Spotlight on China

Succeed in digital

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Digital media is revolutionizing M&E in China. An improving network infrastructure, the rapid adoption of connected devices and the growth of digital content is driving fundamental shifts in how the Chinese — youth, in particular — consume content.

With competition in the digital space so intense, M&E companies that simply offer the same products and services as their competitors are unlikely to thrive.

China has the largest internet population in the world. It had 350 million online video viewers as of June 20121. More than half of the country’s online users use some form of social media2.

As China’s economy and per capita income grow, consumer spending on digital consumption is expected to rise dramatically. The more disposable income a country’s citizens have, the more they spend on mobile data consumption – much of which is driven by entertainment content.

Annual mobile data Average Revenue Per User (ARPU) and per capita GDP (2012e)

Annual mobile data Average Revenue Per User (ARPU) and per capita GDP (2012e)

Source: “Real GDP Per Capita,” Global Insight, accessed 31 January 2012; “Mobile Voice and Data Forecast: 2011–16,” Ovum, January 2012; EY analysis.

China’s position on the chart will continue to move up and to the right toward economies such as France, Australia and the US, which spend upwards of US$200 per year, per wireless subscriber, for mobile data.

Advertisers are particularly eager to reach these digital adopters. By 2015, online advertising will comprise just under a third of the total advertising market2. For content companies, digital offers new monetization opportunities.

However, with rapid growth also comes competition. As such, content providers need to differentiate their content and distributors need to focus on acquiring customers and finding new ways to monetize them.

For M&E companies seeking to penetrate Chinese markets, a digital strategy is a must. Elements for success in digital include:

  • Selecting partners that support digital distribution objectives. Content providers must choose their distribution partners carefully. They must consider several factors, such as the distributor’s brand, its ability to provide useful customer data and its history of product and service innovation.
  • Using social media to form deeper customer relationships. As social media becomes more popular, M&E companies need to better understand how Chinese consumers use it and how they can improve its use as a marketing tool.
  • Fostering a culture of innovation. With competition in the digital space so intense, M&E companies that simply offer the same products and services as their competitors are unlikely to thrive. M&E companies must create a culture of constant innovation to stay ahead in the competitive race.
  • Anticipating and adapting to changing mobile consumption habits. As Chinese consumers go mobile, M&E companies must create (or adapt) their products and services to conform to the evolving needs and habits of mobile consumers. Chinese gaming companies are segmenting their target audiences and studying consumer preferences to balance their investments among mobile, web and PC-based games.
  • Using data to develop insight into consumer behavior. M&E companies can now capture and analyze previously inconceivable amounts of data each day. Analyzing data helps move M&E companies from “we think” to “we know” by generating fact-based and objective insights.
  • Experimenting with monetization models. Digital companies want to diversify their revenue sources beyond advertising to include direct consumer payments. As such, they are experimenting with several monetization models, such as creating “VIP” packages that provide value-added products and services for which consumers are willing to pay.

1 Tobi Elkin, “Online video viewers in China: a user portrait,” eMarketer, October 2012.

2 “Social network penetration in select countries and regions, Q2 2012,” eMarketer citing InSites Consulting, 24 September 2012.

3 “Global Forecast Model: 2000-2017,” MAGNAGLOBAL, June 2012.