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China’s Internet Youth Boom

Key web sites to use to market to young consumers.

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What’s the best way to reach the burgeoning Chinese youth consumer demographic? It might be smart to start where they frequently gather — on the Internet.

This story first appeared in the August 7, 2008 issue of WWD.  Subscribe Today.

In the second installment of its Phoenix Generation report that follows this key demographic, San Francisco-based market research consulting firm Pearl Research has highlighted 15 top Web sites that are attracting millions of Chinese users aged 16 to 30. “In the U.S., we often take these types of Web sites for granted because the Internet has been around for 10 years and we are accustomed to using it regularly,” said Allison Luong, managing director of Pearl Research. “But in China, ideas like e-commerce and social networking are still in their infancy. There is still a lot of potential to grow.”

Even as the Chinese government continues to on occasion restrict access to the Internet for political or other reasons, as recently for the Summer Olympic Games, tapping into these sites could give marketers an edge in reaching the widespread youth population, which is expected to become the country’s biggest consumer group within the next 10 years, Luong said. Here’s a look at five of the top sites grabbing a large chunk of China’s Web traffic.

1. Xiaonei.net

This Facebook-style social networking site has grown to more than 22 million registered users and in May received a $430 million investment from Japan’s Softbank. “Xiaonei is really a phenomenon in the way that Facebook is a phenomenon here in the U.S.,” Luong said. “Like Facebook, when it started, they only allowed college students with registered IDs to go on [the site]. It became very popular because it was considered a very safe space.”

Though Xiaonei has been criticized outside of the country for essentially cloning the look and feel of Facebook, its sparse design and simple presentation have helped it become something of a design breakthrough in China, where most Web sites are crammed with graphics, ads and tons of information. The company’s next step is to work on creating a targeted advertising system — something that could be of major interest to companies. “Such sites have so much information on their users,” Luong noted. “For example, if a girl is posting about how she’s really interested in cosmetics, that information could really be leveraged to market to specific segments.”

2. Zghzp.com

This cosmetics retail site has cornered the market on online beauty sales, offering a wide range of brands from La Prairie to Neutrogena at lower prices than they sell for on the heavily taxed local retail market. The site also offers up-to-date beauty and fashion news, making it a regular destination for savvy shoppers to keep up with new products and trends.

Luong said top e-commerce sites like this could be a real boon to future beauty and fashion marketing strategies. “Because they’re selling online, they’re able to accrue a database of users and target them much more directly,” she said. “If a customer orders a moisturizer, she could be sent a note reminding her that her supply is likely up and also suggesting other products she might like. Sites like this have an unprecedented ability to collect information about their users that would not be available if a customer was just making purchases at a store.”

3. 17173.com

This hugely popular online gaming site — owned by powerhouse Internet company Sohu — is one of the most profitable in China. Gaming sites in general have seen growth of more than 60 percent in the past year and boast profit margins of up to 60 to 70 percent, thanks to smart sales strategies that allow users to play for free but offer game-enhancing additions (like special weapons or avatar ensembles) for sale. Beyond the gaming appeal, such sites also give players a way to communicate with their peers across the country. “A lot of these kids are still very shy and often the Internet provides a safe place for them to connect to each other and chat as individuals,” Luong said.

She sees major sites like this as a perfect gateway to reach this consumer group. “Most gaming companies already advertise on this site, but any company that is interested in targeting young males [could also benefit from advertising on it],” she noted.

4. Sky-fire.com

Comic books and graphic novels have begun taking off in China as they have in Japan and, as a result, this free-to-read online comic site has become immensely popular with young, hip Internet users. “Some of the titles featured on this site have become huge nationwide trends,” Luong said. “We see it as having even more potential to grow.”

5. 5460.net

This college alumni networking site is a relatively new phenomenon in China, where the university system has only opened up in the past decade. “It’s a bit of a niche site, because it focuses solely on online alumni networking,” Luong said. “But it also targets an affluent audience because the users have college degrees and their incomes tend to be higher.”

In addition, Chinese culture has made communication between fellow graduates even more enticing than in other countries. “The fact that people can now connect because they went to the same college is very appealing — after all, in China, personal relationships are paramount [in business],” Luong said. “Who you know is very important — it might be able to help you get a job, or give you an advantage in your field. Being able to connect with individuals is a major good in China, which means sites like this will only become more popular.”

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