China’s booming mobile market is creating lucrative new business opportunities for startups, according to Australian entrepreneur and Koombah cofounder Jason Lim, who recently returned from China. However, mobile is different in China because they have a generation of people who skipped the laptop phase and moved directly to smartphones, says Lim. “China has the [world’s] largest number of mobile internet users with 500 million,” he says. Lim told StartupSmart the mobile boom is leading to big startup opportunities mobile gaming, social media, online video and mobile commerce. “China is set to surpass the US mobile gaming market next year and is on track to hit $US3 billion ($A3.23b) in revenue this year,” he says. “China has a higher penetration rate of social media than the US. WeChat has emerged as the most powerful communication app but has evolved into much more than that,” Lim says. The stats are staggering and not only limited to mobile. China has 450 million online video viewers consuming 5.7 billion hours per month. “Mobile commerce is expected to double in size to $51.62 billion next year. Social mobile commerce is also gaining strong momentum,” Lim says. “Outside mobile, due to China’s existing manufacturing infrastructure, wearable-tech and Internet of Things-type products are rising up.” Lim’s venture, Koombah, helps expats in Beijing find rental accommodation, providing a web platform for people to list and find rental property. The business model is a combination of service fees charged to renters and commission shared with its agents. Before Koombah, Lim was a cofounder of Technode.com, an English and Chinese tech blog, which aims to bring China’s emergent tech and start-up scene to the rest of the world. TechNode manages TechCrunch China and its TechCrunch Disrupt events in Beijing and Shanghai. Since arriving in Beijing in 2010, he has also worked for the HTC Android app store AppStoreConnect and consulted for Jiepang, one of China’s leading mobile location-based service apps. Lim explains Beijing remains the major city for China’s tech startup community. “Within the city, Zhongguancun is a key hub for startups due to the proximity to top engineering schools like Tsinghua University. Major incubators like Innovation Works, co-working spaces like Garage Café and venture capital firms are centred around Zhongguancun,” he says. “Shanghai is traditionally the more financial centre of China, however many tech start-ups are popping up in the city too. Since Shanghai has always been the most international city in China, there are many foreign entrepreneurs based there. The creation of the Free Trade Zone last year is also helping to attract foreign investment. “Shenzhen and Guangzhou in the southern province of Guangdong are fast becoming tech startup zones. With a strong background in electronics and manufacturing, many hardware startups are choosing either city. “Chengdu in the western province of Sichuan is fast becoming a hotspot for entrepreneurial talent, especially for gaming. With better weather and a much lower cost of doing business, many entrepreneurs from the more expensive eastern cities like Beijing are moving there. The city also boasts a Hi-Tech Industrial Development Zone.” Story continues on page 2. Please click below. Lim says the major players in China’s tech sector are Baidu, Alibaba and Tencent, which are sometimes collectively known as the “BAT companies”. “Baidu is China’s dominant search engine with 80% market share. Alibaba is China’s dominant ecommerce company that controls 80% of all online Chinese sales and is poised to go public soon,” he says. “Tencent is China’s dominant gaming company that also owns WeChat (Weixin in China). “It’s important to recognise that although each company has a speciality in search, ecommerce and gaming; all companies have overlapping products and are intense rivals. The founders of each company are also among China’s richest people.” However, despite the opportunities, Lim warns China can be a challenging and frustrating place to do business. “Communication is something that takes time to adjust to in China. Interpreting body language and what is not said, is as important as what is being said,” Lim says. “Showing or saving face in China is very important in Chinese culture, so when you think something is supposed to happen, there is usually an underlying reason why it isn’t happening. “That’s why it is advisable to just go there, observe and learn what happens and how people do things. Of course, you should learn Chinese too.” The other frustration is bureaucratic complexity. “As a ‘communist’ country with many layers of political bodies, there is an excessive amount of process and paperwork,” Lim says. “Policy can often change and many government departments are usually not across the new rules and laws, so you can often hear conflicting stories. Although things can be slow, money and connections can usually speed things up.” Lim says that trust is something we take for granted in Australia. “Here, most people would often give a stranger the benefit of the doubt. However, in China, due to historical and cultural reasons, people default to not trusting a stranger,” Lim says. “That’s why Chinese people must always spend a long time to really get to know you before doing business with you. For entrepreneurs, it is also wise to team up with a local Chinese person you can trust, to help you navigate all the very local customs and business practices. “The bottom line is – don’t assume you understand China without spending sufficient time there. It’s not an easy place to do business.” Lim also warns entrepreneurs need to be aware of the visa and air pollution situation before they move across. “To work in China, like anywhere else, you need a work Z visa. This requires a job offer from a sponsoring company. Since late last year, the government has tightened its restrictions so requires more. In Beijing, a non-criminal record must also be presented,” Lim says. “If you are planning on just checking it out, a business visa is fine. But you should be aware that you are only allowed to stay on the mainland for a short period of usually three months at a time. He says in the last two years, China’s air pollution problem has become increasingly serious. “You may find yourself checking the pollution index more than the weather. If you plan to live there, you will have to sacrifice the vast blue and clean skies of Australia,” he warns. Jason Lim posts on Twitter @jaezenlim. He also writes for Forbes about Tech in China at http://www.forbes.com/sites/jlim.
As first announced by the Financial Times it seems almost certain that Apple will buy premium headphone and audio company Beats for $3.2 billion. Apple was expected to announce the news next week but have been pre-empted by an indiscrete Dr Dre, the rapper, hip hop producer and founder of Beats, who confirmed the deal in public. $3.2 billion is a premium for a company that was valued at around a $1 billion in 2013 after HTC sold a 25% holding in Beats for $265 million. The general media commentary on the deal has surrounded the question of what Apple would want a company like Beats for. Opinions have ranged from the reflected “cool” of having the brand which is very popular to benefiting from the acquisition of Beats’ music streaming service “Beats Music” that was launched earlier this year. What is likely is that Apple will take advantage of the sum of benefits from the purchase. Five of the major benefits that Apple will be getting are the following: 1. The premium headphone market The premium headphone market is currently worth about a $1 billion a year. Beats by Dr Dre headsets are currently a very popular item for sale in Apple’s own stores and so by buying the company, Apple can profit directly from the sale of the headphones and portable speaker on a worldwide basis. What would be interesting is if Apple buys any other companies that have products selling well through its stores. 2. Audio technology Apple gains the design and manufacturing experience that Beats brings to the audio market. Other than headsets, the audio is used in computers and other devices. Although Apple computers have good quality speakers, the audio on Macs has always been limited with no system level equalizer for example. Apple can immediately improve the quality of the headsets it ships with its phones and tablets and the audio in its laptop computers. 3. Music streaming service Beats Music has received good reviews and so Apple will be able to roll its service into improving its own music streaming service iTunes Radio. This will have assumed more importance with the accelerating shift in the music market from digital downloads to streaming. 4. Boosting Apple’s cool The Beats brand has achieved a level of popularity through its association with rap founder Dr Dre and other music stars that the company has used to promote its products. There is no denying that Apple’s brand as the icon of cool has been tarnished through its own success and it evolutionary approach to product development it has adopted over the past 4 years. The Beats by Dr Dre brand and products will definitely help in reestablishing some of that lost image within a certain demographic. Whether that demographic is really core to Apple’s market is another matter altogether. 5. Wearables It is remotely possible that Apple is thinking about the possibility of smart headphones. Given that the use of voice is becoming much more functional as a way of interacting with a computing device, it is again possible that headphones could become independent devices. Although having headphones that could stream music independently of a phone would be a useful product in its own right, smart headphones could theoretically do so much more, rivalling most of the functionality of technologies like Google Glass. The sums of money being paid for recent tech company acquisitions have made multi-billion dollar deals the new normal. Because of this, it is not really necessary to look for too much significance in these purchases. Whilst Apple buying Beats make sense from a number of perspectives, it is just a tiny part of its overall product strategy and is not going to distract those waiting for Apple to do the next big thing. David Glance is the director of innovation at the Faculty of Arts and the director of Centre for Software Practice at University of Western Australia. This article was originally published at The Conversation. Read the original article
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