The Chinese market for apps is a complex and intertwining system that has evolved out of the various channels Chinese citizens must go through to obtain the products they want at prices they can actually afford. To grasp the system is not difficult, but to fully understand it requires you to live and work with it. The subtleties that exists are often missed or misinterpreted when view with untrained eyes, and it is this situation that has allowed Chinese businessmen to outfox their Western counterparts when dealing within China.
Shawn typically writes and manages the Chinese version of our website, but he was kind enough to throw his thoughts down on paper in English for us today.
Yesterday, my colleague, Calvin, wrote an interesting article on market platforms and China. After we exchanged ideas at the lunch table, I thought, “Why not write an article from the native Chinese perspective?” Together with the information he already disclosed, this would create a more complete view of what the picture looks like here in China and what the implications are for Western companies.
Channels, Channels, Channels
Most Western companies are encountering challenges in China due to its puzzling marketing and distribution channels. It is not A challenge, it is THE challenge that has caused most Western ventures to stumble. As Calvin mentioned, most Western developers do not understand the complexity of the local market ecosystem in China. Besides what he has already mentioned, which is the rather visible Independent Distribution Platforms (we call them the Third-party App-stores in Chinese), there are four other types of online marketing channels that the Western world barely knows or understands. Here are these marketing channels in a nutshell:
- Tech Forums – This channel is the most cost-effective and allows more interaction with users. The users on these forums are primarily geeks and early adopters in the market, which makes it a perfect place for early stage promotion and core user cultivation.
- Mobile Ad Platforms – This is a rather developed market where it uses standard payment models like CPC/CPA/CPM/CPI, but the cost among each is almost the same.
- “Rooting and Flashing Market” – This is the sneakiest one. This channel is where most Westerners would not see a viable marketing channel at first glance. However, it accounts for a significant portion of how apps are distributed in China, and it is the most widely used promotion channel among developers. When Chinese customers buy their phone, they typically get it wiped and jailbroken immediately so they can access all these non-traditional channels available in China. It is during this process that the person performing the service loads on a number of apps along with the new operating system. This particular way of marketing might help with the user acquisition and market awareness at the beginning, but would most likely hurt your brand image in the long run (even in China people hate pre-loaded apps they didn’t ask for).
- The Tapjoy Model – This channel has the highest retention rate. This is freemium with a twist. The model works like your typical freemium setup where you pay to gain access to bonus features but the core app is free. The twist comes in the fact that you can “pay” for certain bonus features by installing other apps. Obviously, this method would not be overly popular in the West, but it works here in China.
Where does the Glu go?
Based on our internal sources of data, the effectiveness of users on each platform is in the following order:
Tech Forums > Independent Platforms (Third-party App-Stores) > Mobile Ad Platforms > “Rooting and Flashing Market” > The Tapjoy Model
As you can see, the market is quite complex and constantly evolving. It might be too much to ask for the Western cowboys (Editor’s Note: Yeehaw! They just don’t understand how fun it can be) to understand the multifaceted and cloudy nature of China’s market and grasp its ever-changing conditions, but it’s just as hard for me to fully understand the jokes from Conan O’Brien. (Editor’s Note: It takes a special breed to fully appreciate Conan, regardless of nationality) Fully understanding a culture requires living in it.
So, what’s my suggestion? Generally speaking, I would either recommend companies like Glu to setup a local office with native staff (not Chinese speaking Hong Kong and Singapore folks), or just simply invest into a relevant company which has well-developed upstream and downstream business alliances and partnership in the local market. Ultimately, you just want to let the locals do what the locals do.
Additional Note From the Editor(Calvin): Here is a little side fact that may be of interest given this article’s topic. The mobiSights gang actually operates two versions of itself. The “Chinese” language version of mobiSights is quite different in content than the “English” version. While the Chinese version is not as far along as the English version of our site, we knew from our experience in China that the two versions had to be different if they were going to be successful. All that to say, if you can read Chinese, feel free to switch over to the “China” side from time to time to see what Shawn and the gang are talking about over there!
About the Author
Research and Consulting Manager at GWC, the Author of GPORT Reports, Rock ‘n Roll Singer, Guitarist, Sports Fan, Film Critic, Former Entreprenur, Business Strategist, Senior Marketing, Inter-cultural Communicator, Third-culture-Chinese.