer Connects conference in January 2014, using Fruit Ninja as an example:
“One hour after launch, 30 sites already had pirated versions of the game up. Within ten days it was more than 200. After three months there was one clone. After a year there were 40. Ignoring China means you're creating a bigger problem for yourself later on.” – Jeff Lyndon (iDreamSky)
Piracy and counterfeit knock-off goods are well-known and widely documented issues of the China market. It is therefore very important not to wait until you expand into the Chinese market to protect your trademarks and copyrights – that's already too late. As soon as your product or service becomes a proven hit in some market, you bear the risk of getting cloned in China.
Even worse, if you didn't complete your copyright and trademark homework properly, there's a chance you won't be able to claim back your brand and that the copycats will legally get away with it. China is not covered by the Madrid Protocol. Therefore, registering your trademark or copyright in one western country will not grant you the right to extend it to China automatically at a later stage.
China is its own system, and more importantly it is a "File First" based system, which means the "First Use" argument, so paramount out West, holds little water in Chinese courts. As a result, there is a trend in China known as trademark scalping or squatting, which consists of registering the hot up-and-coming brands from the US and Europe in China and selling them back to their creators for a huge sum of money by the time the creators want to get in the China market. Apple notoriously got taxed this way for the iPad trademark, and so were many others.
The cost of hiring lawyers in China and doing your registration early may seem like a waste of money when you are in the very early stages of your start-up, but it can potentially save you millions later down the road. So do it as early as possible.
Extra tip: also do it as broadly as possible. There may be more than one core category of goods in which your brand will be relevant, and we'd recommend to think hard about this from the get-go. We know of a video game publisher that recently launched a global hit on the App Store. They registered their trademarks and copyrights in the Computer Games category in China ahead of time so they thought they were safe. One day, they wanted to produce some promo t-shirts with a local partner. The latter requested a license grant. When the publisher tried to extend their trademark into the "Apparel" category, they discovered that it was already registered by someone else. After conducting a thorough search, they found out that their brand was already copyrighted (in bad faith) by plenty of different applicants in no less than 70 categories out of a possible 140.
If you are a small video game developer or medium-sized mobile publisher, the cultural gap with the Chinese market and the level of work it represents can feel daunting. It is highly recommended to find reliable local companies to partner with when entering this complex and disconcerting territory.
In mobile gaming, there are hundreds of "Distributors" who will be more than happy to deal with the local channels for a cut on the revenue generated within the territory. Several of them are good, many of them are terrible. Some are even straight out crooks, blatantly under-reporting sales and engaging in shady activities behind your back.
A few have emerged as the best options for foreign developers with a hit on their hand: iDreamSky (distributes Fruit Ninja, Jetpack Joyride, Temple Run 2 and Subway Surfers, among other hits), ChuKong and Yodo1. All three excel at so-called "culturalization" and they don't just pass out advice about what you should do, they have internal development resources to deal with your Android source code within a secure environment and adjust for the market themselves, much faster than you ever could. They also have hits in their portfolio around which they have built a strong cross-promotion network.
Last but not least, they offer SDKs that streamline payment processing and social media hook-ups. Other distributors worth consideration, if you can’t attract interest from the leading trio, would be TalkWeb, SkyMobi, MyGamez and NetEase, the browser-game giant having recently found success on mobile at last.
Some mobile advertising insights to help you along the way:
If you take one lesson from this 2-part report, it is not to discount China when developing your app, as it is a huge driver of growth. So think about China early – this is a market that doesn't wait for you to start your business.