China Adds 25 Million Web Users in First Half of 2012

The number of web users in China has grown by 25 million since the end of 2011 to 538 million, according to a report from the China Internet Network Information Center cited by USA Today. That’s a growth rate of 11%, which sounds strong, but is slightly lower than it had been.

The key driver for the growth in web usage is smartphone penetration. China now claims 388.25 million mobile Internet users, or 39% of the country’s mobile phone owners. Some 70% of mobile phone owners now have mobile access to the web.

The phenomenal growth of Internet usage in China is not translating into revenue for the country’s leading web companies however. We noted earlier this week that growth rates of 50% have fallen to a range of around 10%-12%. Even in a country as large as China, growth rates of 50% have to stop at some point.

Consumers have not been spending, choosing instead to save as the country’s overall economic growth rate has declined. A lack of sales leads to a slowdown in advertising, which has hit the Chinese companies hard.

Most observers expect the current situation to be only temporary. Once the country gets back on a faster growth track, consumer spending is expected to loosen up. The government is once again encouraging private investment, but there haven’t been a lot of takers there either.

Even the vast numbers of Chinese web users don’t count for much unless those numbers can be monetized. And that does not appear to be happening right now in the Middle Kingdom.

Paul Ausick