What it Takes to Win in the Chinese App Market

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China is a growing smartphone market that no mobile player can ignore and much has been written about the mobile app marketing opportunities in China. InMobi recently concluded a research survey to understand consumer behavior in China around app usage & discovery and compared the results with the US market.
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  • 1. WHAT IT TAKES TO WIN In the Chinese App Market JUNE 2013
  • 2. Table of Contents Executive Summary.................................................................................................................. 01 Introduction............................................................................................................................. 02 Research objective and methodology..................................................................................... 02 App landscape.......................................................................................................................... 03 App discovery and download behaviour................................................................................ 03 u iOS vs. Android............................................................................................................................. 05 u App discovery............................................................................................................................... 07 u In-app purchases.......................................................................................................................... 10 What it takes to Win in the Chinese App Market.................................................................... 11 u Fragmented App Distribution...................................................................................................... 11 u Lack of standard payment methods.......................................................................................... 11 u Local social media landscape...................................................................................................... 11 u Need for Localization................................................................................................................... 12 u Piracy concerns............................................................................................................................ 12 Monetization strategy for China............................................................................................. 13 u Freemium model.......................................................................................................................... 13 u Partnering with a local payment provider.................................................................................. 13 u Know your users........................................................................................................................... 13 » Ad monetization........................................................................................................................... 13 Conclusion................................................................................................................................ 14
  • 3. What it takes to win in the Chinese App Market EXECUTIVE SUMMARY Could China be the next big marketplace for app developers? While the size of the market has developers salivating, the complexity, fragmented eco-system and privacy concerns are some of the challenges that must be understood and tackled before developers can successfully monetize their apps in this unique country. In March 2013, InMobi decided to conduct a survey amongst app users in the US and China, to understand consumer behavior in both markets, the factors that influence app discovery and download, and the monetization strategies that could be successful in these markets. Key results from the survey 1. The US and China are comparable markets in terms of appetite for app downloads and usage. Be it proactively searching for new apps, down loading apps or using apps that were downloaded, the Chinese were found to be heavy consumers of apps. 2. While Chinese users are traditionally perceived to be averse to paying for apps, our research indicates that there is a huge market for in-app purchases in China. Also, many Chinese users revealed that price was less of a determinant in driving their download decisions - contrary to what was noticed amongst American users. 3. Receptivity to mobile ads was found to be high in both China and the US with users in both markets preferring ads that recommended apps to them based on their interests and past web browsing history. This whitepaper attempts to provide an in-depth overview of the research findings and also provides several other market specific insights that can help developers craft a successful app distribution and monetization strategy for the Chinese market. 1
  • 4. What it takes to win in the Chinese App Market INTRODUCTION China is the world’s biggest mobile market in terms of subscriber base, and the fastest growing in the history of telecommunications. According to IDC, in February 2013, China overtook the US to become the world’s largest smart device market, with 246 million devices (against the US 230 million) 1 and accounting for 26.5% of all smartphone shipments last year. Concurrent with the growth in smart devices, mobile applications (apps) are also growing at an astronomical rate. While the top 100 countries average an app session growth of over 200 percent, China is delivering more than four times this growth rate (870%), spurred by a massive population voraciously adopting apps. 2 In addition, the falling price of the iPhone and the increasingly capable low- to mid-range Android handsets now available have further propelled this growth. Despite the explosive growth, cultural barriers, piracy concerns, fragmented app distribution ecosystems and the need for localization have prevented most app developers from entering this market. The common perception that Chinese app users were not willing to pay for content and that app usage levels were not high enough to warrant investments in heavy marketing, kept most developers away from China. Today, however, the availability of local payment and carrier billing options with big operators like China Mobile and China Telecom have made it easier to charge mobile app users. 3 In addition, the market is witnessing a consolidation of alternative Android app stores. These factors have sharpened the interest of mobile app developers in the Chinese market. Tim Cook, CEO of Apple Inc., has publicly stated that China is going to be Apple’s largest market very soon. However, very few western firms have the understanding or knowledge to capitalize on the Chinese opportunity. We decided therefore to conduct a survey to help developers answer the question: “What insights about the Chinese app users can help developers understand this market and launch their apps successfully here?” RESEARCH OBJECTIVE AND METHODOLOGY In order to understand consumer behavior around app usage and discovery in the US and China, InMobi recently fielded an on-device survey around the above topics via its global mobile ad network, across both Android & iOS smartphones. The survey was conducted with a sample size of over 1000 Android and iOS users (US Smartphone Users N= 510; iOS Users N= 251; Android Users N=259. China Smartphone Users N= 502; iOS Users N= 206; Android Users N=296). 2
  • 5. What it takes to win in the Chinese App Market APP LANDSCAPE In the US today, the Apple App store and Google Play are virtually neck-to-neck with an almost equal number of downloads (50B downloads for Apple vs. 48B for Google Play). However, the situation in China is quite different. While the Apple App Store is the primary store for iOS apps in China, Google Play is virtually nonexistent since access is restricted. However, China has one of the most complex and fragmented Android app store ecosystems in the world, with over 500 stores. APP DISCOVERY AND DOWNLOAD BEHAVIOUR Our survey showed that app discovery and download are similar across both countries (Figure 1), with a near-direct correlation between apps downloaded and apps used in both the USA and China. Fig 1: App usage is high in both markets Apps downloaded in the past 30 days 7% 10% 14% 7% 21% 20% 9% 11% 10% 35% 16% 8% 16% 17% Q1. About how many apps have you downloaded in the past 30 days? Apps used in the past 30 days 6% 7% 12% 10% 18% 19% 30% 9% 8% 11% 16% 15% 19% 19% Q2. About how many apps have you used in the past 30 days? Over 30 21 - 30 16 – 20 10 – 15 6 – 10 1–5 None 3
  • 6. What it takes to win in the Chinese App Market In addition, the Chinese have a strong appetite for exploring new apps. A whopping 97% of smartphone users in China revealed that they proactively search for new apps to download, with 37% of them searching on a daily basis (Figure 2). The Chinese also seem to be more determined in their search for new apps, with only 28% of the Chinese rarely or never searching for new apps to download, compared to 40% in the US. Fig 2: App discovery patterns 91.0% 97.0% Of Smartphone users in the US have searched for new apps to download Of Smartphone users in China have searched for new apps to download 3% 9% 24% 25% 37% 32% 9% 24% 10% 25% 24% of the US mobile web users search for new apps on a daily basis 37% of Chinese mobile web users search for new apps on a daily basis Q3. How often do you search for new apps to download? Daily Weekly Monthly Rarely Never 4
  • 7. What it takes to win in the Chinese App Market A. iOS VS. ANDROID Fig 3: Apps expected to download in the next 30 Days 43% 40% 21% 15% 14% 14% 10% 10% 6% None 1-5 6 - 10 10 - 15 4% 7% 16 - 20 4% 21 - 30 7% 4% Over 30 Q4. How many apps do you expect to download in the next 30 days? Fig 4: Apps expected to download in the next 30 Days 28% 21% 17% 17% 18% 16% 14% 10% 17% 13% 9% 9% 8% 4% None 1-5 6 - 10 10 - 15 16 - 20 21 - 30 Over 30 Q4. How many apps do you expect to download in the next 30 days? 5
  • 8. What it takes to win in the Chinese App Market 29% of Android users in the US say they search for new apps daily, versus 18% of iOS users (Figure 5). In China, these numbers were nearly equal, at 38% and 37% respectively (see Figure 6). This ties in with research from mobile research firm Canalys, who found that just over half of all apps downloaded in the first quarter of 2013 were for Android. iOS, at about 40 percent share, was the only other big-time player. 4 Fig 5: Frequency of Searching Apps to Download Of iOS users in the US have searched for new apps to download 91.0% 9% Of Android users in the US have searched for new apps to download 92.0% 8% 18% 29% 27% 36% 27% 10% 10% Daily Weekly Monthly 24% Rarely Never Q6. How often do you search for new apps to download? Fig 6: Frequency of Searching Apps to Download 98.1% Of iOS users in china have searched for new apps to download Of Android users in china have searched for new apps to download 97.0% 2% 26% 3% 25% 37% 38% 9% 10% 26% 25% Daily Weekly Monthly Rarely Never Q6. How often do you search for new apps to download? 6
  • 9. What it takes to win in the Chinese App Market B. APP DISCOVERY So, how do users discover apps in these markets? In both the US and in China, browsing the app store is the most common method for both iOS and Android users (Figures 7 and 8). Also, in both markets, word of mouth is a bigger factor for iOS users than Android users. In the US, 42% of iOS users use the recommendations from friends and family to find new apps, vs. 27% of Android users. In China, these figures are 33% and 23% respectively. In both markets, Android users are more likely to look up reviews for apps on mobile websites. Fig 7: App discovery in the US Browsing the app store 57% 53% Recommendation from friends and family 27% 18% 19% Recommendation from social media 14% Websites I access through my mobile phone Advertisements on my mobile phone None of these Websites I access through a desktop laptop computer Magazines and newspapers 42% 25% 11% 9% 10% 10% 8% 7% 6% 4% Q7. How do you usually find new apps to download to your phone? Fig 8: App discovery in China 55% 54% Browsing the app store Websites I access through my mobile phone 35% Recommendation from friends and family 23% Websites I access through a desktop laptop computer 44% 33% 23% 30% Recommendation from social media 18% 12% Advertisements on my mobile phone 13% 20% Magazines and newspapers None of these 10% 4% 5% 3% Q7. How do you usually find new apps to download to your phone? 7
  • 10. What it takes to win in the Chinese App Market The Chinese are also highly proactive in app search and discovery, with 36% of our Chinese respondents expecting to download over 20 apps in the next month, compared to 16% in the US (Figure 9). Fig 9: Number of apps expected to download in the next 30 days 18% 6% 5% 8% 16% 5% 24% 10% 11% 9% 14% 17% 41% Over 30 21 - 30 16 – 20 10 – 15 15% 6 – 10 1–5 None Q4. How many apps do you expect to download in the next 30 days? How do users discover new apps? In both markets, most users (55%) discover new apps in the App store (Figure 10). However, US users are more likely to rely on recommendations from friends and family (35%), while Chinese users are influenced by app review websites on a mobile phone (40%). Review websites are key in China, with 27% accessing them through a desktop/laptop computer, as against just 8% in the US. Fig 10: Channels through which users discover apps 55% 55% Browsing the app store Websites I access through my mobile phone 20% 27% 35% Recommendation from friends and family Websites I access through a desktop laptop computer 40% 8% Advertisements on my mobile phone 17% 10% Recommendation from social media (facebook & etc) 15% 18% 27% Magazines and newspapers None of these 7% 5% 4% China Smartphone users US Smartphone users 10% Q7. How do you usually find new apps to download to your phone? 8
  • 11. What it takes to win in the Chinese App Market Receptivity to mobile ads is high in both the US and China. In the US, 65% are equally or more comfortable with mobile ads as they are with ads on the TV or on the desktop/laptop; in China this figure is 49%. 5 In addition, we found that there was no silver bullet - different mobile ad formats such as static banner ads, rich media ads, interstitials, and video ads are all effective in different situations (Figure 11). That being said, we found that contextual ads are extremely well received - users in both markets preferred ads that recommended apps based on their interests and mobile web browsing history. Fig 11: Mobile ads that influence app download iOS Users Android Users iOS Users Android Users Banner ads which appear at the top of the screen. 28% 23% 18% 24% Ads which include multimedia content such as games, audio, and pictures. 25% 29% 24% 28% A full screen ad which appears briefly, while an app is loading. 18% 27% 20% 19% A short video clip 22% 16% 17% 14% Ads which recommend specific apps for me, based on the website I am browsing on my phone (for ex, ads for sports apps displayed when I visit a sports website on my phone) 34% 29% 39% 42% Q8.When searching for mobile apps to download, which types of advertisements on your mobile phone would be the most helpful? Fig 12: Factors that influenced the download decision Price 51% 45% Description and screenshots 50% 55% App store reviews & rating Recommendation from friends & family 30% 45% US Smartphone users 41% 44% App is ranked high on app store chart 33% App featured by app store Reviews from magazines or websites 61% 37% 18% China Smartphone users 59% 30% Q9. When you are deciding whether to download an app, which factors have the biggest influence? 9
  • 12. What it takes to win in the Chinese App Market What factors most influenced the download decision (Figure 12)? Our research showed that in China, price is less of a determinant due to the prevalence of free apps in the market. App store reviews were also considered important by about half the respondents in each market. Interestingly, recommendations from friends and family was less important in China (30% vs. 45% in US), with Chinese users giving far more importance to the app featured by the app store (59% vs. 33% in US). Lastly, the app’s rank on the app store chart was also a factor of consideration in both markets (41% in US vs. 44% in China), and Chinese users gave a higher ranking to reviews from magazines or websites (30% in China, 18% in US). C. IN-APP PURCHASES Fig 13: In-App Purchases 37.0% of smartphone users in the US have made an in-app purchases 46.0% of smartphone users in China have made an in-app purchases Q10. When using an app on your phone, have you ever made an in-app purchase? Contrary to popular belief that Chinese users are less willing to pay for app content, our research indicates that 46% of Chinese have made an in-app purchase as compared to the Americans (37%). 10
  • 13. What it takes to win in the Chinese App Market WHAT IT TAKES TO WIN IN THE CHINESE APP MARKET At first glance it seems as if the Chinese app market is ripe for the picking. However, effectively marketing apps in China is far more complex due to several challenges, as outlined below. FRAGMENTED APP DISTRIBUTION: In the US, the apps market is a two-horse race, dominated by the App Store and Google Play, both being able to meet app distribution needs. In China, Android currently holds a 70% market share, which is expected to increase to 75-80% by the end of this year. However, since access to Google Play market in China is restricted due to political reasons, it is a relatively minor distribution channel. China has one of the most complex and fragmented Android app store ecosystems in the world, with over 500 stores. With most Chinese Android apps downloaded from one of these app stores, apps developers necessarily have to distribute their apps via third party stores. Some of the largest app stores include Anzhi, AppChina, Gfan, Hiapk, Mobile Market, Nduoa, Snappee, Tencent, Wandoujia, Baidu App Store (run by the Chinese search engine giant), Opera Mobile App Store, and Pandaapp. We strongly recommend marketing your app through one or more of the large stores listed above. LACK OF STANDARD PAYMENT METHODS: Credit card penetration is low in China, and hence alternative payment methods play a huge role in enabling the in-app purchase market. Recently, big operators like China Mobile, China Unicom and China Telecom have come up with local payment and carrier billing options, making it easier to charge mobile app users. We suggest partnering directly with carriers or device makers for pre-install deals. Several top developers such as HalfBrick and Rovio have benefitted from such arrangements. LOCAL SOCIAL MEDIA LANDSCAPE: Social media has a great influence on app download decisions amongst consumers in China (Figure 3). While Facebook and Twitter are fixtures of daily online use in the West, the Chinese have no access to these sites; local cousins such as Sina Weibo, Tencent Weibo, Renren and Douban dominate the social media landscape here. Developers must promote their apps heavily on these local social media channels to drive downloads in China. 11
  • 14. What it takes to win in the Chinese App Market NEED FOR LOCALIZATION: A Distimo report - The Impact of App translation (September 2012) revealed that 73% of free downloads amongst the top 200 most downloaded free applications in China were localized in Chinese, far outstripping other language-sensitive markets like Korea and Japan. In fact, China is the only country where localized apps generate more downloads than English apps. 6 In addition, close to 50% of the Top 25 most downloaded apps in China have Chinese names. Figure 14 shows how important it is to customize apps for the Chinese market. While translating apps into Simplified Chinese is essential, localization should be beyond simple translation – it is important to connect with user emotions and culture. Customizing with Chinese avatars and timing launches with Chinese festivals is a good strategy. For instance, HalfBrick’s popular app Fruit Ninja was introduced as a Chinese version with C
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