Friday, July 25, 2008

Number of Online Users in China Surpasses U.S.

There were 253 million Chinese internet users as of June 30, compared with 223.1 million in the United States. The web is widely used for business, shopping, and education, but above all to receive news that is often censored by the authorities. Strict control by Beijing, which arrests those who criticize the government and blocks unwelcome news. The new estimate of Internet users from the information center, which operates under the government-controlled Chinese Academy of Sciences, only represents about 19 percent of people in China, underscoring the potential for growth...

With 253 million internet users registered at the end of June, China has surpassed the United States as the largest online community in the world, as the China Internet Network Information Centre announced yesterday. But censorship of "unwelcome" news is also growing.

Since June 30, 2007, there have been 91 million new users, a growth of 56%. 84.6% of these, or 214 million people, have high speed broadband connections. There are 12.19 million websites registered with the domain "cn", for "China".

The increase is in part due to the rapidity and relative freedom of information on the internet, both on some websites and in the forums. Events like the snowstorms in January and February, the earthquake in Sichuan in May, and the voyage of the Olympic torch were followed by millions of people through the internet, where they received news that was often not provided by the rigidly controlled Chinese media: 81.5% of Internet users, or 206 million people, read news online, compared to 71% in the United States and 67.1% in South Korea.

Liu Bing, director of research and development at the center, observes that the internet is becoming "the most influential mainstream medium with the biggest development potential", and emphasizes the low cost and the increasing demand in the countryside, and also the use of the internet for entertainment, for example to listen to music. He expects 285 million users by the end of 2008. The strong growth is significant in part because Beijing is encouraging the use of the internet for business and education purposes, but is trying to block access to sites that it considers "subversive" (these are often the sites that deal with human rights, and many foreign sites) or that provide pornography. Dozens of people have been arrested for posting to the internet articles or e-mails that are critical of the government, or "dangerous to national security". In March, access was blocked to the photos of the protests in Tibet posted on YouTube.

The internet is also used to exchange information and opinions, through forums, on issues of current affairs that the media and even websites themselves largely ignore: like episodes of misgovernment and injustice, which have repeatedly provoked fiery protests by tens of thousands of internet users in a few days.

Online shopping is also very widespread: in the first quarter of 2008, the Chinese website had a profit of 265 million yuan (26.5 million euros), an increase of 87%. During that period, Baidu had a 63 percent share of China's search engine market, while Google had about 26 percent, with Yahoo trailing far behind, according to iResearch, a market research firm based in Beijing. And Tencent, a popular social networking, gaming and leisure site, now has a stock market value of $15 billion, making it one of the world's wealthiest Internet companies. By comparison, is valued at about $30 billion.

"The Internet market is the fastest-growing consumer market sector in China," said Richard Ji, an Internet analyst at Morgan Stanley. "And only 19 percent of Chinese people have access to the Internet. We are still far from saturation.

So the next three to five years, we're still going to see hyper-growth in this market."

High Price of Gas Means More People Shop Online

Depending on your perspective, online sales are up either despite...or....because of the economic slowdown.

With gas prices continuing to climb, a growing number of shoppers are deciding to skip car trips to the mall in favor of online merchants. Even as many brick-and-mortar stores are struggling, 11% of US consumers surveyed by Nielsen in June 2008 said they were shopping more on the Web as a result of gas prices.

"E-commerce is a bright spot," said Jeffrey Grau, senior analyst at eMarketer. "While retail store growth is in the middle-low single digits, e-commerce is still growing at least in the mid to high teens."

"With gas being such an issue, we know that mall traffic is down more than off-mall traffic," said Mike Boylson, CMO of JCPenney, in a July 2008 New York Times article. Mr. Boylson said J.C. Penney had an 8.7% increase in Internet sales in Q1 2008, compared with a 7.4% decrease in sales at stores open at least one year. The Times also reported that Gap had an 11% decline in same-store sales in Q1 2008, but a 21% increase in online sales.

The effect of gas prices on consumer behavior has been building for a while. Some 13% of adult consumers in the US surveyed in January by Vertis Communications said they were buying more online.

Over one-half of respondents to an April 2008 Piper Jaffray study selected rising gas prices as an incentive to increase online buying, while slightly less than one-half (48%) cited lower prices as a reason for making Web purchases.

Another April survey by iCongo revealed that high gasoline prices were an incentive for 33% of shoppers to purchase more online.

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