Why are Chinese Internet Users Paying for Digital Content?
Photo Credit: Fenda
By Wen Xin Lim

Why are Chinese Internet Users Paying for Digital Content?

Jul. 11, 2017  |     |  0 comments

China’s rapid development of its digital economy and the diffusion of its social platforms have been bolstered by its high internet penetration which sees an increasing number of mobile users and the constant innovation in the digital ecosystem to better address the internet users’ needs. Today, the nation has reversed the technology catch-up game and is predicted to outstrip the US digital market by 2018.

According to Henry Chan: “While it is acknowledged that the US pioneered the development of the underlying computer and internet-based digital communications technology behind the current new economy and has been the acknowledged leader since the 1980s on innovations, the ascendancy of China highlights the importance of the scale effect and entrepreneurship.”

China’s digital media is now undergoing a big transformation and is abuzz with innovations to develop the unique online consumption patterns of Chinese internet users. For example, China’s knowledge sharing platforms have gained popularity recently as celebrities and professionals have started to turn their knowledge into cash and make money from news and digital content. iiMedia Research suggested that the number of China’s internet users who are willing to pay for digital contents amounted to almost 981 million in 2016. In the same year, Chinese users spent 212.3 billion yuan on digital content online, a year-on-year increase of 28 percent, according to a report released by the Blue Lotus Research Institute.

Following a boom of online celebrities (wanghong) in China’s digital economy, the new digital trend is moving towards a sustainable online business model of netizens paying for knowledge and information. While China’s paid digital content has grown beyond education to include streaming media and entertainment channels, paid knowledge and information are now widely available in different forms including Q&A, subscription, lecture sessions, personal coaching, etc.

The Luojisiwei (“logical thinking” in Chinese) app launched by Luo Zhenyu was the first to introduce a membership fee system, rolling out the online paid knowledge business model in 2013. The application provides a 60 second audio every morning and the contents vary from books summaries, current affairs, philosophical discussions, career motivation, etc. Then in 2015, China’s online video platform iQiyi implemented an online subscription model for video streaming. Today, the top knowledge sharing platforms — Ximalaya, Zhihu Live, Dedao and Fenda — offer live streaming by experts and professionals who give speeches, lectures, and online courses to paid users.

Figure 1. Subscription for Experts’ Column on Dedao

Figure 2. Ximalaya Offers Subscription for Live Streaming

Interestingly, the Q&A knowledge platform Fenda, launched in May 2016, gained huge popularity from curious netizens who are willing to pay for responses from celebrities such as Wang Sicong, the son of Chinese tycoon Wang Jianlin, celebrity Zhang Ziyi, actor Tong Dawei, etc. According to the South China Morning Post, Wang reportedly earned more than 200,000 yuan by answering 32 questions on Fenda, including this one, “Is there anything you cannot afford as the son of the richest man in Asia?”

China’s burgeoning trend of paid digital content is astonishing. Knowledge payment is becoming widely acceptable in China for a few reasons, the most important of which is that it is supported by China’s prevalent mobile payment, online payment and in-app payment services. iResearch noted that China’s mobile payments was 50 times the size of the USD 112 billion market in the US, reaching USD 5.5 trillion in 2016, based on Forrester Research figures. China’s dominant mobile payment services led by digital titans Tencent and Alibaba have greatly facilitated the monetization of digital content. Today, Alipay and Wechat Pay facilitate online purchases of tangible goods and intangible services, including knowledge, skills and experience. Digital wallets have paved a new way for people to acquire knowledge as users can easily subscribe to knowledge platforms or carry out monetary transactions on Q&A platforms such as Zhihu or Fenda in exchange for answers to their questions.

Another important factor is the enforcement of copyright law and the increasing awareness of intellectual property rights. China Daily reported that “more people are increasingly willing to pay for quality content on the internet, including novels and music — a change in behaviour that could promote copyright protection and tackle online piracy.” Matthew Dresden, an American expert who focuses on intellectual property works, opined that “Chinese media companies are undergoing similar transformations, upending how entertainment is protected in the world’s second-largest economy.” With increasing awareness of the importance of intellectual property, people are more willing to pay for digital content.

In the bustling city environment, people have grown accustomed to fragmented reading habits. They get fragmented information from social media sites and never spend too much time and attention reading articles in full. Fragmented reading can be done anywhere: on the train, during lunch, waiting for cab, or queuing. While fragmented reading enhances people’s reading space, it transforms one’s structured reading habit into a recreational and leisure activity. “People are time poor and money rich in China now, and it’s a very good thing for content,” says Matthew Brennan, co-founder of China Channel. This allows online knowledge creators to reap rewards from readers’ subscriptions as people yearn for information and knowledge content which they can carry around with them.

As internet users face information overload in the era of information technology, payment in exchange for knowledge helps readers in terms of information selection and content filtering to attain high-quality information. Today, fake news is becoming an insidious trend and has become a global phenomenon. Despite countries’ efforts to purge and clamp down on fake news, the trend is impregnable. Credible sites are introducing subscriptions to differentiate themselves and better cater to readers with heightened interest. At the same time, users’ subscription and knowledge monetization provide a sustainable business model to cushion minimal revenue inflows from advertisements.

Unlike those educated in Western education systems, the Chinese are well-trained in a system that drives their thirst for knowledge to excel in the competitive market. Historically, the Chinese Imperial Examination system (keju) identified select intellectuals and elites to be important scholar-officials. Today’s National Higher Education Entrance Examination (gaokao) reflects the imperial examination system. Typical Chinese students were educated in a high-pressure education system since their early age. The gaokao is a crucial milestone for one to progress to the tertiary education system and excel in their future career. On top of that, with increasing employment pressures in China, the younger generation is eager to equip themselves with numerous skills so as to stand out from their peers. This serves as the underlying motivation for people to subscribe to various knowledge channels.

Lastly, as China becomes increasingly open and internationalized, many Chinese are keen to explore cultural diversity and international affairs. In the long-run, we shall expect this knowledge-seeking society to dominate many aspects of the world economy.

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