A Wise Word About 210 Million Internet Users

In the Hutong
Downloading music
2126 hrs.

Donald DePalma, author of Business Without Borders: A Strategic Guide to Global Marketing puts CNNIC’s recent report on China’s Internet market into perspective in an article on Chief Marketer.

He introduces a compelling concept he calls the Online GDP, which basically translates to the buying power of the online population.

According to DePalma, China’s 210 million Internet users account for only 1.1% of the world’s online GDP. He doesn’t give us enough information to check his figures, so it is hard to judge the validity of his claim.

Let us assume for a moment, however, that what he says is true. His point is simply this – don’t make a decision about localizing for a market based on the number of people it has, but based on its buying power. All of which is easy to understand and hard to dispute.

Or is it?

I have a couple of problems with using the e-GDP as the sole means to evaluate whether it makes sense to come to China.

The e-GDP figure is static. What we need to understand the value of a given market is both that figure AND its rate of growth. I would bet, given the fact that China’s population is slowly aging and becoming more prosperous as it expands AND that China’s overall GDP continues to grow at double-digit rates, that the growth rate in China’s e-GDP is fairly spectacular compared to other markets. At some point, that 1.1% is going to grow into something much larger.

The e-GDP figure assumes that Chinese users confer the same priority on all goods – or, more correctly, it fails to take into account that some goods and services are better sold online in China.

Similarly, the e-GDP figure does not tell you how badly advertisers on your site want to reach online users in China.

Finally, the e-GDP does not give an idea of what percentage of a country’s overall GDP is represented by Internet users. In other words, if you are already IN China and looking to identify places where a certain group of buyers goes, an overall figure is unhelpful.

I like DePalma’s analysis, but I think he (and we) need to dig deeper. To rush to China purely on the basis of 210 million users is madness. But to stay away on the basis of a snapshot of the market runs the risk of missing very real opportunities.

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About David Wolf

An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.
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