Uncertain future
- Source: Global Times
- [22:26 July 06 2009]
- Comments
By Sherman So and J Christopher Westland
Alongside the growth of China’s Internet market is the development of its wireless data sector. More than 640 million people have mobile phones in China and the mobile operators open their platforms for third parties to provide wireless value added services (WVAS) such as ring tone downloads and games.
Initially, they wanted to encourage third-party participation and terms were very generous. New companies such as Tom Online, Kongzhong, Hurray and Linktone flourished. But, starting in 2004, the mobile operators tightened controls and took part of the wireless value added services in-house. The fate of third-party players changed overnight. Many have been running losses since mid 2006. With 3G’s arrival in 2009, could it be another boom-bust cycle?
Before China’s Internet was large enough to attract advertisers, WVAS formed a key part of the revenue for companies as Tencent, Sina and Sohu. Besides the basics, many creative ideas also flourished – the most obvious example being use of SMS voting to decide the winner of a nationwide singing contest – Super Girl.
In 2005 the American Idol-style competition drew the largest audiences in Chinese TV history. The winner received more than 3.5 million SMS votes in the final contest. It was a huge success for the TV station, which organized the show, and raked in massive rewards for Linktone, which ran the SMS voting platform.
Mobile data services, such as SMS or short messaging services, have been available in China since 1992. But until third-party companies became involved, the services were limited to simple messages sent between mobile users, as an alternative form of communication.
In 2000, the mobile operators hoped to provide some extra data services to their customers. But the questions were what to provide and how?
“The mobile operators didn’t know what to do with WVAS. So they let third-party companies design new services and provide them to their customers,” said JP Gan, managing director of Qiming Venture Partners, a venture capital firm active in China. Gan was also a former chief financial officer of leading third-party mobile data service provider, Kongzhong.