China-India Internet Market Comparative Report
China and India—two Asian super powers and the most populous countries in the world. For a long time, they’ve been naturally considered competitors and the battle between the “dragon and the elephant” has long been a topic of international discussion. In reality, this competition has been lopsided for quite some time, as China’s GDP is five times larger than India’s. However, in 2015 India’s growth rate surpassed China’s for the first time to become a rare bright spot in the world economy. The “China vs. India” discussion is once again heating up.
As an important component of future economic growth, China and India are both focused on developing their internet industries. Not only are the governments of both countries actively promoting innovation and entrepreneurship, but both have put forward internet development plans—“Digital India” in India and “Internet+” in China. The internet industry might be the area in which the competition between China and India is the narrowest. Because of this, both sides are excited by the competition.
What is the state of China and India’s internet development? Which country will be the global leader in the future? Can we predict India’s internet market development path from China’s internet development experience? The current report will attempt to provide a comprehensive comparison of the internet markets of China and India from the perspective of internet user bases, markets, culture and policy to analyze the current state and future development challenges of the internet in China and India.
Ⅰ. Current Situation: China’s Internet Development Leads India Overall
To determine whether a particular country is a developed country in terms of the internet, you can look at the question from two different angles: 1) Does a country have an extensive internet consumer market and spending power? 2) Does a country have world-class internet companies? From these two perspectives, China is far ahead of India at the present stage.
1.China: World’s Largest Internet Market
As two hugely populous countries, the massive internet user bases of China and India undoubtedly serve as the foundations for their internet development and determines how much space for growth the internet companies in their respective countries have. But even though the countries have similar populations, China and India’s internet markets have developed at a vastly different pace. According to the State of Broadband 2016 report published by the UN Broadband Commission for Sustainable Development on September 15, China has the world’s largest internet market with 721 million users, while India has overtaken the United States to become the world's second largest Internet market, with 333 million users. In terms of mobile internet users, according to online statistics portal Statista, China’s mobile internet penetration rate is 44.91% as of 2016. If you estimate China’s population at 1.4 billion people, that means that China has 629 million mobile internet users. India on the other hand has a mobile internet penetration rate of 24.33%, or 316 million people (total population 1.3 billion). When you compare the two countries, India possesses roughly half the mobile internet users as China.
As a result of this huge and rapidly developing market, China’s internet companies were able to rise quickly and become major players.
2.Chinese Internet Companies Climb to Top of Global Rankings
According to Statista’s data, as of May 2016, China had seven of the top 19 internet companies in the world by market value, compared to 11 in the U.S, one in Japan and zero in India. According to Cheetah Mobile’s Big Data analysis platform libra, at the end of 2015, China possessed eight of the top 14 mobile internet companies in terms of active users, as compared to four in the U.S., one in South Korea and one in Russia (if you include Cheetah Mobile then China has nine of the top 15 companies). From these two perspectives, China has already become a great internet power.
The rise of Chinese companies has not only been dependent on the domestic market. Since the beginning of 2015, Chinese mobile internet companies have been expanding globally. Countless companies, from Alibaba, Tencent and Baidu to Cheetah Mobile, YY Inc. and Meitu, as well as numerous small-scale internet companies and app developers, have been heavily focused on expanding overseas.
Aliexpress, the overseas version of Alibaba’s flagship e-commerce platform Taobao, has already made major inroads into overseas markets, including Russia where it is the number one e-commerce service.
Cheetah Mobile was one of the first Chinese internet companies to expand overseas, with more than 3.1 billion app downloads globally and 623 million MAUs, among which 80% are in developed markets in Europe and America. Cheetah Mobile’s overseas live streaming app live.me has infiltrated mainstream American youth culture, while surpassing popular American live steaming app Periscope in the process.
India’s burgeoning internet companies possess a golden opportunity for overseas expansion due to the status of English as India’s de facto national language and the huge Indian diaspora, but despite these natural advantages only a handful of Indian companies have achieved overseas success, including online and mobile restaurant directory Zomato and mobile advertising company InMobi. At the current stage, India’s internet companies are mostly still in the local development stage.
3.Chinese Smartphones Sold All Over the Globe
Chinese smartphone manufacturers are among the top companies in the world in terms of global shipments. According to Bloomberg, during the four years from 2012 to 2015, Chinese branded smartphone shipments rose much more rapidly than established overseas brands like Apple and Samsung. (see below graph)
According to data compiled by market research organization Gartner, Chinese brands accounted for three of the top five smartphone brands by global shipments in the second quarter of 2016, including Huawei, Oppo and Xiaomi.
These impressive results aren’t simply due to the low price of Chinese phones and China’s massive consumer base. In fact, Chinese smartphone brands have already begun shifting towards the high-end market. According to a report by China Central Television (CCTV), shipments of Huawei, OPPO and Vivo account for 40% of the total $500 and up smartphone market as they compete directly with Apple’s iPhone and Samsung’s Galaxy series. Moreover, Chinese smartphone brands have already established footholds in overseas markets. A large portion of Huawei, ZTE, TCL and Lenovo’s sales come from overseas, including approximately 40% for Huawei and 60% for ZTE. ZTE is the second ranked phone brand in Russia with a 9.4% market share, fourth in Europe and South Africa, and fifth in Australia and Mexico.
Ⅱ. Future Outlook: Will China Maintain Its Lead or Will India Catch Up?
The huge strides taken by China’s internet market and enterprises has really only been in the last five years. This can be seen by comparing the Chinese and American markets. Ten years ago, and even five years ago, China’s internet companies, both in terms of product concept and business model, imitated American companies. But recently the innovation and technology capabilities of Chinese companies are on track to overtake the U.S. Will a similar situation happen with India and China? Over the next five years, will the Chinese internet market and internet companies maintain their leading position, or will India eventually catch up? The following analysis might provide the answer.
1.India: World’s Fastest Growing Internet Market
In terms of growth potential, India’s internet user numbers could still catch up. According to the G20 National Internet Development Report, India’s internet user base grew by 51.9% in 2015, the fastest growth rate of all member states. Conversely, growth in China’s internet user base has slowed significantly as China reaches the tail end of its so-called demographic dividend.
2.Will the Next Internet Giant Come from India?
American venture capitalist Mary Meeker wrote in her 2015 Internet Trends Report that India’s 2014 internet penetration rate was the equivalent of China in 2008 and America in 1996. From 1990 to 1996, America produced internet giants Netscape, Yahoo, Amazon and eBay, while China’s rapid internet development stage between 1999 and 2008 produced Tencent, Alibaba, JD.com and other internet powerhouses. If India is able to achieve the same levels of growth, then over the next five years, its internet market will experience massive development with the possibility that a group of world-class internet giants will emerge.
Meeker’s prediction is not without logic. India’s internet development has skipped over the PC development stage and jumped right into the mobile internet era. Because of this, many enterprises don’t have baggage from the PC era, especially in the mobile space. Instead, it’s easier for them to compete in the mobile space with lots of space to grow.
3.India Possesses Numerous Advantages
India’s internet market has numerous advantages, including a deep talent pool, policy support and a degree of market openness that will benefit its rapid development in the later stages.
1)IT Talent Pool
Although India’s illiteracy rate is far higher than China’s, India has a more advanced academic education system. According to a report by global management consulting firm McKinsey, every year India has 1.5 times as many college graduates as China. Moreover, India is rich in IT talent. This is evident in the number of ethnic Indians in American internet companies compared to the number of ethnic Chinese. In recent years, Indians have even become executives of major American tech companies, including Microsoft CEO Satya Nadella and Google CEO Sundar Pichai. Moreover, four of Google’s 13 board members are of Indian descent. In 2012 ethnic Indians accounted for 33.2% of tech company executives in Silicon Valley.
According to a 2014 report published by LinkedIn, five of the top 10 cities with the most IT talent can be found in India.
Compared to China, the Indian government has a relatively open attitude towards foreign internet companies. There are very few licensing requirements. Even sensitive industries like telecommunications are open. In March 2016, India approved a law allowing 100% direct investment in a platform-style e-commerce companies, but it still limits foreign investment in self-operated e-commerce companies. Compare this situation to China where companies like Google and Facebook are still prohibited from entering the market.
In terms of developing the internet and encouraging innovation and entrepreneurship, the Chinese and Indian governments are both working very hard. In March 2015 Chinese Premier Li Keqiang’s Government Work Report unveiled China’s “Internet+” action plan and called for “mass innovation and popular entrepreneurship.” In the same year, the Indian Prime Minister Narenda Modi unveiled multiple new policies to encourage the development of the internet as well as startups, including “Digital India,” “Startup India,” “Skill India” and the “India Innovation Fund.” In terms of goals and concrete measures, China and India’s policies are quite similar. Both countries are providing strong support for the development of the internet industry in the form of capital and tax relief, among other measures.
Ⅲ. China and India’s Mobile Markets: Different Stages of Development
By multiple metrics, it’s not completely unreasonable to think that India, along with the U.S. and China will become the three most developed internet nations in the world over the next five to ten years, but as a relative latecomer, what can India learn from China’s experience? Can we predict India’s development prospects based on China’s development path?
1.China & India’s Top 100 Apps
China’s mobile app market is very unique. Facebook, Google, eBay and Amazon have all tried to develop the Chinese market, but every one of them has failed. All of the apps in China’s top 100 list are published by Chinese publishers. This is not simply a result of strict local regulations. It’s more a matter of foreign companies having trouble adapting to China’s unique consumer culture and fierce competitive environment.
India is also in the middle of a mobile startup wave. The difference between India and China is that India skipped over the PC era, so there are no locally cultivated internet giants like Alibaba, Baidu or Tencent, which means mobile internet startups don’t face as much competitive pressure as companies in China. But as a relatively open market, India’s mobile startups face comparatively fierce competition from foreign companies.
We can see from Cheetah Mobile’s Big Data platform libra that the majority of India’s mobile app market is controlled by foreign app publishers, mainly American and Chinese publishers. Of India’s top 100 apps, only 29 are published by local companies. This shows that U.S. and Chinese publishers look at India as a land of opportunity. In the future, the competitive environment in India’s mobile market will become even fiercer than China. (For India’s Android Top 100 App list, see appendix II)
2.Regional App Comparison: Can India Duplicate China’s Miracle by Following China’s Development Path?
India’s communication, social networking and tool app markets are dominated by foreign companies, but local publishers perform very well in the e-commerce and lifestyle markets. Local products equivalent to Chinese services such as Tmall, Taobao, JD.com, Ctrip, Didi, Eleme, Meituan and 58.com can all be found in India. The situation is similar to the way Chinese companies originally copied American business models. At the same time, multiple U.S. internet companies such as Amazon and Uber have set their sights on India as they attempt to redeem themselves after failing in China. By examining China’s development path in these areas, we’re able to roughly predict the path of India’s mobile internet market.
1)E-Commerce: Mature China Market, Precarious India Market
China has a relatively mature e-commerce market. Over the past 10 years, China has felt its way through the development of the market and even welcomed in foreign investors. But eBay pulled out after encountering fierce pushback from Alibaba, while Amazon has achieved progress in China very slowly. The rapid increase in the purchasing power of China’s population created local e-commerce giants like Taobao and JD.com. The structures of the platform and synthesized e-commerce markets are essentially set, while discount and second-hand vertical markets are rising to satisfy the ever-expanding needs of Chinese consumers.
India’s 1.3 billion people are a very attractive target for the e-commerce industry. According to market consultancy firm RedSeer Consulting, annual online sales in India are expected to reach $80-$100 billion by 2020. India is currently recording about $13 billion in annual online sales.
However, Cheetah Global Lab believes that the Indian market isn’t as promising as some might believe. Although it has opportunities, it also has its risks.
Indian Consumer Purchasing Power is Still Limited
India’s recent Diwali festival is the biggest shopping season of the year for India’s largest e-commerce companies. Diwali accounts for nearly 1/3 of all annual online sales in India, similar to China’s November 11 “Singles Day” holiday. But if you compare the total amount that consumers spend on both holidays, it is clear that the gap between India and China is still quite large.
During Singles Day 2015, sales on Taobao alone reached ¥91.2 billion (approximately $13.6 billion), while according to RedSeer Consulting, consumers in India only spent $1.7 billion on e-commerce platforms for Diwali. In other words, Chinese consumers spent 8 times more on Taobao during Singles Day that Indians spent on all e-commerce platforms combined for Diwali.
Within the context of limited consumer purchasing power, during the last few years, India’s e-commerce platforms have consistently burned capital on discounts to retain customers. India’s e-commerce industry is stuck in this pitfall with no way of pulling itself out at present. Although many Chinese e-commerce companies such as JD.com burn through capital, they spend it on building up their logistics or on capital improvements. The way Indian companies are burning through capital to offer discounts in an effort to attract customers foreshadowed market integration in China. Once investors are no longer willing to invest in a company anymore, that company either withdraws from the market or is swallowed up by another company.
Indian E-Commerce Platforms Won’t Necessarily Be Able to Copy China’s Success
Overseas e-commerce brand Amazon has launched a fierce offensive in India. A June 2016 Nielsen survey showed that Amazon is the most well-liked e-commerce brand in India, followed by Flipkart.
According to statistics compiled by libra, the daily active penetration rate of Amazon and Flipkart jumped sharply during the Diwali season, and as of October 23, their daily active users (DAUs) were nearly identical.
For Flipkart and Snapdeal, 2016 has been an especially difficult year. As India’s largest domestic e-commerce company, Flipkart’s valuation was adjusted downward multiple times. Although it was recently adjusted upward, the company is still only valued at $12 billion, far lower than last year when it was valued at $15.2 billion. So whether Flipkart and Snapdeal will be able to imitate their Chinese peers and beat back foreign competition is still uncertain.
2)Car Hailing Apps: Will Uber Be Able to Regain the Face it Lost in China?
Uber China’s announcement in August 2016 that it had been acquired by local rival Didi Chuxing effectively ended its aspirations in China. Since then, Uber’s active user base in China has steadily declined. Didi has already acquired all of its primary competitors in the market, with only a few verticals such as ride share and high-end private car apps still grabbing market share.
Following its withdrawal from the Chinese market, Uber has set its strategic sights on India.
Currently in India, Uber isn’t too far behind Ola, India’s largest local company. Ola only has a 40% lead on Uber in terms of WAUs. Uber has adopted a series of measures in India to adapt to the unique market, such as not requiring an app to book a car and installing “Help” buttons in vehicles to protect women. This is the first market that Uber has taken these measures. Additionally, in light of India’s complex language situation, Uber offers multilingual service. But in India, Uber is bound to face a tough battle. Ola has already secured $1.2 billion in financing, it is familiar with the local market, is well liked by users and currently covers three times as many cities as Uber. Also, Ola allows users to hail all types of vehicles, from three-wheeled “Tuk Tuk”-style vehicles to high-end luxury cars. The number of orders for its lowest level “Micro” vehicles are higher than all of Ubers orders combined. According to estimates, Uber is burning though more than 10 million U.S. dollars per month in India. Uber wants to bounce back in the Indian market, but it won’t be that easy. Cheetah Global Lab believes that Uber might be destined to fail in India the same way it did in China.
3)Take-Out & Food Delivery Apps: Catching Up with China, Indian Market to Reshuffle in the Next Couple Years
For cultural reasons, Indians are accustomed to hiring people to go on errands and deliver things to them. Over the last three years, more than 400 take-out services have emerged, raising a total of $120 million in funding. The market is already excessively inflated, similar to the development history of China’s own O2O delivery market. But in China, following a fierce battle, only three main competitors remain. Of all the numerous brands that appeared in the beginning, such as Taobao’s Koubei Waimia, German brand Delivery Hero ,Daojia, they all either retreated from the Chinese market altogether, were taken over by their competitors or they are just scraping by. It’s very likely that within one or two years a similar situation will occur in India.
India’s food delivery enterprises seem to have more globalized ambitions than Chinese companies. India’s number one app Zomato was launched in the Indian market in 2010. In 2012 it made its first foray overseas and by 2013 it have entered the Middle East, South Africa, South Asia and North America; in 2014 it entered Europe, with total service to 19 countries; in early 2015 it acquired Urbanspoon, America’s second-largest restaurant directory service, making it a direct competitor with Yelp. By this point, it had operations in 22 countries. According to statistics provided by libra, Indonesia is Zomato’s largest overseas market, and it possesses a substantial user base in America as well. Possibly because the Chinese market has just stabilized, China’s three largest food delivery services still don’t have plans to expand overseas.
4)News Apps: India’s Huge Market Potential, Fierce Fighting Between Chinese and Indian Publishers
In the last two years, algorithm-based personalized recommendation apps have achieved great success in China. Three of the top five news apps in China are personalized recommendation apps, namely TouTiao.com, Tencent’s Tiantian Kuaibao and Yidian Zixun.
India’s news apps lag far behind China’s in terms of active penetration rate and Average Weekly Openings per Capita, India’s rapidly growing mobile internet population, combined with the fact that India’s number one news app Dailyhunt features algorithm-based recommendations, signifies a huge market opportunity.
Chinese app publishers aren’t passing up the opportunity to enter India’s mobile news app market. There are currently two apps in India’s top 20 that have connections to Chinese companies, including News Republic, acquired by Cheetah Mobile, and UC News, developed by UCWeb. Two other apps with Chinese connections that didn’t make it into top 20 but that are highly ranked are NewsDog and Hotoday. Many of the apps feature personalized news recommendations, but they also possess different resource advantages. Recently, popular Chinese news app TouTiao.com invested in Dailyhunt with the belief that the Indian news app market will develop rapidly in the near future, personalized news recommendation apps will become the market mainstream, and Chinese and Indian app publishers will battle intensely over this space.
Ⅳ. India: The Next China for Chinese Companies
Due to the rapidly growing internet market, India has already become a popular destination for foreign investors. Chinese companies that are actively seeking to invest in foreign markets can’t pass up the Indian “gold mine.” The majority of Chinese companies that are expanding overseas consider India to be one of the most important overseas markets. This logic is very clear: take a successful business model from a country with a large population and duplicate it in another country with a large population—use a total market of 2.7 billion people to achieve their next stage of growth. At the same time, the introduction of these companies will accelerate India’s internet development.
China’s internet company operations in India take three forms: 1) direct operations, such as Cheetah Mobile, Lenovo’s SHARit, and Xiaomi; 2) invest in local market leaders and thus enter the Indian market through capital investment like Alibaba, Ctrip, Tencent, Fosun and Didi; and 3) incubate and invest in early-to-mid stage startups, using the "Chinese experience + India Innovation" model to help these startups with capital, technologies and other resources.
1.Mobile App Publishers: Breaking the American Monopoly
Among the Chinese companies that have entered the Chinese market, mobile app publishers have performed especially well, breaking into the Indian app market that was for the most part monopolized by American companies. Chinese app publishers have achieved huge success in India by focusing on untapped markets and leveraging India’s unique circumstances, particularly India’s poor internet infrastructure and the prevalence of low-end mobile phones to develop device-to-device file sharing apps (e.g. SHAREit), junk removal and speed boosting apps (e.g. Clean Master) and high speed mobile browsers (e.g. UC Browser).
2.Chinese Mobile Phone Brands Marching into India
Mobile phone consumers in India seek low-priced smartphones with a high performance to price ratio due to the economic situation and consumption patterns in the country. Because of this, Apple’s smartphone shipments in India have consistently been low. According to international market research firm IDC, Apple has a 2.4% market share in India, which provides a huge opportunity for China’s phone manufacturers. They will increasingly focus on India as an important market.
According to libra, Lenovo is the third largest mobile phone brand（Lenovo+Motorola） in India in terms of inventory while Xiaomi is in the top 10.
Note: data source: libra; rankings based on phone active users; data from 9/26/2016 to 10/3/2016; India’s mobile phone active market share ratio=brand WAUs/India Android market total WAUs.
IDC’s data shows that Chinese smartphone shipments to India are increasing. Vivo, OPPO and Xiaomi each shipped 1 million units to India in the second quarter of 2016. This had previously only been achieved by Lenovo. Xiaomi’s shipments to India increased 72% in the second quarter, with the company’s low-end Redmi 3 performing especially well. IDC points out that the Redmi 3 is the best-selling phone online in India and it’s also Xiaomi’s best-selling phone in the quarter. By comparison, shipments by transnational and local Indian mobile phone manufacturers dropped on a year-on-year basis in the same quarter.
3.Chinese Enterprises Investing in India’s Future Stars
There are numerous examples of Chinese companies investing in India. For example, Didi invested $30 million in Indian ride hailing service Ola and Alibaba has increased its investment in India by investing $680 million in Indian e-commerce service PayTM. Chinese internet companies have been on a buying spree in India since 2015.
Ⅴ. India: What Barriers Does it Still Need to Overcome?
Although the prospects for India’s internet market are very bright, India is still facing many problems which will be the greatest hindrance to India’s internet market catching up with China.
1.Underdeveloped Network Infrastructure
India are in the middle to lower end of the spectrum in terms of average connection speeds globally. South Korea has the world’s fastest average connection speed at 27Mbps. India has a speed of 2.8Mbs, the U.S. 14.2Mbps and Japan 17Mbps. For example, it only takes three minutes to download a high-definition movie in Korea while in India it takes 30 minutes. Most of India still has dial-up internet while most of its 300 million mobile users still covered by 2G service.
2.Expensive Data Fees
The Indian government permits foreign investment in the telecommunications industry. Because of this, India’s mobile communication industry has been in a continuous state of “small government,” with as many as 14 operators of relatively equal market share and intense competition. Many telecom operators are barely profitable. China by comparison only has three major operators and all of them are state-owned, namely China Mobile, China Unicom and China Telecom. The market is highly monopolized. It is widely believed that data in India is very cheap compared to China, but if you look at data fees as a percentage of GDP, data fees in India are higher than in China.
3.Complex Language Situation
All apps in the Chinese market use a single language, but India has approximately 200 languages in addition to English, including more than 10 mainstream languages. Moreover, not even 30% of India’s 1.3 billion people speak English. Having numerous languages is a nightmare for foreign internet companies. It is even a problem for local companies because it means more development costs.
4.Online Gender Discrimination
Although gender discrimination is deep-rooted in both China and India, women’s access to mobile phones and internet is much more restricted in India.
According to India’s Internet and Mobile Association, women account for roughly 30% of India’s internet users. A Wall Street Journal report shows that only 28% of Indian women have a mobile phone compared to 48% in China. 81% of India’s female mobile phone users have never used their phones to access the internet, compared to 29% in China.
Even though in some ways the Chinese and Indian internet markets are technically in competition with each other, their relationship is actually mutually beneficial. As the Chinese market becomes more saturated, India is the first market that many Chinese companies target overseas. At the same time, India’s internet market development benefits from Chinese investment and expertise.
In the mobile internet era, mutually beneficial cooperation between China and India is preferable to competition. When Chinese President Xi Jinping visited India earlier this year, he mentioned that China has been labeled the “World’s Factory” while India has been labeled the “World’s Office.” The two sides should strengthen cooperation and complement each other’s advantages.
Appendix I:China & India Top 10 Apps
Data source: libra; app weekly active penetration rate=app WAUs/the country Android market total WAUs; data from 9/26/2016 to 10/02/2016
1.Communication and Social Networking
3.Music & Music Video
Appendix II:India Android Market Top 100 Apps
Appendix III:China Android Market Top 100 Apps
1. On August 2016, Cheetah Mobile’s Big Data platform libra (formerly Appinsight) officially expanded its data sources, significantly increasing the amount of available data, including DAU, WAU, MAU, new installation rate, retain rate, etc. providing a more comprehensive and accurate picture of the app market. Based on this data, Cheetah Global Lab will be able to provide more authoritative and accurate mobile internet industry reports.
2. Unless otherwise noted, the data in this report is taken from Cheetah Mobile 3.1 billion installations and 623 million MAUs worldwide.
3. Cheetah Mobile collected all data legally, in accordance with all relevant laws and regulations.
4. Libra’s data are limited to the user scope and distribution of Cheetah Mobile’s products and are limited only to the Android platform.
Libra (formerly appinsight) is Cheetah Mobile’s world leading Android data analysis platform. Libra utilizes data from nearly 50% of the world’s Android users and leverages Cheetah Mobile’s Big Data technology to perform deep dive research and analysis. Through analysis reports, data products and cases studies, libra provides users with insights into the changes and trends in the mobile internet market.
Please visit Cheetah Mobile’s Big Data platform libra.
Log into the official platform at libra.cmcm.com to get even more data information!