China’s Internet obsession

People in the country’s 60 largest cities spend 70 percent of their leisure time online. Seismic changes in the consumer market are likely as a result.

There is a very interesting McKinsey & Co. article out this week. The penetration and growth rate of the Chinese internet is stunning. China is a bigger deal for Google than I realized.

Just how big (or small) a market would Google leave behind were it to pull out of China today? In January, China Internet Network Information Center, the country’s official domain registry and research organization, reported that by the end of 2009, the number of Internet users in China had touched 384 million, more than the entire population of the United States. That’s an increase of around 50 percent over 2008. Moreover, 233 million Chinese—twice as many as in the previous year—accessed the Net on handheld devices, partly because China’s cellular providers started offering 3G services widely last year.
The Chinese are obsessed with the Internet. People in the 60 largest cities in China spend around 70 percent of their leisure time on the Internet, according to a survey we conducted in 2009. In smaller towns, the corresponding number is 50 percent. The PC is fast replacing the TV set as an entertainment hub, and emotions run high over who gets to log on and for how long. In a small city in northwest China, for instance, a man told one of us that domestic squabbles over using the PC got so out of hand that his wife and he discussed spending, for them, a large sum of money to buy another machine—or filing for divorce. They eventually bought a second PC and saved their marriage.
People in China use the Internet more for entertainment—playing online games, messaging, downloading music and movies, and shopping—than for work. The Chinese place great stock in the opinions of online product reviewers. One in five consumers between the ages of 18 and 44 won’t purchase a product or service without first researching it on the Internet. They shop online at auction Web sites such as Taobao, paying for products and services with prepaid Taobao cards that the post offices sell for a small commission. The volume of e-commerce in China more than doubled last year.
Unsurprisingly, both Chinese and foreign consumer-facing companies are pouring money into Internet marketing. Online advertising has been growing at between 20 and 30 percent a year—twice the print media’s growth rate—and the market was around $3 billion (20 billion renminbi) in size last year.

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