As local market gets tough, world is China startups' oyster

Presence of domestic giants and severe competition prompt enterprising firms to push their luck abroad

Severe competition and presence of local giants in the domestic market has pushed smaller Chinese app developers to chase success in overseas markets.

Some of them have tasted success already. For instance, Musical.ly, an online social networking app based on music videos, has drawn media attention in China recently, after reports appeared about its popularity among young people overseas, especially in the United States.

Louis Yang, co-founder and co-CEO of Musical.ly Inc, said the app, which was launched in 2014, has almost 15 million active daily users and more than 150 million registered users in all.

More than 35 percent of Musical.ly's users are from the US, the single largest national market for the startup. Europe collectively accounts for almost 40 percent of users.

Global investors have poured $150 million into it, including over $120 million in the latest C round of funding in May 2016.

"We'll focus on overseas markets. After the US and Europe, we'll give more attention to the emerging internet markets such as South America, Southeast Asia and India. The potential for growth in those emerging markets is huge," he said.

Asked about the company's strategy in China, Zhu Zinan, vice-president of Musical.ly, said the company hasn't yet decided whether or not it will launch in the home market.

China had 725 million mobile internet users in 2016, according to a report by the iiMedia Research, a global mobile internet firm focusing on third-party data mining and analysis.

Globally, there were 5.2 million smartphone apps in 2016, 19.1 percent more than that the previous year. In China, the most popular apps are used for social communication, news, information, videos and live streaming.

Xue Yongfeng, a senior analyst of the internet industry at Beijing-based consultancy Analysys, said although Chinese app developers have accumulated rich technical and market experience after years of development, a mature market as it exists today has many powerful players, squeezing the room for startups to grow and thrive.

For example, BAT - it is an acronym for Baidu, Alibaba and Tencent, the three biggest Chinese internet giants - owns the country's largest shopping and payment apps.

There are also dominant apps in weather, gaming, taxi-hailing, video streaming, image processing and video sharing.

"Some app developers tend to look for a 'blue ocean' overseas, which is created by uneven development of the global internet market, where they could mix China-based experience with local features to become successful," he said.

Agreed Edward Tse, founder and CEO of Gao Feng Advisory Co, a global strategy and management consultant. He said that big companies such as BAT have dominated China's internet market and penetrated almost all areas of the internet ecosystem, which means startups in China would face direct competition from the big boys.

However, China's recent rapid economic growth has spawned many commonly used internet innovations that are not seen in other markets. That spells great opportunities for startups, industry observers said.

"Some entrepreneurs will focus on niche markets overseas, some will target countries where the internet infrastructure and market are not yet mature," he said. "Some will take China's latest innovations and business models overseas. For example, the bicycle-sharing service has been expanded to Singapore, the UK and Silicon Valley."

The SHAREit app, which enables users to share files between multiple operating systems - Android, iOS, Mac, Windows, WinPhone and PC - with no need for conversion, is another example.

The app could send a wireless signal to the recipient so the files can be shared without an internet connection, which makes it very popular in countries where the internet infrastructure is not yet mature and the expense of mobile internet is still unaffordable for many people.

Qiu Jun, chief operating officer of the Beijing-based developer SHAREit Technologies Co, said during the 2nd ChIndia TMT Dialogue on March 16 in Beijing that the app has now more than 1 billion global users. The number of monthly active users is about 380 million on average.

The company's growth mainly comes from India and Indonesia, where the app is a must-have, and more than 80 percent of its internet users are using it. In India alone, the number of users is more than 250 million.

Qiu says that when many Chinese companies go to India, they would simply bring the Chinese business model there, but he would urge them to localize their products based on local users' habits and cultural traits. SHAREit has even released some reports on the India market, in terms of the smartphone segment, religion, culture and users' preferences, to help Chinese companies keen to enter the country.

"Now more companies understand that when you enter India or the Middle East, they need to consider tailor-made products," he said.

Tse said many Chinese companies that have achieved success overseas owe it to their developers who have not only Chinese DNA but overseas background or work experience. This combination of factors has helped them to understand the values that overseas users hold, and design products that would connect to them.

In late 2014, Adham Baodunnov, who belongs to the Uygur ethnic group in China and also speaks Turkish, founded the Gundem news platform, an online news aggregator that has more than 10 million users now. Gundem boasts about 1.2 million daily active users in Turkey. The number of users has been growing ever since.

Baodunnov said success did not come easy. First, since 2013, he had tried to launch several Chinese internet innovations like group-buying and takeout apps in Turkey. But such attempts did not yield the desired success.

Undaunted, he launched the online news aggregator app, a niche that has a mature business model in China. Bingo! Gundem clicked in Turkey.

He said two reasons led him to Turkey. First, the culture and language of Turkey have certain similarities to those of the Uygur ethnic group. Second, he had researched many markets such as Japan, the United States, Kazakhstan and Uzbekistan, and found that Turkey's internet market has great potential, as it is open and ready to accept new things.

He said China has many advanced internet technologies, various kinds of online innovations and successful business models, which people in many parts of the world are not familiar with.

This advantage could be leveraged to develop internet-based businesses in other countries, he said.

Ouyang Shijia contributed to this story.

chenyingqun@chinadaily.com.cn