Chinese digital media today

Chinese digital media today

Guide When it comes to digital media, mobile phones are a frequently occurring topic. From mobile video to the rise of chatting on social networks and microblogging, netizens are able to use unique methods to maintain their Internet lifestyles. In this volume we will specifically use the perspective of mobile technology to view the influence of different trends. Look out for the MOBILE symbol, which is used to point out those discoveries targeting mobile phones. 2

In the past year, Chinese Internet revenues grew 54%... representing an increase of 13.5 billion RMB from last year Chinese Internet revenues from 2010 to 2013 Revenue billion RMB Growth Rate 800.0 600.0 400.0 200.0 46.9% 149.8 66.9% 249.9 54.1% 385.0 44.9% 557.9 0.0 2010 2011 2012e 2013e Source: iresearch 2012 China Internet Economy Report 3

18% of growth or 240 billion RMB comes from advertisements 20% of growth or 270 billion RMB comes from mobile devices 55% of growth or 630 billion RMB comes from e-commerce *includes ads streamed before videos *includes video searching, social networking and videos Source: iresearch 2012 China Internet Economy Report 4

Looking at the broad picture, even though trends are leaning towards users of mobile devices; online video, social networks and e-commerce still play a leading role. 371,830,000 Online video 66% of netizens 14% year-on-year growth (Online video users) 275,050,000 Social networks 49% of netizens 20% year-on-year growth (Social network users) 242,020,000 E-commerce 43% of netizens 25% year-on-year growth (E-commerce users) Sources: CNNIC Jan 2013, National Bureau of Statistics of China 2013 5

Advertisements The headline of digital consumption reports 6

Next year, due to shifting budgets for printed media, expenses for digital media will be 24% higher than forecasts predict. 100% 90% Advertisement expenditures for different media from 2009 to 2014 Magazine Newspaper Internet Radio Outdoor Cinema TV 80% 70% 60% 50% 38% 43% 42% 42% 41% 40% 30% 20% 10% 18% 22% 14% 22% 18% 21% 21% 19% 24% 18% 0% 2009 2010 2011 2012 2013 2014 Ad expenditure share Source: ZenithOptimedia AdForecast 2013 7

This trend is being propelled by advertisements streamed before online videos; it is especially prevalent for the food and drink, beauty and skincare industries Internet expenditures for all industries by ad format (not including searches) 132% year-on-year growth 11% year-on-year growth 3% 20% Digital ad banner Display ad special format 77% Video (Pre-roll) Others year-on-year growth Source: iadtracker February 2013 8

As of February 2013 Food and drink products: growth of 125% Drinks: Nestle 6082%; C'estbon: 12331% Food: Mars: 701%; Kraft: 3609% Spirits: Harbin Beer: 661%; Snow Beer: 4891% As of February 2013 Cosmetic and bath products: growth of50% L'Oréal Group: 168% Procter & Gamble: 22% Unilever: 187% As of February 2013 Telecommunications and IT: growth of 20% China Mobile: 54% China Telecom: 54% As of February 2013 Automobiles: growth of FAW-VW: 245% Changan Ford: 77% Dongfeng Nissan: 288% Mercedes-Benz: 287% Chery: 105% 10% Source: iadtracker February 2013 9

Although mobile sales only account for 8% of advertising expenditures, they are also the most rapidly growing sector. Expenditures and growth in Chinese Internet in 2012 Annual Revenue in 2012 (billion RMB) Absolute growth in2012 (billion RMB) % Growth in 2012 Billion RMB 180 160 140 120 100 80 60 40 20 0 162.8 75.3 51.8 29.2 11.0 29.1 329% 13.0 Mobile 162% 6.4 5.2 119% 1.3 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% Source: iresearch 2012 China Internet Economy Report 10

Users 11

The ever-increasing Internet penetration rate helps reduce difficulties with accessing the Internet from households and mobile devices 564,000,000 Netizens 42% of the total population 16% year-on-year growth 28% of netizens Villages Total population Internet penetration rate 72% of netizens Cities 420,000,000 75% of mobile netizens Mobile netizens 32% year-on-year growth Sources: CNNIC Jan 2013, National Bureau of Statistics of China 2013 12

The amount of time spent on digital media is comparable to traditional media, especially among the under-30 years age group Time spent on media consumption by age group (hours per week) 40.0 35.0 30.0 25.0 20.0 15.0 10.0 2.7 11.2 4.3 17.1 3.5 17.5 2.2 15.1 1.4 12.0 20.2 0.3 4.2 25.0 Mobile Internet Internet TV Radio Newspaper Magazine 5.0 0.0 14.1 15.1 16.5 18.5 Under 18 19-24 25-30 31-35 36-40 41+ Source: CMMS Winter 2010-2012 13

There are numerous opportunities online to target different age groups by using media portfolio optimization The proportion of time spent on different media by varying age groups 90% 80% 70% 60% 50% 40% 4.7% 9.3% 16.5% 6.4% 9.6% 19.0% 8.3% 10.0% 17.4% 8.6% 9.8% 16.7% 7.4% 9.8% 19.0% 7.1% 9.7% 17.9% Others (net) Game Finance Recreation News 30% 20% 10% 0% 44.2% Under 18 39.6% 19-24 32.6% 25-30 30.9% 31-35 29.5% 36-40 35.2% 41+ Ecommerce Search Service Social Networking Online Video Source: iusertracker February 2013 14

Mobile trends 15

MOBILE Its rapid growth has allowed mobile devices to become China's method of choice for accessing the Internet Internet-accessing devices Total Internet 400 300 200 Mobile Desktop 100 Laptop 0 2H 2009 1H 2010 2H 2010 1H 2011 2H 2011 1H 2012 2H 2012 Source: CNNIC 2009-2013 16

MOBILE As a matter of fact, the amount of time mobile netizens spend on the Internet is becoming to threaten the television industry 60.0 The amount of time spent weekly on different media 50.0 40.0 38.6h 14.6 TV Radio 30.0 20.0 10.0 19.2 12.6 18.4 Mobile Internet Internet Newspaper Magazine 0.0 3.3 10.8 Total Mobile Netizens Source: CMMS Winter 2012 17

MOBILE Although it is a cost-driven market, smartphones are still the core of mobile phone boom with advertisements strengthening their hidden potential 73% Smartphones made up 73% of all phones sold in China in 2012 These 213 million new devices will provide a more diversified mobile network and advertising medium Source: CNNIC Jan 2013, IDC 2012 Q4 18

MOBILE The importance of smartphones is influencing new behaviors: compared to 12% of time spent browsing the Internet, 88% of time is spent when using apps; this is the new sector for the majority of advertisements to develop Time spent monthly (in billions of minutes) Time spent using apps and browsing the Internet by Android and IOS system mobile users 60 40 20 0 Using apps Browsing the Internet Source: Nielsen Smartphone Analytics 19

MOBILE Because over 50% of time spent on apps are concentrated on the top 20, it is very possible that the most popular apps will gain much more attention and demand than others Top ten 43% 11-20, 8% Remaining apps 39% 21-30, 4% 31-40, 3% 41-50.3% Source: Nielsen Smartphone Analytics 20

MOBILE The potential of opening a new mobile network depends on: Internet browsing 100% 100% App usage 70% use search engines 83% use social networks Reach Reach 48% use microblogging 32% watch videos 33% play games *Size of bubble indicates relative time spent 21 Sources: iresearch 2013; CNNIC Jan 2013; InMobi & Decision Fuel APAC Mobile Media Consumption 2012

MOBILE At the same time, mobile phones implement data caps Over 90% % of users browse less than 300M a month Wireless Internet Plans Data Limit Smart Mobile Netizens Non-Smart Mobile Netizens Over 80% of users don't exceed their data plans Wireless Internet Plans Data usage Smart Mobile Ne-zens Non- Smart Mobile Ne-zens Over 300M 100M-300M 50M-100M 20M-50M Below 20M None 7.1% 1.5% 6.1% 19.1% 19.3% 30.6% 32.1% 54.7% 11.0% 4.8% 7.3% 6.3% 0% 20% 40% 60% Never beyond monthly traffic limit Seldom beyond the monthly traffic limit Often beyond the limit, by just a small portion Often beyond the monthly limit, by a large portion 9.4% 7.0% 7.5% 3.9% 30.5% 26.7% 52.6% 62.4% 0% 20% 40% 60% 80% Source: CNNIC Jan 2013 22

MOBILE Very few brands are concerned with the status of their mobile networks; the disapproval rate among mobile users for browsing the Internet are noticeably high Approval rates for Internet browsing on smartphones 100% Don't know Completely Unsatisfied Unstatisfied Indifferent Satisfied Completely Satisfied 80% 60% 40% 20% 0% China France Japan USA Source: Think With Google Our Mobile Planet 2012 23

MOBILE Many websites still lack mobile versions Only 22% of fashion websites are optimized for mobile phones Just 26% of websites use 52% of websites can't be used with mobile phones Source: L2 Digital IQ Index: Fashion Supplement 24

MOBILE Having an optimized mobile version may decrease a website's bounce rate Bounce rates for site with and without optimized mobile versions 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 36.9% 54.8% Mobile Websites Desktop Websites Source: Google Analytics 2013 25

MOBILE HTML5 allows browsing of mobile websites to become more interactive, more powerful and more effective. Coding Simpler than the HTML standard used in the past Rich media Even without Flash game and video content can be generated Geographic positioning: Supports local server support Ease of use: Forms, text entry and search boxes 26

MOBILE In regards to mobile advertisements, technological execution is essential to guarantee their effectiveness and ensure a positive user experience. Device compatibility Data traffic plans When optimizing ads of different sizes, using multi-touch and other exclusive interaction methods can maximize user convenience Suitable for wireless, 3G and 2G restriction plans; provides reasonable loading speeds and is helpful in implementing data traffic planning (banners, plug-ins and videos, etc.) 27

Videos 28

Rich online video content drives the time consumers spend online Time spent online viewing different media 2.5% 4.6% 5.0% 14.5% 37.1% 6.9% year-on-year growth Online Video Social Networking Search Service Game Ecommerce 7.1% 9.1% 19.7% News Recreation Source: iusertracker February 2013 29

Over 1/6 of netizens spend more time watching videos online than they do watching TV Comparison of time spent by netizens on watching TV, watching online videos and browsing the Internet 23% 16% 5% 3.7 hours spent online daily 9% 2.1 hours spent watching online videos daily 1.4 hours spent watching TV daily Q2 2012 Q3 2012 Q4 2012 Q1 2013e Source: CMMS 2012 30

After one quarter, no noticeable changes were found in time spent on different media Amount of time spent on different video websites 2.4% 3.9% 2.5% 3.8% 8.6% 19.4% youku [Video Websites] iqiyi [Broadband TV] sohu [Video Websites] 6.4% 10.6% 12.0% 12.1% 16.8% tudou [Video Websites] letv [Broadband TV] pptv [Online TV] xunlei [Broadband TV] qq [Video Websites] cntv [Online TV Station] ifeng [Video Websites] Others Source: iusertracker February 2013 31

As the industry moves forward, mainstream video websites have accepted collaboration agreements in order to attract more users Q2 2012 -Youku and Tudou merge 19 % + 12 % share in the desktop market Q2 2013 iqiyi acquires PPS 7% +1% share in the desktop market (PPS also possesses top-notch mobile video apps) Q2 2013 Sogou and PPTV discuss possible merger, both have alrea dy begun sharing material) 2% + 6%potential share in the desktop market Source: Techinasia, People s Daily, South China Morning Post 32

Mobile videos 33

MOBILE Due to the ability of mobile phones to stream videos while using wi-fi without being restricted by data plans, mobile video applications have gained widespread usage Top ten used apps (in millions of minutes) QQ UC Mobile Browser WeChat Sina Weibo QQ Mobile Browser PPS Audio/Video PPTV Web TV 360 Battery Saver Qiyi Video Taobao Source: iresearch 2013 0 5000 10000 15000 20000 25000 34

MOBILE Youku and other video platforms encourage the simultaneous use of phones with other online devices when watching videos; linking with the mobile video market The QR codes found in every video allows users to continue watching the same footage on their phone or computer HTML5 allows for the possibility of using browsers without video plug-ins Source: Youku 2013 35

MOBILE Many Chinese video websites look at 2013 as the advent of profiting from mobile video Q22013 At the end of this April, iqiyi released a multi-platform advertisement system, with support for computer, IOS and Android systems + Youku and Tudou also released advertisements geared at mobile phones in April Q32013 The latest profit report from Sogou's management team reveals that it plans to release mobile advertisements by Q3 of this year Source: Technode 36

Viewpoints on videos 37

In-stream advertisements showed before videos are just one type of video advertisement; various formats can be used to achieve different goals In-stream advertisements showed before popular videos can bring high click-through rates, but are also very expensive Pause advertisements may not be very interactive, but they can also promise good clickthrough rates Although click-through rates for skippable advertisements are relatively low, they ensure strong interaction with interested consumers, while reducing the number of uninterested ones Leftover bandwidth on video networks can be used to provide monitored and inexpensive brand exposure, as well as appropriate click-through rates Investing in and testing the effect of your brand in mobile videos 38

Regardless of whether going through sponsorships, integration or other methods, brands can directly participate in programs Integrating with a program ensures brand exposure regardless of wherever the program is played, but at the cost of losing click-through options to guide viewers to e-commerce platforms for said brand Sponsorship and content cooperation are all possible 39

Social networking media 40

Chinese social media boasts extremely high coverage and participation rates The popularity of social media among netizens over the past six months 91% 67% 30% China US Japan Average time spent daily on social media 46 minutes 37 minutes 7 minutes China US Japan Source: McKinsey China s Social Media Boom 2012 41

With the majority of users moving to mobile devices, the coverage of social media websites for laptop and mobile computers has somewhat decreased 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% Coverage rates for top ten social websites qq QQ [SNS Channel] baidu [Community] Weibo[microblog] qq [microblog] sina [Blog] pengyou [Vertical SNS] douban [Vertical SNS] 10.00% 0.00% 2012-09 2012-10 2012-11 2012-12 2013-01 2013-02 renren [Vertical SNS] tianya [Community] mop [Community] Source: iusertracker February 2013 42

Users who still access social media via desktop and laptop computers have also been visiting said websites less and less, with the largest difference among QQ Space users 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Time spent on top ten social websites The amount of time spent on primary social media platforms fell a whole 21% in just one month QQ [SNS Channel] baidu [Community] weibo [microblog] qq [microblog] sina [Blog] pengyou [Vertical SNS] douban [Vertical SNS] renren [Vertical SNS] tianya [Community] mop [Community] 2012-09 2012-10 2012-11 2012-12 2013-01 2013-02 Source: iusertracker February 2013 43

Mobile social networking 44

MOBILE The popularity of social media on smart-phones is higher in China than in developed countries 97% 67% 63% 80% *Penetration among smartphone users Source: Google Insights 2012 45

MOBILE Chinese users frequently visit mobile social networks Rates users use smart-phones to access social media networks Daily access 100% 90% 80% 70% 60% 50% 40% 30% 10% 0% 20% Daily Weekly Monthly Less than Monthly Never China France Japan US Source: Google Insights 2012 46

MOBILE There is also more participation in social networking 100% 90% 80% Rates users use smart-phones to share information on social networks Daily Weekly Monthly Less thanmonthly Never 70% 60% 34 50% 40% 21 24 30% 20% 10% 47 23 21 32 34 0% China France Japan US Source: Google Insights 2012 47

MOBILE QQ, WeChat, Sina Weibo and other social media are where most of mobile device users spend their time QQ Top ten used apps (in millions of minutes) UC Mobile Browser WeChat Sina Weibo Over 300 million WeChat users only use its mobile version QQ Mobile Browser PPS Audio/Video PPTV Web TV 360 Battery Saver Qiyi Video Taobao Traffic generated by Weibo's mobile version exceeds that of its desktop version; 72% of users use both versions 0 5000 10000 15000 20000 25000 Source: iresearch 2013, Tencent January 2013, Sina Q2 2013 48

MOBILE WeChat, Momo and other mobile-specific social media platforms have proven themselves to be more competitive than the desktop versions of Sina Weibo, Renren and QQ Space Time spent monthly on the top five social network apps (millions of hours) 500 400 300 200 100 0 Aug. Sept. Oct. Nov. Dec. Jan. Feb. WeChat Weibo Renren QQ zone Momo Source: iresearch - musertracker 2013 49

MOBILE In reality, WeChat and microblogging possess a lot of similarities in their commercial aspects Commercial comparison of WeChat and microblogging Unique content-created advertising mode Brand publicity Innovative premium content and opinion-leading publicity model Relatively simple model with possibility of further diversification in the futureinteractive sales Interactive sales Multiple model, open and innovative cooperation Automatic reply function, however the majority of features have specific costs User services Use of application interface as well as third-party tools to strengthen user service Suitable sales for noticeably-positioned users Marketing and sales Strongly increases brand influence Hard to look for problems, but able to effectively resolve them Crisis assessment Monitoring done by third-party software, official and public relations accounts used to resolve problems Tools possess a great deal of potential, similar to online focus groups inspiration can be found from 'messages Research and innovation Salespeople can use social data to analyze microblogbuzzes to retrieve valuable information 50

MOBILE MOBILE 85%of mobile social network users have participated in brand publicity campaigns Source: ZO Mobilization of Social Study 2012 51

MOBILE 70% of users who have participated in brand activities have been left with a favorable impression of said brand Source: ZO Mobilization of Social Study 2012 52

MOBILE Men are attracted to brand campaigns that they have something in common with, while women are more steadfast about their own opinion and are more susceptible to activities involving prizes What attracts you to brands on mobile social networks? Most common motivating factor Influence Most common motivating factor Influence Men 1 1 Shared experience with Internet friends Women Shared experience with Internet friends 2 3 4 Fondness for the brand in question Approval of brand reviews Helping others and offering suggestions 2 3 4 Expression one s own opinion Fondness for the brand in question Being able to win prizes Source: ZO Mobilization of Social Study 2012 53

MOBILE Videos, pictures and polls drive men to interact with a brand The most common formats for brand-related interaction over the past six months Videos Pictures Polls Free trials On Jiepang I shared some local activities, as well as information regarding Xperia and other Sony products. Occasionally I will post pictures and videos regarding new phones or merely discussing their functions. - Riki "Xiaozhu" (male) Source: ZO Mobilization of Social Study 2012 54

MOBILE However when it comes to women, actual usage and prize campaigns are key Benefits Discounts Sales Prize drawings Of course my shared posts are for prize campaigns; one time I participated non-stop and even managed to win a few times. Most [of the prizes] were cotmerics, but there were also books and even one time I won an SLR camera Linxiaoyi" (female) Source: ZO Mobilization of Social Study 2012 55

Viewpoints on social media 56

The influence of mobile phones on social network strategies exceeds the expectations of most brands Your communication strategies must take mobile phones into account as a part of social network statuses; when beginning planning work you should first consider mobile phones and think about how they connect to computers, not vice-versa. When releasing Internet advertisements also simultaneously work on mobile advertisements to release in social networks When cooperating with opinion-leaders, do not underestimate the value of the mobile content they can provide 57

Searching 58

Searching is part of every netizen's Internet experience, with 80% of netizens using search engines Search engine users The number of search engine Internet users utilization 500 450 400 350 300 250 200 150 100 50 0 79.4% 407.4 80.0% 451.1 80% 75% 70% 65% 60% 55% 50% Source: CNNIC Jan 2013 59

Baidu is still the leader in monthly search visits however at the end of 2012, 360 began to make a rise Monthly visiting rates for search engines 100% 90% 80% 11.3% 10.8% 10.6% 12.0% 12.4% 70% 60% 50% Others (Net) google soso 40% 30% 20% 10% 0% 76.2% 77.5% 78.4% 76.7% 76.7% sogou 360 baidu 2012-08 2012-09 2012-10 2012-11 2012-12 2013-01 Source: iusertracker January 2013 60

Following cross-platform integration, competition between search provides is becoming even more fierce Qihoo Was able to achieve a coverage rate of over 10% in a very short amount of time, but has not made any significant gains since last quarter. This is due to how it attracts users to its search engine: by relying on traffic from its browser and other applications. Sogou (search method integrated with its Chinese input method) Possesses great potential due to integration of its Chinese input method and real-time searches. Sogou input methods are the most common Chinese input method software. Able to dramatically reduce time searching, collecting information and even shopping online 61

By connecting with e-commerce, 360.etao.com combined Qihoo's search engine with Alibaba's e-commerce search engine etao Source: Techcrunch 62

New search functions like the ability to showcase product photos are able to produce higher click-through rates and conversion rates 63

Mobile phone searching 64

MOBILE The amount of searches done on mobile devices is rapidly increasing Coverage rate for searches done by mobile netizens 350 300 250 62.1% The amount of users conducting mobile searches 291.38 69.4% 70% 60% 50% 40% 200 220.81 150 100 50 30% 20% 10% 0% 0 Users (millions) 2011 2012 Source: CNNIC Jan 2013 65

MOBILE Since 2010, Baidu's mobile searches have grown eleven-fold 11X 1X 2010-1 2010-5 2010-9 2011-1 2011-5 2011-9 2012-1 2012-5 2012-9 2012-12 Source: TechinAsia

MOBILE China's mobile netizens use mobile searching more than those in developed nations Rate of search engine usage on smartphones Daily Weekly Monthly Less thanmonthly Never 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 68 65 62 49 China France Japan US Source: Think With Google Our Mobile Planet 2012

MOBILE Mobile phones, done interactively with television ads, magazines, stores and outdoors media, boast a wealth of opportunities The amount of users who did a related search right after watching a TV ad in the past week 50% 10% 18% 27% China China Japan US Source: Think With Google Our Mobile Planet 2012

MOBILE Mobile searching has the potential to change consumer decisions when shopping in stores and online The influence smartphones have on purchasing decisions 60 50 40 30 20 10 Intentionally take smartphone to research products smartphone Changed mind about in store purchase Changed mind abouot nline purchase 0 China France Japan US Source: Think With Google Our Mobile Planet 2012

Viewpoints on searching

Searching can use new platforms and cross-media to create new advantages If hoping to increase coverage via a new search campaign, one should consider using Qihoo 360 and Sogou, which combined possess a share of approximately 20% in the search engine market. China's search engines are trying very hard to incorporate e-commerce into their product lineups. 360 and etao's integration has greatly boosted its flagshiptmall brand Search engine users' searches originate from non-digital channels (such as television). Going from television to searching allows these two different media to achieve integration.likewise, adding an 'as seen on TV' label to products links online can help boost the amount of visitors to the product s website When considering mobile phones, employ strategies that involve online searching and of fline purchasing instead of those that revolve around directly buying products with thephone. Favorable user reviews can increase purchasing opportunities.

E-commerce

E-commerce's total sales volume is expected to at least double in 2015 millions of RMB 3000 2500 2000 1500 1000 500 0 56 112.9% 128 128.8% 263 105.2% Total volume of transactions 461 75.3% 767 66.3% 1,184 54.5% 1,569 32.5% Growth 2,012 28.3% 2,551 26.8% 140% 120% 100% 80% 60% 40% 20% 0% Sources: iresearch 2011-2012 China E-Commerce Report

Which is of benefit to the increasing number of netizens shopping online Chinese users taking part in online transactions Million 450 400 350 300 250 200 150 100 50 0 178.4 219.8 270.9 322.1 374.9 423.4 2011 2012 2013e 2014e 2015e 2016e Source: emarketer January 2013

as well as the stable growth of individual consumption Average amount of money spent annually online (RMB) 7000 6000 5000 4000 3000 2000 3077 4115 5233 5872 6,382 1953 1000 0 2011 2012 2013 2014 2015 2016 Source: emarketer January 2013

All types of products are available for purchase online Goods bought online in China by type 47.2% 7.7% 13.2% Apparel Computers, communication and consumer electronic products Shoes and bags Furniture Cosmetics Books and optical media Misc. 3.1% 4.9% 5.0% Source: iresearch 2011-2012 China E-Commerce Report

The market share held by B2C (business to consumer) transactions is growing; at the end of last year is accounted for 1/3 of all transactions The ratio of sales volume covered by B2C (business to consumer) and C2C (consumer to consumer) transactions 100% 80% 7.8% 13.7% 23.5% 29.8% 33.8% 37.8% 40.7% 60% 40% 20% 92.2% 86.3% 76.5% 70.2% 66.2% 62.2% 59.3% B2C C2C 0% Source: iresearch 2011-2012 China E-Commerce Report

Purchasing behaviors for B2C (business to consumer) and C2C (consumer to consumer) are very different Online buyers using the C2C model tend to have a general idea of what kind of product or category of products they want to buy but don t have a particular brand in mind are usually very frugal are more willing to spend time browsing multiple online shops and websites until making a decision Online buyers using the B2C model tend to already know specifically what brands they want; honestly is very important to them are willing to spend more for convenience spend less time on detailed browsing

Alibaba purchased a 18% stake in Sina Weibo, which led to the appearance of Taobao advertisements on Sina platforms

On tuan.weibo.com, users can directly browse daily transactions using the same interface without making known whether or not they following the account

On tuan.weibo.com, users can directly browse daily transactions using the same interface without making known whether or not they following the account

Mobile e-commerce

MOBILE Compared to users in other countries, Chinese smartphone users boast a higher usage rate for mobile e-commerce 59% China 39% Japan France *Base: Smartphone owners Source: Think With Google Our Mobile Planet 2012 25% US 35%

MOBILE The amount of sales coming from mobile phones in China is expected to exceed that of the US Mobile e-commerce sales in China and the US (millions of USD) 45 40 35 30 25 20 15 10 5 0 China USA 27.1 17.2 23.7 11.6 15.7 6.7 3.5 0.4 1.8 7.8 41.4 31 2010 2011 2012(e) 2013(e) 2014(e) 2015(e) Source: iresearch China Mobile Commerce Report 2012; New Media Trend Watch 2012

MOBILE The market share held by purchases done on mobile phones will continue to maintain stable growth Ratio of e-commerce profits by device used 100% 90% 0.5% 1.5% 4.2% 8.1% 11.7% 15.1% 17.8% 80% 70% 60% 50% 40% 30% 20% 10% 0% 99.5% 98.5% 95.8% 91.9% 88.3% 84.9% 82.2% 2010 2011 2012 2013e 2014e 2015e 2016e % Mobile Device % PC Source: iresearch 2012 China Internet Economy Report

MOBILE Because Taobao applications are very popular, especially on IOS systems, Taobao's holds the leading share in the mobile phone market Shares in the mobile e-commerce market 0.7% 0.7% 3.6% 5.2% 0.6% 14.0% 75.2% Taobao platform Jingdong Tencent Amazon China Dangdang Suning 4 5 Four-fifths of mobile transactions on Taobao are done using IOS system devices Others Source: iresearch Q4 2012, Taobao

MOBILE Purchasing transactions done by mobiles is usually focused on apparel, skincare, jewelry and electronic products 2805 Apparel 428 Shoes 60 792 Cosmetics Every 60 seconds spend on Taobao via a mobile device 104 Household electronics 450 Accessories Source: Alibaba 2013, Singles Day sales 314 Child care products 300 Electronic products

Viewpoints on e-commerce

Viewpoints on e-commerce When first beginning, start from the transaction process: such as combining searching and advertisements and other effective sales techniques with website advertisements Much like throwing a stone over a river, one should be prepared for both success and failure, but don t be quick to believe that failure means that a medium has a problem; it is possible that you need to reconsider other methods. Be aware that even if the Internet doesn t bring in new sales, it doesn t mean that such sales won t occur in the future; they may occur in platforms that you aren t monitoring. Invest effort into understanding the driving force and influence that e-commerce advertisements have on consumers during the purchasing process.

Mobile games

MOBILE One of the major activities mobile netizens engage in on their phones is playing games 43% of mobile users play games Comparison of activities mobile netizens engage in on their devices 12% 10% 22% Information and other searches Entertainment 18% 20% Games Social networking E-mail Shopping

MOBILE Recreational games are especially popular 60.9% Coverage of major mobile games by genre by percent 33.5% 17.8% 15.9% 14.9% Recreational Action RPG Sports Strategy Shooting/FPS

MOBILE As HTML5 games start appearing on WeChat, there is now opportunities for the integration of simple entertainment with richer brand information Source: TechinAsia

Chinese travellers A hot topic in digital consumption Digital lifestyles have managed to tie in with the increasing numbers of Chinese travelling overseas and subsequent tourism opportunities. Activity on travel websites is not limited to booking hotels and ordering tickets, but also has many interactive and social networking factors. Digital media is playing an increasingly important role in travel. In this section we will take a deeper look into the development of travel websites.

More and more netizens are booking tickets and making their travel plans online Amount of travel website users 140 120 100 80 60 40 20 0 Amount of travel website users 19.8% 8.2% 42 112 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Booking train tickets online Booking plane tickets online Booking hotels online Making travel plans online 5.4% 7.2% 9.0% 14.0% 2011 2012 0.0% 5.0% 10.0% 15.0% Sources: CNNIC Jan 2013

There are many specialized travel websites providing specific services to choose from Coverage rates of major travel websites 12306 (train ticket booking) 36.1% qunar (travel/plane ticket booking) 29.7% ctrip.com (travel booking) 18.4% 17u.com (travel information) 12.8% elong.com (travel booking) 6.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Sources: iusertracker 2012

Chinese travelers are increasingly relying on the Internet, regardless of whether they are using it before their trip or afterwards Beforeembarking on the trip Vertical travel websites Finding travel plans consultants and other matters of importance; looking for travel companions Travel rating websites Finding personal reviews for tourist destinations, hotels and other experiences Group buying websites Travel groups purchase packages Ticket ordering/hotel booking websites Booking plane tickets and hotels During the trip Vertical travel websites Acquire real-time advice and help; access activity livefeeds Microblogging Write journals in real-time, which also includes sharing photos and updating statuses Jiepang Share your current location and destination with others After returning home Vertical travel websites Share your travel experience and photos, as well as matters of mportance with others Travel rating websites Rate locations, hotels and other aspects of the trip Microblogging Share your experience and photos with others Source: CIC 2012 IWOM Travel Special Edition

MOBILE When it comes to highly-directed consumers, mobile devices provide relatively valuable opportunities On the popular website Qunar.com, 6% of users use mobile devices to book their journeys However, they account for over 12% of the website's revenue

Our view is that communication between brands and consumers getting ready to embark on their voyages provides excellent opportunities Airplanes or trains Hotels Shopping Bags Fine cuisine Watches Photography Cosmetics Spirits

Thank you!