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China Portals + Mobile Phones = $$$

Micropayments used for Pay per View



12:07 am on Jan 22, 2003 (gmt 0)

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We have heard about the use of Mobile Phone in Japan from Bill, and it seems China has been doing the same thing. Perhaps they read Bill's threads here ...

A report from Silicon Valley .com [siliconvalley.com] states "After years of losses, China's three biggest Internet portals are making a sharp turnaround" thanks to "China's love affair with the mobile phone."

The big challenge in China is of course relatively low income and therrefor lower advertising budgets and online sales than in the west. But the Chinese do love their phones and do love sending messages. I remember after a teaching session a couple of years ago one young pupil becoming very happy when she switched her phone back on to find no less than 27 SMS messages sent by her friends in one hour.

The trick has been how to marry the two technologies and profit from that. "But the turning point came when China Mobile, (China's) biggest mobile-phone company, introduced a system last year called micropayment that lets portals share in revenues for wireless Internet access."

"These guys are getting fat off the crumbs off China Mobile's table," said Steven Schwankert, an industry expert in Beijing.

The result have been that the Top three portals, Sohu, Sina and Netease, have all posted profits largely based on this new system. The article has more information about profit postings etc.

Taking the success a little further, according to a China Daily [www1.chinadaily.com.cn] report, "Sina.com planned to acquire MeMeStar, a mobile phone service provider based in Guangzhou, for US$20.8 million, in a move expected to double Sina.com's wireless services revenues." This will enlarge their revenue base and also the Advertising Sales & Marketing base as well.

It seems that diversification is the key to staying afloat in China as "Internet advertising sales have dissipated."

A further report dfrom Reuters [reuters.com] talks about Sohu.com, "once written off as another flamed-out Internet portal" making a phoenix-like rise "thanks to the chatter of hip young mobile phone users". The result has been a "lift (in the) the stock (of) 800 percent in six months." The article has detailed figures for the three protals mentioned above.

Interesting food for thought.


1:00 am on Jan 22, 2003 (gmt 0)

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Interesting articles Woz. It looks like China is leapfrogging a lot of the pitfalls of other countries and going straight to a wireless community. I'm not as knowledgeable about China as you, but it was my impression that there is no private monopoly conglomerate that has sway over telecommunications. In Japan we have NTT which kept domestic and international phone rates unbelievably high until competition was introduced only recently. NTT had control of almost every aspect of Japan's telecommunications infrastructure and although their capitalistic ways were very profitable (for them) their stranglehold on telephone lines and rates really impeded the introduction of the Internet into Japan. Although Japan now boasts some of the world's cheapest broadband, they're going to be playing catch-up for a while because of their slow start.

The system in China sounds very different from what I have read. I think that companies can afford to offer lower priced packages to the masses and recoup profits on the sheer numbers of potential customers. Technologies like SMS are incredibly inexpensive to offer and I know that the service is extremely popular elsewhere in Asia. I would be interested to know what sort of billing plans they are offering in China and also what sort of coverage there is.

In Japan, NTT's DoCoMo, which runs the i-Mode service, has really perfected the micro-payment model. On-line browsing and sending/receiving mail is based on the number of packets sent/received. The amounts are really tiny, but they do add up. Then they have services that cost between 100-300 per month that individuals can subscribe to. All of this is conveniently added to the user's monthly phone bill. It make payment simple and you're dealing with a trusted entity. I wonder how this is being handled in China.

It's somewhat comforting to see these Internet portals get into the wireless game. Somehow it just seems to me that these Internet companies 'get it', while the old world telecom companies are a bit staid and moldy in this market. You've got to be fast and keep up with the youthful trends in order to make it in the mobile market in Asia.

6:18 am on Jan 24, 2003 (gmt 0)

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Having spent some time in PRC in the late '70's, my vision of the Peoples Republic is still one where there is little electric power or communication infrastructure, except to a limited amount in major cities. It's still a vision of technology mired in the 1940's.

Has all that changed? How far has their great modernization plan taken them?

I can see how wireless communications could evolve in major cities, overcoming the landline limitations, but that would only be touching a modest fraction of the population.

I have great difficulty grasping an Internet-enriched population where I can't even envision phone lines, or electricity to feed power-hungry computer monitors.

And has the word "profit" really found it's way into mainstream Chinese business language?

Someone please update me. Do we have any Chinese (PRC) webmasters hanging out at WebmasterWorld?

6:42 am on Jan 24, 2003 (gmt 0)

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I don't know if this is any indicator, but China became the world's #2 biggest market for PCs in 2002. Japan had been #2 behind the US until China caught up. Also in 2002 China became the world's largest market for mobile phones. It sounds like their planning has paid off to some exent.
7:17 am on Jan 24, 2003 (gmt 0)

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Bill, I am no expert.I am just trying to answer you question. :)

Till the end of October,2002, there are 195 million mobile
subcribers in China , and that amount to less than 15 percent
of the total. In 2002, about 60 billion MSM were send. And Every year there are about 5o-60 million new subscribers added to this number. Although I never got "no less than 27 SMS messages in one hour" :) , as Woz said, Msm is really popular in China.

Normally, recieving msm is free and to send is RMB 0.1 for one msm.
I am talking about sohu as an example.
Chinaren.com was acquired by sohu.com in 2000 . Chinaren provide kind of service which allow people to build an alumni on Chinaren.com and then former schoolmates could contact each other online, sort of a forum and then people talk and keep in touch.
In the case you were talking about, people registed to China Mobile to receive notice when someone input in their forum and also they could edit their content on their mobile and then send to a certain num and then the content could appear on the forum.
This kind of service is charged RMB 10 per month, from their mobile fee.

7:55 am on Jan 24, 2003 (gmt 0)

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Welcome to WebmasterWorld as_is and thanks for jumping in here. Those SMS rates you quote seem to be in line with other providers in Asia. I had read stories of people in the Philippines who purchased mobile phones only for the SMS :). It's cheap enough for almost anyone at that rate.

Could I ask what sort of coverage is available in China for wireless? What is it like outside the major cities? Can you roam throughout the country using the same phone?

8:43 am on Jan 24, 2003 (gmt 0)

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bill, I am not sure whether I understand you or not.

There are diffent ISP in China, the most successful one CHina Mobile said that their wireless coverage to 138 cities in China.(which released in 17 May,2002. I am sorry I could not find the latest news. if I find the latest statistics later, I would come to reply this thread)

Even in some remote and small village , getting signal is still avilable,only sometimes it is weak.

And yes, there are some places where you can't use mobile phone, but that's rare.

8:37 am on Jan 29, 2003 (gmt 0)

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Thanks as_is I think you understood me fine ;)

I was wondering what percentage of China has mobile phone coverage. I know that even Japan is not 100% covered and there are still places where you can't get a signal.

If you can find any statistics please post them.

8:57 am on Feb 10, 2003 (gmt 0)

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sorry for the late reply.

here is what I found.

36 major cities in China mobile phone coverage: 99.86%
in freeways of china mobile phone coverage : over 96%

I could not find the exact statistcs of suburbs. If anytime I find, I would come back to contine the thread.

Hope this helps.


7:23 am on Mar 18, 2003 (gmt 0)

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Huge Mobile Subscribers Amount

According to the latest report from the Ministry of Information Industry on Dec 17, 2002, by the end of Nov 2002, the number of mobile subscribers has reached 200.3 million.

Mobile phone subscriber # 200.31 million
Fixed-line telephone subscriber # 212.68 million
Telephone total subscribers # 412.99 million
Internet users # 48.29 million
# of telephone subscribers by the end of Nov 2003, according to Ministry of Information Industry, China

From the begining of 2002, there are about 5 million new mobile subscribers. With this trend going on, the number of mobile subscribers will exceed the one of fixed-line telephone very soon. The number of 200 million subscribers means every 100 persons in China have 14.95 mobiles. This number in big cities like in Shanghai and Beijing is much higher.

My personal perspective

From my personal perspective, there is vivid persons and lives behind these abstract numbers. I bought my mobile five years ago when I was still a student. My girlfriend bought hers 6 years ago. I don't have any friend who don't have a mobile in Shanghail now - my estimation is, any well-educated young people in Shanghai have a mobile.

What surprises me a lot is, even the workers decarating my house have their mobiles - the painters, the decorators, the mason, the electricity, and the carpenter. They dressed poorly - they don't bath for weeks, but they have mobiles. It is amazing!

I do have one friend in Shanghai who only have a pager - a 70-year-old famous professor. Beside him, I don't know anyone without a mobile phone.

Mayor of WebmasterWorld described his vision for China when he was here in 70's.

Having spent some time in PRC in the late '70's, my vision of the Peoples Republic is still one where there is little electric power or communication infrastructure, except to a limited amount in major cities. It's still a vision of technology mired in the 1940's.

It is quite true that in late 70's, there is almost on communication infrustructure. But now, it has changed greatly.

Impression of my friends in US

Some friends of mine came to Shanghai from Seattle. They are talking about the mobile and communication infrustcture in China excitedly - "Can you imagine it? My mobile phone still gets signals in the mountains that are hours' car ride from Chengdu!" I happent o have the pictures of the mountains he described.

When I was travelling in Seattle, I found it insteresting that a lot of people don't have mobiles. People explained this to me: in the north Americian, the telephone infrusturct has been built very well and you can easily find a telephone anywhere. But in China, to find a telephone on the street is not as easy. So there is a huge demand to get a mobile.

Fee of China Mobile

Here is the fee of China Mobile Communication Corp. (a.k.a CMCC)

Monthly subscription fee: 50 RMB/month
Local call: 0.4 RMB/min
Long distance call: 0.4 RMB/min + 0.07 RMB/6 seconds = 1.1 RMB/min
Answer phone: 0.4 RMB/min

Good way to save money:
Dial 17951 + Long distance number: 0.7 RMB/min

(note: 1 USD = 8.3 RMB)

For me, I use my mobile frequently. For local calls and long distance calls. I get a bill of around 300 RMB every month.

Mobile phones

Mobile phones in China is cheap. For some old-fasioned mobiles, it only costs about 300+ RMB (40 USD?) to get a mobile. It is different than in U.S. Mobile phone and the SIM card are sold seperately. You can buy any mobile you like and choose the NSP (network service provider). Any two can macth. There is a discount to buy a mobile with a SIM card though.

Big mobile phone companies are fighting for bigger market share aggressively. It is clear that Nokia is taking the leading position and Motorola follows. My new mobile is Alcatel OT715.

Network Service Providers

There are three large NSPs in China

China Mobile - the largest. I am using China Mobile.
China Telecome
China Unicom - this is the provider of my girl-friend's

Actually, I don't see much difference between the service they provide.

Besides the subscription fee based model, they also have other options, like Prepaid Card.

Pre-paid Card

All the providers offer their pre-paid card. Users of these card don't have to pay for the monthly subscription fee, don't have to pay the bill. They just buy a card (with a SIM card and certain amount of fee). There is a mobile phone related to this SIM card. Insert the SIM card into any mobile and you gain instant access to the mobile network.

Before the prepaid amount of money is used out, you can buy "value card", which is about 50, 100, 200 RMB. Unveil the card number and password, call the provider's number, key in the card number and password, you gain additional communication time. It is easy. The charge of this card per minute is a little bit higher than the monthly subscription model.

I have a lot of phone calls so I choosed the subscription based. My girl friend don't use her mobile as frequently, so she bought the prepaid card.

Pre-paid card in action

Here is an example of the Shenzhouxing pre-paid card from China Mobile (CMCC).

(picture cut after pasting to forum)

Shenzhouxing card. You can see the SIM card on the left.

Local: 0.6 RMB/min
Domestic long distance: 0.6 RMB/min + 0.07 RMB/6sec
Answer call: 0.6 RMB/min

You can compare the rate with subscription-based rate listed before. Please note: both calling out and answering call are charged, at the same rate.

Signal coverage

Here is the China Mobile Communication Corp. (CMCC) report on signal coverage from ChinaByte on March 10, 2003

In the 36 major cities, avg. coverage = 99.86%
Country-wide highway coverage = 96%

In big cities like Shanghai, the coverage is a big challenge. There are two many tall buildings that weakens the signal. Now, most places are covered, such as in metro tunnel, in most elevators.

SMS is hot; SMS is part of people's life in China

I couldn't image there is anything that affected people's life more than Internet two years ago. Now I realized SMS is competing with Internet to change people's life.

In China, there is only 48.29 million Internet users by end of Nov, 2002 (don't get me wrong, this number is huge already), but there are 200.3 million mobile users.

I have a friend who spend about 100 RMB every month for SMS. It is only 0.1 RMB per SMS, which means 1000 SMS every month. Young generation (16-20 years old) use SMS more frequently. As I described in this article, Mobiles in China - My Personal Perspective, some people just buy a mobile phone and a pre-paid card. They only use the SMS functions as a good way to save money. They don't use the mobile phone to call.

SMS + TV? SMS + Radio? SMS + newspaper? SMS + ....

SMS is no longer a method for peer-to-peer communication. Some TV programs uses SMS as a feedback channel from the audience. They will put a survey on TV and they can get instant feedbacks. For example, in some competitions, SMS sent by audience will be a factor to choose the final winner. It is the same for the combination of SMS + Radio or newspaper.

SMS applications

More and more companies in Shanghai are using SMS as the information platform. There is a company called Guangxi (or Relation in English). You can send a SMS message to their service number 885074 containing any place name, and they will return the result to you via SMS. It is very handy.

CMCC (China Mobile) allows you to send JFCX to 1861 to query your credit in CMCC. Even the government is using SMS as a quick way to validate the invoice. This way, people cannot make fake invoices.

SMS + Internet

The reason why SMS can generate revenue is, the provider can charge more than the standard 0.1 RMB/message. In [sms.sina.com.cn,...] for example, people can download rings, pictures. Sina.com will charge 1.0 RMB/message for most of the download. The fee will appear in the monthly bill of mobile fee of the users. Then communication companies like CMCC will share the revenue with Sina.

For companies like 5460.net, a classmate finder service, information is no longer free. If you want to find a long lost classmate, you can enter his/her name, and the site will list very limited information about the person you are looking for. If you want to get more like his email, mobilephone, ..., you need to enter your mobile phone number. The site will send it to you. The trick is, if the site display is on the web site, it is free. But if they send it to you, they can charge you 1 RMB. That is the different. Although it is very small amount of expense for you, the thousands of subscribers do add up to big money.

P.S. The content of this page is copied from my blog entry [home.wangjianshuo.com] and part of the format and picture were lost.