At 799 yuan ($131), low-cost Android devices like Xiaomi’s Hongmi are driving smartphone sales and mobile game revenue in China.

NOV. 26, 2013 • The mobile gaming market in China is expected to reach 10.9 billion yuan ($1.8 billion) in 2013, of which 74% of that revenue is generated on smartphones. The estimates were provided by Baidu, Inc. senior vice president of strategy Sun Zude in an interview with China’s Internet Data Research Information Centre. Baidu is the Chinese equivalent of Google that was founded in 2000 and is the leading search service in the country. The company is moving significantly into the mobile space, most notably via the acquisition of 91 Wireless from NetDragon Websoft Inc. for $1.85 billion that finalized last August – the largest IT acquisition ever in China. 91 Wireless not only is one of the top-three smartphone app marketplaces in China via its 91 Assistant and HiMarket stores, but is also a major mobile game operator. Between its own app stores and the inclusion of 91 Wireless, Baidu racked up an average of 69 million daily downloads in July. Combined with its search engine data, the acquisition of 91 Wireless provided Baidu with an enormous repository of user purchase information from which to size the mobile game market in China. By the end of 2014, Sun forecasts that smartphone game revenue will be more than 20 billion yuan ($3.3 billion).

Impact: That smartphone growth in China is substantial is not news as smartphone penetration is on the rise worldwide. However, DFC Intelligence has always had a major issue quantifying app sales in China.  In the report The Global Market for Games and Entertainment Applications it was noted that China was a country where estimates for app sales were hard to come by as Google was only a small portion. The DFC report focused on looking at sales from iOS and Google Play while Chinese companies like Baidu that have their own app stores were not tracked.  Nevertheless, the nature of the growth in China can be colored by local experiences elsewhere. In the U.S. we see mobile as a multi-screen phenomenon shared by smartphones and tablets that coexist with laptops and desktops. But in China there is a lot of discussion that the trend there is to primarily a one-screen market where consumers use smartphones as their sole media device. Such talk was reinforced by the release last August of a joint survey study by the Interactive Internet Advertising Committee of China and the New York City-based Interactive Advertising Bureau. A one-screen perspective would explain why the jump in mobile content and infrastructure investment present worldwide takes on a much more intense nature in China. Three years ago smartphone penetration was relatively slow given high prices around 4,000 yuan ($655), and 3G networks that were only just appearing. Since then low-cost Android smartphones around 1,000 yuan ($165) have flooded the market with smartphone sales and penetration in China going through the roof. The country may even see its first 4G network before the end of the year. No wonder Baidu spent so lavishly to acquire 91 Wireless, and content firms such as Tencent can’t shift quickly enough into mobile. There are plenty of virgin Chinese smartphone buyers yet to be tapped to keep domestic mobile carriers, manufacturers, and app publishers busy for a while. But it will not be long before that intense one-screen focus is shifted outward. Chinese companies are showing a growing interest in export, and we expect to them to have a growing impact on global smartphone trends in the near future.