Speaking Sensis

Sensis China CEO, Robert Rath, talks about China’s online consumers and offers some tips for Australian businesses looking to do business in the world’s fastest growing economy.

WA:    G’day Robert. How’s the weather in Beijing?

RR:    A lot warmer than Melbourne I suspect. As normal for this time of the year, it’s in the mid-30s today.

WA:    I wish I hadn’t asked. Robert, it’s been another strong year for Sensis in China. What are the things you remember most about the year?

RR:    I’d have to say our investment in PCPop and Norstar was the most notable event. These companies are associated with sites that are number one in Chinese online auto (Autohome.com.cn and CHE168.com) and number two in Chinese online IT and consumer electronics (PCPop.com and IT168.com). This is a great addition to Soufun, which is the world’s largest real estate site.

What’s really exciting is that all these sites are still in the early growth stage of their life cycles. It feels like a start-up over here… albeit one with proven success and a lot of strength behind it.

Beyond that, I’d say achieving our Soufun 100 cities target, and just the growth in our team over here. We’re really operating as a tight-knit team now and we’re working very closely with Telstra and Sensis in Australia.

WA:    Any down sides?

RR:    The world is going through an economic downturn. Chinese commerce has been impacted like everyone else. But you need to put the Chinese experience into perspective. While the rest of the world has experienced flat or negative GDP growth, China’s ‘low point’ was about 6%. Nevertheless, the government has invested aggressively – and very wisely, I think – in key infrastructure right across the country. As a result, China definitely seems to be turning the corner. It was great to see that some of our key markets, like auto and real estate, were specific targets for government consumer incentives and investment.

WA:    Robert, you recently delivered a speech about the Chinese online consumer. Can you share some thoughts about how Chinese and Australian online consumers differ?

RR:    The first and most obvious difference is scale. It’s amazing to think that every one of Soufun’s 100 cities has more than a million residents. Beijing, where I live, has almost as many residents as the whole of Australia.

China is now the largest online audience in the world with 338m users as of June this year¹. The amazing thing is that only 25%  of the Chinese population are online². Even in the developed cities such as Shanghai and Beijing, the penetration is still only 60% or so. So that’s a big difference. At the same time, Chinese consumers spend over 40% of their leisure time online³. That’s ahead of even of Korea and Japan and more than any other country.

WA:    Why is that?

RR:    Part and parcel of China’s economic growth is an enormous amount of social change. One change that’s relevant to us is that millions of people – particularly young adults – are moving to the major urban centres. In the cities, they’re finding huge opportunity. The end result is we’re seeing a rapidly growing, young middle class emerging in China.

But moving to a new city has its challenges too. Young people need to connect with each other, find new friends, find products and services, find their way around and so on. And they need to do all this in a city that’s unfamiliar to them.

So they’re turning to digital media for just about everything – instant messaging, chat, news, games, shopping and even things like translation. In preparing for the speech you mentioned, I spoke to one of our employees who recently moved to Beijing from Hunan province. Between work and home, he uses the web about five hours a day. He watches TV for only an hour.

WA:    Are you finding that Chinese consumers use the web in different ways to Australian consumers?

RR:    Definitely. One of the really big things I’ve noticed is the enormous amount of social activity on our partner sites. And, remember, these aren’t social networks. They’re sites that help people wanting to buy good and services. On the auto sites, for example, over 20% of visitors spend time on discussion forums. They use these forums to talk about their favourite cars, compare deals and specs and even to organise social events like driving days. Now, the major manufacturers are working to build clubs on our sites as well. This interaction makes for a really vibrant experience – like special interest social networks. It’s an exciting dynamic to be a part of.

WA:    What about mobile, Robert? Are people surfing their phones?

RR:    It’s astonishing to think that there are about 700 million mobile phone users in China. To put that into perspective, the number of mobile phone users in China today is roughly the same as the entire population of Western Europe. And of those using their mobiles, over 150 million use them to connect with the internet⁴. They connect online to chat to friends and download music and games. Although, unlike Australia, where 3G has been in place for three years now, it has just launched in China and is still not used by the majority of consumers.

WA:    Thanks Robert. Just one more question, if I could. You’ve been working in China for almost two years now. What advice would you have for Australian businesses looking to trade with China?

RR:    To me, four things really matter. Firstly, invest to be number one or two. More than most other markets, it’s hard to really make an impact and drive growth without that. Secondly, go local. Sensis and Telstra have a lot of expertise to contribute to our Chinese colleagues. But it’s vital we let our local people get on with the job. They know the markets, the people and the culture. The management within our partner companies are the ones who built and are running these businesses.

Thirdly, connect at all levels of the organisation. Build strong relationships and intimate knowledge at all levels. It’s vital in this market. And, finally, you’ve got to enter China with the right attitude. Ask yourself “how can I support China’s growth”, not “how can China support my growth.”

WA:    Thanks a lot Robert.

1: CNNIC, 24th Statistical Report on Internet Development in China

2: Sensis analysis of CNNIC, 24th Statistical Report on Internet Development in China

3: TNS “Digital World, Digital Life” as cited in press release, December 19, 2008

4: CNNIC, 24th Statistical Report on Internet Development in China