Jeremiah Owyang has published a good report for beginners who know nothing about China’s internet market. I questioned the wisdom of going to Hong Kong to cover the Chinese Internet; to me it seemed like visiting Toronto to understand the UK market. However, he does have some good takeaways for people just starting out in China and who do not read,write or speak Chinese.

I am going to dig a little deeper. Christine Lu of the China Business Network has mentioned to me that her audience is mainly for new people just starting out with China; I’m going to dig deeper and point out some real issues behind the current numbers tossed about re China. Tangos Chen has an excellent follow-up posting which is well worth a read.

All the reports which have so far covered China have been based on impressing non-Chinese with the huge numbers of China’s online population. This provides a very incomplete picture of China’s Internet users, especially those who go to Internet cafes. Most of these people go to play games and communicate with each other using QQ.

An awful lot is posted about China’s large online gaming population accessing the games from China’s Internet cafes. I suspect that a lot of the people who write these articles have never even been inside one in China. I would like to tell you about my first-hand experiences.

I am now in Beijing, and I have been to several Internet cafes here. Several months ago I also went to several in Shanghai.

Let me tell you something about these Internet cafes and their users. For the most part, these Internet cafes are shitholes and firetraps. And the people who go there are young, single, low-income males. They do not bring their dates there. The places are smoky, dingy and poorly lit. They sell some basic food and beverages in the front, and also charge people a fee to sleep overnight on the dirty, bug-infested, stained futons which pass for couches. If you want a truly terrible experience, visit their bathrooms.

These are dirty decrepit places in every way; they are just filthy. If fire safety laws were actually enforced, they would be shut down. And the people who spend their day playing games are, in my opinion, China’s new urban permanent underclass. Why do they go to Internet cafes? Because most of them are from outside Beijing and Shanghai, and the Internet cafe is the cheapest place to go to. They can get by spending 20-30 yuan (US$5-6) a day, including food, drink, games and a place to sleep.

The characters are sad characters; if they were living in England 150 years ago, Charles Dickens would be writing about them. From the Chinese perspective, although games and the Internet are highly addictive, Internet cafes serve a useful purpose. Otherwise these people would be on the street, unemployed. The Internet cafe today in China is what gin and beer was to England’s working class in the mid-19th century when Karl Marx was writing Das Kapital about the evils of class exploitation.

Now, if you were an advertiser, would you want to reach this audience? It all depends.

If these people were working their way up the social ladder, got better jobs, made more money and spent less time playing games and socializing at the Internet cafes, then yes, there would be some value in reaching this audience. On the other hand, if these people are a permanent underclass who have very little money to spend, then the answer would have to be no.

I have made an interesting observation from a personal experience. Earlier this year I visited Chongqing for the first time, and went to an Internet cafe downtown. It was on the ground floor of a an office building (unlike in Beijing and Shanghai, which are in upper floors or basements). It had windows you could actually see in and out of. It was clean, had fresh air, and carried fresh food and drinks. Unlike Beijing and Shanghai, it was divided into smoking and non-smoking areas. The highest fee for a booth was 4 yuan an hour, and there were several people paying that amount at 11AM in the morning, when I visited. I could tell that it was cleaned and maintained on a daily basis. I would not have been ashamed of going into this Internet cafe, unlike in Beijing or Shanghai.

For this reason, I am much more impressed with Internet cafe users in Chongqing than I am with Internet cafe users in Beijing and Shanghai, which are basically awful.

The trouble with the reports about China’s market is that they don’t go deep enough; they just present very basic number information, enough to make the marketing and bizdev types get excited about China, but not enough to ask hard questions which provide insights into user behavior, so that advertisers can really take a deeper look at Chinese audiences, because there is not one; there are many.

Here are some questions I would ask and like to see answered in a report, and advertisers contemplating targeting China’s Internet cafe users should also ask:

• Please explain your methodology for data gathering.
• What cities and provinces do you gather data from?
• How do you scrub your data to make sure that it is as close to factually correct as possible?
• What is their average income divided by city/region/provinces?
• What kind of jobs do they have divided by city/region/provinces?
• How many hours do they spend online per day divided by city/region/provinces?
• Can you show me the amount of churn of Internet users over time? (This is one of those rare situations where high churn is a good thing; you want these people to make their way up the social ladder.)
• What games and activities do they spend their time on?
• Define the difference between hardcore and casual gamers over time.
• How much money do they spend every month divided by city/region/province?
• What do they spend their money on, divided by city/region/province?

I always find this kind of information much more useful than the “Wow, China has a lot of people!” level of coverage; I find this information, for example, very helpful in understanding the Chinese mobile market and its users better.

I’d like it if the publishers of Ogilvy China Digital Watch
or CiC or some other agency could commission a report like this, and make it widely available on the Internet.

I suspect that the hard-core gamers are basically a bunch of losers, but the casual gaming market has good potential for advertisers.

It is time for advertising departments to start slicing and dicing the Chinese audience on demographic and psychographic profiles, and finding out the education/economic profiles of different audiences. Forget the big numbers about China; let’s get our hands dirty and start looking for insightful information which will really help advertisers, consultants and everyone else.

Enough China hype already; it’s time to dig deeper and get down to business and start making money for our clients.