China Mobile Internet: Trends & Next Opportunities

China's mobile Internet users

The overall size of China's mobile internet users is showing a steady growth trend, increasing from 986 million in December 2020 to 1.096 billion in June 2024. This growth trend is relatively stable, but the decline in the growth rate indicates a slowdown in market growth, gradual market saturation, and a slowdown in the rate of new user additions.

AI penetration in China

The number of users covered by AI applications has exploded

By December 2024, the AI app industry will reach over 240 million users, experiencing explosive growth. Based on the age and city distribution of AI app users, by 2024, AI users will gradually expand from a niche group to the general population, with the demographic structure gradually converging with the overall mobile internet user distribution.

In 2024, 67.7% of users will see an increase in AI usage compared to 2023. The most notable growth will be seen in women, those aged 16-34, those with a bachelor's degree or higher, those with a monthly household income of 15,000 yuan or more, as well as Generation Z, young people from small towns, emerging white-collar workers, and the experienced middle class. This indicates that AI applications are gradually expanding from early pioneers to a wider range of ordinary users, accelerating the trend of popularization.

Over 40% of users use AI applications for searching and writing, with an average of 3.5 usage scenarios per person. Among the demographic groups, Generation Z, experienced middle-class professionals, and emerging white-collar workers have more diverse AI usage scenarios.

Generation Z prefers graphic design, entertainment interaction and educational learning.

Senior middle-class people prefer graphic design, video editing and investment and financial management.

New white-collar workers are more inclined towards photography, voice assistants and health management.

This personalized preference will drive AI applications towards verticalization of scenarios and refinement of functions.

Barriers to AI adoption for different users

Data privacy and security concerns are the main reasons why users never use AI applications or reduce their use, accounting for 37.6%. For users who have never used AI, barriers to adoption include high learning curves, complex operations, and difficulty getting started. For users who have reduced their AI use, this stems from dissatisfaction with the AI experience, believing that AI applications are inaccurate and unable to meet their needs. Therefore, improving data privacy protection and optimizing the user experience will be key to driving user growth and retention for AI applications.

Intelligent transformation of Chinese enterprises

Enterprise intelligent transformation

AI agents have become a crucial engine for enterprise intelligent transformation, offering tremendous potential for reducing costs, increasing efficiency, improving user experience, and driving business growth. From intelligent sales in education to digital police officers in government affairs, to intelligent cockpits in manufacturing, agents are reshaping service and operational models across various industries. The future of AI lies not only in revolutionizing user experiences but also in further expanding intelligent scenarios across enterprises. This two-way interaction will accelerate the adoption of AI across industries, build a closed intelligent ecosystem, and create even more possibilities for future development.

Major platforms cooperate with each other

In the run-up to Singles' Day (Singles' Day) 2024, China's major platforms collaborated on interconnection and collaboration in payment, logistics, and advertising, driving platform ecosystem integration and commercial value growth. Changes in user overlap indicate that interconnection has enhanced synergy between platforms. In particular, the collaboration and integration between Alipay, JD.com, and Taobao in payment and logistics has significantly increased user overlap.

Users are highly aware of the newly added interoperability features, particularly regarding payment interoperability. Over 70% of users believe that interoperability improves their shopping experience, indicating a majority of users are positive about inter-platform collaboration. Over 80% of users prefer platforms that support multiple payment methods, and if a common payment method is unavailable, most will switch platforms or temporarily forgo a purchase. When choosing a logistics method, users place great importance on services such as home delivery and tracking, as these significantly enhance the shopping experience.

Chinese e-commerce platforms build core competitiveness

led internet companies to reduce costs, increase efficiency , and refocus on their core businesses

Consumption trends: In 2024, China's online retail sales will reach 15.5 trillion yuan, and the year-on-year growth rate will fall below 10% again, and the growth momentum of online consumption will weaken.

Competitive situation: Industry competition intensifies and customer acquisition costs rise.

Market environment: The Internet industry is highly competitive and demand fluctuates greatly. We need to focus on our core business to enhance our competitiveness.

Cost reduction and efficiency improvement: Optimize personnel, structure and business, concentrate resources, improve efficiency and reduce costs.

Technology-driven: Increase R&D investment, enhance technological innovation, and promote the development of core businesses.

Policy support: Government policies encourage enterprises to focus on their core businesses and enhance their core competitiveness.

Core issues facing e-commerce platforms

1. Bad money drives out good: Low-quality goods crowd out the market for high-quality goods, impacting the healthy development of the industry. Industry harm: Low-price competition leads to reduced R&D investment and reduced competitiveness.

2. Upgrading consumer demands: Consumers pay more attention to quality, service and brand, and no longer focus solely on price.

3. Increased competitors: Intense market competition means low prices are no longer a significant advantage. Rising traffic costs: Low-priced products have limited profit margins and are unable to support high traffic costs.

4. Declining advertising revenue: Low-price strategies have led to a slowdown in advertising revenue growth. Frequent rule changes: Frequent rule changes put pressure on merchants. Compressed profit margins: Low-price competition has reduced profits and put merchants under great operating pressure. Vicious cycle: Low prices have led to declining quality, reduced consumer trust, and further sales declines.

Low price is no longer the primary consideration for Chinese consumers when choosing a shopping platform

The survey results show that while price is a factor in online shopping, consumers prioritize other factors, such as platform quality, value for money, platform trust, user reviews, and after-sales service. Consumers' attitudes toward promotions on e-commerce platforms are complex and diverse, and a simple low-price strategy is no longer enough to attract all consumers. Beyond apparel, shoes, bags, and household cleaning products, consumers are placing greater emphasis on product quality than before when purchasing other categories.

China's leading e-commerce companies adjust their strategies, with GMV returning to top priority

Douyin E-commerce: July 2024: Adjust the priority of business objectives, no longer put "price power" first, and focus on pursuing GMV growth in the second half of the year.

Taotian Group: After June 18, 2024: We will begin to de-emphasize the price power strategy, weaken the absolute low price strategy, and return to the GMV traffic distribution logic.

Pinduoduo: Second quarter of 2024: Adjust business focus from pursuing commercialization and increasing profits to putting GMV back as the top priority.

The role of GMV

Market performance: GMV is a key indicator for measuring the transaction scale and market competitiveness of e-commerce platforms.

Optimize products and services: By analyzing GMV, the platform can identify problem categories, optimize product structure, and improve user experience.

Enhance user stickiness: Increasing GMV requires enhancing user stickiness. The platform can increase user repurchase rate through membership system and other means.

Marketing Science

Lock in target customers: Through data analysis and user profiling, accurately find target customer groups and improve the relevance and effectiveness of advertising and marketing information.

Improve information delivery efficiency: Deliver marketing information directly to potential customers, avoid ineffective communication, and increase brand exposure.

Enhance marketing effectiveness: Targeted marketing strategies attract potential customers, stimulate purchasing desire, and increase purchase likelihood.

Optimize marketing processes: simplify the shopping process, increase page loading speed, etc., reduce customer churn, and increase conversion rates.

Reduce customer acquisition costs and ineffective investment: avoid ineffective marketing investment in non-target customer groups and save advertising costs and other resources.

Improve resource utilization: Rationally allocate marketing resources and improve the utilization efficiency of human, material and financial resources.

Provide a basis for decision-making: Collect and analyze marketing data, gain insights into market trends, consumer behavior, etc., and provide a basis for decision-making.

Improve decision-making efficiency and accuracy: Respond quickly to market changes and avoid risks associated with blind decision-making.

Overseas Services

Internet companies' overseas revenue surges, and the gaming industry becomes the king of the Age of Exploration

In 2023, the global economy gradually recovered, and Chinese Internet companies actively expanded into overseas markets, driving a substantial increase in overseas revenue. Among the top 100 Internet companies,

Overseas-focused companies accounted for 54% of the total, with total overseas revenue reaching 140.1 billion yuan, a year-on-year increase of 22.8%. 33.3% of this total was from online game companies. In 2024, actual sales revenue from Chinese-developed games in overseas markets reached $18.557 billion, a year-on-year increase of 13.4%. Overseas revenue from Chinese-developed games continued to grow in 2024, with the United States, Japan, and South Korea accounting for 57.3%. Strategy, shooting, and role-playing games have ranked in the top three categories for five consecutive years. "Black Myth: Wukong" has achieved tremendous global success since its release in August 2024. As of January 11, 2025, the game's projected sales on Steam are 21.93 million copies, with 25.1% of these copies played by overseas players. This success not only marks a breakthrough for Chinese games in the high-quality AAA game market, but also inspires more companies to increase R&D and expand into overseas markets. With intensifying competition in the global gaming market, the overseas expansion of Chinese games has become a major trend. Future efforts will require improving product quality and promoting the globalization of these games.

Rednote(Xiaohongshu) is experiencing a surge in traffic, but its overseas expansion presents both opportunities and challenges.

Influenced by the US government's ban on TikTok, Rednote saw a surge in overseas users, topping the US App Store's free chart. This not only boosted Rednote's international profile, attracting a significant influx of overseas users, but also boosted traffic in China. Since January 13th, Rednote has seen a surge in new installs and daily active users in China. Simultaneously, its popularity on Weibo and WeChat has also skyrocketed, reaching peaks on January 15 and 16, 2025, respectively. Faced with this surge in overseas traffic, Rednote needs to balance its user ecosystem outside of China, strengthening content regulation and cultural adaptation to successfully retain overseas users and enhance the overall value of its ecosystem.