BEIJING, Feb. 18 /Xinhua-PRNewswire/ -- CCID Consulting, China’s leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), recently released its article on Internet game rules after the grand capital feast.
In the first half of 2007, China’s Internet market was very flat. Except that the netizen penetration rate topped the 10% mark at the beginning of the year which stimulated the whole market, there were not many exciting spots. In the second half of the year, the Internet market changed its plain-sailing scene in the first half of the year and was in upheavals: Firstly, the successful listing in the United States of the online game company Perfect World opened a new round of listing tide for Chinese Internet enterprises. The original online game firm Kingsoft was listed in the HKEx. In the golden month of November, http://www.ztgame.com , the overthrower of old online game rules landed in the NYSE, which was the first Chinese online game stock. Almost at the same time, NetDragon made its debut at the Hong Kong Growth Enterprise Market. The biggest highlight was the listing in the NYSE of Alibaba, the No.1 firm in China’s B2B market 5 days later. Its $20 billion plus market value created a legend for science and technology stocks in China, bringing the grand capital fest to its peak.
Other Internet enterprises which had already been on the capital stage did not stop there, In November, Baidu announced, in a high profile, its entry into the C2C E-business market, causing shocks and guesses in the market. Considering the cooperation between Google and Sina, Netease’s introduction of Yodao search engine after consolidating in the online game market and Tencent’s Paipai E-business strategies, listed Chinese Internet enterprises have seen their main business positioning going through the whole process from portal to IM, search, online games and then to E-business. However, after drawing a clear main business line, their gradually integrated business forms have become more uncertain and less inscrutable.
CCID Consulting’s research shows that the number of Internet users in China is expected to top 180 million. Driven by a continuously growing demand, the Internet services market will also maintain a high growth of 40-50%, reaching a size of almost 60 million Yuan, The main services market including online games and search engine will grow by some 70% year-on-year. Meanwhile, major breakthroughs have been made in the development of the E-business market. There is a deepening integration between B2B and traditional industries. B2C and C2C business models have also been innovated. There has been a big increase in the number of E-business users and trading volume. The total transaction value in China’s overall E-business market in 2007 is expected to hit 1.7 trillion Yuan. In this market with over 180 million Internet users, the user demand is growing and becomes integrated. On the other hand, the rapidly growing Internet user numbers and the incremental demand and users greatly support the fast growth of the Internet market and allow Internet enterprises in China to fully enjoy the successes and joys brought about by market growth. While Chinese enterprises enjoy the grand capital feast, capital also enjoys a great meal of China’s Internet market and continues to push forward Chinese enterprises to gather pace to continuously pursue every possible market opportunity.
Game Rule 1: traffic is everything
The iron rule of portal websites in the Web/1.0 era is that traffic is everything. Access traffic by netizens is measured using such important indicators as rankings by Pageview and Alexa which are favored by the capital market. Through the profitability of traffic has met with suspicions and challenges from the market, what is undeniable is that the potential values of traffic itself have been recognized in the capital market. The logic is very simple -- taking up and owning the potential values will be the precondition for mining and releasing commercial values. Under this major logic precondition, domestic portal websites started a grand listing movement around 2000. In addition to portal websites, search services also belong to a leading business model for traffic. To increase their traffic, some Internet enterprises have carried out diversified operations in these 2 fields. For example, Tencent has built a Tencent portal website and Alibaba has acquired Yahoo! China.
In essence, traffic possesses the potential to turn into cash. Once matching with the corresponding profit models, traffic will have a huge power. This rule is thus still playing a considerably important role, though it is already morphologically different from the access traffic by netizens at the beginning. For example, making a later start, http://www.ztgame.com has adopted a fundamental free online game business model to bring huge player traffic to its game ZhengTu. Then, it has got the market value from game props charges on high-end users. To retain and consolidate its various individual business merchants, Alibaba Group’s C2C platform http://www.Taobao.com has long adopted a free model. So far, it has not really collected any charges. From one aspect, Netease’s entry into the search field and the cooperation between Google and Sina also reflect Internet enterprises’ desire for traffic growth.
Game Rule 2: user experience and improve adhesion
Entering the Web2.0 era, initiative, interactiveness, personality and experience have become the mainstream ways to use Internet for users. Under the precondition of no good experience, Internet users can select a new services provider and experience new services by clicking another domain name or simply the mouse on the network browser. No any other service has a lower shift cost than Internet services. In this sense, access traffic and access loyalty are difficult to be unified. They even exclude each other. The capital market is also well aware that without loyalty, it is very difficult o realize the business values of access traffic.
Using experiences with the sense of recognition to improve user adhesion is a sensible judgment and choice made by many Internet enterprises in the Web2.0 era. We can also see that enterprises have made a series of efforts to improve their user adhesion, including diversified penetration between Internet services with big traffic and strong adhesion and mutual penetration within Internet services with strong user adhesion. For example, Baidu Tieba and Baidu Zhidao both strengthen user adhesion to the search engines through communities. As an IM service provider, Tencent has entered the leisure game field and stayed top of the market. These are all specific measures to further strengthen user adhesion.
Game Rule 3: value orientation
Be it user traffic or user adhesion, the whole business model system still cannot be without the final link to encash values. In addition to caring about how to encash values, the capital market pays even greater attention to how to maximize the cashing of values. Under the current business models, E-business has won unique favors from the capita market due to its control over high-valued customer groups with the biggest consuming power. Alibaba saw an almost 200% rise in its share price on its IPO day and a 318 times P/E ratio. This speaks it all. Of course, the absolute number of high-end B2B customers is limited. To catch up with capital, E-business enterprises have also to conceive all kinds of ways to improve the access traffic of their services while ensuring user adhesion and innovating their high added-value services.
Value orientation not only refers to customer groups with high values but also includes high value services that correspond to corresponding customer group. Only when high-end users accept high-end services, they can show high adhesion. Low-end users will be automatically filtered out when services are provided to them. The result of offering general services to all customer groups can only be the gradual loss of high added-value users. This is an important reason why QQ has 250 million active users but still cannot smoothly switch to the B2B E-business online trading platform. Thus, the business logic behind Tencent’s introduction of C2C Paipai is self-evident. This similarly can explain the initial purpose which Baidu had in entering the C2C E-business field. Whether the huge traffic of the Internet grassroots can take up the mainstream position in business values will not only depend on the stratification and upgrading of their group structure but also whether there is adhesive services with high added-values to go along with them in the process.
Being based on access traffic, taking user adhesion as the guarantee and user values and business values as the orientation are the game rules for China’s capital-led Internet market. Internet services have started to gradually turn their public information integration and release functions to the function of particular services for high added-value groups. Services attributes have transcended new media platforms and gradually approached enterprise- and personal-level value-added applications. The rising helix curve from the starting point to the end and then to a new starting point represents the whole process of Chinese Internet enterprises’ business integration and evolution, market competitions and cooperation. As the operational rules of China’s Internet market are increasingly closer to those of the traditional industries, exploring the game rules of the Internet market may bring us some other implications.
About CCID Consulting
CCID Consulting Co., Ltd. (hereinafter known as "CCID Consulting"), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: HK08235), is directly affiliated to the China Center for Information Industry Development (hereinafter known as "CCID Group"). Headquartered in Beijing, CCID Consulting has set up branch offices in Shanghai, Guangzhou, Shenzhen, and Harbin, with over 300 professional consultants and industry experts. The company’s business covers over 200 large and medium-sized cities in China. Apart from home market development, CCID Consulting establishes international cooperation links across the United States, the Asia-Pacific region and Europe with agents in the U.S., Japan, South Korea, Australia, Singapore, Italy and Russia, with the aim of going global.
Based on four major competitive areas: powerful data channels, industrial resources, intense knowledge and a deep understanding of information technology, CCID Consulting provides customers with consulting, research and IT outsourcing services covering strategic planning, IT applications, marketing strategies, human resources and information technology outsourcing. Customers range from industrial IT users, telecommunications companies, energy companies, finance companies, and automobile companies, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to be the number 1 consultant in strategic consulting, the number 1 brand for strategic consultancy, the number 1 advisor for enterprise management and the number 1 consultant for government decision-making.
For more information, please contact:
Cynthia Liu
Coordinating Manager
CCID Consulting Co., Ltd.
Tel: +86-10-8855-9080
Email: liuyan@ccidconsulting.com
