WHAT IT TAKES TO WIN. In the Chinese App Market

Transcription

1 WHAT IT TAKES TO WIN In the Chinese App Market JUNE 2013

2 Table of Contents Exective Smmary Introdction Research objective and methodology App landscape App discovery and download behavior... ios vs. Android... App discovery... In-app prchases What it takes to Win in the Chinese App Market... Fragmented App Distribtion... Lack of standard payment methods... Local social media landscape... Need for Localization... Piracy concerns Monetization strategy for China... Freemim model... Partnering with a local payment provider... Know yor sers...» Ad monetization Conclsion... 14

3 EXECUTIVE SUMMARY Cold China be the next big marketplace for app developers? While the size of the market has developers salivating, the complexity, fragmented eco-system and privacy concerns are some of the challenges that mst be nderstood and tackled before developers can sccessflly monetize their apps in this niqe contry. In March 2013, InMobi decided to condct a srvey amongst app sers in the US and China, to nderstand consmer behavior in both markets, the factors that inflence app discovery and download, and the monetization strategies that cold be sccessfl in these markets. Key reslts from the srvey 1. The US and China are comparable markets in terms of appetite for app downloads and sage. Be it proactively searching for new apps, down loading apps or sing apps that were downloaded, the Chinese were fond to be heavy consmers of apps. 2. While Chinese sers are traditionally perceived to be averse to paying for apps, or research indicates that there is a hge market for in-app prchases in China. Also, many Chinese sers revealed that price was less of a determinant in driving their download decisions - contrary to what was noticed amongst American sers. 3. Receptivity to mobile ads was fond to be high in both China and the US with sers in both markets preferring ads that recommended apps to them based on their interests and past web browsing history. This whitepaper attempts to provide an in-depth overview of the research findings and also provides several other market specific insights that can help developers craft a sccessfl app distribtion and monetization strategy for the Chinese market. 1

4 INTRODUCTION China is the world s biggest mobile market in terms of sbscriber base, and the fastest growing in the history of telecommnications. According to IDC, in Febrary 2013, China overtook the US to become the world s largest smart device market, with 246 million devices (against the US 230 million) 1 and acconting for 26.5% of all smartphone shipments last year. Concrrent with the growth in smart devices, mobile applications (apps) are also growing at an astronomical rate. While the top 100 contries average an app session growth of over 200 percent, China is delivering more than for times this growth rate (870%), sprred by a massive poplation voraciosly adopting apps. 2 In addition, the falling price of the iphone and the increasingly capable low- to mid-range Android handsets now available have frther propelled this growth. Despite the explosive growth, cltral barriers, piracy concerns, fragmented app distribtion ecosystems and the need for localization have prevented most app developers from entering this market. The common perception that Chinese app sers were not willing to pay for content and that app sage levels were not high enogh to warrant investments in heavy marketing, kept most developers away from China. Today, however, the availability of local payment and carrier billing options with big operators like China Mobile and China Telecom have made it easier to charge mobile app sers. 3 In addition, the market is witnessing a consolidation of alternative Android app stores. These factors have sharpened the interest of mobile app developers in the Chinese market. Tim Cook, CEO of Apple Inc., has pblicly stated that China is going to be Apple s largest market very soon. However, very few western firms have the nderstanding or knowledge to capitalize on the Chinese opportnity. We decided therefore to condct a srvey to help developers answer the qestion: What insights abot the Chinese app sers can help developers nderstand this market and lanch their apps sccessflly here? RESEARCH OBJECTIVE AND METHODOLOGY In order to nderstand consmer behavior arond app sage and discovery in the US and China, InMobi recently fielded an on-device srvey arond the above topics via its global mobile ad network, across both Android & ios smartphones. The srvey was condcted with a sample size of over 1000 Android and ios sers (US Smartphone Users N= 510; ios Users N= 251; Android Users N=259. China Smartphone Users N= 502; ios Users N= 206; Android Users N=296). 2

5 APP LANDSCAPE In the US today, the Apple App store and Google Play are virtally neck-to-neck with an almost eqal nmber of downloads (50B downloads for Apple vs. 48B for Google Play). However, the sitation in China is qite different. While the Apple App Store is the primary store for ios apps in China, Google Play is virtally nonexistent since access is restricted. However, China has one of the most complex and fragmented Android app store ecosystems in the world, with over 500 stores. APP DISCOVERY AND DOWNLOAD BEHAVIOUR Or srvey showed that app discovery and download are similar across both contries (Figre 1), with a near-direct correlation between apps downloaded and apps sed in both the USA and China. Fig 1: App sage is high in both markets Apps downloaded in the past 30 days 14% 7% 20% 7% 21% 35% 16% 16% 17% 8% 11% Q1. Abot how many apps have yo downloaded in the past 30 days? Apps sed in the past 30 days 6% 12% 7% 18% 30% 8% % 16% 1 11% Q2. Abot how many apps have yo sed in the past 30 days? Over None 3

6 In addition, the Chinese have a strong appetite for exploring new apps. A whopping 97% of smartphone sers in China revealed that they proactively search for new apps to download, with 37% of them searching on a daily basis (Figre 2). The Chinese also seem to be more determined in their search for new apps, with only 28% of the Chinese rarely or never searching for new apps to download, compared to 40% in the US. Fig 2: App discovery patterns 91.0% 97.0% Of Smartphone sers in the US have searched for new apps to download Of Smartphone sers in China have searched for new apps to download 24% 25% 3% 32% 37% 24% 25% 24% of the US mobile web sers search for new apps on a daily basis 37% of Chinese mobile web sers search for new apps on a daily basis Q3. How often do yo search for new apps to download? Daily Weekly Monthly Rarely Never 4

7 A. ios VS. ANDROID Fig 3: Apps expected to download in the next 30 Days 40% 43% 21% 15% 14% 14% 6% 7% 7% 4% 4% 4% None Over 30 Q4. How many apps do yo expect to download in the next 30 days? Fig 4: Apps expected to download in the next 30 Days 28% 21% 17% 18% 14% 17% 16% 17% 4% 8% 13% None Over 30 Q4. How many apps do yo expect to download in the next 30 days? 5

8 2 of Android sers in the US say they search for new apps daily, verss 18% of ios sers (Figre 5). In China, these nmbers were nearly eqal, at 38% and 37% respectively (see Figre 6). This ties in with research from mobile research firm Canalys, who fond that jst over half of all apps downloaded in the first qarter of 2013 were for Android. ios, at abot 40 percent share, was the only other big-time player. 4 Fig 5: Freqency of Searching Apps to Download 91.0% Of ios sers in the US have searched for new apps to download 92.0% Of Android sers in the US have searched for new apps to download 18% 8% 2 27% 36% 27% 24% Daily Weekly Monthly Rarely Never Q6. How often do yo search for new apps to download? Fig 6: Freqency of Searching Apps to Download 98.1% Of ios sers in china have searched for new apps to download 97.0% Of Android sers in china have searched for new apps to download 2% 3% 26% 37% 25% 38% 25% 26% Daily Weekly Monthly Rarely Never Q6. How often do yo search for new apps to download? 6

9 B. APP DISCOVERY So, how do sers discover apps in these markets? In both the US and in China, browsing the app store is the most common method for both ios and Android sers (Figres 7 and 8). Also, in both markets, word of moth is a bigger factor for ios sers than Android sers. In the US, 42% of ios sers se the recommendations from friends and family to find new apps, vs. 27% of Android sers. In China, these figres are 33% and 23% respectively. In both markets, Android sers are more likely to look p reviews for apps on mobile websites. Fig 7: App discovery in the US Browsing the app store Recommendation from friends and family Recommendation from social media Websites I access throgh my mobile phone Advertisements on my mobile phone None of these Websites I access throgh a desktop laptop compter Magazines and newspapers 11% 8% 7% 6% 4% 18% 1 14% 25% 27% 42% 57% 53% Q7. How do yo sally find new apps to download to yor phone? Fig 8: App discovery in China Browsing the app store Websites I access throgh my mobile phone Recommendation from friends and family Websites I access throgh a desktop laptop compter Recommendation from social media Advertisements on my mobile phone Magazines and newspapers None of these 4% 5% 3% 18% 12% 33% 23% 13% 20% 23% 30% 35% 44% 55% 54% Q7. How do yo sally find new apps to download to yor phone? 7

10 The Chinese are also highly proactive in app search and discovery, with 36% of or Chinese respondents expecting to download over 20 apps in the next month, compared to 16% in the US (Figre 9). Fig 9: Nmber of apps expected to download in the next 30 days 18% 6% 5% 5% 8% 16% 24% 11% 14% 41% 17% 15% Over None Q4. How many apps do yo expect to download in the next 30 days? How do sers discover new apps? In both markets, most sers (55%) discover new apps in the App store (Figre 10). However, US sers are more likely to rely on recommendations from friends and family (35%), while Chinese sers are inflenced by app review websites on a mobile phone (40%). Review websites are key in China, with 27% accessing them throgh a desktop/laptop compter, as against jst 8% in the US. Fig 10: Channels throgh which sers discover apps Browsing the app store Websites I access throgh my mobile phone Recommendation from friends and family Websites I access throgh a desktop laptop compter Advertisements on my mobile phone Recommendation from social media (facebook & etc) Magazines and newspapers None of these 8% 7% 5% 17% 4% 20% 15% 18% 27% 35% 27% 40% 55% 55% China Smartphone sers US Smartphone sers Q7. How do yo sally find new apps to download to yor phone? 8

11 Receptivity to mobile ads is high in both the US and China. In the US, 65% are eqally or more comfortable with mobile ads as they are with ads on the TV or on the desktop/laptop; in China this figre is 4. 5 In addition, we fond that there was no silver bllet - different mobile ad formats sch as static banner ads, rich media ads, interstitials, and video ads are all effective in different sitations (Figre 11). That being said, we fond that contextal ads are extremely well received - sers in both markets preferred ads that recommended apps based on their interests and mobile web browsing history. Fig 11: Mobile ads that inflence app download ios Users Android Users ios Users Android Users Banner ads which appear at the top of the screen. 28% 23% 18% 24% Ads which inclde mltimedia content sch as games, adio, and pictres. 25% 2 24% 28% A fll screen ad which appears briefly, while an app is loading. 18% 27% 20% 1 A short video clip 22% 16% 17% 14% Ads which recommend specific apps for me, based on the website I am browsing on my phone (for ex, ads for sports apps displayed when I visit a sports website on my phone) 34% % Q8.When searching for mobile apps to download, which types of advertisements on yor mobile phone wold be the most helpfl? Fig 12: Factors that inflenced the download decision Price 37% 61% Description and screenshots 51% 45% App store reviews & rating 50% 55% Recommendation from friends & family App is ranked high on app store chart App featred by app store 30% 33% 45% 41% 44% 5 US Smartphone sers China Smartphone sers Reviews from magazines or websites 18% 30% Q9. When yo are deciding whether to download an app, which factors have the biggest inflence? 9

12 What factors most inflenced the download decision (Figre 12)? Or research showed that in China, price is less of a determinant de to the prevalence of free apps in the market. App store reviews were also considered important by abot half the respondents in each market. Interestingly, recommendations from friends and family was less important in China (30% vs. 45% in US), with Chinese sers giving far more importance to the app featred by the app store (5 vs. 33% in US). Lastly, the app s rank on the app store chart was also a factor of consideration in both markets (41% in US vs. 44% in China), and Chinese sers gave a higher ranking to reviews from magazines or websites (30% in China, 18% in US). C. IN-APP PURCHASES Fig 13: In-App Prchases 37.0% of smartphone sers in the US have made an in-app prchases 46.0% of smartphone sers in China have made an in-app prchases Q10. When sing an app on yor phone, have yo ever made an in-app prchase? Contrary to poplar belief that Chinese sers are less willing to pay for app content, or research indicates that 46% of Chinese have made an in-app prchase as compared to the Americans (37%). 10

13 WHAT IT TAKES TO WIN IN THE CHINESE APP MARKET At first glance it seems as if the Chinese app market is ripe for the picking. However, effectively marketing apps in China is far more complex de to several challenges, as otlined below. FRAGMENTED APP DISTRIBUTION: In the US, the apps market is a two-horse race, dominated by the App Store and Google Play, both being able to meet app distribtion needs. In China, Android crrently holds a 70% market share, which is expected to increase to 75-80% by the end of this year. However, since access to Google Play market in China is restricted de to political reasons, it is a relatively minor distribtion channel. China has one of the most complex and fragmented Android app store ecosystems in the world, with over 500 stores. With most Chinese Android apps downloaded from one of these app stores, apps developers necessarily have to distribte their apps via third party stores. Some of the largest app stores inclde Anzhi, AppChina, Gfan, Hiapk, Mobile Market, Ndoa, Snappee, Tencent, Wandojia, Baid App Store (rn by the Chinese search engine giant), Opera Mobile App Store, and Pandaapp. We strongly recommend marketing yor app throgh one or more of the large stores listed above. LACK OF STANDARD PAYMENT METHODS: Credit card penetration is low in China, and hence alternative payment methods play a hge role in enabling the in-app prchase market. Recently, big operators like China Mobile, China Unicom and China Telecom have come p with local payment and carrier billing options, making it easier to charge mobile app sers. We sggest partnering directly with carriers or device makers for pre-install deals. Several top developers sch as HalfBrick and Rovio have benefitted from sch arrangements. LOCAL SOCIAL MEDIA LANDSCAPE: Social media has a great inflence on app download decisions amongst consmers in China (Figre 3). While Facebook and Twitter are fixtres of daily online se in the West, the Chinese have no access to these sites; local cosins sch as Sina Weibo, Tencent Weibo, Renren and Doban dominate the social media landscape here. Developers mst promote their apps heavily on these local social media channels to drive downloads in China. 11

14 NEED FOR LOCALIZATION: A Distimo report - The Impact of App translation (September 2012) revealed that 73% of free downloads amongst the top 200 most downloaded free applications in China were localized in Chinese, far otstripping other langage-sensitive markets like Korea and Japan. In fact, China is the only contry where localized apps generate more downloads than English apps. 6 In addition, close to 50% of the Top 25 most downloaded apps in China have Chinese names. Figre 14 shows how important it is to cstomize apps for the Chinese market. While translating apps into Simplified Chinese is essential, localization shold be beyond simple translation it is important to connect with ser emotions and cltre. Cstomizing with Chinese avatars and timing lanches with Chinese festivals is a good strategy. For instance, HalfBrick s poplar app Frit Ninja was introdced as a Chinese version with Chinese zodiac images among other cstomizations. In jst 3 months, the Chinese edition reached 40 million downloads, and racked p $6 million in sales! % of iphone apps w/ Local Langage Names in National Top 25 of monthly free downloads % of iphone apps w/ Local Langage Names in National Top 25 of monthly free downloads Switzerland Germany Spain Italy France Rssia Japan China Taiwan Korea Spain Japan Rssia Switzerland Italy Germany Taiwan Korea France China 0% 20% 30% 40% 50% 60% 70% 0% 20% 30% 40% 50% 60% PIRACY CONCERNS The Chinese market is notorios for piracy, and laws in China do not safegard against innovative ideas. Withot Google Play to reglate the market, pirated games and malware are rampant in the Android app space. A recent report from the Data Center of China Internet indicated that almost 35% of Android apps pll ser data nrelated to the app. Many developers claim that almost 100% of their pirated sers are either from China or se Chinese devices. One way to overcome this is by sing a freemim bsiness model as against paid monetization. Freqent pdates to the app are also recommended, which will make it difficlt for hackers to keep p. Small app developers shold also consider partnering with larger companies who are better positioned to handle piracy, given their access to more resorces. 12

15 MONETIZATION STRATEGY FOR CHINA A. FREEMIUM MODEL While developers in general have been moving away from paid apps to freemim apps (apps that are free to download bt allow sers to pgrade to the fll version pon prchase), the freemim monetization model tends to work well particlarly in China for the following reasons: Paid apps are easily pirated, especially in China Chinese sers like to try ot the prodct before they actally make a prchase The trst of the Chinese ser mst be earned before payment B. PARTNERING WITH A LOCAL PAYMENT PROVIDER Given the low credit card penetration in the Chinese market, partnering with a local payment provider sch as Alipay is critical. While in the US, sers are open to signing p for a sbscription service and having their credit card charged every month, atomatic recrring payments (sbscriptions) are sally not a viable option in China right now. In China, sers mst deposit money into their Alipay accont before any payments can be processed, and have to reathorize their payments every month. It is therefore evident that Chinese sers have to make a conscios decision each time they pay for a service. C. KNOW YOUR USERS While marketing yor app in China, do bear in mind the profile of sers and how they map to yor app. For instance, online mobile games are known to appeal to middle aged and yong adlts in the contry, while Casal games appeal to low income, low edcation grops and to children. Knowing who yor apps will appeal to, will help yo target sers and cstomize yor marketing strategies appropriately. D. AD MONETIZATION Given the large ser base, ad-based monetization can be a viable sorce of revene. However, the Chinese ad network space is qite fragmented, with over 70 competing ad networks. Given the stiff competition, many networks resort to misleading reporting and other nscrplos practices to lre developers. Hence developers mst condct de diligence and pick a trstworthy partner who can offer both performance and scale to make ad monetization work for them. 13

16 CONCLUSION Unlike the U.S, where Apple's App Store and Google Play dominate the app market, the fragmented Chinese app ecosystem has hndreds of third-party app stores, making it difficlt for overseas developers to reach a wide enogh adience. In addition, fears of piracy and payment concerns have prevented many developers from choosing to explore the Chinese app indstry. Do app and mobile game developers from the West stand a chance? While China is no easy market for app developers, the hge potential of this market can make it very lcrative for developers who adopt the right strategy and take the troble to nderstand the Chinese market. It is important to nderstand the similarities and differences between the US and the Chinese markets, and be willing to work with the Chinese cltre and economy to be sccessfl in this market. We hope or research report has given yo the data and the insights on how to craft yor app strategy to not only scceed bt also thrive in the brgeoning Chinese app economy. 14

17 REFERENCE 1. Top-Smart-Device-Market they-are-with-tv-or-online-advertising-2/

18 ABOUT INMOBI InMobi has been recognized by MIT Technology Review as one of 50 Disrptive Companies of InMobi platforms enable the world s leading brands, developers, and pblishers to engage global consmers. InMobi bilds mobile-first technology platforms that leverage advances in big-data, ser behavior, and clod-based architectres to simplify advertising. Agencies and advertisers leverage InMobi platforms to create HTML5 rich media ads and engage 691M consmers across 165 contries. Developers and premim pblishers se InMobi platforms to acqire sers and monetise their mobile apps and their mobile websites globally. With offices in mltiple continents, InMobi provides global reach with local service and spport. InMobi is ventre-backed by investors inclding: SoftBank, Kleiner Perkins Cafield & Byers and Sherpalo Ventres. Developers can start monetizing instantaneosly by downloading or SDKwww.inmobi.com/SDK To learn more, please visit follow s on or discover the latest mobile insights at Want to know more abot InMobi Developer Soltions contact: developer@inmobi.com 16

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