China Internet Report 2019
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www. scmp.com/china-internet-report Table of Contents China has emerged on the world stage with a brace of global tech companies that is innovative and competitive. And increasingly, their successes are being studied and replicated in other markets. This report, informed by on- the-ground reporting by the South China Morning Post and Abacus, offers insights into China's tech trailblazers and the big important trends shaping the world's biggest internet community. Special thanks to our contributors in alphabetical order: p54 p27 p27 p38 p89 p27 p101 CHEN Chi Dada Eric XU GONG Yu James PENG JIANG Fan Johnson YEH CEO Co-founder Managing CEO CEO President Head of Greater Xiaozhu Pinduoduo Partner iQiyi Pony.ai Tmall and China and SEA Duanzu GGV Taobao Riot Games p69 p54 p83 p96 p101 p69 p64 p64 Dr. LEE Kai-Fu LI Kaizhu Miffy CHEN Phil CHEN TAN Min-liang Dr. XU Li XU Ziyang YANG Chaobin CEO Co-founder General Chief CEO CEO CEO President of 5G Sinovation Hellobike Manager Decentralized Razer SenseTime ZTE Corp Product Line, Ventures Alibaba AI Labs Officer HTC Huawei 2 Table of Contents 1 CHINA AT A GLANCE 3 2 2018 LOOK BACK 12 3 TOP TRENDS FOR 2019 14 4 DEEP-DIVE BY SECTOR 25 3 At a Glance – China vs U.S. Internet Although China’s internet penetration rate is only 60%, its sheer scale means almost three times the number of internet users as the United States. In mobile payments, the gap is even wider: more people pay with their phones in China than there are people in the U.S. Internet Mobile Internet Mobile Payment report - internet - www.scmp.com/china Source: CNNIC, National Bureau of Statistics of China, US Census Bureau, we are social 4 China vs U.S. – Top Players for Key Verticals China and the U.S. operate in two separate technology ecosystems. IN CHINA report - internet - www.scmp.com/china IN U.S. Source: SCMP analysis 5 A Year of Chinese Tech IPOs 56 Chinese TMT* companies went public in 2018 with a total combined market capitalization of USD$222 billion as of Jun 10, 2019. Number of Chinese TMT* Company IPOs Over the Last 10 Years Major 2018 IPOs . produces and sells mobile phones, US-listed HK-listed smartphone software, set-top boxes and related report accessories worldwide. Market cap: US$35 billion. - . provides telecommunication tower internet construction, tower maintenance, ancillary - facilities management and other services. Market 28 cap: US$47 billion. www.scmp.com/china Potential 2019 IPOs . owns global short video hit app TikTok (500 million MAU worldwide) and news aggregator 13 28 Toutiao. Its most recent financing round in Oct 2018 valued the company at US$76 billion. 2 7 7 . 3 4 4 7 is a short video app with 300 million MAU 2 7 8 5 and is the primary competitor to TikTok. Latest 1 4 3 4 3 4 market valuation: US$25 billion. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Note: TMT = Technology, Media and Telecommunications 6 Source: 21Finance, company filings Top Chinese Internet Players (1 of 2) As of Jun 10, 2019 Market Cap/ Company CEO Selected Investors Listed on Valuation (US$ bn) 1 Tencent Holdings Pony MA IDG Capital, Lippo Group, Naspers, PCCW HKG: 700 418 DST Global, GGV Capital, Goldman Sachs, 2 Alibaba Group Daniel ZHANG NYSE: BABA 416 SoftBank, Temasek Holdings report 3 Ant Financial Eric JING Alibaba Group, NSSF, CDIB, CCB International Private 150 - Sequoia Capital China, SIG Asia Investments, internet 4 Toutiao (Bytedance) ZHANG Yiming Private 75 - Sina Weibo, Softbank Group Matrix Partners, Tiger Global Management, 5 Didi Chuxing CHENG Wei Private 56 Softbank Corp., Alibaba Group, General Atlantic, Hillhouse www.scmp.com/china 6 Meituan-Dianping WANG Xing Capital Group, Northern Light Venture Capital, HKG: 3690 45 Sequoia Capital China DST Global, Google, Sequoia Capital China, 7 JD.com Richard LIU NASDAQ: JD 40 Tiger Global Management, Walmart DFJ, Google, ePlanet Capital, Peninsula Capital, 8 Baidu Robin LI NASDAQ: BIDU 39 Integrity Partners CICC, COFCO, Arbor Ventures, BlackPine Private 9 Lufax Gregory D GIBB Private 39 Equity 10 NetEase DING Lei SoftBank Capital NASDAQ: NTES 34 Source: Crunchbase, CBinsights, company filings, avcj, caixin, reuters, hurun. As of Jun 10, 2019 7 Top Chinese Internet Players (2 of 2) As of Jun 10, 2019 Market Cap/ Company CEO Selected Investors Listed on Valuation (US$ bn) DST Global, Goldman Sachs, JP Morgan Chase & 11 Xiaomi LEI Jun HKG: 1810 30 Co., Morgan Stanley, Temasek Holdings IDG Capital, Sequoia Capital, Tencent Holdings, Pinduoduo Colin HUANG NASDAQ: PDD 23 12 Gaorong Capital, Lightspeed Capital report 13 Tencent Music PANG Kar Shun Spotify NTSE: TME 23 - internet - 14 WeBank GU Min Tencent Holdings Private 21 IDG Capital, SAIF Partners, Capital Today, SIIC 15 Ctrip Jane SUN NASDAQ: CTRP Investment 19 16 Kuaishou SU Hua Tencent Holdings Private www.scmp.com/china 18 17 Cainiao Logistics Daniel ZHANG GIC, Khazanah Nasional, Temasek Holdings Private 15 JD, Sequoia Capital China, CICC, COFCO, China 18 JD Digits CHEN Qiangsheng Private Taiping Insurance 15 Baidu, Xiaomi, Providence Equity Partners, 19 iQiyi GONG Yu NASDAQ: IQ Sequoia Capital 13 Coatue Management, Sequoia Capital China, 20 Bitmain Technologies WANG Haichao Private 12 IDG Capital Source: Crunchbase, CBinsights, company filings, avcj, caixin, reuters, hurun. As of Jun 10, 2019 8 Jan 2018 – Top Chinese Startup Exits (IPO) (Jan 2018 - Jun 2019) Jun 2019 Market Cap Company CEO Listed on Date of IPO Headquarter (US$bn) 1 Meituan-Dianping WANG Xing HKG: 3690 20/9/2018 Beijing 45 2 China Tower TONG JILU HKG: 788 8/8/2018 Beijing 44 3 Xiaomi LEI Jun HKG: 1810 9/7/2018 Beijing 30 report - 4 Pinduoduo Colin HUANG NASDAQ: PDD 26/7/2018 Shanghai 24 internet - 5 Tencent Music PANG Kar Shun NTSE: TME 12/12/2018 Shenzhen 23 6 iQiyi GONG Yu NASDAQ: IQ 29/3/2018 Beijing 13 www.scmp.com/china 7 Bilibili CHEN Rui NASDAQ: BILI 28/3/2018 Shanghai 5 8 Ping An Healthcare WANG Tao HKG: 1833 4/5/2018 Shanghai 5 9 Luckin Coffee QIAN Zhiya NASDAQ: LK 17/5/2019 Xiamen 4 10 Nio William LI NYSE: NIO 12/9/2018 Shanghai 3 Source: Crunchbase, ITjuzi, Zero2IPO 9 Most Active VC Firms in China in 2018 Number of Investments in 2018 report - internet - www.scmp.com/china Source: ITjuzi 10 BAT vs TMD The Chinese tech giants known as BAT (Baidu, Alibaba, Tencent) have built ecosystems while challengers TMD (Toutiao*, Meituan-Dianping, Didi) are strengthening their core businesses. Social & Mobility/ Autonomous Artificial Enterprise Ecommerce Content & Media Messaging Logistics Travel Fintech Gaming Cars Intelligence Services Baidu report - Alibaba internet - Tencent ByteDance www.scmp.com/china Meituan- Dianping Didi Note: Toutiao is the product of the Beijing-based company ByteDance 11 Source: SCMP analysis Table of Contents 1 CHINA AT A GLANCE 3 2 2018 LOOK BACK 12 3 TOP TRENDS FOR 2019 14 4 DEEP-DIVE BY SECTOR 25 12 Looking Back at 2018 We identified four overarching themes last year. Here’s why they’re still relevant today. Still in Recap of Last Year’s Trends 2019? • Baidu, Alibaba and Tencent have been stepping up their investments over the past few years, with more Chinese Internet Giants of these investments in overseas companies. 1 are Doing Everything • BAT invested in 252 companies in 2017; in 2018, that number rose to 280 with 42 of those being overseas investments. report - • The number of internet users in rural China increased by 13 million to 222 million in 2018, increasing Chinese Internet the penetration rate from 35% to 38%. internet 2 Empowers Rural Population - • Time spent online increased by 30% last year. • Social+ refers to the model where a business is anchored by a social pillar that drives user engagement 3 Chinese Internet Companies and growth. Embrace ‘Social+’ • Tech giants, including Alipay and JD.com, are extending their Social+ plans, launching group-buy functions within their apps. www.scmp.com/china • Fintech, gaming, and content-driven internet companies continue to face tight restrictions by government authorities. • The number of P2P online lenders has halved within a year to 1,027 in 1Q 2019. • The Chinese government suspended licensing for new games for 9 months last year, causing the gaming Government is industry to experience its slowest revenue growth in over a decade. 4 the Visible Hand • In Jan 2018, the Cyberspace Administration of China scrubbed the web of more than 7 million items, deleting more than 9,300 smartphone apps to screen out information deemed inappropriate or harmful. • President Xi Jinping urged China to go all in on scientific self-reliance and make breakthroughs in core technologies. Source: ITJuzi, CNNIC, China National Bureau of Statistics, QuestMobile, 01caijing.com 13 Table of Contents 1 CHINA AT A GLANCE 3 2 2018 LOOK BACK 12 3 TOP TRENDS FOR 2019 14 4 DEEP-DIVE BY SECTOR 25 14 Four Top Trends for 2019 1 2 China’s ‘Copycat’ Tech Industry is China is Racing report Now Being Ahead With 5G - internet Copied - 3 4 www.scmp.com/china China is Using AI Social Credit Is on a Massive Becoming a Scale Reality in China 15 1 China’s ‘Copycat’ Tech Industry is Now Being Copied Global technology companies are now replicating successful concepts from their Chinese counterparts, from the Super App to social+ ecommerce to short video. The Super App WeChat Alipay Meituan Facebook LINE Go-Jek 1bn+ MAU 1bn+ MAU 289mn MAU 1bn+ MAU 220mn MAU 27mn MAU report - internet - www.scmp.com/china Facebook’s standalone LINE started as a messaging Go-Jek started as a China has pioneered the “Super App,” a one-stop shop for messaging app now has platform and now offers motorcycle ride-hailing multiple features including services, including a digital service but has since services from shopping to ride hailing to money transfers chatbots, games and mobile wallet, news streaming, expanded its offering to to flight bookings.