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Mass market, mass messaging |
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 While industry insiders view China as the world's largest potential cellular market, they should also consider the country's potential as the world's largest messaging market. During this year's Spring Festival, Chinese mobile users ushered in the lunar New Year with an avalanche of billions of SMS messages sent within a single day. Sending mobile messages has come to be a token of fashionable lifestyle in China. A promising wireless communication market scene has unfolded. In today's Market Analysis, industry experts and inside players describe business opportunities in this so-called "fifth medium" market in China.
This year, February 15th is Chinese traditional Festival of Lanterns. The annual gala held by China Central Television is going on. Yin Xiaoxin, along with dozens of other audience members, was drawn by CCTV from its viewers. During this year's Spring Festival, more than 13 million individuals across China entered the competition for the tickets just by sending short messages.
Yin Xiaoxin said,"SMS tightens the link between me and CCTV. By means of SMS, I got a lot of information about CCTV's Spring Festival Special. And I took part in some surveys conducted by CCTV. All this helps me to get informed even when I am engaged with busy work. Even if I am too busy to watch TV, I can also know what's going on on TV and what the hot topic is. I like SMS very much."
On this Lunar New Year's Eve in Beijing, SMS gateways were clogged with messages as early as 10:30 PM - well before the midnight crunch. CCTV also got into the SMS act by repeatedly inviting viewers of its traditional New Year's Eve Special to send in messages. CCTV says, this was very likely China's largest cross media SMS event to date.
Sending SMS has become a culture in the world. With the exception of the US, Europe and Asian countries like Japan, South Korea and China have become key SMS areas. When the audience watches our programs, they can't wait a long time to tell us their opinions. SMS is the easiest and the most convenient way for them to do it.
The past week-long Spring Festival Holiday witnessed an SMS explosion. Over seven billion short messages were sent in the holiday period. This means in China which claims to be the largest mobile market, with over 200 million mobile subscribers, each subscriber sent more than 30 SMS on average.
The usage rate of SMS in 2001 was 20%. Two out of ten mobile subscribers sent SMS. By the end of last year, the figure had reached 40%. Four out of ten mobile subscribers sent SMS.
By the end of last year, 96 billion SMS were sent within the year, five times the number for 2001. This year, it is anticipated that some 150 billion messages will be sent. As SMS usage increases, so do revenues. Given the low price of roughly one US cent per message, the SMS sector in China is predicted to create revenue of some 1.8 billion US dollars this year. By 2007, SMS revenues will jump to $16 billion. More than 500 million mobile subscribers will be sending, on average, six messages per day.
Early in 1994, mobile messaging service had already been introduced to the country by China Telecom. But why is it booming now?
Guo Chang, Analyst of CCW Research said,"At that time, there were few mobile phone subscribers in China. And it's not easy to operate messaging service. That's the main reason that the SMS was not popular. Since late 2000, China Mobile began to promote the service that doesn't require subscribers' application. Meanwhile, due to the explosion of mobile phone users, and the strong support of network operators, the SMS business is booming."
Han Qiuhong, an SMS user, said,"I like sending messages to my friends. My friends and I, we all like this way to communicate with each other.It's really very good, I think, especially during the Spring Festival. We download many messages, around 100 messages from the Internet. It's very cheap and convenient to communicate with each other. It's a good way."
China's SMS explosion undoubtedly benefits the country's carriers who take in the vast majority of the revenue. Although carriers do not publicly release traffic figures, China's large internet portals have been the current leaders in the booming SMS content provider market.
Guo Chang, analyst of CCW Research, said, "China Mobile and China Unicom are the biggest beneficiaries of SMS business. On the other hand, portals make more profits in the SMS market. We can see that those portals that get listed abroad gain revenues mainly from SMS."
The typical Chinese SMS user is found in one of the large cities like Beijing or Shanghai, and in provinces such as Guangdong and Hebei. Like European markets, the typical user falls within the 15-30 age group and the most popular services are ring tones, logos and basic information services like news and weather forecast. Combining all these factors, the Internet naturally, has come to be a main source of message content. Sina.com is one of the top portals in China. During this Spring Festival, Sina got the laurels as "the net users' favorite".
Ben Tsiang, senior vice-president of SOL General Manager, said, "We have the most professional, fastest SMS news service, and also the richest and most complete online library for download service. All of this service are combined to be a very valuable destination for all the users to send SMS as a part of their daily lives."
Currently, every two out of ten messages sent by mobile subscribers are from the Internet, and the ratio is projected to become 30% soon. More than 400 service providers across China have signed messaging service contracts with China Mobile. The five largest service providers contribute 50% of the total monthly revenues to messaging services. Building on the success of SMS, insiders are expecting multimedia messaging service, or MMS, to be a huge phenomenon in the communication scene.
Ma Yun, deputy GM of Wireless Data Service Dept., Netease, said,"There will be a fierce competition among service providers in terms of SMS quality and quantity. Currently, the MMS is not very popular, but Netease has already begun to provide MMS news service. I believe by year's end, MMS will hit a higher growth rate."
Despite the eight-times higher charge for MMS compared to SMS, and the expensive cost of color-screen handsets, two factors are driving the mass adoption of MMS in China. First, half of the nation-wide subscriber base changes mobile handsets yearly. Color-screen handsets from both foreign and domestic manufacturers are just being introduced and are expected to generate significant sales among early users this year. Secondly, the introduction of new GPRS- and MMS-based services will fully utilize the features on those new handsets.
Hong Kong-based Tom.com took the lead in providing MMS on the Chinese mainland. The head of Tom.com's online business Wang Leilei predicts that MMS will generate one million yuan or some 120,000 US dollars for his company by this June. He has some insights in developing this new service in China.
The long awaited take-up in messaging services in the Chinese market has arrived. As with any other business opportunity in China, the sheer size of the market has vendors excited about the future prospects.
Ben Tsiang, senior vice-president of SOL General Manager said,"SMS is the bread and butter for today, if you are looking for another 24 months. The colorful content, interactive content is going to be in place. So there is room right now empty for a lot people to fill in."
While China is still largely closed to foreign operators, opportunities are abundant for aggressive and creative content providers. Currently, mobile content providers from Japan, Korea and Taiwan are bringing content, ring tones, and games to Mainland consumers. More are coming. They comb the market, looking for ways to capitalize on it. Then what preparation do they need to do before taking the first step?
Despite the potential of China's messaging market, the fact that the market is still in its infancy is apparent. When people see beneath the hype, some problems are emerging.
Guo Chang, analyst from CCW Research said,"The clog, delay and loss of messaging transmission, plus non-interoperability of China Mobile and China Unicom are cited by the customers as primary complaints. In addition, the small input keys of handsets make it difficult for aged users."
To capture the market momentum, inside players have taken efforts to tackle the difficulties, and dominant mobile operators are developing innovative ideas.
Cai Ji, deputy GM of Dept. of Value-Added Services, China Unicom, said,"We will offer a better revenue sharing solution. We will also lower the entry barriers, and provide better entry service. In order to better serve our service providers, we will invest more in setting up a focused gateway specifically for them."
Ben Tsiang, senior vice-president of SOL General Manager said,"you can see the market is still growing very rapidly and all the content, handset, mobile operators are working even closer and closer each day to foster even faster growing market in China. I would say I'm optimistic in terms of wireless market here.Definitely I'm very positive in having more international players coming into the market. We can make this market more exciting and more colorful and more successful."
After a slow start, China has embraced mobile messaging in full force. Now, it is rapidly catching up with other parts of the world...and is on pace to overtake all other regions. As millions of Chinese mobile users become accustomed to using their phones for more than voice, the mobile messaging market is set to boom. And a pool of business opportunities is opening to investors both from home and overseas.
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