Meeker on Internet Trends in China

Every year, at the start of summer, Mary Meeker of Kleiner Perkins produces a detailed report on internet trends. There is a lot of detail. And when I say "a lot" I mean that this year's report is 355 slides long. I covered most topics in yesterday's post Meeker on Internet Trend. Today it is China's turn, and tomorrow will be India. I should point out that this section of Mary's report is credited to Hillhouse Capital.

Usage

Internet usage is growing less explosively than a few years ago, but still very fast. The number of mobile users is growing 15%, but the usage minutes are growing at 30%. So not only are more users getting online, those already online are spending more and more time online. Non-mobile internet access in China has been small historically, so this trend is not really being driven by people switching their usage from PCs to mobile.

You have probably heard of Tencent, Alibaba, and Baidu. They dominate the time that people spend online in a way that no one does in the US. All other companies put together are the grey area at the bottom of the chart.

You have probably heard of WeChat, which is often described as the Whatsapp of China. Since Whatsapp has more registered users (or did last time I saw the numbers), it is easy to assume WeChat is somehow inferior. But look at how much time people spend in it, the green area at the top of the above chart. It is more like Facebook than Whatsapp (counting Facebook's internal messaging system, too, and ignoring that Facebook actually owns Whatsapp, but doesn't seem to do much with it). Unlike Facebook, WeChat monetizes users through a lot more than advertising since it is an e-commerce platform, too.

To give you another idea of the scale, Alibaba has 507M monthly active users, up 24% year-on-year. Over 40% of them are daily active users. The average time users spend on Alibaba is over 24 minutes per day.

You only have to go back about five years to an era when revenue from all interactive media was small. But now it is almost the same size as the US market. Interestingly, apart from games, the breakdown is a bit different: almost no ebook, video a lot less but live-streaming a lot more, no music.

In interactive games, since 2016, China is the largest market in the world.

Livestreaming is a market that barely exists in the US although that might be partially a classification problem. I'm not sure where live sports shows up, for example. In China, it covers a wide range of content: singing, dancing, talkshows, gaming. Almost by definition, being live, it has high consumer engagement and it has many ways to interact and to monetize. In terms of revenue per hours, it dwarfs everything else, with everything other than online games barely even on the scale.

On-Demand Transportation

China is a big market for on-demand transportation (think Uber) with many more trips. You can see from the above chart (which is number of trips, not $) that usage is huge in China (the blue at the bottom), many times the usage in the US (the green in the middle). One area that is growing explosively is bike-sharing. Of course, we have bike-sharing in major cities in the US, based around fixed stations where you can get a bike and drop one off. They are also relatively expensive.

Mobike in China has pioneered stationless bike-sharing. There is in-bike GPS, a smartphone App, QR codes to avoid typing and reduce friction and very low cost (about 15¢ per half hour). Just look at the growth in the above diagram, which shows less than a year (MAU is monthly active users). I assume you only need to use a bike once in a month to register in the count, but it turns out that two-thirds of users ride more than three times per week, with half of trips being people commuting to and from work.

Mobile Payments and eCommerce

Mobile payments (think ApplePay or Google Wallet) have really taken off, now over $1T (that's trillion with a T). Mobile payments are a sort of next-generation technology and so have tended to grow fast in parts of the world without good credit card infrastructure (including M-pesa in Kenya and other parts of Africa).

Another driver is cost. Mobile payments (which basically means AliPay and WeChat Pay) are cheaper almost as cheap as the cost of handling cash, and much cheaper than debit/credit/PayPal in US. This growth has also led to the internet leaders becoming diversified suppliers of financial services, replacing many services previously obtained from banks and other companies more obviously in the financial services sector.

In all countries, a growing portion of total commerce is eCommerce. In the US, this is dominated by Amazon. Korea turns out to lead the world in the percentage of all commerce that is eCommerce, but China is on a trajectory to blow past them (the red line in the above graph). I was surprised to see that the UK is #2, with a higher percentage than the US, which is just over 10%. These numbers exclude B2B eCommerce, although I suspect that is dwarfed by the consumer side.

Advertising revenue is growing fast too, now up to $40M per year, growing at 40% CAGR.

China Summary

For More Details

If you want all the details then you can read the entire report.

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