Last week, I had to write a business report on the growth of the Internet in China (a lucrative but all too occasional gig for an international management consultancy, spinning their researchers' raw data into a coherent narrative overview of a particular industry sector).
And one of the figures they threw at me was that Tencent - one of China's most successful Internet companies - has a customer base of >800 million people.
I transcribed it without engaging my brain in my initial draft; but on a readthrough, I found that a big mental speed-bump - what the hell?
That's a figure that is often bandied around, often repeated uncritically by Chinese and foreign analysts alike. But is it.... um, plausible?
Well, NO. The entire population hasn't reached 1.4 billion yet, for heaven's sake. The key data point at the outset of my article was that China had allegedly surpassed 400 million Internet users last year (most estimates put the number at something just over 420 million as of the end of 2010).
So, Tencent's online customer base is around twice the number of actual Internet users?! How did this happen?
Tencent's Internet empire is based on its QQ instant messenger service, which has been around for 12 years and completely dominates the domestic market. OK, but a large proportion of China's 400+ million Internet users (maybe 480 million now) are only very recent adopters, and an even larger proportion are probably only occasional rather than regular users - the kind of people who'd be unlikely to use an IM service. And it's difficult to know what the impact of the smartphone/tablet PC explosion in the last year or two has been, but I'd guess that traditional IM services are losing ground to microblogging platforms like the hugely successful Sina Weibo.
QQ has an 80% share of the IM market, but I'd guess that probably no more than 60% of China's nominal Internet users bother with an IM service.
The customer base Tencent can tap into via its QQ constituency has certainly got to be a lot less than 800 million. That figure is supposed to be the number of "active user accounts" - but I think anyone who makes that claim is being careless in their research or wantonly economical with the truth. Tencent in its annual report acknowledges that this number includes a lot of defunct or duplicate accounts, though it can't say exactly how many.
The most useful measure for gauging the true number of QQ customers, I believe, is the "peak concurrent user" total - which they currently give as 136 million. I would think that mid-week, during the working day, probably at least 80% of QQ's users would regularly be logged in; and the record high would probably be something above 90%. And again we may have the figure being inflated by some people logging in under multiple aliases simultaneously.
I'd be very surprised if the customer base Tencent can hope to tap into for its e-commerce ventures is any more than 150 million. That's still a HUGE number - more than twice as many as the total registered users Sina Weibo currently claims. But it's a believable number, a number that makes sense.
Unlike 800 million - which is clearly IMPOSSIBLE, clearly off the mark by a factor of at least 3 or 4, if not 6 or 8 times.
And yet so many people fail to notice this sort of thing, they note and pass on statistics like this without ever questioning them.
9 comments:
The trick with Tencent (and basically every other Chinese internet company) is getting the 活跃用户 -- active user -- figures. In Tencent's case, though, it probably really is around what they report: there are plenty of people with more than one account, plus shared accounts, lapsed accounts, etc.
The point is "what they claim", Weebs.
Or rather, what other people claim, based on figures they haven't bothered to look closely enough at.
The stat was being quoted as evidence of the actual number of individuals using QQ in China, who thus might be a captive clientele for e-commerce ventures like Gaopeng. Because of the rampant use of multiple accounts, "active users" does not equate to "individual customers".
The "active users" number is all very nice for gauging the amount of activity on your sites, but it doesn't tell you how many people you're actually reaching.
Makes you wonder why they bother requesting reports to be made in the first place. You could just have written "everything's great here guys!!!" and been done with it; they'd have probably nodded and uh-huhed as much as they did to the 800 mill.
My (first!) silly China story for the day: Browsing a cookery book by Ken Hom, the not so famous [young] as he once was chef in a local charity shop I came across the Chinese translated names for the two types of soy sauce (light- better for cooking and dark- older, better for dipping). Light is known as "Supreme Soy", OK fair enough, makes sense. So I presume dark is Standard Soy or something? Nope, dark is "Soy Supreme Sauce", not confusing in the slightest! You can imagine the conversation the "old foreigner" has in the grocery store- "I'd like some Supreme Sauce please, no wait, Supreme Soy Sauce, no hang on, etc. etc...
Ah, John, I thought we'd lost you in the old archives forever. Welcome back to the daylight!
You haven't dropped in here yet - What's your unusual super-power?
The Marxist terminology they favour here is besotted with the word 'contradiction'; they use it all the time, where I would mostly be inclined to say things like 'problem', or 'obvious flaw in the system'.
But I think the Internet represents a genuine contradiction for the Communist government here. On the one hand, they support it as a huge economic opportunity, a potent educational/propaganda tool, and a sign of the country's advancing modernity - and so they are encouraging the telecoms companies to invest huge sums in upgrading the architecture and increasing the reach of the network into the less developed central and western areas of the country. On the other, they are terrified of the medium's potential for facilitating criticism of the regime and coordinating opposition to it.
In barely 18 months, two-thirds of China's young Internet users have started accessing it via mobile devices. Estimates - though I suspect they're over-optimistic - now suggest there'll be 800 million Internet users by the end of 2015, with most of them able to enjoy mobile access. That is a colossal change to be trying to deal with in just 7 or 8 years. And I don't think the CCP - or anyone else - has any idea what may be unleashed by it.
It takes *ahem* 5000 years of 'civilization' to develop this level of numerical imagination.
This is one case, Stuart, where I think foreign commentators are just as guilty of sloppy thinking (or deliberate misleading) as the Chinese. I don't know where that 811 million from Tencent got labelled as "active users"; it's pretty clear from their last annual report that it's just "user accounts", many of which (maybe more than half) are now defunct. It's also pretty clear that "user accounts" is not the same as "number of users".
Some foreign analysts are guilty of wishful thinking about the China market, and too readily grab at the biggest numbers they can find.
Of course, by 2015, Tencent will probably be claiming 10 billion customers in China, and no-one will think twice about that.
I have seen it suggested that Groupon's disastrous entry into the China market (via Gaopeng, a joint venture with Tencent) might have been prompted by a naive believe that Tencent really had 800 million customers on its books.
With just a little bit of digging, I discovered that Tencent claims a 'peak concurrent user' total of 130 million - which is probably a more significant figure, a more accurate reflection of the likely number of individual users on the QQ service. However, they don't necessarily have full ID and billing information for any of their users. So, the QQ customer list is of very limited value as an e-commerce resource.
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