Compared with the "collective listing fever" in 2004 and the "big storms" in 2005, the year 2006 saw neither the entry of international giants nor hotspot in enterprise listings. Even Web2.0 was only a continuation of the high tide in 2005. Therefore, a situation of happy to all did not come in 2006. In reality, under the joint push by capital and innovation factors, China's Internet industry is still in a fast growth momentum.
CCID Consulting's data show that China's Internet market made steady progress amidst a quiet surface in 2006. As for user numbers, netizens in China rapidly increased, reaching 135 million, laying a solid user foundation for developments in Internet applications. In terms of industry size, the overall Internet market reached 83.5 billion Yuan, up 33.1% over 2005. In terms of revenue structure, the Internet application services market reached a size of 37 billion Yuan, accounting for 44% of the overall market. China's Internet market is now changing from infrastructure building to content services. In terms of Internet business entities, Internet services enterprises topped 13,000. Service providers such as Sina, Shanda and Tencent have risen as a fresh force. As for Internet application services, new Web2.0 applications such as blog and Witkey were gradually accepted by numerous netizens in 2006. Their user numbers grew by 200% or even over 1000%.
Though network access still account for half of the revenue in the whole market, the percentage of Internet application services is nevertheless expanding. Internet application market segments such as search engine, E- business, online games and IM have gradually matured. The market pattern becomes clearer and more stable. All these segments maintained a growth of over 40%. Online marketing and online media have gradually warmed up amidst stable growth.
Industry hotspots and frontier issues
E-business grows fast: Approaching the end of the year, the cooperation between eBay and Tom Online, two global E-business giants once again brought E-business into the spotlight. By the end of 2006, total E-business transaction in China amounted to 1.1 trillion Yuan, up 48.6% over 2005.
Capital pushes forward a tide of Web2.0 innovation: In 2006, Web2.0 profoundly affected the thinking model in the whole Internet market. Large numbers of new Web2.0 enterprises and traditional Web1.0 enterprises collectively explored the development road of Web2.0. Web2.0 enterprises tried to seek how to turn innovative concepts into profit models. Traditional enterprises also explored ways to use the 2.0 concept to innovate their services models. Traditional portal websites have introduced blog, RSS and other Web2.0 services to improve user experiences. In the development of Web2.0 enterprises, capital has played a leading role. New generation enterprises conceived various ways to attract attention from investors. The involvement of venture investment also provided a growth space for these enterprises. Meanwhile, mature enterprises used capital as a means to improve and expand themselves. Enterprises sought cooperation between them, while leading enterprises unleashed large-scale M&As. All these painted "a crimson capital color" to China's Internet market.
Industry development trend
As multinational Internet giants step up their efforts in the Chinese market in 2007, competitions in such mature market segments as search engine and E-business will intensify further. With the arrival of the 3G era, there will be an accelerated integration of wireless and cable networks. This will become the main driving force for the development of the Internet market. The in-depth integration between Web1.0 applications and Web2.0 ideas and technology will also bring new business models to the market. A standardized market environment will guide enterprises and users to become more rational. With the further development of E-business, the mutual penetration between traditional industries and the Internet will fully improve the values of internet services. China's internet market is expected to continue to maintain steady growth in 2007.
Multinational giants' continuous efforts are expected to change the market pattern. Frequent changes at the top executives level at the end of 2006 reminded the market that these giants are now changing their development strategies in the Chinese market. We also have sufficient reasons to believe that such changes will produce a positive role in the development of the market and may even change its pattern.
Mutual integration of diversified technologies and applications is also anticipated. The year 2007 will be a year in which internet technologies and applications will be improved. The advent of the 3G era will speed up the integration of wireless and cable network and become the main driving force for the development of the Internet market. The in-depth integration between Web1.0 applications and Web2.0 ideas and technology will also bring new business models to the market. On the other hand, the penetration of the Internet into traditional industries and the deepening application of E- business in traditional industries will fully improve the values of Internet services.
Mature applications drive up rational and healthy market development. In the Internet market, which has long beset with various problems, enterprises and users have become more rational as the segments of search, E-business and online games gradually mature. This is bound to bring the market into a mature and healthy development course.
Industry development will bring new market opportunities. Continuing their innovations in 2006, Internet enterprises have started to explore deeper into more detailed Internet application segments. Vertical search has become the most typical example. Meanwhile, along the track of integrating, Internet enterprises will cooperate more with enterprises in traditional industries. E- business will become the most important link in the process. It will deepen the Internet industry.
2007 is therefore expected to be a year of rich developments and innovations for the Chinese market.
