Telco 2.0™ Research

The Future Of Telecoms And How To Get There

Baidu, Xiaomi & DJI: China’s Fast Growing Digital Disruptors

Summary: Baidu, China’s answer to Google, is one of the world’s leading Internet companies by market capitalisation. But can Baidu break out of the Middle Kingdom? Fast-growing smartphone maker, Xiaomi, is building a multi-faceted ecosystem and a tribal brand among young people. What impact will Xiaomi have in Western Europe and North America? DJI, the world's leading drone manufacturer, could become an anchor for a major ecosystem in the consumer robotics arena. But several obstacles may knock DJI off course. (September 2015, Dealing with Disruption Stream)

Microsoft Revenues and Margins









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Below is an extract from this 46 page Telco 2.0 Report that can be downloaded in full in PDF format by members of the Dealing with Disruption Stream hereTo find out more about how to join or access this report please see here or call +44 (0) 207 247 5003.

 

Introduction

The latest report in STL’s new Dealing with Disruption in Communications, Content and Commerce stream, this executive briefing analyses China’s leading digital disruptors and their likely impact outside their home country. The report explores whether the global leaders in digital commerce – Amazon, Apple, Facebook and Google – might soon face a serious challenge from a company built in China.

In our previous report, Alibaba & Tencent: China’s Digital Disruptors, we analysed China’s two largest digital ecosystems – Alibaba, which shares many similarities with Amazon, and Tencent, which is somewhat similar to Facebook. It explored the intensifying arms race between these two groups in China, their international ambitions and the support they might need from telcos and other digital players.

This executive briefing covers Baidu, China’s answer to Google and the anchor for a third digital ecosystem, and the fast-growing smartphone maker, Xiaomi, which has the potential to build a fourth major ecosystem. It also takes a close look at DJI, the world-leading drone manufacturer, which is well worth watching for its mid-to-long term potential to create another major ecosystem around consumer robotics.

Context: sizing up China's disruptors

As U.S. companies have demonstrated time and time again, a large and dynamic domestic market can be a springboard to global dominance. Can China’s leading digital disruptors, which also benefit from a large and dynamic domestic market, also become major players on the global stage?

Alibaba, Tencent and Baidu, which run China’s leading digital ecosystems, have all developed in a digital economy that has been partially protected by cultural and linguistic characteristics, together with government policies and regulations. As a result, Google, Facebook and Amazon haven’t been able to replicate their global dominance in China. Of the big four global disruptors, only Apple can be said to be have a major presence in China.

Thanks to their strong position in China, Alibaba, Tencent and Baidu are among the leading Internet companies globally, as measured by market capitalisation (see Figure 2). As China’s economy slows (although it will still grow about 7% this year, according to government figures), many of China’s digital players are putting more focus on international growth. Alibaba & Tencent: China’s Digital Disruptors of this report outlined how Alibaba is gaining traction in other major middle income countries, notably Russia, whereas Tencent is trying, with limited success, to expand outside of China

Figure 2:  China is home to four of the world’s most valuable publicly-listed Internet companies

Microsoft Quarterly Revenues and Gross Margins 

Source: Source: Morgan Stanley, Capital IQ, Bloomberg via KPCB

Of the five companies covered in the two parts of this report, search specialist Baidu is the least international – its revenues are almost all generated in China and its services aren’t much used outside its home country. Innovative and fast growing handset maker Xiaomi is still heavily dependent on China, but is seeing strong sales in other developing markets. The most international of the three is DJI, the world’s leading drone maker, which is making major inroads into the U.S. and Western Europe – the heartland of Apple, Google, Amazon and Facebook.  

As discussed in Alibaba & Tencent: China’s Digital Disruptors, international telcos, media companies and banks all have a strategic interest in encouraging more digital competition globally. Today, the big four U.S.-based disruptors dominate the digital economy in North America, Western Europe, Latin America and much of the developing world, limiting the mindshare and market share available to other players.

Many telcos are particularly concerned about Apple’s and Facebook’s ever-strengthening position in digital communications – a core telecoms service. They also fret about Google’s and Amazon’s power in digital commerce and content. On the basis that my enemy’s enemy is my friend, telcos might want to support Xiaomi’s challenge to Apple, while backing Tencent’s efforts to make messaging app WeChat an international service and Alibaba’s growing rivalry with Amazon (both aspects are covered in the previous report).

 

To access the rest of this 48 page Telco 2.0 Report in full, including...

 

  • Introduction
  • Executive Summary
  • Context: sizing up China’s disruptors
  • Baidu – China’s low cost Google
  • Why Baidu is important
  • Baidu’s business models
  • How big an impact will Baidu have outside China?
  • Threats to Baidu
  • Xiaomi – Apple without the margins?
  • Why Xiaomi is important
  • Business model
  • Xiaomi’s likely International impact
  • Threats to Xiaomi
  • DJI – more than a flight of fancy
  • Why DJI is important
  • DJI’s business model
  • Threats to DJI
  • Conclusions and implications for telcos
  • Baidu, Xiaomi and DJI could all build major ecosystems
  • Implications for telcos and other digital players

 

...and the following report figures...

 

  • Figure 1: Baidu is significantly smaller than Tencent, Alibaba and Facebook
  • Figure 2: China is home to four of the world’s most valuable publically-listed Internet companies
  • Figure 3: Baidu is in the world’s top 15 media owners
  • Figure 4: Baidu is one of the world's leading app developers
  • Figure 5: Baidu's clean and uncluttered home page resembles that of Google
  • Figure 6: Baidu is beginning to monetise its millions of mobile users
  • Figure 7: IQiyi has broken into the top ten iOS apps worldwide
  • Figure 8: 2014 was a banner year for Baidu’s top line
  • Figure 9: Mobile now generates almost 50% of Baidu’s revenues
  • Figure 10: Baidu says its mobile browser is popular in Indonesia
  • Figure 11: Xiaomi is a rising star in the smartphone market
  • Figure 12: The slimline Mi Note has won plaudits for its design
  • Figure 13: The $15 Mi Band: A lot of technology for not a lot of money
  • Figure 14: One of Ninebot's products - an electric unicycle
  • Figure 15: Xiaomi is turning its MIUI into a digital commerce platform
  • Figure 16: Xiaomi even has fan sites in markets where its handsets aren’t readily available
  • Figure 17: Drones’ primary job today is aerial photography
  • Figure 18: DJI majors on ease-of-use
  • Figure 18: DJI claims its Inspire One can transmit video pictures over 2km
  • Figure 20: DJI’s Go app delivers a real-time video feed to a smartphone or tablet
  • Figure 21: Baidu’s frugal innovation

 

...Members of the Dealing with Disruption Stream can download the full 48 page report in PDF format here. For non-members, to find out more about how to join or access this report please see here or call +44 (0) 207 247 5003.

Technologies and industry terms referenced include: Smartphones, Internet of Things, smart homes, mobile wallets, localized commerce, location based services, personal data, telco strategy, big data, mobile commerce, digital commerce, APIs, business models, SoLoMo, mobile advertising, mobile marketing, mobile payments, telecom, strategy, China, drones, Xiomi, Baidu, Google, Apple, DJI.