The future of the internet is notoriously difficult to predict. At TechCrunch, Mark Suster chronicles how firms that were once ‘unstoppable’ internet monopolies (AOL, Netscape Navigator, GeoCities, Yahoo!, Microsoft, MySpace) are now extinct or marginal players. Suster writes that Facebook will probably end likewise:
It is ‘no doubt’ that the next decade belongs to Facebook. But the coincidence is that 10 years out will be 2020 and when we look back from that date I’m certain that people will also find a Facebook monopoly a bit laughable.
I believe Facebook controls stronger barriers to entry than most, but completely agree that the internet is often shaped by forces we never see coming.
China’s internet is even more challenging to predict. The government is an added X-factor in China tech, as its regulations can shape an industry or knock out entire firms. There’s not a soul who could have predicted all the top stories of 2010: 1) Google’s feud with the Chinese government and partial withdrawal; 2) Tencent’s fight with 360 anti-virus; and 3) the rise of Sina Weibo’s microblog.
Without further ado, here are my predictions for China tech in 2011. Just keep an additional eye out for all the stories that are completely unpredictable!
5) Chinese Internet IPOs Galore!
There’s a long line of firms seeking to IPO on the NYSE or NASDAQ, including VANCL, Taobao, Tudou, RenRen, Taomee, Jiayuan, Zhenai, Sunity, Qunar, 58.com and more. While IPOs have become near passé in the Silicon Valley (see Facebook, Twitter, Zynga, etc.), they’re still red hot in China.
4) Tencent Tries to Re-Invent Itself
After the fight with 360 anti-virus, CEO Ma Huateng has pledged to open up Tencent and build a 3rd party ecosystem. That would be a dramatic shift for a firm that is far more feared (and hated) than loved by 3rd parties.
I’m skeptical of attempts by big companies to re-invent themselves in social. Tencent is now testing Pengyou, its latest attempt at a real name social network, a market I argue it should have dominated a long time ago. Mashable’s top prediction for social networks in 2011 is that “Google’s Social Networking Efforts Flop Spectacularly.” Even though Tencent’s core business is far closer to real name social networking than Google’s, I still don’t Tencent winning this market. Pengyou already has the most incompetent Facebook integration I’ve ever seen.
Nonetheless, Tencent’s “fall back” is not a bad deal: billions in profits on its core business of MMORPG games and monthly subscriptions for virtual goods. And a struggling Sina was able to reinvent itself with its Weibo product…
3) Sina Weibo Continues to Grow
At the beginning of 2010, it was not at all clear that microblogging would be successful in China or who would win. Sina Weibo has since risen to dominance with over 50 million users and a torrid growth rate. It’s added close to $3 billion to Sina Weibo’s market cap. There’s even the possibility that social will evolve differently in China than in the West, and Weibo could threaten China’s social networks. I believe micro blogging will capture a larger audience in China than in the West, but that real name social networks will still play an important role.
Sina Weibo is far beyond a Twitter clone, and it is constantly experimenting with new social features. It would be wise to ensure that its core service retains does not suffer; there have been a recent spate of outages as the services struggles to scale its architecture. It’s also worth noting that microblogs are still subject to sensitive, shifting regulations in China.
2) E-commerce and Advertising Dethrone Gaming
Gaming has long ruled as the largest industry on the Chinese internet. But the slowdown of growth in gaming now coincides with a rise in e-commerce and advertising. And within e-commerce, expect B2C growth to outpace C2C as more and more merchants join the game. Chinese are now growing comfortable purchasing anything online, from clothes to cars to diamonds. As these online retailers seek performance-based advertising, content providers will need to develop more sophisticated targeting where they previously conducted only general branding. In the end, this should improve monetization for all.
1) Smartphones at the China Price: Modified Android OS + Shanzhai Hardware
Chinese entrepreneurs have long been producing phones with top-notch hardware, but the operating system (OS) was often an afterthought cobbled together in a few months. With a modified Android OS, Chinese can now have a truly smart smartphone at the China price.
One early smartphone entrant, the HiQQ by Tencent, should retail for 1000 RMB ($150), before operator subsidies. It is based on the Android OS, but seemingly strips the phone of any traces of Google. Instead, the phone comes pre-installed with 19 Tencent applications, as that firm attempts to port its walled-garden strategy from the desktop to the mobile. The Meizu M9 is a higher-end “made in China” smartphone and people are lining up around the block to buy one.
Content providers should win big in this explosion of smartphones. The power of carriers (notably China Mobile) appears to be slipping. No Chinese hardware firm has been able to get the software right, so a “Chinese Apple” seems unlikely. Nor will Android’s ascent necessarily boost Google in China. The most attractive suitors for the attention of Chinese mobile users are the existing giants (Tencent, Baidu, and Alibaba) as well as new entrants who focus on content creation.
Expect Chinese to adopt smartphones en masse in 2011.
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