Digitalwall: Predictions on China Internet Market (4) Job, Education & Games

The most important thing for content providers is to take control over the "Channels of Contens".

[+] Key target of online recruitment: the student market

For some segments, leap developments are only possible after the Internet market enters its saturation stage. Online recruitment is one of such segments. As a matter of fact, online recruitment companies are barely off the start line in a competition to attract users.

In face of the continued growth of the Internet market in China, the top priority for existing online recruitment companies is to attract more resumes. Those in possession of more and better resumes will gain the favor of potential employers. The following figure shows very obviously that students have been the prime source of resumes.

One of the prominent identities of the Internet market in China is the growth of student users each year (which has produced profound impact on the eCommerce market too). Students are usually more familiar with the computer and the Internet. Some even have longer Internet experience than many adults. Therefore, it is very natural for them to seek job opportunities online after graduation.

Offline enclosure movements do help online recruitment companies to increase their revenue and influence (for example, 51job.com's collaboration with a number of newspapers to print and publish 51job Job Weekly, which contributes 57.9% to the company's revenue). However, there's no means for such enclosure movements to achieve a speed as fast as their online counterparts.

[+] Online enclosure is much faster.

In May 2005, ChinaHR.com set up a three-year-termed job channel on Sina.com, and agreed to share its revenue with the latter. That, in essence, is to buy resumes. But it's worthwhile. In fact, Sina.com is unable to provide the users with job services. Once the agreement is terminated and the job channel on Sina.com is closed, those who use the channel on Sina.com to look for a job will come back to ChinaHR.com again.

That was also one of the reasons behind Yahoo!'s acquisition of HotJobs. To portals, this kind of cooperation through specific channels could only bring short-term income, and might not prove to be a lucrative deal in the long run. When the online recruitment companies have built their brands, they will break away sooner or later. A better way is to acquire the online recruitment company for good.

In May 2005, globehr.com, a search engine focus on job search appeared, claiming that it had collected information from more than 200 recruitment websites around the country to provide users with one-stop job services. In addition, it also offers resume delivery services, which allows users to deliver their resumes in a large number and automatically to potential employers within a set range. Since the birth of the website, its user base has grown rapidly.

Unlike traditional online recruitment companies whose main revenue sources are potential employers, this service model, based on the information collected from other traditional job site, generates its revenue from bid-ranking ads. Since the revenue streams are different, and the job search engine brings more exposure for the information on traditional job sites, it seems that both models could co-exist peacefully. However, once such search engines start to request users to leave their resumes, conflicts might arise.

[+] Portals need to pay attention to this market

In addition, job search engines are not supposed to directly contact potential employers, otherwise the conflict would be even sharper. In the United States, there are similar search engines (e.g., indeed.com) too, but they all play the game strictly by the rules. Sticking to the key word advertising as their prime revenue source, they do not ask users to leave their resumes.

As a matter of fact, I believe the best model is to allow portals to operate such search engines. Portals could bring additional visitors to job sites and increase the chance of each job vacancy's being found. The bid-ranking advertising is also a revenue model suitable to portals.

What kind of bid-ranking ads is most suitable for job search engines? My first response is the education and learning information. As some job vacancies require high ability of English and others professional training background, such ads would be pulled out along with the job searches.

In addition to offline education and learning information, online learning information will also become a major sector. With the leap development of the online recruitment sector, online learning will gain moderate acceleration too. The following figure shows that the proportion of Internet users that often use online learning services has increased substantially since the end of 2004.

[+] Thanks to the broadband's infiltration, online learning has had leap developments

During the recent years, the proportion of Internet users who use online learning services (the yellow curve in the above chart) has increased drastically, just as the proportion of those who sign up for paid education and learning services both online or offline (the orange curve). The interesting part is, form June 2001 to December 2004, both curves were on a declining trend.

That is because the increase of Internet users was so fast during the time period, that it diluted both proportions. It was not until the recent years when home broadband users increased substantially that the proportions began to rise.

It also reminds us that for online learning service providers, the fastest way to accomplish their enclosure movement could be to introduce bundle sales with broadband service providers (such as telecom carriers or cable TVs), who, to some extent, are "channels of contents". Services will enter households along with the broadband Internet access.

Of course, there are numerous types of online learning, among which, the largest segment is the accredited education (which holds an 85% market share according to the 2004 Annual Report of iResearch). However, the market is already starting in a number of other fields, including corporate training, E-learning, language training and child education.

[+] Online game market has taken structural changes with infiltration of broadband

Obviously, the online game market is not as promising as the online recruitment and learning markets. After years of development, this Internet segment now faces too many embarrassments, including the market saturation, doubts from investors, negative media coverage and the inability of many players to survive.

Yet this is not a really hopeless market. From the above figure we can see that the game player base has maintained a fast growing trend. Nevertheless, the extensive infiltration of the broad band into families has brought structural changes, for example, to the place for playing games. Today, about 70% players play games at home, instead of in Internet cafes.

Over the years, a lot of changes have taken place to the model of the online game. The following figure shows that, other than the ever-green role-playing and leisure games, two types of game are now in the course of decline: the real-time strategy and simulated business operation games. In other words, users that play games via the broadband at home are less interested in such games.

Many people believe that the next trend of online games would be free services, in which case, service providers would have to seek other revenue sources, for example, selling virtual items to game players or adding advertisements into the game. As a matter of fact, any content-related industry would end up offering free services once they move online. Now that it is the reality for portals, can the online game sector be an exception?

[+] "Shanda Box" (i.e. Shanda EZStation) is not a content strategy, but a channel strategy

What role do you think Shanda (NASDAQ:SNDA), the largest online game provider in China, which started its business success from the game The Legend of Mir II is playing the content or the channel of contents? In fact, it must be clarified that, for providers of whatever content, it would be impossible to grow big without the ability to control the "channels of contents".

To online game providers, Internet cafes are the "channels of contents". Channel is the king. Supposedly, Internet cafes should have controlled game providers. However, The Legend of Mir II is such a successful game that it enables tight controls of the channels with the help of Shanda's unique Point Card System.(a sort of prepay topup game card through which the player can buy game points for playing the game. The system has been built in Internet cafes).

Yet the things are changing. The most lethal part is the fact that more and more players are playing games at home, instead of in Internet cafes, and paying their monthly fees through telecom carriers' phone bill, not Point Card System in Internet Cafes. Shanda is no longer able to control those players by controlling the channels, i.e., the Internet cafes. With the emergence of broadband access, telecom carriers are today the largest channels of contents.

Without players, online game providers would be completely incapable of coping with telecom carriers. Lately, Shanda announced that The Legend of Mir II would be offered free of charge, out of the fact that its Point Card System is no longer able to keep a tight control over the channels. The top concern today is not to charge fees, but to retain users.

The way to launch a counter-attack for Shanda is to turn into a new channel. This is exactly the basis of the "Shanda Box" strategy: to compete with telecom carriers for living rooms. By selling a PC based box to consumers with pre-built games and contents and the ability to access the Internet, Shanda has to have new channels direct to the players at home to deliver contents to support its development in the long run. The purpose of the box is not to integrate contents, but to build a new channel. (
2006/03/19 - By Digitalwall.com - Way to
China Internet/Telecom )