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Why china loves the Internet

Misiek Piskorski
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In 2011, Chinese people spent more time on the Internet than they did watching TV, while in the U.S. that crossover is predicted to happen only this year.

The size of the Chinese Internet is staggering. There are almost 600 million Internet users in China, more than in any other country in the world (the next highest is the United States, with 254 million). And those users represent just 44 per cent of the Chinese population. If half the population of every province in China had access to the Internet, 135 million additional people would come online. Among Chinese Internet users, 78.5 per cent of them access the Web using their mobile devices (compared to 63 per cent in the U.S.), and many of the most popular services, like WeChat, exist only as mobile apps.

Chinese Web users are also more engaged than Americans are. In 2011, Chinese people spent more time on the Internet than they did watching TV, while in the U.S. that crossover is predicted to happen only this year. More than 75 per cent of Chinese people regularly contribute content online, while less than a quarter of Americans do. And it’s likely that users in China will spend more money on e-commerce in 2013 than Americans will.

There are many reasons for the immense popularity of the Internet in China. The first set is related to what’s happening offline in the country:

Existing media are weak

Because their media are censored, people in China turn to the Internet to get a deeper understanding of what’s going on in their country and what other people think about it. Moreover, if you ask an average Chinese person about TV, you’ll often hear: “Oh, it’s really boring. There are so many channels, but there’s usually nothing to watch.” So Chinese people turn to the Internet for entertainment.

People are on the move

In 1990, only a quarter of the Chinese population lived in cities. Today, half does. This means that more than 300 million people moved far away from the friends and family they grew up with, and the Internet is critical to reconnecting them with their roots. The urbanisation of China will only continue: The government plans to move 250 million rural residents into newly constructed towns and cities by 2025.

Income inequality is growing

China’s economy is growing very fast — but so is inequality. For example, in 2013 there were 315 people in China who had more than a billion dollars, up from zero in 2003. Those who have grown wealthier than their peers in a short period of time want to establish relationships with others of similar economic stature, and to do that they often turn to the Internet.

Kids are lonely

China’s one-child policy has been around for more than 30 years, which means that most kids are growing up without siblings. When they come home from school, the only people they see are their parents. They want to hang out with people their own age, so they go online.

And some adults are lonely too

Due to the one-child policy there are many more men than women in China, particularly in rural areas. This has created intense competition in the marriage market and some men have to work extremely hard to find a spouse. The Internet offers great opportunities to find suitable partners.

Another major reason for the Internet’s popularity in China is the immense selection of quality sites and services. Even though Chinese people can’t access Facebook, Twitter, YouTube and some Google services, they can access multiple Chinese equivalents. In the U.S., Facebook is the primary site that people use to interact with friends. In China, people can choose between QQZone, WeChat and Renren, to name a few. To interact with celebrities and strangers, most Americans use Twitter. In China, people can choose between Sina Weibo, Tencent Weibo, Alibaba Weibo — as well as a ton of little Weibos. The same goes for social gaming: Tencent, Netease, Sina Weibo and others offer many social games. There are also many sites for which there’s no equivalent in the U.S. For example, sites like 9158.com and yy.com enable users to sing for or with other people. Such sites provide much-needed entertainment and allow people to connect with one another easily.

The third set of reasons behind the Internet’s popularity in China has to do with the ways the Web connects shoppers to businesses:

You can find a large selection at low prices

In China, the five largest retailers account for only 10 per cent of the total retail market, so most customers have to buy items at mom-and-pop stores. Since these offer neither great variety nor low prices, customers look to the Internet to get what they need.

Brands are weak

Some China specialists I interviewed in the country estimated that 330,000 new products are introduced every year in China. Most of them are unbranded, and most of them fail. Consumers don’t have enough information about these products, so they turn to the Internet to discuss them with others. In fact, more than 40 per cent of Chinese e-commerce shoppers first saw information about a product on a social media site before they bought it.

TV advertising is expensive

Since the Chinese state has a monopoly on television - and on TV advertising rates - companies often complain that TV ads are too expensive. The Internet often offers a more cost-effective solution. Not only can firms advertise online, they can also pay online opinion leaders to drive their product reviews.

Same-day delivery is common.

One reason e-commerce works so well in China is that in many of the 160 cities with populations over 1 million, same-day delivery is extremely cheap. Buying online is so much more fun when the item you ordered in the morning is on your doorstep that afternoon. Some Chinese startups are even gearing up to deliver products within 24 hours to any city in China within the next eight years.

We should expect the Internet in China to continue drawing vast numbers of users while finding even more ways to engage them. Chinese companies are accelerating this trend by constantly trying new things — often in partnership with each other. This creative freedom is the result of low engineering costs and a willingness to fail. If Chinese Internet companies introduce something that doesn’t work, they just scrap it and move on. This approach will allow them to innovate far beyond what American companies like Facebook and Twitter are doing right now.

And if these trends continue, it won’t be long before we see broad adoption of Chinese Internet products in the U.S. and around the world, just as we saw with nondigital products in the past. This can only be a good thing for consumers.

Misiek Piskorski is an associate professor of business administration and a Richard Hodgson Fellow at Harvard Business School. He just spent several months researching the Internet in China.

© The New York Times 2013

© 2013 Harvard Business School Publishing Corp.

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