China Gets The Mobile Message
Text messaging via cellphones is taking China by storm.
Can the simple platform deliver profits where fancier
wireless services have failed? By
CRYSTYL MO
Ricky Wong for Asiaweek.
Why type
when you can talk? Because it's cheaper than a phone
call.
Step into the Beijing offices of mobile-game developer Enorbus
and you could be back in the dotcom bubble of late 1999. It's
start-up city all over again - open-plan premises, a conference
table that doubles for ping pong, a couple dozen disarmingly
young programmers hammering out code, and a pervasive sense
of energy and conquer-the-world optimism.
Enorbus is a prospector in China's newest gold rush. It's one
of a growing number of mainland firms - from software developers
to Internet portals - hoping to take advantage of a boom in
the use of short message service (SMS), a technology that lets
mobile phones exchange small files and text messages with other
phones or computers.
Unlike most of their dotcom predecessors, firms such as Enorbus
stand to become profitable. Enorbus's most popular game is "Battle
SMS," in which mobile-phone users exchange text equivalents
of kung fu kicks and punches. The game is a long way from arcade
quality. But anyone with a standard phone can play, and users
pay 1.8 cents for every electronic blow they zap to their buddies.
That illustrates key differences between SMS and many of the
ill-conceived ideas touted during the dotcom stampede. SMS works
with existing technology, generates immediate revenues and has
a potential paying audience of millions.
And at the moment, SMS fever is sweeping China like foot-and-mouth
in an English shire. An estimated 20 million of the country's
123 million cellphone users regularly exchange text messages,
play simple games, enter contests and download screensavers
or ringtones. Tencent Technology, an SMS chat service, has seen
its monthly message volume grow from 30 million in May to 80
million in July. China Mobile, the country's biggest cellular
operator, predicts 10 billion messages will be sent this year.
SMS RIVALS: THE
TOP PROVIDERS IN CHINA
TENCENT TECHNOLOGY
Has used its status as China's No. 1 chat portal
to become the country's leading SMS provider.
The Shenzhen-based company's popular Mobile
QQ service lets cellphone users exchange messages
with PC users in online chat rooms
LINKTONE A mobile-game
developer that in March introduced a cellphone-based
trivia quiz called IQQ; the quiz quickly inspired
a cult following. The Shanghai-based company
is planning to release a mobile-phone "pet"
that will communicate with pets of other subscribers
SINA, SOHU AND NETEASE
Have all launched SMS services in desperate
bids to boost revenues. China's big three Internet
portals are hoping to convert tens of millions
of website viewers into paying SMS users. So
far, their services lag those of leaders Tencent
and Linktone
ANY8.COM Boasts a strong
following in Guangdong. In addition to offering
ringtones and logos, Any8.com has a website
that stores addresses, birthdays and appointments
and can send these via SMS to a mobile phone
Mainlanders are quickly adopting a phone-messaging culture.
Part of the reason is cost: A one-minute phone call is four
times the price of an SMS message. But a bigger factor is fun.
Most people use SMS not just to communicate, but to receive
more expensive "value-added" messages - an industry shorthand
for anything other than straight text. With so many ways of
idling away time on a cellphone, people are changing their habits
- not always for the better. "I got my first SMS message about
two months ago," says software salesman Zhang Shi. "Now I'm
addicted." Zhang isn't the most serious case, either. When Shanghai-based
Linktone launched an SMS-based intelligence quiz in March, one
determined contestant reportedly played the game 10,000 times.
At a time when telecoms talk centers on 3G and the arrival of
video on mobile phones, it's strange that a primitive text-messaging
platform is making a splash. "The initial excitement was about
WAP, not SMS, which has been around for like 10 years," says
Ted Dean at Beijing-based consultancy BDA (China). But WAP,
which was supposed to display websites on mobile phones, has
been a disappointment. And with widespread commercial implementation
of high-speed 3G services still far off, wireless data companies
instead are focusing on what already works: SMS.
But the biggest catalyst for the spread of SMS has been the
advent of billing platforms modeled on Japanese firm NTT DoCoMo's
successful i-mode. The first was China Mobile's Monternet
wireless data service, introduced last November. China Unicom
is following suit with Uni-Info, which launches this month.
These platforms make life easy for both users and content companies.
Users pay for messages on their monthly phone bills, a method
that encourages impulse usage because each item costs just a
few cents. Content providers get access to cellular subscribers
- China Mobile has 60 million - and billing services in return
for sharing 12%-15% of revenues with the mobile operators.
The fundamentals are attracting investors in an otherwise arid
venture-capital scene. A consortium including ING Barings plowed
$17.5 million into New Palm, the creator of an SMS platform
for playing a state lottery. Mint, an incubator linked to Perkins
Coie and PricewaterhouseCoopers, has backed Beijing-based Mezzme,
which makes, among other things, software for gameshow voting.
Shanghai's Linktone, which sends out more than 400,000 graphics,
ringtones and quiz questions a day, just got a $4-million investment
from Mitsubishi and Index, one of Japan's top i-mode content
providers.
Among the most closely watched SMS entrants will be China's
embattled Internet portals, which are desperate for revenue
and facing extinction. Five months after inaugurating an SMS
division, Netease processes more than 200,000 value-added messages
a day and is making money on the service, according to Jim Zheng,
who leads an SMS team of nearly 50 at the Chinese portal. Still,
almost no one - not analysts, nor even portal operators themselves
- thinks messaging revenues will be sufficient to boost them
into the black.
Portal purgatory notwithstanding, it's hard to find contrary
voices when it comes to the money-making potential of SMS. But
the market is quickly getting crowded and successes are likely
to be outnumbered by failures - as the shakeout of wireless-data
companies starting in Europe ominously illustrates. Shenzhen-based
Tencent, which claims to handle the most SMS messages among
China's independent operators, is just breaking even.
Even if someone makes a killing, it's far from certain that
the aging technology will last much longer. Text-messaging is
crude when compared with video transmission and other whizzy
technology promised by next-generation wireless networks. But
the next-generation 3G services are being delayed by mobile-phone
operators, who are unconvinced they can make back the enormous
investments required to upgrade their networks. BDA's Dean says
SMS will be popular until high-speed mobile networks are firmly
established. "There's going to be a lot of people out there
for two to three years whose primary wireless service is going
to be SMS. There is time for SMS operators to make money."
And a lot are trying. Beijing resident Tang Minrui, 28, says
his phone buzzes several times a day with junk SMS ads, including
one claiming to be from the Fujian Coast Guard offering deals
on confiscated luxury cars and mobile phones. Everyone, it seems,
thinks they can make a buck through SMS.
Commentary
2003-12-06
Coming soon to the commentary column--behind the scenes stories of the how the articles are really put together--the difficulty in getting anyone to accept an interview in China, the political sensitivities, the great stuff that got cut because of space, and much more about the joys and frustrations of writing in China
.gif){kind=spacer}
