1
Do it right or.. Do it right now? The Market
Charm and Design Challenges in China Internet
Space

• Ben Tsiang
• Executive VP, SINA
• Chicago May 18, 2006

2
China Internet and Mobile User Growth

• 393 million mobile phone subscribers as of Dec.
  05
• representing a 30 wireless penetration rate
• 111 million internet users as of Dec. 05
• the 2nd-largest internet market in the world
• representing less than 10 of internet
  penetration rate
• 64 million broadband users as of Dec. 05
• Largest number in the world
• representing 50 y/y growth rate

CNNIC 17th Internet Development Study (in mn)
China Mobile Phone Users Projection (in mn)
500.0
80
450.0
70
68
400.0
60
350.0
50
300.0
43
250.0
40
30
200.0
30
25
150.0
16
20
14
100.0
10
50.0
0.0
0
2001
2002
2003
2004
2005e
2006e
Mobile Phone Users
Growth
Source MII and iResearch
Source CNNIC
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Trends of the Digital China

• Information Centric ? Entertainment Centric
• Import Killer Contents ? Produce Local Contents
• Geo-targeting ? Generation-targeting
• Sales-driven ? Product-marketing driven
• Single Device ? Digital Convergence
• International Business Models China ? New
  Paradigm (e.g. Mobile SP, Focus Media, CTrip,
  etc.)

4
Online Activities by Regions
Question In the past week, what did you do on
Internet?
Data Base 603 Internet Users in North of China
(including BeiJing / ShenYang / JiNan), 804 Users
in East of China (including ShangHai / HangZhou /
NanJing), 402 Users in South of China (including
GuangZhou / ShenZhen / FuZhou) and 603 Users in
Middle West of China (including ChengDu / WuHan /
XiAn)
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ECom Activities by Regions
Question In the last three months, what did you
do on Internet?
Data Base 603 Internet Users in North of China
(including BeiJing / ShenYang / JiNan), 804 Users
in East of China (including ShangHai / HangZhou /
NanJing), 402 Users in South of China (including
GuangZhou / ShenZhen / FuZhou) and 603 Users in
Middle West of China (including ChengDu / WuHan /
XiAn)
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Online Activities by Age Groups
Question In the past week, what did you do on
Internet?
Data Base 438 Internet Users of Middle School
Students, 348 Users of College Students, 437
Users of High Class with high salary and high
education, 392 Users of Young Fellow who aren't
students with the age below 25 years old and
without high salary or high education, 573 Users
of Middle Age who aren't students with the age
above 25 years old and without high salary or
high education
7
Content Consumption by Age Groups
Question In the past week, what kind of
information did you read or look for on Internet?
Data Base 438 Internet Users of Middle School
Students, 348 Users of College Students, 437
Users of High Class with high salary and high
education, 392 Users of Young Fellow who aren't
students with the age below 25 years old and
without high salary or high education, 573 Users
of Middle Age who aren't students with the age
above 25 years old and without high salary or
high education
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A little about SINA--

• The Leading Internet Media for Global Chinese

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Where SINA comes from

• Founded in 1995 in Silicon Valley, by 3 Stanford
  grads
• The largest Chinese Online Media in 1997
• Entered Greater China market by merging with a
  Beijing-based company (Stone Richsite) in 1998.
  Launched Taiwan, Hongkong local sites in 1999
• NASDAQ listed in 2000
• Create SINA mobile VAS business in 2002
  (contributing 50-60 of annual revenue in 2004,
  2005)

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Company Overview
SINAThe largest Online Media for Chinese
World-wide
SINA Global
Company Facts

• Headquarters in Beijing, China
• Worldwide Employees exceed 2,000 in Mainland
  China, Hong Kong, Taiwan and US
• NASDAQ SINA

• sina.com
• sina.com.cn
• sina.com.hk
• sina.com.tw
• sh.Sina.com
• gd.Sina.com
• us.sina.com

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Company Product lines
SINA.com
SINA.net
SINA Mobile
SINA Online

• Web Portal Content
• Online Advertising

• Mobile content (subscriptions, downloads)
• News, pictures, ringtones, games, community,
  entertainment

• Enterprise services
• Paid search (pay per click, pay for placement,
  pay for inclusion)
• Full portal integration

• Online community and communication
• Mail and IM
• iGame casual game portal
• Chat, dating, forums

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SINA Leading Online Media in China
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Chinas Online Advertising Market

• The health of Chinas Online ad. market is driven
  by the robust GDP growth in China (9.9 for 2005,
  according to China's National Bureau of
  Statistics )
• Chinas online ad. market grew to 515mn in 2005
  from 282mn in 2004 representing a 77 growth
  rate, according to iResearch
• Online advertising represents between 2 - 3 of
  total advertising spending in China

• The leading online media company
• 1 in online advertising with dominant market
  share

2005 Online Ad Rev. Comparison (in mn)
Source press releases
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SINA Mobile VAS Business
SINA Mobile Value-Added Services
SMS, MMS, WAP, JAVA/BREW, IVR and CRBT Platforms

• News and information
• Sports scores and updates
• Lifestyle and horoscopes

• Pictures and screensavers
• Ringtones and sound effects
• Java-based games

• Dating communities
• Hometown communities
• Audio chatrooms

Online, offline and direct media
advertising marketing channels
13.9 million monthly unique paid users (as of
Q405)
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The Challenges

• Fast Changing Landscape? Vertical vs. Horizontal
• Mixed design principles? Global vs. Local
• Rapid digital-convergence? PC, Mobile, TV
• Market Expectation? Immediate Sales vs. Long Term
  Viability
• Government Policy ?Media vs. Utility
• Drastic value-chain re-shuffle? mobile SP,
  digital music industry

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Fast Changing Landscape

• 2000-2002Portal Media Sina, Sohu, Netease
• 2002-2004 Mobile Sina, Tom, KongZhong, QQ,
  Linktone
• 2004-2006Online Game Shenda, NineCitySearch
  Baidu

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What affect Chinas digital media design?

• China Policy Regulation
• news, games, commerce, etc.
• Culture Convention
• generation gap, provincial developing stage,
  content selection, international vs. local
  convention- red or green?
• China Market Genre
• pre-empt, sales-driven, do-it-right vs right-now
• Global competition
• google, yahoo, ebay, msn, etc.
• Product Management Structure
• Matrix vs. Linear mgmt structure

How Design Strategy can contribute to the
success, or failure in CN ?
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See some examples
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China Portals vs. International Portals
China users 1. Email 2. News 3. Search
US users 1. Email 2. Search 3. News


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CN Screen Resolution Statistics
800 x 600 28
1280 x 1024 2
1024 x 768 68
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Information Design
Yahoo
AOL
CNN
Sohu
SINA
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Information Design
x5 x4
x4 x3
x2
Yahoo
AOL
1024 x 768
CNN
Sohu
SINA
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Information Design
Financial Times
CNN News
Yahoo News
Netease News
Sina News Channel
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Information Design
x18 x15 x5
x3 x3
1024 x 768
Financial Times
CNN News
Yahoo News
Netease News
Sina News Channel
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Interactivity Design

• To pop, or not to pop?
• China web sites mostly use pop-up windows,
  whereas US web sites refresh within the same
  window
• Convention came from relatively heavy web page
  design

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Media vs Utility Design
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Media vs Utility Design
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What is and What can be

• User Experience is a catchy term in CN
  Conceptual ? Professional Practice
• Talents Short ScatteredIn-house Brewing ?
  Professional Network
• Digital ConvergenceSingle Device ?
  Cross-Devices/Media User Experience( PC, Mobile,
  TV, Print )
• Gold Rush Sales-driven Product Roadmap ? Design
  with higher Consistency Integrity

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Extra Case Study

• Handset makers (domestic vs. international) in
  China 2002-2005
• Ericsson in 1997-2000

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Case1 China Domestic Handset Makers

• 2002 7 China domestic brand in top 10 HMs
• 2003 CN HM market share increase sharply, reach
  50
• 2004-2005 CN HM market share declined severely,
  to 30-40.
• First bucket of Gold vs. the 2nd one..
• CN Handset largely used OEM/ODM in 2002-2003
  sales channel battles
• Handset sales license Scarce ? Open
• International brands have brand cost advantage.
  inhouse rd, shared product modules, and
  experience continuity
• Sales driven? Branding ? RD ? User Experience
  Loyalty
• The rise of CN handset design house (CNTF,
  LongQi, ChenXun, YuHua, JingWei, etc.)

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Case2 Ericsson 1997-2000

• Some Facts
• Ericsson has strong technology with long history
  among the phone companies world wide
• RD budget 13 of total revenue
• First business contract with China 100 years ago
  (AC 1892, Qing Dynasty) first Beijing branch
  1985. i.e. long and firm government relationship
• Strong localization in manufacturing, parts
  supply, knowledge transfer. e.g. Ericsson China
  School 1997 opened in Shanghai
• Total 3K employees in China 95 Chinese
• China ranked top in Ericsson worldwide market in
  1998 (incl. handset data exchange system)

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Case2 Ericsson 1997-2000

• 1997 Ericsson 37 market share in China GSM
  handsets market. An assured contender to
  challenge dominant players Motorola and Nokia in
  China
• 1998 Q4, handset market share down to 25
• 1999 Q4, handset market share down to 10
• 2000, handset market share down to 5
• (Reference Kotra report)

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Case2 Ericsson 1997-2000

• What went wrong 1997-2000?
• Technology-dominant mindsetProduct design
  marketing didnt have enough understanding on the
  local taste and fashion choice
• Slow-reacted Product Strategy Competitors were
  fast shaping new consumers experience and
  expectation on mobile data services, including
  web.
• Growing crisis on Customer Service Multi-layer
  Reseller and Agent detach from the fist line of
  sales small pitfalls ? national crisis
• Today, handset makers say Learn from Sony
  Ericsson and Samsungs success if you want to
  enter China. It has become a role model for
  Asian handset makers, but we should all learn
  from their lesson in 1997-2000.
• (Reference China in Ten Years, Pu-HanZhen)

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Some Rules of Thumb (of SINAs)

• Gear towards the upcoming fashion and grasp local
  symbols
• Catch theme-based Economy
• Creative cooperation with locals
• Crisis handling management
• Highly Adaptive Organization

Passwords for China Market Understand the
Potential ? Understand the Changes
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Some Rules of Thumb (of SINAs)

• Gear towards the upcoming fashion and grasp local
  symbols
• Catch theme-based Economy
• Creative cooperation with locals
• Crisis handling management
• Highly Adaptive Organization

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• Passwords for CN Market
• Understand the Potential ? Understand the
  Changes

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You are the one!