Today I will talk about what kind of changes will happen in the future market and demand of mobile Internet. First, we can take a look at how big this market is. The number of mobile Internet users in China will reach a huge figure of 233 million this year. And more and more Internet users are starting to use mobile Internet, or even some users who don't use the Internet are using mobile Internet. So its growth rate is very astonishing. Can we make money? We can see that in the United States, there are already 130,000 applications on the iPhone, meaning you can download games, weather apps, rental car apps, various types of software, with different payment channels, which has brought Apple $2.4 billion. So it's absolutely possible to make money, and not only Apple but also many application developers have made money, such as Electronic Arts which has made $80 million in the gaming field, Gameloft has made $40 million.
Is it only by doing games and platforms that we can make money? Actually, no. We can see that Internet advertising can make money, and mobile Internet advertising can also make money. For example, AdMob was acquired by Google for $750 million, so advertising is also a very good direction. Looking at the history, we know that the mobile Internet market is huge and can make a lot of money. What can the future of mobile Internet do for us? In fact, mobile Internet connects a portable phone to a vast Internet, helping me become a stronger me, using the phone's memoryless capability and the vast knowledge of the Internet combined to help solve problems.
For example, we can imagine having a voice assistant in the future where I can tell my phone which nearby restaurant is the best, or if I want to buy a bouquet of flowers, it can help me achieve my goal. We can imagine seeing a great product in a store, like a mouse, taking out your phone, taking a picture of the mouse, uploading it to the Internet to compare prices on Taobao, buying it if it's cheaper, or going home to order it online if it's not. Taking pictures with your phone can be instantly uploaded to social networking sites like Kaixin or Renren. If I want to tell my friends about today's program, I can immediately take a selfie and upload it with one click. But if I look bad in the picture, no problem, there are apps on the phone that can beautify, whiten the skin, enlarge the eyes, all of which can be achieved.
The examples mentioned earlier are not feasible today, but they will be within 3 to 5 years. This shows us that the future of mobile Internet will be amazing because it gives me unlimited memory and an infinite knowledge base, making me a stronger me anytime, anywhere. Looking back at the development of phones over the past 20 years, at first it was just a tool for person-to-person voice communication. Gradually, it became a combination of voice and text communication due to SMS, then entertainment and multimedia functions were added, even watching TV and playing games, but now if the phone is really connected to the Internet, it becomes a personalized personal assistant that follows us everywhere. So this is an industry trend. This trend brings about an Internet phone, from our feature phones to smartphones to Internet phones, these two or three eras will have more functions, such as online music, app stores, synchronization functions, etc. So it gradually becomes as powerful as a PC, which makes us feel very excited.
But there is a big problem: how much does such an amazing Internet phone cost? We can check online, and the price range for these Internet smartphones is around 4,000 to 5,000 yuan. Is this affordable for everyone? We conducted another survey, and mobile Internet users hope to purchase a phone in the price range of about 1,000 to 2,500 yuan, with only 9% of users willing to buy a phone over 2,500 yuan, while today's prices are all above 4,000 yuan, so this raises a feasibility issue. We want Internet phones to sell quickly, but their prices are at least twice as high. There are also 17% of users hoping to buy a phone under 1,000 yuan, is there any hope?
If we look back at the PC era, a very significant event happened called Horizontal Integration. This means that 15 years ago, every component and every piece of software in an Apple computer was made by Apple itself, making it extremely perfect and thus very expensive. It cost $5,000, but later horizontal integration occurred. When Windows created a software platform, when IBM and Compaq started making standard machines, when Intel and AMD began producing chips, they separately integrated three industry chains, rapidly reducing their individual costs. The products they produced weren't as good as Apple computers, but they gradually reduced the price from $5,000 to $1,000, bringing about the real PC revolution. Interestingly, today's best phone is again Apple's iPhone, and the iPhone is entirely made by Apple, from hardware to software. However, it's possible for Android or Windows Mobile to integrate software, for companies like MediaTek or Qualcomm to integrate chips, and for HTC or Foxconn to integrate phones.
So we can predict, after analyzing trends, that the price of smart Internet phones will decrease. How fast will it decrease? Branded phones might drop to around 2,000 yuan this year, possibly to over 1,000 yuan next year, and potentially to 1,000 yuan the year after. But we mustn't forget that besides branded phones, there is another supply chain - the knockoff phones, whose prices will be even lower. Next year, there might be 1,000 yuan phones available, and the year after that, possibly phones for several hundred yuan. These phones are all Internet phones, with the same functionality as iPhones or Androids. So this gives us confidence; originally we worried about the feasibility being too expensive, but through the proven Horizontal Integration, prices will drop, allowing us to proceed. What should we do? If we open up American phones today, we'll find that the main functions are all Internet functions: search, maps, email, browsers, or YouTube-like functions. Americans actually treat these mobile phones as small portable computers, secondarily using them to make calls.
However, we find that the needs of Chinese users today and the applications that China's bandwidth can support are not those five. Phones in China must have excellent dialing and SMS capabilities, which differ from the US. Of the five major applications discussed earlier in the US, none apply to China except for dialing. Besides dialing, what else is there? Music, games, instant messaging, e-books, photography, news, microblogging, communities, these are the most important. We discover that these foreign-made phones actually do not meet China's needs; China requires a different type of phone.
Why is this? Are we so far behind Americans? Further research reveals that Chinese users can be divided into ordinary users and high-end users. High-end users' habits are quite similar to those abroad, but ordinary users have more entertainment-oriented and youthful demands. Over time, these two user groups will converge. Partly, this may be due to age differences; Chinese users are younger, with 75% of China's mobile Internet users being under 26 years old. This helps us understand who our users are, and when engineers innovate, they will practically target user needs. Another consideration is that Chinese users already have many expectations, as they are Internet users with established Internet habits that they wish to bring to their phones.
For instance, on the Internet and PCs, people habitually use Sogou input method, and they would also want to use it on their phones. They are accustomed to customizable skins for input methods, and they would want the same on their phones. If you tell Americans that Chinese input methods need skins, they wouldn't understand what that means, but that's what Chinese mobile users expect. Therefore, to satisfy our Chinese mobile users, we must meticulously understand and learn everything they need, whether it's skins for mobile input methods or white/blacklists for mobile security.
From these perspectives, many existing phones and their software and services are inadequate. We must humbly and meticulously learn each user demand. This roughly describes how we understand the mobile Internet environment. Every entrepreneur and innovator here isn't just brainstorming ideas but ensuring that mobile Internet products worldwide are developed based on analysis of trends, markets, demands, and feasibility, leading to learning and growth before innovation.
Summarizing all the points discussed about mobile Internet:
First, since mobile Internet will integrate with the Internet, we need to consider if there are mobile Internet business models that can be transplanted to maximize economic benefits.
Second, since the US and Japan are ahead, we must learn from their experiences but not blindly copy them to China without deeply understanding local needs.
Third, given the large number of ordinary users, we must focus on them rather than high-end users, and we can optimistically anticipate that Internet phones will become more affordable for ordinary users.
Fourth, we must concentrate on the ten major applications needed by ordinary users, focusing our innovations within these areas to pave the way for future visions. While we enjoy these visions, we shouldn't attempt them immediately as they might take one to two years to achieve. Let's start with what we can do now.
Fifth, we must deeply understand young users and not assume that as innovators we represent the final users of the product.
Sixth, we hope that some companies will play a huge role in making phones cheaper, becoming our best partners. When they open up opportunities for more people to use mobile Internet, we hope to follow their lead and let them use our innovations.
Seventh, we must align with local leaders, like those who lead innovations in input method skins, not reinventing what they've invented, nor fantasizing that user demands are wrong. Users are always right. We must meet their needs and bring these habits and practices from the Internet to mobile Internet.
Finally, we hope to innovate and design solutions that perfectly match future demands, clearly considering technological developments and articulating our innovations. But all this must be done in line with industry trends, market and user needs, and feasibility. Only under these premises will our innovations truly have value.