A Wise Word About 210 Million Internet Users

In the Hutong
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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.