The European market, with its high-quality users and their mature payment habits, serious ad revenue and advanced technology, is a prime target for internet companies small and large. Yet because the continent has a relatively small population and high linguistic diversity, relatively few European developers, especially app developers, have been able to achieve success on a global scale. Some say that Europe's relatively mature PC technology has been a factor in its slow transition to the mobile internet, and that the European tendency to value exquisite craftsmanship is at odds with the often fast and loose style of mobile internet development, impeding mobile internet development there.
Cheetah Lab has harnessed Cheetah Mobile's big data to analyze the European market, looking at mobile phones, apps, mobile ad trends, and its future outlook, as well as how the market differs - and is similar to - China's. Through this analysis, Cheetah Lab aims to present a clear and vivid portrait of the state of the mobile internet in Europe today.
I. The European Android Mobile Phone Market: Samsung has the high ground, while multiple Chinese brands make headway
1. Samsung sweeps the European market
Samsung remains the strongest Android mobile phone brand in Europe based on market share. Cheetah Lab's data shows that Samsung boasts over 50% of the Android market share in seven of the 15 European countries for which figures were calculated, including Germany, the Netherlands, and Great Britain, where the brand's market share was highest.
2. Chinese mobile phone manufacturers make headway in Europe
Although Samsung's market share in Europe is quite high, Chinese mobile phone manufacturers including Huawei, Lenovo, TCL, and Xiaomi have achieved impressive results in Europe as well.
Global distribution of Chinese mobile phone manufacturers
Note: On this map, the deeper the color, the higher the coverage by Chinese mobile phones in the country or region in question. Gray areas on the map indicate countries and regions not discussed by this report.
According to Cheetah Lab's January 2016 data, Chinese mobile phone brands have achieved impressive results on a global scale, with extremely high coverage in European countries such as Portugal and Belarus.
In terms of urban market penetration, Espinho, Portugal has the highest market penetration at 43.8%. Chinese mobile phones have different development strategies in mature and emerging markets. Cheetah Lab believes that in developed countries, market penetration by Chinese brands in second- and third-tier cities with relatively lower populations is higher, while in developing countries, due to economic and technological constraints, Chinese mobile phones fare better in first-tier cities.
As can be seen in the chart above, in Germany, the cities with the first- and third-highest market penetration are not even among the country's ten most populous cities. The city with the highest market penetration was Gelsenkirchen, a highly industrial city in the northern part of the Ruhr area.
3. Patents help mobile phone brands establish firm footholds in the European market
As Chinese mobile phone brands expand into the European market, the patenting process is both an unavoidable hurdle and a key way by which they may establish firm footholds. Having many core patents or licensing patents can help make a company more competitive, and may also help it avoid being sued for infringement, which could lead to a halt in product sales or a total retreat from the market.
Source: European Patent Office
Data released by the European Patent Office (EPO) shows that Chinese companies applied for 2,203 patents in Europe in 2016, second only to the United States, and this figure represents a 9.2% increase from the previous year.
In terms of specific companies, Huawei made 1,385 applications, the most of any Chinese company, coming in far ahead of the company with the next highest number of applications. Huawei invests 10% of its yearly sales revenues into research and development and has 16 R&D centers worldwide, while 70% of the company's workforce are engaged in R&D. The company's strength in patenting has given it a competitive edge in the European market and enabled it to avoid a great amount of legal risk.
II. The European App Market: No local internet giants
1. A comparison of the top 20 apps in different European countries
(See appendix for the Top 100 charts for each country)
WhatsApp topped the rankings in both Great Britain and Germany, while other communications and social apps achieved high positions in the charts. Single-function communications apps are no longer enough to meet users' day-to-day needs, so different kinds of messaging apps have attracted different user bases.
2. Rankings by category: Utility comes out on top in Europe's top 15 app categories
In the smartphone sector, especially on Android systems, demand for utility apps is the highest, and their user base is the largest. Because these kinds of apps solve concrete problems and don't run the risk of getting lost in translation, they are an attractive option for app developers seeking to enter the European market.
3. A comparison of the top 10 apps in major categories
1) Social: musical.ly draws young European users with its social music and short video platform
In the Top 10 rankings from Great Britain, Germany, and France, the top five apps are all products from US companies. Local developers have achieved occasional successes, but lag behind on the whole. Two dating apps for meeting people close by, Great Britain's Badoo and Germany's LOVOO CHAT, made the charts.
Badoo's user interface
Great Britain's Badoo appears in the rankings in three countries. In France it comes in at number eight, while in Great Britain and Germany it claims the 10th spot.
LOVOO CHAT's user interface
Like Badoo, LOVOO CHAT is an app that enables users to meet people in the nearby vicinity, and the app is among the top ten social apps in both France and Germany. LOVOO CHAT is more similar to Plenty Of Fish in terms of design and style.
There are established heavyweights in the social category that make it difficult for other apps to break in, but breakthroughs are still possible in proximity based social apps, like the Chinese apps Momo and Tantan. These two apps both made the 2016 rankings in the social category, with Momo coming in at number five and Tantan coming in at number seven.
Musical.ly's user interface
In the social category rankings, the Chinese-developed app musical.ly has been a bright spot. It has broken into the rankings in Great Britain, Germany, and France, where it has come in at number seven, six, and seven respectively.
musical.ly is a social app with music and short video functions. Users can pick a song or sound effect they like from the app's selection and upload videos up to 15 seconds long of themselves lip synching to them, which they may then share with their friends. The short video + music model has been a bit hit in the North American market, where it has attracted a vast number of young users, propelled some to internet stardom, and remains number one in the charts in 19 different countries.
In 2017, short video became the next big thing. Snapchat successfully held its IPO, while Instagram introduced its new story function. Data collected by Deloitte through a survey of adults in Great Britain showed that short video and short video accessed via social networking were the main forms of video content watched by users.
In terms of app structure, user groups, and advertising resources, musical.ly has virtually unlimited potential for development and will likely achieve future breakthroughs in the European market.
2) E-commerce: Chinese apps stir things up in Europe, while local apps focus on the secondhand market
In the rankings of e-commerce apps in Great Britain, France, and Germany, international heavyweights like eBay and Amazon cast long shadows, but Chinese companies like AliExpress and Wish have also staked out territory.
Meanwhile, local apps such as Germany's eBay and France's leboncoin have positioned themselves as apps for general information and shopping. Secondhand e-commerce is also highly accepted in Europe: leboncoin, Petites annoces, and eBay Kleinanzeigen are all apps related to secondhand e-commerce.
Cheetah Lab looked at rankings from Great Britain, France, Germany, China, and the United States and compared how each country's top e-commerce app fared in the overall domestic rankings. Taobao was China's number seven app, coming in far ahead of Great Britain, France, and Germany, whose top e-commerce apps came in at number 14, 19, and 15 respectively. In the United States, the number-one e-commerce app eBay only climbed to number 37, which may indirectly show the relative maturity of the European e-commerce market and the large room for expansion open to Chinese e-commerce.
3) Video: YouTube is the uncontested number one, while there are too few platforms for user-generated content
According to data released in February of 2017 by eMarketer, 42.1% of British users watched video on their mobile phones in 2016, making up 68.4% of mobile phone users and representing a year-on-year growth of 9.8%.
At 64.55%, video penetration is higher in Great Britain than in Germany or France. In the video app rankings for all three countries, YouTube is the undisputed number one by a fair margin. Aside from its abundant copyrighted content, a great amount of free user generated content is a key factor in YouTube's high user stickiness. Meanwhile, Netflix and Google, which come in just behind YouTube, are apps with backgrounds in traditional video media distribution. Their core competitiveness is formed by their streaming services, large amount of professionally generated content, and abundant copyrighted film content, which help them differentiate themselves from other competitors.
According to data from Mediabug Wave, in the third quarter of 2016, users accessing video content via mobile devices exceeded those accessing it through personal computers or smart televisions among British users.
Unlike in Great Britain, France, and Germany, competition in the Chinese video market is more diverse.
The top five apps in the Chinese video market are closely matched, with number-one Tencent Video and number-two IQIYI neck-and-neck for the top spot. Content and copyright are the core competitive resources for Chinese video apps. Fifth-ranked Toutiao Video focuses mainly on short video, using professionally generated content and user-generated content along with personalized recommendation technology to recommend videos related to user interests.
4) News & Media: Aggregation apps come in strong
From these charts, it's clear that the news aggregation app Flipboard has claimed the number one spot in the European News & Magazines market. As more and more users get their news from social apps, Facebook's Instant Article has thrived, and after Twitter rolled out its new "Moments" product, the company began to list the app in the News & Magazines category on Google Play in a bid to reposition itself. Flipboard and Twitter lead the pack in News & Magazines, which represents a serious challenge to traditional media.
Among the top 10 News & Magazines apps in these countries, traditional media still have a place at the table. Great Britain has The Guardian, Daily Mail, BBC, and Sky TV; Germany has SPIEGEL ONLINE, FOCUS Online, and n-tv; and France has Le Figaro.fr, Le Parisien, and 20 Minutes.
Like the European market, the Chinese market has also undergone transformation, as a personalized news revolution has changed the landscape. Personalized recommendations were first inspired by news aggregation apps. First, they collect information about content that interests users, and then they use algorithms to carry out personalized distribution. In this sense, personalized recommendation came from aggregation but is a functionally upgraded version of it.
In the Chinese market, the top five News & Magazines apps are all personalized news products that utilize aggregation. Aside from Tencent News, which was once a traditional portal news site, all traditional media apps have retreated to spots six through nine.
In the rankings of Great Britain, France, and Germany, the only international app to break into the top ten for all three besides Flipboard and Twitter has been News Republic. News Republic was originally the product of a French company, and has been operating in Europe for six years. After Cheetah Mobile acquired News Republic it continued to work on amassing copyrighted content. At present, News Republic has already established partnerships with over 2,300 media partners worldwide in 47 countries and 43 languages, and adds over 100,000 new articles each day. Additionally, Cheetah Mobile has been able to leverage its own success and experience in the Chinese market to improve News Republic with big data and personalization algorithms. The data has shown that News Republic has performed even better in Europe with its precise personalization algorithms, copyrighted content, and vast offerings. A similar competitor has yet to challenge News Republic in Europe, where the app's outlook remains extremely bright.
4. Where are the major European app publishers?
According to Cheetah Lab's 2016 Global App Development Report, the top US and Chinese publishers account for 13 of the top 15 app publishers worldwide with a virtual monopoly. In Europe, only Russia's Yandex has pushed its way into the top 10, while not a single publisher from Germany, Great Britain, or France even made the cut.
The rankings of the top 15 game publishers tell a very different story: seven of the top 10 game publishers are European companies. The top publisher, King, is a British company, while second place was claimed by Supercell, a Finnish company. Chinese publisher Tencent came in at number three. It is worth noting that in 2016, Tencent acquired an 84.3% stake in Supercell for $8.6 billion USD; following the acquisition, Tencent became the world's largest gamepublisher based on income.
Similarly, number-one King was acquired by US company Activision Blizzard, Inc. in 2015 for $5.9 billion USD.
5. The rise of Chinese Internet giants: innovation is the strongest firewall
The rankings for Great Britain, France, and Germany show that local European publishers make up less than 50% of the top 30 app publishers, which shows that local European publishers have not been able to achieve much regional coverage. Meanwhile in China, where the mobile internet market is more publisher, all of the apps in the top 30 were from local publisher. In all app categories, foreign publishers have a very difficult time succeeding in the Chinese market. One major reason for this is that Facebook and other giants are at present banned in China, but more importantly, China's mobile internet market is highly innovative.
1) Streaming drives content-centered e-commerce
The hottest part of the Chinese internet sector at present is streaming apps, and in the eyes of all major e-commerce platforms, streaming has already become one of the most important methods of content marketing. Traditional e-commerce traffic drivers are becoming less important, while "user" power is rising in the global internet sphere. Streaming and content may become the next big traffic drivers.
The "streaming + e-commerce" model of the influencer economy and collaborations between celebrities and e-commerce platforms have benefited all parties involved. According to incomplete figures compiled by Cheetah Lab, almost all of China's top 10 e-commerce apps have rolled out streaming functionality, using streaming to facilitate personal shopping or allowing shoppers to stream themselves.
E-commerce platforms are also putting personalized content on their apps, embedding ads within that content, and telling their stories to users, which also raises conversion rates.
2) The sharing economy
The concept of the sharing economy, which is highly popular at present, has led to a range of new apps in China, and ride hailing apps, some of the first to test the waters, are a prime example.
Uber is the global leader in the ride hailing shared economy, but it was not able to outmaneuver Didi in China. Building out from its basic ride hailing functionality, Didi expanded into rental cars, carpooling, buses, test driving and test riding, cross-provincial carpooling and other services. The domestic company also integrated WeChat Wallet and coupon sharing to increase interactivity with users. In the end, Uber China's China story ended with its acquisition by Didi.
What was even more astonishing than Uber’s rapid rise and fall in China, was the effect that China’s strict new car hailing regulations had on the industry. According to regulations that were proposed in October 2016, but didn’t go into effect in Shanghai and Beijing until December, drivers for car hailing services were required to possess local "hukou" (residency permits) for those cities. We have witnessed a negative impact on Didi Chuxing’s performance over the past month since the policies took effect.
At the beginning of 2017, Didi Chuxing announced plans to invest in Brazilian car hailing app 99Taxis; launched an international version of its flagship car hailing app Didi; and made a strategic investment in Ofo, a popular Chinese bike-sharing app. Based on these moves, we can see that Didi Chuxing is now expanding the scope of its business to target the overseas car hailing and domestic bike-sharing markets.
After the big showdown between Didi and Uber, new sharing economy apps began to appear, including Mobike and Ofo, both bicycle sharing apps.
From 2015 to 2016, the rideshare market's total number of users exploded from 2.45 million to 18.86 million. BigData-Research predicts that in 2017, the number of users will continue to grow quickly and reach 50 million users by the end of the year. Ofo completed Series D funding of $450 million USD in March of 2017, and Mobike completed Series D funding of $300 million USD in 207 as well. Bike sharing has become one of the hottest investment choices on the market.
Chinese bike share companies are also expanding into foreign markets, and Europe might just be the next stop.
3) Personalized news recommendations
The ferocity of competition in the Chinese news and information app market may be unique in the world. The major players from the portal era - Sina, Sohu, Netease, and Tencent - have not backed down, while strong newcomers have also emerged. One of these is Jinri Toutiao, which has earned its top position in the Chinese news market through personalized recommended reading.
Of course, the major internet giants didn't just sit around and watch the growth opportunity represented by personalized news recommendations pass them by. These established players rolled out Tiantian Kuaibao, Yidian Zixun, and other products. At present, these apps are difficult to differentiate in terms personalized news recommendation technology, so they have begun to leverage their own resources to become more competitive, and have set their sights on the short video sector. Personalized recommendation is set to become the hallmark of the Chinese news and information app market.
III. China and Europe
1. Chinese app developers in Europe
Tmall Global, the AliExpress Shopping App, and the Alibaba.com app are the three main pillars of Alibaba's international strategy, and they focus on cross-border e-commerce, export B2C, and export B2B respectively. The AliExpress Shopping App has done well in the rankings in European countries across the board.
Rankings for the AliExpress Shopping App in European Countries
Outside of e-commerce, Alibaba Cloud also announced that it was entering the European market. It has officially begun operations in its Europe-based data center and also established a strategic partnership with Vodafone. The two companies will work together to provide cloud computing services in Europe. Alibaba Cloud's Frankfurt, Germany located data center has achieved Tier 3 status. In terms of products, Alibaba Cloud's computing, storage, security, and middleware will all be rolled out in its European location.
In the 2016 Global App Development Report, Tencent came in third overall in the world, and first among Chinese companies. Tencent's success could not have happened without the Chinese market, and of Tencent's products, WeChat has contributed the most in terms of market share, closely followed by QQ. Among its global services, Tencent Games has already become the largest game publisher in the world based on revenues following its acquisition of Supercell.
As the internet gaming, streaming, social, and financial sectors have continued to flourish, Tencent, with its strengths all of the aforementioned sectors, has begun to make moves into international markets. In December of 2016, Tencent Cloud announced that it would open 11 overseas service centers, including three European centers in Frankfurt, London, and Amsterdam.
Currently, Baidu's mobile product lineup is already available in over 200 countries and regions, and these products boast 1.6 billion users, of which 300 million are monthly active users. In terms of app development, Baidu has opted to leverage its wealth of experience in China to develop products tailored to regional needs. For example, it does streaming in Indonesia, group-purchase discounts in Brazil, and Baidu MoTu in the South Korean and Southeast Asian markets.
In the future, Baidu will roll out its "we-media" platform in Japan and continue to expand into international markets with content, services, and light social products. Baidu Maps has become the frontline product of the company's European strategy: in June of 2016, Baidu Maps officially went live in 32 European countries, and the company aims to reach 50% international users by 2020.
Cheetah Mobile is the example of success among Chinese app developers abroad. According to the company's financial statements, over 80.3% of its users come from foreign markets, mainly North America and Europe. Cheetah Mobile focuses mainly on utility products, such as Clean Master, CM Security, and Battery Doctor. Additionally, Cheetah Mobile is the number three game developer worldwide. Its hit game Piano Tiles 2 was a runaway success, claiming the number one spot on the overall app ranking charts in 117 different countries.
In 2016, Cheetah Mobile acquired global mobile news services operator News Republic for $57 million USD and began a content strategy transition. News Republic has also become Cheetah Mobile's most powerful weapon in its European market expansion.
According to data from the Rhodium Group, China's investment in Europe has exceeded Europe's investment in China since 2013, and in recent years the gap has grown ever wider.
The Chinese home appliances company Midea Group acquired German industrial robot manufacturer KUKA AG in 2016 for $4.5 billion USD. KUKA is a leader among industrial manufacturing process digitization in the German market, and its robots have already been used to assemble Audi sedans and Airbus planes.
Chinese printer manufacturer Apex Technology Co., Ltd. partnered with PAG and Legend Holdings subsidiary Legend Capital to buy out the internationally renowned printer and software company Lexmark for $2.5 billion USD.
In 2016, Beijing Enterprises acquired German waste processing company EEW Energy for $1.44 billion euro, setting a record for the most expensive acquisition a German enterprise by Chinese capital.
These and many other acquisitions have repeatedly shown the China's ever growing capital advantage. On the other hand, they have also shown that Chinese companies are still clamoring for European technology.
IV. An Overview of Mobile Ads in Europe: Three major opportunities
1. Europe mobile ad penetration
According to data collected by eMarketer as of December 2016, mobile ad penetration has been gradually growing as a portion of all media ads. In Western Europe's 16.7% mobile ad penetration came in third behind the Asia-Pacific and North American regions. And Central and Eastern Europe‘s 11.4% ranked 4th.
Western Europe also came in third in terms of money spent on mobile internet ads, and this figure continues to rise.
Great Britain, Germany, and France were all big spenders in mobile advertising.
2. Development trends in Europe's mobile advertising sector
Through an analysis of the data, Cheetah Lab has discovered several development trends for mobile ads in Europe.
Trend 1: Increased investment in in-app ads
As smartphones have become a household item, app functionality has improved and more and more users have chosen to install and use apps rather than browsers. Advertising has also seen a corresponding increase in investment in in-app ads.
The figures show that as of the third quarter of 2016, spending on in-app ads accounted for more than 80% of all spending on mobile ads for programmatic ad in most countries, while in China the figure was over 99%.
Trend 2: Content ads
A survey of US and Western European users found that respondents were fed up with old kinds of advertising. Pop-up ads, mobile phone ads, ads embedded before the start of online video content, and banner ads were most hated by users. Meanwhile, most users had begun to use ad-blocking software or features, which has greatly impacted the effectiveness of advertising and profits from it.
But is it really true that advertising and the user experience are a zero sum game? Not necessarily. In China, there has been a new wave in marketing. If a famous person wears a certain brand of clothing, his or her fans will search for the same outfit online. Variety shows have started to find ways to mention the products and names of their sponsors. Online, users may read an article and get to the bottom, only to find that the article is an ad. But users don't feel used - the more interesting the advertising methods, the more likely users are to approve of them. And this is not just a Chinese trend: a survey of short video users in Great Britain found that 63% of respondents said that they hoped advertising could work with brands to innovate and not just use the same old methods. Additionally, more than half of respondents said that they would be more likely to accept an advertisement if it was related to the content of the video they were about to watch.
Trend 3: the rise of vertical video
It's an undeniable fact that video ads have become a global trend, and behind this trend is vertical video, the format best adapted to mobile screens. Vertical video fits perfectly on the mobile screen, and it offers users more content and a better user experience. Most internet giants, including Snapchat, Vimeo, ESPN, and Periscope, have developed vertical video functionality. All of this applies to advertising as well. Users don't need to turn their phones to the side in order to enjoy a video ad: with a vertical video ads, they can see more content and have a better experience.
Case Study 1: Snapchat
In October of 2014, Snapchat rolled out its first vertical video ad. According to Snapchat's figures, the rate of completion for vertical videos is nine times higher than that of horizontal videos.
Case Study 2: Facebook
In February of 2016, Facebook released Canvas for full-screen advertising embedded timelines.
Case Study 3: News groups
During this year's Cannes Lions, an advertising festival, the US industry heavyweight News Corp released its first vertical video ad. Two of the company's media outlets, the New York Post and The Sun, became the first to provide this format of advertising to readers, and they were followed by News Corps' other papers, including the Wall Street Journal. News app News Republic has also been developing vertical video ads.
Case Study 4: Cheetah Mobile
Cheetah Mobile has more than 612 million monthly active users. Its products cover categories including social, short video, communications, live streaming, news, utility, photography and games. Cheetah Mobile's product line has also embraced the philosophy of "vertical video in all social moments," providing advertisers with a comprehensive selection of vertical video advertising options, including pre-social moment, in-social moment, utility moment and content moment.
According to an IAB report, over 90% of advertisers and media companies have said that in the next year they plan to increase investment in vertical video and believe that vertical video ads can increase their revenues.
Advertisers who have invested in vertical video:
Through comparison, we have discovered that, as Facebook, Snapchat, and Twitter have achieved global success, and as Asian internet companies like Naver and Xiaomi have achieved market values of over $10 billion USD, Europe's mobile internet development has not yet achieved comparable results.
One contributing factor is the relatively small population of each European country's market. Another factor is that language barriers between regions have made it harder to expand across borders. These two factors combined mean that it will be difficult for Europe's mobile internet developers to replicate the explosive success seen in places with large populations, like China and the United States.
Of course, Europe's mobile gaming industry is highly developed. European gaming companies like Gameloft and Rovio are first-class mobile game producers, which is perhaps due in part to the fact that Europe was the first content to undergo industrialization, giving it an edge in technology, and it has historically been a bastion of the arts.
As the mobile internet craze has taken the world, Europe has also joined the mobile internet era. In today's global market, the United States and China have already seen explosive growth in streaming and short video. The European market may see greater development in the near future, and the use of vertical video is likely to expand rapidly there.
Notes on the data used in this report:
1. Rankings are based on weekly active user penetration, and are only representative of Android platforms.
2. Unless otherwise noted, data comes from Cheetah Mobile's big data platform libra. On August 22 2016, libra began to use a new data source, greatly expanding the amount of data available for study. After the transtion, the more multifaceted data, which includes figures on daily, weekly, and monthly active users as well as new installation and retention rates, has allowed libra to more comprehensively and precisely uncover the state of the mobile app market. Libra will build on this to produce more authoritative and detailed reports on the mobile internet industry.
3. Data is collected in the process of the normal daily operations of Cheetah Mobile products and is in compliance with relevant laws and regulations.
4. Data is impacted by the scope and distribution of Cheetah Mobile prodcuts.
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