As we settle into our post-festive lull, with Christmas and New Year celebrations firmly behind us, maybe we can look to China to lift our spirits a little.
The country is gearing up for its own festivities – with its annual Chinese New Year celebrations due to kick off mid-February. As is traditional in China, it will be a week of color, music and fireworks, wrapping up The Year of The Horse 2014.
According to the Chinese Zodiac, the spirit of the horse can be summed up as the Chinese people’s ethos – “making unremitting efforts to improve themselves,” while people born in this year tend to have “ingenious communicating techniques.”
Well, this all seems rather apt when you consider the milestones that China’s most innovative tech firms hit this year in terms of the mobile Internet and communications space. Let’s take a look at some of main players putting to bed China’s Shanzai – “copycat” – reputation:
The rise and rise of WeChat
It is hard to make money peddling social media. During their first few years in business, Facebook and Twitter lost pots of money. Yet somehow Tenecet, an innovative Chinese firm that released the WeChat app in 2011, seems to have cracked the code and is expected to finish 2014 with $1.1 billion in revenue.
Although the company is often compared by commentators in the west to WhatsApp and Facebook, its nearest Western counterparts, it has gone far beyond being a simple messaging or social networking app. WeChat’s ambition is much bigger – to become an “all-in-one” social and e-commerce platform.
In May, WeChat took a step forward in evolving as a mobile commerce platform after it opened up an option on Weixin – the version of WeChat offered in China – for official account owners to set up shop within the app. By incorporating a whole e-commerce system within Weixin, third parties can create their own individual stores. This marks the company’s ambition in creating a “sticky” place where users not only send messages to one another, but can also play games, shop and buy things without having to leave the app. WeChat is an all-you-can-use mobile service.
As we realized this year, there really is nothing comparable to it in the West.
Alibaba goes global
Tencent’s competitor, Alibaba – a vast e-commerce portal that supports business-to-business, business-to-consumer and consumer-to-consumer sales – has also made great leaps in 2014. In September, the company captured the world’s imagination with the largest initial public offering in U.S. history, whereby it knocked Amazon.com off its perch as the world’s largest online retailer by market capitalization. The IPO was not just a commercial success, but also a national success: massively raising the profile of Chinese tech companies abroad, and putting the spotlight on Chinese innovation.
In November, Alibaba hit the international headlines again with its annual “Singles Day” shopping event. China’s anti-Valentine’s Day – a marketing event to encourage people who aren’t in a relationship to splurge on a gift for themselves – surpassed the U.S.’ Black Friday as the world’s most profitable manufactured holiday in history, with the company passing $9 billion in sales in 24 hours.
This year, sales were helped by Alibaba taking the Singles Day phenomenon global. The company tapped many foreign brands, including Calvin Klein, Costco and American Eagle, to add up to a total of 27,000 participating labels aimed at piquing international interest.
And 2014 showed what an important role Alibaba will play in changing and upgrading China’s economy and further integrating it into global markets.
China Telecom
While the applications are more advanced, so too is the telco strategy for engaging with these innovative Internet players. We may finally be starting to get on top of this challenge in the West – or, at least, we’re certainly talking about getting on top of it – but the Chinese operators have been visionary about this challenge and have taken strategic steps to sandbag their businesses against the “over-the-top wave.” They are a market that we in the West can really learn from in that respect.
China Telecom is a good example. The company recognized the threat faced by the OTTs long before many of its counterparts. China Telecom knew it had to turn this threat into an opportunity, and saw serious merit in partnering with these players and reselling converged products in the marketplace.
It was a hunch that paid off – with annual incremental revenue of more than $2 billion coming through partners using China Telecom’s open operational platform. In a single month (March 2014), 21 million top-up calls generated revenue of $166 million; 390,000 subscription API calls added more than $3 million; 4 million traffic charging calls contributed over $3 million. In summary, a radical approach to the OTT “threat” is enabling China Telecom to generate almost $200 million in additional revenue every month. That’s a very relevant take-away for operators in the West.
Xiaomi upsets the Apple cart
Mobile phone manufacturer, Xiaomi, continued upsetting the Apple cart with its $50 mobile phones and innovative marketing techniques, leaping into the international spotlight. In October, Xiaomi was the No. 3 smartphone vendor by shipments.
Xiaomi is commonly described as “China’s Apple” and founder Lei Jun as “the Chinese Steve Jobs,” yet the company is only 4 years old and did not release its own smartphone until 2011. An important side note here: While Apple is rightly a much-celebrated brand, it did not invent the mobile phone or even the smartphone; rather, it recognized unarticulated consumer needs and went ahead and served those needs. That is innovation.
In January, Xiaomi was declared the world’s most valuable technology startup just four years after it was founded. The company raised $1.1 billion in its latest round of funding, giving it a valuation of $45 billion.
With strong domestic performance, Xiaomi can now afford to dip a toe into international waters, which many analysts suspect it will do in 2015, following the release of its new flagship device this month.
From imitator to innovator
Of course there are plenty more examples of Chinese innovation; The tech firms over there are developing new products and services at breakneck speed to satisfy a nation that is intense in its mobile usage and hungry for the new.
In the West, our industry has tended to naval gaze, which, combined with our infamous lack of agility when we do spot an opportunity, means we have a habit of letting other players and markets steal the march on us. However, the challenge of operating in a fast-moving digital ecosystem is forcing operators to rethink business models and everything else that entails.
That might explain why prejudices about China are finally starting to subside in the West, because we recognize that the nation has a thriving digital landscape that is way ahead of us in terms of business models, applications and infrastructure. The market is changing so rapidly that Chinese companies have to be agile, nimble and innovative to keep up. In other words, copy/manufacture/undercut is a model that is not only entirely out-of-date, it’s just not practical in this incredibly competitive and fast-moving market.
Europe and the rest of the world will need to keep a close eye on China’s innovations because as well as threats, they will bring with them opportunities – including ideas that may be worth taking inspiration from.
Andy Tiller joined AsiaInfo in 2012 to create a global product marketing function based out of the new European headquarters in Cambridge, U.K. Prior to joining AsiaInfo, Tiller was SVP of product marketing and strategy for Ip.access, where he was responsible for the product roadmap, market strategy and communications. He was also a board member and director of the Small Cell Forum. Tiller holds a PhD in theoretical chemistry from Cambridge University, U.K.
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