China's Internet User Base Is Growing Faster Than Mobile

In recent days, I've seen a couple more stories along the lines of "The Internet will be dominated by mobile, especially in emerging markets". MobHappy wrote a post on how this might spell doom for Microsoft (MSFT) if the PC loses influence, and Tomi Ahonen has focused more on mobile as a media channel.

Regular readers will know that I'm rather skeptical of the supposed shift from PC to mobile devices, or from "The Internet" to more general mobile platforms for delivery of content or communications.

I've just come across something rather fascinating, which I'd argue backs up my point of view. China's Ministry of the Information Industry and Internet Network Information Centre both release copious quantities of statistics and reports on the uptake of different technologies. In particular, they publish regular stats on mobile subscribers and Internet users.

At the last count (a month ago, at end-June 2008), there were 253m Internet users, and 601m mobile subscriptions.

But there's an interesting twist. According to the CNNIC's last full report published at the end of 2007, "According to the survey findings of CNNIC, each mobile phone subscriber has 1.33 mobile phone cards [SIMs / subscriptions] in average". (It's on page 35 of the report, or page 36 of the PDF). In other words, there are about 450m unique individuals using mobile phones in China - considerably less than the 600m suggests.

I haven't got data on how that 1.33 number is trending, but it seems like multiple phone/ SIM ownership in China is nothing new over the past year or two.

So I put together a quick spreadsheet on the growth in Internet users and Mobile users in China over the past few years, assuming that 1.33 number as constant. It makes interesting reading:

 

 

 

This shows that over the last year, the number of Internet users has grown at a faster rate than Mobile users - 43m vs 41m in the last 6 months, and 48m vs 34m during the 6 months before that. By contrast, in the second half of 2005, it was 8m vs 23m.

 

 

What appears to be happening is that Internet use in China is being catalysed by wider availability of broadband, and more affordable PCs. 214m out of the 253m users are broadband-based. At the same time, there is some mobile use of the Internet - 73m users of the total access on phones - but virtually all of these are PC-Internet users as well. (There's no double-counting of mobile broadband as China doesn't have 3G yet).

Looking at some of the charts on the CNNIC website, it looks like China's Internet use has hit a sudden point of inflection in the past 12 months, and is now on a steepening S-curve trajectory. Mobile is still growing extremely fast, but it doesn't seem to be accelerating at the same level.

This does not necessarily mean the same trends will be seen elsewhere in the developing world. It's worth noting that China is heavily pushing the roll out of fixed broadband - something which is much slower in markets like India and most of Africa. But it does suggest that China is extremely unlikely to have a future population of mobile-only Internet users.

One other interesting snippet from the CNNIC report - the average home Internet-connected PC has 2.7 users. This is worth remembering when considering all the stats on PC vs mobile handset shipments.

Comments

[ksmithdc:]

As China's wealth continues to grow, so shall their ability to purchase electronics. Now if only they can convince their commie government to stop censoring the internet. :)

2008 Aug 03 10:57 AM

[Paul Denli...:]

The mobile phone has grown faster in China, at least initially, because voice was the communications method of choice for many non-technical buyers. Everyone was familiar with the phone interface; only office workers and government workers were the first ones familiar with Windows. Over the past ten years, that base has expanded exponentially to the rest of the population, and there are Internet cafes to be found in every Chinese city and village. Now, DSL is being made more affordable for homes. Many Chinese parents, for example, would prefer that their child access the Internet from home than from Internet cafes, which have a bad reputation.
The comparison between mobile and Internet communications will soon be rendered moot as the two merge, as they have on the iPhone platform. It is estimated that there are about 800K cracked iPhones in use in China. Although the iPhone is a niche device now, it would be safe to say that Apple will come out with cheaper models in the future, and other companies, such as Nokia, will also abandon WAP as 3G gets rolled out in China. Eventually, mobile and the Internet will be one and the same, and the comparisons will be completely dated. If you come to Shanghai and Beijing and just walk around, you will see that that is already taking place.

2008 Aug 03 04:40 PM

[Pipo:]

Its time to buy some chinese value plays like Aluminum Corp of China

investinchinastocks.bl...

2008 Aug 03 07:54 PM