What Mobile App Developers need to know about the Chinese App Market

China has 390 million mobile internet users.  As per the latest numbers from Umeng 2012 Q3 (a Beijing based mobile analytics company), Chinese users have purchased 200M iPhone and android smartphones.  So it’s no surprise that developers have a huge potential in China and there lies ahead lots of opportunities and challenges for Western developers who want to enter this market.

China’s mobile ad market

China has about 20-25 local ad networks, the mobile ad market in China is still in its infancy stages. Many of the local mobile ad network use illegal ways like brush ranking to boost downloads in the app store. Local ad network lure advertisers with the promise of delivering conversion rates as high as 50%. As per latest news, Apple is now penalizing app developers who use such means of artificially boosting their ranking. Many of the top gaming apps have been removed off the app store.

Free Apps vs Paid Apps

Well, Chinese hate to buy an app upfront, those that buy an app may be hardcore gamers, or may have read or heard good reviews of the app.  But once a Chinese user installs an app and likes it, he/she will spend millions of dollars in the game in the form of in-app purchases. The freemium model is widely adopted by many app developers. According to smartphone analyst Distimo, 72% of Apple’s Store purchases come from in-app transactions.

Chinese are Heavy App Users

Chinese are heavy app users, 55% of the app users spend longer than 1 hour/ day.  While most countries have increased their time spent within the app from 300- 500% over the past year, China has jumped ahead by 870%. (Even more than US consumers)

Chinese App Market
Chinese App Market (Source: Ad China research)

China :Second largest App Economy

With its heavy app usage, China has moved up the ranks to become the world’s second largest App economy.  China now ranks second behind the US. But in terms of revenue generated from apps, China is the 8th, this is due to app piracy and copycat apps available on Jail broken handsets. This will now change soon with the Government body MIIT to now start regulating China’s app market and mobile application industry at large.

iOS Trends in China

Most of the Top Apps in the iTunes Store are from Western Developers.

As per the data from AppAnnie, Fruit Ninja-  Half Brick Studios is the #1 App in the App store followed by Google Maps. In fact 6 of top 10 apps are from Western developers. In the paid apps section 8 of the top 10 apps are from Western developers.

Gaming Apps Dominate

On the day of writing this article, 9 of the 10 paid apps and 7 of the 10 free apps fall in the “Games “category. Most of the Games category apps come from major players like Rovio and Half Brick Studios.  China is projected to have 192 million game players by the end of this year.

Android Market in China

The android market in China is fragmented with over 100 Android App Stores. Most of the handsets in China are shipped without the standard Google Play App store.  Most users download apps off these 3rd party app stores like Gfan, Hi Market or just install the apk files off the web. Due to lack of Google billing framework in China, most in app purchases happen through Telco billing or local payment gateways. The best way one can promote your App though advertising is to use an .apk file.

Even though 60% of the smartphone users are on Android, most app developers look to advertise their games on iOS. Android OS has very few takers.  Due to this and the abundant supply of android inventory, iOS commands a much higher premium CPC compared to Android.

Chinese App Market: Potential Challenges

In spite of the large market and huge revenue potential, as an app developer here are few things to watch out for.

  • Weak Intellectual Property laws in China. App piracy is prevalent.  Laws in China do not safeguard against innovative ideas.  As a solution if you’re a small app developer, consider partnering with larger companies.
  • Slow 3G speeds in China: GPRS speeds in China are much slower compared to other Western countries. Designers should be careful to maximize speed of the app by keeping app designs relatively simple.
  •  Experts suggest that Chinese users move quickly from one product to another and keep trying new apps,this holds both opportunities and challenges. Developers should make sure their apps are engaging and addictive.
  • Competitive Landscape:  The number of app developers in China is literally doubling each year with developers seeking to make quick bucks in this fast growing ecosystem.

Summary

The China market’s growth is unique –as there is growth both at the user app adoption and the shipments of smartdevices. With a well-crafted and executed entry strategy there is enormous amount of money on the table. The recent success of Rovio, Half Brick Studios and Outfit7 will enthuse more western developers to look to the east.

[Guest article contributed by Tyrone Dsouza. Tyrone works for Inmobi as an Account Strategist and has spent considerable amount of time in the China market to help train and build the China business.]

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