China, the world’s second-largest economy, has its own internet. Thanks to an elaborate firewall created and maintained by the Chinese government for censorship and surveillance, most users cannot easily access the global internet. This barrier makes it difficult for Chinese users to access the same mobile app marketplace as the rest of the world. Foreign app developers are either denied access to the Chinese market or have narrow distribution channels that make success improbable. China is isolated but that does not mean it is not innovating.
Operating inside the Great Firewall
While government policies have effectively cordoned off the Chinese mobile app landscape, they have not destroyed the market. In fact, the Great Firewall of China enabled the creation of a vibrant mobile marketplace unique to China. The development of this marketplace accelerated in 2010, when internet giant Google announced it would withdraw its Chinese version amid tense relations with the government. Google’s exit meant Chinese users lost access not only to the company’s iconic search engine but also to the Google Play Store, the world’s largest mobile app store.
Despite losing access to the Google Play Store, the Android mobile operating system is still the most popular mobile platform in China. As of February 2017, Android’s share of the Chinese market was nearly 75%. As a free platform, Android helped make entry-level smartphones affordable, which fuelled the rapid penetration of smartphones in China’s enormous wireless communications market.
Market Share of Mobile Operation Systems in China, 2013-17 (%)
While users bemoaned the loss of Google services, Chinese developers saw an opportunity. Almost overnight, apps designed with Chinese preferences in mind sprung up in place of the newly banned apps. There are now more than 200 Android-based app stores operating in China. The most popular are AppChina, Anzhi, Gfan, Hiapk, Liqucn, and Wandoujia (purchased by Alibaba). China’s largest companies also have their own app stores, such as the largest mobile provider with its China Mobile store. There are Chinese search giants such as Baidu and Facebook-like social networks such as Tencent.
Apps for China by China
One mobile app stands above the rest in terms of popularity: WeChat, developed by Tencent. The app has 938m global monthly active users, more than any of the other messaging apps not owned by Facebook (WhatsApp and Facebook Messenger have 1.2bn global users each). Part of WeChat’s success lies in its ability to multitask. WeChat users can pay their bills, transfer money to friends and family, hail a taxi, make travel reservations, order food, and, if they are so inclined, even manage their investments _ all without leaving the app. The result is that more than a third of WeChat’s user base spend close to four hours a day on the app.
Approximately 95% of China’s 731m internet users opt to use their phones as their primary way of accessing the internet. That is almost the entire population of Europe, and it remarkably has plenty of potential to grow given China’s swelling population. With so much activity in the local marketplace, developers have little reason to look beyond China’s borders.
However, given the rapid pace of innovation in China, it is inevitable Chinese developers will start to look beyond their country’s borders to sell their products. The shift has already taken place with regard to mobile hardware. Instead of manufacturing hardware for US companies such as Apple, some Chinese companies including OnePlus and Huawei are making their own hardware and selling their devices around the world. These companies have had to break down stigmas associated with Chinese technology that plague the app marketplace.
Emerging market opportunities
The debate about internet privacy that has recently gained significant traction in the West presents a specific challenge to Chinese developers. Apps such as Signal promise secure communications while apps such as WhatsApp have added strong layers of encryption. The more users are concerned about privacy, the more likely they are to view Chinese apps with suspicion. This issue feeds into a perception that Chinese app technology is somehow inferior or unsafe compared to what is coming out of Silicon Valley.
While this might be a challenge for Chinese app developers who want to make it in the West, there are other markets they can focus on. The rapid success of WeChat in Africa demonstrates the potential of Chinese apps to expand into emerging markets. Some Chinese apps have also tapped into markets in Latin America and Europe.
While emerging markets may not necessarily grab international attention when it comes to fierce mobile market competition, they do constitute a ripe market for China. Users in parts of India, Asia, and Africa often rely on less sophisticated mobile headsets that almost uniformly use the Android operating system. China’s experience with these platforms and its restricted regulatory environment give the country’s developers a leg on the competition in underdeveloped emerging markets.
Moreover, Chinese developers understand the value in apps that multitask by offering many services inside one app such as WeChat. For inexperienced users in emerging markets, having one app that takes care of the majority of tasks makes for an easier introduction into the mobile world. You sign up once and most of your mobile needs are taken care of. As users gain experience in the mobile environment, they are already tied to a Chinese app ecosystem (think, for example, how difficult it is to change email addresses after a year or two of use).
If Chinese developers are able to export their ecosystem to emerging markets and win over users faster than the likes of Google or Facebook, China’s internet could expand the mobile landscape into underdeveloped markets. Regardless of whether China’s marketplace development succeeds, the Great Firewall is a divide that some developers are turning into an opportunity.