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China named a rising force in the digital media business

With the UK already playing catch-up against US technology firms, China has now emerged as a new threat, with new figures revealing it accounts for a third of the six companies generating the highest online media revenues globally.

The US is unquestionably producing household names in the digital media space, from Google to Facebook to Twitter. UK entrepreneurs are looking to replicate that trend too, and on 24 November, Google X adviser Jack Hidary told Real Business it's not all about the individuals, but a nurturing ecosystem of “supporting actors” too.

He said: “What I'm hearing from UK entrepreneurs is that the UK investor base may be a bit conservative. The window to dominate your market is smaller than you think. I find that American companies are very aggressive in their effort to go and dominate their sector because they know the number one in the sector tends to monopolise the capital and attention in the space – it sucks up the air in the room.”

As if US innovation wasn't already enough for the British to contend with, China is growing as a digital business market, , according to research firm Strategy Analytics. The country accounts for two of the six firms with the highest online media revenue, thanks to internet service Tencent and search engine Baidu.

Google came at the top of the list with digital media revenues of $31.4bn in H1 2014 – a 12 per cent spike year-on-year. This was well ahead of Amazon at $10.3bn (up nine per cent) and Facebook at $5.4bn (up by 66 per cent).

The Mark Zuckerberg-owned social network was just ahead of Tencent, which also secured a $5.4bn revenue but with a 43 per cent revenue increase – while iTunes reached $5.2bn and Baidu $3.4bn, the report has shown.

Michael Goodman, director digital media at Strategy Analytics, said: “A red-hot Chinese internet market is challenging the historical dominance of US companies. The fact that there are about 2.5x more Chinese than Americans online is a big factor so they’ve been able to hit such heights solely in a domestic market. The big question, and the key threat to US global dominance, is whether they can translate this success outside China.”

An example of success China has translated globally is with its Alibaba Shopping Festival, also known as Singles' Day. It generated an ecommerce record $9.3bn of sales in 24 hours, with 27,000 brands in 217 countries taking part in the shopping extravaganza.

Additionally, the Strategy Analytics study found China is also responsible for four of the ten fastest-growing online media revenues, with Chinese web security software provider Qihoo achieving the largest year-on-year growth of 123 per cent to $582m – beating Twitter, which was up 122 per cent to $562m, and Facebook.

Online media company Sina also achieved fast growth with 36 per cent, sharing the Chinese success with Baidu and Tencent, while America's Disney and LinkedIn were also in the top ten.

The report reveals that advertising is the biggest driver of digital revenues, with 77 per cent, followed by online games with 15 per cent and video with five per cent. Interestingly, this varies significantly by platform – 100 per cent of Baidu's revenue comes from advertising, while 100 per cent of Netflix revenue is from video and 90 per cent of Tencent's is from games.

Goodman, added: “The Chinese companies have been particularly adept at generating revenues across a variety of services. The fastest mover, Qihoo, for example has done well in both advertising and internet value-added services, driven by expansion into search and mobile.

“Ultimately, this increases revenue per customer, a vital component of sustained growth – Baidu, for instance, has upped ARPU 50 per cent over the last year.”

Whether we will see representation from the UK in the future is unclear, but the government is on a quest to encourage support for British tech startups with a £25m fund to help scaling and the creation of 2,500 jobs, while £5m worth of investment will run through Crowdcube.

 

Source: Real Business

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