China sees greater shift to internet-based enterprises

By Money Times

Nov 03, 2015 01:25 AM EST

The rising costs of labor and infrastructure are paving the way for more opportunities being created via the internet. The online-based ventures are growing up in China and also enhancing the efficiency of the traditional enterprises as well. Mobile internet is changing the way consumer market behaves in the world's second-largest economy. Initially, the technology innovation doesn't happen in a consumer market, but it takes place in the enterprise segment. The consolidation is very slow in the traditional Chinese business when compared to the western part of the world.

Many Chinese online firms such as Dianping and Meituan, and are registering encouraging growth rates. Consolidation is also taking place among competitors. For instance, and have been combined early this year and running successfully.

Chinese internet-based enterprises feel that consolidation among competitors is normal in the industry. The consolidation activity in the US and Europe markets takes place every day. However, in Chinese traditional business segment, the consolidation is a bit slow. Many traditional businesses in China are facing many challenges, but still don't feel consolidation is the need of the hour.

The number of internet users is hovering at 668 million and is increasing at six per cent per year. China is outnumbering the US and Europe combined together in terms of social media users. The number of social media users stands at 675 million, registering 1.3 billion mobile subscriptions. This is luring many enterprises to make their presence online to explore vast business potential on the internet. 

The number of mobile social media users grew 15 million this year. The mobile internet usage is fast catching up in China as it rose to 594 million accounting from 89 percent of total internet users in the dragon country. The active internet user penetration is 49 percent indicating further growth potential in the world's second-largest economy.

Mobile terminal users spend less time on traditional apps like games, SNS and online shopping. Lifestyle apps are gaining momentum among youngsters. The average time youngsters spend on traditional apps has gradually been reducing. Apps on education, daily life, health, fitness and finance are in great demand.

There's growing demand for apps as well as creating a new business potential for internet-based enterprises. The top-20 popular apps include Tencent apps, Alibaba apps, Baidu apps, etc. Tencent is topping the list of app developers in China. 

According to Neil Shen, founding partner at Sequoia Capital, there's are growing opportunities in Chinese business environment. Shen successfully led a series of investments in the internet industry alone including, Qihoo 360 and The Chinese billionaire listed by Forbes is focusing on enterprise business such as Sinnet, which provides internet data center service. 

After $15-bn merger by Meituan and Yelp as announced in October, Shen sees huge market opportunity in China. He says the business dynamics are different in China when compared with the US for local services. China has many larger cities with huge population density. The demand for apps is growing very strong in Chinese mobile internet market. Shen is upbeat on business potential as the mobile internet is going to change the day-to-day life in China.

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