Digitalwall: Predictions on China Internet Market (3) Online News & Blog

Both the surplus and shortage of contents can create new business opportunities.

[+] The four pillars of the Internet

As a matter of fact, the concept of "Four Pillars of Internet" was first raised back in 1999. Although many people insist that today we be already in the Web 2.0 time, we have not yet stepped out of the range of those four pillars. Therefore, in my view, Web 2.0 is only an improvement, not an innovation.

Specifically, the four pillars are known as four Cs, i.e., Content, Communication, Community and Commerce. So far, all Internet companies, without any exception, have been competing in those four fields.

Geographically speaking, competition modes can be divided into 2 major types. In continental markets such as the United States and P.R. China, Internet portals tend to be involved in all of the above four fields. However, these markets are so large that single-field-oriented websites are also able to survive and even compete with portals in specific fields too. For example, in the U.S. market, eBay has been standing up to Yahoo!

In island markets such as Taiwan and Hong Kong, which have much smaller sizes, each of the four pillars of portal websites is very strong and there is little room left for single-field-oriented websites, which, in most cases, end up to be taken over by or establish some kind of partnership with portals.

[+] Surplus and shortage of content

Talking about contents, online news is the first thing that the domestic Internet subscribers think of. With the occurrence of important domestic and international affairs during the years and the efforts in early years that portals have made toward their goals of becoming media companies, online news eventually grows to be a classic of China's Internet market.

The following figure shows the proportions of the Internet subscribers in China that search for news information on the Internet and of those who do not think online news could satisfy their needs. Obviously, the higher the demand for news gets, the higher the dissatisfaction rate is. That seems to be only normal human feelings.

However, the section of the curve for the past year or so shows that, as subscribers' demands for news rise, the dissatisfaction rate declines. That indicates in the field of news, online content has begun touching its ceiling. From the finding of CNNIC questionnaires, we can even see that subscribers are beginning to feel tired about massive information, which makes it only harder for them to find the contents they really need. In addition to highlighting the role of search engines, how to enable subscribers watch the news they really want (i.e., the My News concept) will be the next focal point of the online news sector.

[+] Personalization and broadband news: The focal points of the next stage

In addition, the drastic increase in broadband subscribers will drive online news toward its next milestone—live online broadcast. This is an indisputable trend given the fact that, so far, even in the most developed regions for the broadband, the percentages of subscribers watching live broadcasts online still remain low.

According to a report released by CNNIC in December 2005, as many as 37.1% of Internet subscribers have the experience of watching and downloading movies or TV programs online. However, I am rather inclined to believe that most of those subscribers only download the contents, but not watch them online.

Downloading, however, is also a form of news dissemination, as there's no rule specifying that only live broadcasts could be called news. Normal broadband news archive downloading could be a viable option. News editor staff of portals must develop and improve their broadband content editing abilities as well.

Compared with the digital TV or IPTV whose future is largely uncertain, I am more optimistic about live online broadcast which uses computer as the tool for watching. The report also reveals that, between 8:00 p.m. and 9:00 p.m., more than 60% Internet subscribers are surfing the Internet (instead of watching TV), and the percentage is still rising. Which one, then, do you think will become the mainstream?

[+] Myths about Blog

If there is enough, or even more than enough online news to meet our demands, what is the point for the existence of the massive information brought by Blog which is tagged as the grassroot media, and the numerous Bloggers? In its December 2005 report, CNNIC released that 14.2% subscribers used Blog frequently, 3.7% up from the level of June of the same year.

Will the figure exceed 70% (the proportion of Internet subscribers who often read online news)? If not, Blog will not become a mainstream media. In other words, Blog is not mass media, but demassified media for a niche market. It is impractical to expect a niche to take the place of mainstream media.

I often tell a joke that the so-called community service is "a group of people with the same identities gathering together to warm each other". Blog, which falls into the scope of community service too, cannot break away from that feature despite its distinct media characteristics. Of course, such a group of people could also support the business operation of an Internet company so long as the number is large enough.

Having finished the main dish of mainstream media, subscribers may still have the appetite for a dessert of Blog to avoid being drawn by the massive information. Internet companies that run Blogs need to have a clear view of their competition situation with portals in two fields, i.e. content and community. It is impractical to brag about overtaking their rivals in all of the four fields.

[+] Information with low demand might survive in large markets

In addition to news, there are, of course, many other types of online information. Surprisingly, despite their low demands compared to online news, the demand is strong enough to support the listing of Internet companies at NASDAQ, for example, traffic and travel information, which facilitates the listing of Ctrip.com (NASDAQ: CTRP), the largest online travel agency in China.

It indicates that in a sufficiently large market, even the proportion of the people is small with the demand for the information of a certain type, it is still possible to gather them together and create value by leveraging the borderless Internet. Real estate, automobile and medical information in the above figure has that identity and, therefore, should be heeded by startups.

In the CNNIC reports over the years, three subjects keep attracting my attention: online recruitment, online education and online games. The first two are typical hot subjects in the saturation stage of the Internet. Take online recruitment for an example, the proportion of this sector among Internet usages has soared during the recent years:

Online recruitment has been one of the first fields in the development of the Internet industry. However, it has not gained sufficient media attention in virtually all markets around the world. In the meantime, as the first profit-making players in the Internet industry, online recruitment companies have kept a low profile in counting their money.

[+] Online recruitment will be one of the key fields

In 2005, Monster.com, the largest online job site in the United States purchased 40% shares of ChinaHR.com, the largest local online recruitment company. In the meantime, 51job (NASDAQ: JOBS) landed on NASDAQ, too. Nevertheless, I believe that, in China, this market segment is just off the start line and still has a large development room in the future.

According to a report released by CNNIC in June 2004, the No. 1 reason for using online job sites is "rich available recruitment information" (35.5%). On the other hand, the largest problem is "too much false information" (31%), followed by "recruiters care little about information delivered through the Internet (26.4%)".

As to the question: "Is it possible to find a satisfactory job through this means?", only 50% of the repliers give yes, 26.9% give no and 24.9% say they do not know or it is hard to say. Obviously, there are huge market demands that have not been satisfied. Also, there are many large players in this market, but few did a good job. Therefore, there is still a large room for the future development.

Content producers tend to believe that what they offer is invaluable. Sometimes they seek customer demands based solely on their own instincts. Through analysis on information needs and satisfaction rates of Internet subscribers, we are able to tell which fields have too much information, and which fields have unsatisfied information demands where business opportunities lurk. (
2006/03/12 - By Digitalwall.com - Way to
China Internet/Telecom )