Much has been said on the vast opportunities of China’s burgeoning app economy. China is a huge driver of growth when it comes to worldwide smartphone adoption and, despite low penetration overall, it already boasts the largest smartphone subscriber base in the world. So it’s not hard to see why, on the surface, the Chinese market makes a huge amount of sense for developers looking to expand their business and for newer developers looking for a cheaper route toward app store success compared to Europe and the US.
China also isn’t necessarily a story of quantity over quality. Unlike some other emerging markets such as Latin America and India, there’s enough evidence that a large number of Chinese users willing to spend money on in-app purchases, and have an appetite for downloading apps that outstrips users in many Western territories.
But of course, when it comes to app promotion in China it’s definitely not all roses (or should we say Lotus flowers?). China’s app store landscape is incredibly fragmented and complex, localisation is a huge issue, and developer revenue can easily end-up siphoned off to channel partners, app stores, and the Chinese government. This creates a big barrier to entry, especially for smaller and mid-sized developers.
So with the iPhone’s recent launch on China Mobile – the world’s biggest mobile operator – we thought it’s a good time to take an in-depth look at China’s app market, discussing the opportunities and pitfalls it presents to developers. We’ll kick off with a brief look at overall size and growth prospects of the smartphone market in China, before going in-depth into the value of Chinese users, the potential cost of CPI campaigns and much more.
- Installed Base, Shipments and Growth
- Mobile OS Landscape
- App User Value
- App Engagement and Usage
- The App Store Landscape
- Ad Networks and App Promotion Platforms
- Wrap up
Installed base, shipments and growth
Forecasted growth of smartphone installed base in China
Source: Portio Research
As you probably already know, China has experienced a huge growth in smartphone users over the past few years, and – despite a quarterly hiccup late last year – it’s still growing. Above you can see data Portio Research shared with us on the growth of China’s total smartphone installed base between 2011 and 2016. According to Portio, China will account for over 40% of the Asia Pacific market’s installed base from 2013 onwards.
Estimated smartphone shipments for 2013
Smartphone shipments stood at an estimated 360 million in 2013 according to IDC and are forecast to grow to 450 million in 2014. Above you can see a breakdown of 2013 total shipments by region, according to IDC estimates (we’ve added the China-specific forecast from here), which shows China storming ahead of all other regions by some margin.
Total 3G subscribers worldwide Q2 2013
To get an impression of how big China’s market is compared to other regions, take a look at the above chart, which shows total 3G subscribers by region as of Q2 2013, according to Informa. You can see just how massive the Chinese mobile market really is, with over 325.5 million 3G subs, and penetration standing at just 24.5% overall. Compare that with penetration in territories such as the US (70%) and the UK (72%) and you can see just how much room there is for the Chinese market to grow. According to NPD DisplaySearch China is expected to account for 30% of the total smartphone market by 2017.
The mobile OS market share landscape
Mobile OS market share in China (Q3 2012)
When it comes to mobile OS market share China is now heavily dominated by Android. According to Kantar’s data, and illustrated in the chart above, Android represented 66% of the mobile market in Q3 2012.
Mobile OS market share in China (Q3 2013)
But fast forward 12 months and Android’s share grew by a massive 14%, reaching 81% in Q3 2013, as lower priced Android devices began penetrating the market.
According to a study from Baidu (Q4 2013) China currently has over 270 million Android users, making it the biggest Android market globally. However, it’s worth noting that 70% of those Android devices are so called ‘AOSP’ (Android Open Source Platform), which means they do not run Google services and are not hooked-up to the Google Play store (more on this below). But iPhone developers need not be discouraged, there’s a lot of people in China, and despite Android’s dominance ad network Umeng (2013) says iOS has an 85-million strong installed base in the country (Umeng pegs Android’s user base at 160 million).
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App user value in China
When people think of emerging markets in Asia, Africa and Latin America they usually think of low value users. While this attitude bears true in some respects when it comes to China, it doesn’t paint a comprehensive picture of the country’s app market.
Number of installed paid apps (Q1 2013)
However, everyone we talked to agreed that China lags behind other territories when it comes to paid apps. The reason why is an open question, but might involve the large number of AOSP handsets and cracked iOS devices, which led to a proliferation of pirated apps early on in the app eco-system’s emergence. The above chart is based on survey data from Google and shows the number of paid apps across all smartphones. Google’s survey is from Q1 2013, so the market for paid apps may have picked up since then, but regardless, it demonstrates that China seriously lags behind mature markets when it comes to paid app purchases and also falls behind other emerging markets such as Latin America.
Apple’s further expansion into China, following the China Mobile deal, may see more Chinese users swayed by the App Store’s emphasis on paid applications. However, there’s a good chance China’s aversion to paid apps is deep set. According to research from InMobi only 37% of Chinese users say price is a factor when downloading an app (compared to 67% of US users). This may sound like good news (Chinese users don’t care about price!) but, as InMobi points out, it’s more likely a reflection of how most Chinese users have a ‘freemium-or-nothing’ attitude when it comes to apps.
Top 10 countries by app revenue
While Chinese users are less likely to pay for apps, they do spend money on in-app purchases, with 90% of all app revenue in China coming from within the app. The above chart from Distimo shows global rankings for total app revenue in 2013. Although Distimo doesn’t reveal actual numbers, as you can see China comes fifth, just behind the United Kingdom. Not bad, but it paints a slightly lacklustre picture when you consider the size of China’s smartphone market.
However, Distimo’s data for China (and China alone) only takes into account iOS revenue – not Android revenue. China’s iOS install base is thought to be around 85 million according to Chinese ad network Umeng, which also says a sizeable 30% of Chinese iOS users jailbreak their phones, meaning any revenue data for those handsets is unlikely to be captured by Distimo’s revenue rankings.
Take away that 30% and we’re left with roughly 60 million iOS users in China, an install base that’s pushing China into fifth place globally in total app revenue rankings. For an emerging market that’s pretty good going, especially when you consider that Brazil has an estimated 55 million smartphone users and hasn’t even cracked Distimo’s top ten.
When it comes to app revenue growth over 2013, China grew significantly compared to mature markets. Distimo’s data above shows 280% growth in app revenue over the year, compared to 89% and 81% growth in UK and US respectively. Again, bear in mind this is only based on iOS revenue, not Android, where most of the install base growth has occurred over the last year. Quite why South Korea – which only experienced 17% increase in smartphone penetration (Flurry) over the period – saw such high growth isn’t explained.
Average Cost Per Install ($US)
As you would expect, user acquisition in China is cheaper compared to mature markets. Above you can see the average CPI rates given to us by AppFlood, YeahMobi and Avazu, which compare nicely with the global average, illustrated according to AdParlor below.
CPI by Territory (2013)
Cheaper CPIs, especially when it comes to Android, mitigates the risk of running a campaign in China, giving you much more room for experimentation. This is particularly important when you consider the complexity of the Chinese market – from a Western perspective – which we’ll get into a bit further below.
AppFlood’s Francis Bea reminds us that while user acquisition is very low, developers need to understand the goal of any app promotion campaign in China.
“The cost of acquiring a single user is cheap – $0.29. That’s an attractive value proposition, which put into perspective a U.S. user could cost $1.00 – $1.50. But this is assuming that all the developer cares about is boosting their user base… Chinese users are known to quickly jump from app to app (low retention) and spend little on in-app purchases. However, the whales in China can spend in the upwards of tens or even hundreds of thousands of dollars.”
Average Revenue Per User for freemium Chinese users ($US)
Although Average Revenue Per User is very dependent on the app in question, YeahMobi has given us their estimate for ARPU for freemium titles across iOS and Android, which you can see above. According to Distimo, ARPU for freemium iOS apps in the US is around $0.93. Proceed with caution here, but a high ARPU for Chinese iOS users makes some sense. The iPhone’s user base in China – just like in Brazil – is likely to have a large concentration of high earners due to the comparatively high cost of Apple devices in China.
App usage and engagement
So what type of apps are Chinese users downloading and what’s their usage patterns like? China follows the rest of the world with mobile games dominating the charts. In fact, according to Distimo, mobile games are more popular amongst smartphone users in China than in any other territory worldwide. But perhaps more interesting is data from Flurry (2013), which shows Chinese users also over indexing in utility and reading apps.
Flurry says the average time Chinese owners spend using Books, Newsstand, Utility, and Productivity apps is greater than the rest of the world (1.8x, 1.7x, 2.3x, and 2.1x respectively). According to Flurry’s data, Chinese Android users, on average, spend more than seven times as much time in Finance apps (7.4x) than Android owners in other territories. Chinese Android users also spend more time in Entertainment apps (1.7x).
The importance of a “wide selection of apps” for smartphone buyers (%)
The above data from Nielsen (2013) shows Chinese smartphone buyers are more concerned about the selection of apps on offer than smartphone buyers in the rest of the world. The only selection criteria that beat “wide selection of apps,” for Chinese users, was “good value for money.” Nielsen also says Chinese users come out on top for news app usage globally, and come third overall in terms of app activity.
Average number of apps installed and actively used apps (Q1 2013)
Above is a chart based on a Google commissioned survey (2013) concerning the total number of apps currently on a user’s smartphone (paid and free) and the number of apps used in the last 30 days. Nielsen’s data on the importance of apps to Chinese users doesn’t quite tally with Google’s data on actual installs (US is way ahead here), but Chinese users certainly have a bigger appetite for apps than users in other emerging markets, such as Brazil, Russia and South Africa.
Also worth noting is Flurry’s data (2013) on locally developed-apps vs foreign-developed apps, which shows Chinese users preferring apps developed on home territory. Chinese users spent 64% of their time in local apps, compared to USA users spending 59% of their time in local apps, and Brazillian users spending only 8% of their time in local apps. This leads nicely to our next section on the importance of localisation.
App localisation issues
Unlike emerging markets in Latin America, which require very little localisation, China is the only market where localised apps are download more than English versions, according to inMobi. YeahMobi’s director Grace Lee told us the large amount of effort needed to localise apps for Chinese audiences makes the market difficult for smaller developers to crack
“For some smaller developers, and maybe some mid-sized, trying to promote your app in China may not be a good choice,” says Lee. “Chinese apps often have very strong local properties and characteristics and Chinese users do need apps matching local tastes. It can be a little hard for foreign developers to meet this.”
Despite this difficulty there are a few success stories when it comes to foreign apps being localised to Chinese audiences. A great example is the Chinese version of Fruit Ninja, which incorporated China-specific backgrounds, Chinese-style swords, and other visual features to make the game more palatable to Chinese users. Developers Halfbrick also changed the monetisation elements to be more “in your face” (as Chinese users apparently need more encouragement) and used Chinese social channels to crowd-source further suggestions for improvement.
However, Halfbrick outsourced most of this localisation to China-based developer iDreamSky and wisely so, says AppFlood’s Francis Bea. According to Bea, if you’re not familiar with the Chinese market it’s imperative to find a Chinese partner to help guide you through the localisation process.
“Don’t assume that the Chinese market isn’t that different from the Western app market,” says Bea. “Local Chinese partners will know more than you do about the Chinese market, but more importantly have the crucial relationships. Also make sure that your app caters to the Chinese mobile consumption habits – this might include offering China-specific content or re-skinning your app for the Chinese market. China is extremely different from the Western market. Don’t underestimate the differences.”
When planning your app promotion strategy it’s also worth taking into account the multitude of cultural facets specific to China that may give your app the edge. Of course, a lot of this will depend entirely on the kind of app you’re promoting, such as Fruit Ninja’s incorporation of Chinese-style swords. One good piece of general advice is to pay attention to Chinese holidays. AppFlood recently put out a very illuminating report on app activity during the Chinese New Year, which saw a big jump in users downloading apps before embarking on long trips to their hometowns.
The app store landscape
Finding a Chinese partner is not only necessary for app localisation, it also extends to distribution, as the Chinese app store landscape is much more complex than in the West. While Android dominates in China, just like it does in most territories, Google monopoly on app distribution does not exist. This is largely because Google Play was technically banned when the Chinese government decided to kick Google out of the country, resulting in only an estimated 6% of phones running Google services. The proliferation of jailbroken iPhones has also weakened Apple’s grip on distribution, with some estimating 30% of all iPhones are running apps that weren’t downloaded from the App Store.
So what does the Chinese app store ecosystem look like? Firstly, there’s a huge amount of stores, around 500 in total. Although handful of players have become more dominant than others, and manufacturer and carrier stores have much more clout than they do in the West, the landscape is highly fragmented.
Yi Shi, who heads up Chinese ad network Avazu, told us despite the fragmentation, there’s still a few key stores developers should focus on.
“As most people know, Google and its services are largely blocked in China,” says Shi. “So when it comes to Android – and iOS to a lesser extent – you need to look carefully at the numerous third party app stores operating in the country. With the right partner most developer can get good results, whether they are small or large. The top three app stores I recommend to focus on are 360, 91 and Wandoujia.”
Perhaps contrary to expectations, many developers also end-up handing over a much bigger slice of their revenue. This is due to a number of factors. Firstly, most app stores will take the regular 30% cut, but some of the biggest app stores also double as channel partners, handling distribution and advertising across a variety of mediums. Therefore, the amount of revenue taken could reach as high as 70% – depending on the particular agreement you’ve struck with your channel partner.
After the Chinese government levies its 30% tax, the other factor is billing. There’s a number of different billing options in China. Aliplay is growing in popularity and the app store run by Wandoujia offers its own in-store billing. But carrier billing is probably the most popular way for users to pay for in-app purchases, and carriers will typically take another 30% cut of any in-app transactions, as AppFlood’s Francis Bea explains.
“For example, I have a game app and I agree to a revenue share of 30% going to the app store and 70% going to me,” explains Bea. “Of course I have a carrier billing service that I’ve integrated for my users. Then someone downloads the app and pays RMB 100 for various in-app purchases by using the carrier billing option. RMB 30 of that goes to the carrier right away, leaving RMB 70 for you to split with the partnered app store. The app store would be taking 30% of the RMB 70, which is RMB 21. That leaves you with RMB 49 for yourself.”
Perhaps a more developer-beneficial aspect to this fragmented landscape, is that many smaller app stores cater to specific niches and boast unique features. For instance, some stores are focused on mothers, some are exclusively focused on games, while others – such as Tencent – boasts strong social functionality. AppFlood’s Francis Bea says getting to know this complex landscape can be difficult, which is why developers should seek local help.
“Because there aren’t any centralized Android app stores in China, major technology companies in China like Tencent, Baidu, Qihoo360, UC, and many more grabbed this opportunity to build their own app store markets,” says Bea. “This is where a Chinese partner or publisher comes into the picture where app stores are concerned. They can identify the app store markets that your app would be best suited for, not to mention help you negotiate favorable deals with these app stores.”
Based on our discussions with Chinese app promotion platforms, below are the most prominent app stores in China. This isn’t including the obvious carrier or manufacturer stores.
Top Chinese App Stores
360 Mobile Assistant – Owned by Chinese security software firm 360 and comes bundled with China’s most popular mobile security app, putting it on around 70% of Chinese handsets according to AppFlood.
Anzhi – Highly popular Android app store that is famous for having a very large forum community that comments on apps.
HiMarket – Massive app store installed on majority of Chinese smartphones. Was recently bought by Baidu.
D.cn – Formally a mobile gaming portal for Symbian phones. Boasts apps from all major operating systems.
Baidu Mobile Assistant – Baidu is China’s biggest search engine. By signing up as a Baidu dev you can also get your apps displayed in search results.
Wandoujia – Claims over 200 million users and pushes over 30 million app downloads a day. Woundoujia says 10% of non-Chinese devs have apps on the store but they account for most of the popular games.
AppChina – Claims over 30 million users and recently received $6.4 million in funding. Offers mostly games.
Mumayi – App store with high level of traffic focusing on Android.
Gfan – Claims more than 12 million users and has partnerships with major manufacturers such as Samsung and HTC. Also boasts a large forum community
Xiaomi – Chinese handset manufacturer that isn’t that well known outside of China, but runs a very successful app store, which is obviously pre-installed on its phones.
Tencent MyApp – Tencent runs China’s largest web portal and a popular messaging app. It’s app stores has a strong focus on social, with lots of user comments and shares.
China-focused Ad Networks and App Promotion Platforms
China has a growing number of ad networks and app promotion platforms that aim to help Western developers and advertisers get a foothold in the market. Below are some of the most popular networks. If you know of any others, please let us know in the comments below.
Avazu – Performance based mobile ad platform that’s part of the Chinese Avazu Inc, with offices across Asia, UK and the rest of Europe.
YeahMobi – Affiliate ad network with an exclusive mobile CPA network. Global reach but has a focus on China and is headquartered in Shanghai.
AppFlood – App promotion platform that focuses on cross-promotion between developers. Run by the China-based PapayaMobile.
Adwo – Chinese mobile advertising platform offering solutions to app developers and advertisers. Focuses on CPC and CPM campaigns.
Madhouse – Mobile ad agency and ad network with offices in Beijing, Shanghai and Guangzhou. Offers a range of solutions including CPC and CPI.
A.mo.bee – Premium mobile ad network with global coverage, including China. Offers a range of solutions for developers across Android and iOS.
AirAd – Chinese ad network that focuses on the Hong Kong, Macao and Taiwan regions.
Casee – Claims to be China’s largest mobile ad marketplace and has over 1000 content publishers across its network.
GuoheAD – Chinese mobile ad exchange providing access to a number of DSPs and ad networks across the country. Claims a network of 200 million users.
Domob – China-based mobile advertising network claiming a user base of over 150 million independent mobile users.
AdChina – Mobile marketing company running a DSP and SSP with a reach of over 486 million unique visitors across China.
YouMi – Mobile ad platform based in China offering CPA, CPC and CPM solutions to developers and advertisers.
Wooboo – Chinese mobile ad network enabling app developers and mobile we owners to monetise traffic and target mobile app users.
As we’ve explained, China is a complex landscape when it comes to app promotion. On the one hand there’s huge opportunities for western developers. The market houses a staggering volume of smartphone users with a big appetites for downloading apps and lots of room for growth. It’s also possible to run very cheap performance marketing campaigns in China and there’s plenty of money to be made as long as you’re operating with a freemium business model. But China also presents some huge challenges. Localisation needs to go beyond language translation and reflect the tastes and preferences of Chinese users, and when it comes to distribution it’s important to strike-up partnerships with carriers, channels and apps store to get your app distributed and monetised. Whether or not you jump into China should be based on what your aims are when it comes to app promotion, the cost of working with a partner, and the effort needed to make your app as relevant as possible to Chinese users.