Sunday, February 03, 2008

Consider e-GDP before you leap in China

This is a new concept to me, but an interesting one. The Silicon Hutong blog picks up on an article by Donald DePalma, author of Business Without Borders: A Strategic Guide to Global Marketing. In this article, de Palma explores the concept of e-GDP and its implications for investing in China's Internet.

He defines e-GDP as a cross tabulation of global GDPs with Internet penetration as a proxy for internet-accessible wealth. "Guess what?", he asks, "Last year just six languages gave you 88% of the world's e-GDP. Chinese was not one of those six, but English and Japanese were. Compare: Website owners can access 13.2% of the planet's e-GDP by localizing for Japan, but only 1.1% by supporting the People's Republic of China (PRC) Simplified Chinese. What that means is China has lots of people online, but they're mostly browsers, not yet accustomed to pulling out their wallets to buy stuff online".

Details of the e-GDP formula are scanty but it certainly provides food for thought.

Gen Kanai, commenting on the Silicon Hutong posting, obviously thinks this all makes sense with the following input to the debate:

Witness the rush of Chinese internet firms opening offices outside of China and new services in non-Chinese languages. To me, that's the clearest sign that the these publicly listed Chinese businesses understand that they need growth (and profits) from outside of China in order to support their P/E ratios because the internal Chinese Internet advertising and/or ecommerce markets are not large enough at this time to support the growth the markets demand.
Update: The fact that there might be something to all this is demonstrated in a post on Hugo E. Martin's blog where he reports e-Marketer's data on B2C e-commerce in Asia. Japan leads with over half of the region's spending ($43.7 billion of $73.3 billion). Australia is 2nd ($13.6 billion), Korea 3rd ($10.9 billion) and China a pretty distant 4th ($3.8 billion). By 2011, China is expected to have overtaken Korea but still to lag far behind both Australia and Japan.

Certainly, breathless excitement over 210 million users could at best be described as a bit premature.

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