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Is There a Mobile Internet Bubble in China?

As the popularity of mobile Internet reaches an unprecedented height, some are beginning to wonder whether there may be an upcoming bubble in the industry. According to them, the mobile Internet industry may seem promising, but it probably won’t produce any profit. Some data has caught people’s attention, and some investors and developers are getting cautious.

Domestic mobile Internet users have reached the 450 million mark this year, which surpassed many people’s expectation. However, data from Analysys shows a decline in user growth from an 8.6% increase in Q4 2011 to 5.1% in Q1 2012. Furthermore, in the face of such a large user-base, there are relatively few companies with a clear profit model.

Fan Bao, Founder and CEO of China Renaissance, said at the Global Mobile Internet Conference (GMIC) this year, that there were already bubbles existing in the mobile Internet industry, and that 2013 may be a trough for a lot of companies. According to his view, outstanding companies won’t emerge until 2014 or 2015.

In Q2 2012, there were only four major investments in domestic mobile Internet, less than that of 2011 which was around 22. According to Analysys, the cooling of investment is mainly due to three reasons. One reason is that the business model of most applications is still unclear. With fewer products appealing to users, companies find it hard to make profit. Another reason is that the domestic mobile Internet isn’t mature enough. Users haven’t formed a good habit of paying for applications, and the payment systems leave something to be desired. Finally, big Internet companies squeeze the market with capital advantages, threatening the growth of medium- and small-sized companies.

Under these circumstances, CTO of Dolphin Browser Mr. Liu believes that the earlier that companies take action the better, as they can attract a larger user-base. He believes that mobile Internet will follow the pattern of PCs 10 years ago. Therefore, those that start from the Web side of things will probably have more of an advantage further down the road. Who will have the last laugh?

Translated by Stella Wang (TechWeb)

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