Let’s close out the week with a look at a few developments in the mobile space, including news of a pending crackdown on applications developers that looks quite counterproductive, along with word of layoffs at mobile services pioneer Sina (Nasdaq: SINA). I’ll wrap things up with a look at the hot new location based services (LBS) space, where a company called Jiepang is teaming up with Starbucks (Nasdaq: SBUX) for a promotion that underscores the big growth potential of this new kind of service. All of these tidbits underscore the huge growth potential of China’s mobile services space, which has spawned a huge range of new products but also a somewhat unruly marketplace where competition has also become fierce.
Let’s start with the biggest item, which has media reporting the Internet regulator is preparing to impose strict new rules on all new developers of mobile applications, commonly referred to as mobile apps. (Chinese article) The rumored new rules would require all developers of new apps to get approval from the Ministry of Industry and Information Technology (MIIT) before making their products available for sale.
This kind of approach is typical for China, whose solution to many problems is often heavy-handed government regulation. The MIIT is taking the step to try and bring some order to the unruly market for mobile apps, which is becoming filled with new many products that are both useless and sometimes even harmful. But this kind of regulation is likely to seriously hurt the development of new apps by adding a burdensome layer of new bureaucracy, and the MIIT should really look at alternate solutions that would rely on the private sector to police itself.
Moving on to other matters, media are also reporting that leading web portal Sina is cutting jobs in its mobile services division, as revenue for that part of its business shrinks. (Chinese article) If the report is true, it wouldn’t come as a big surprise since Sina’s mobile service revenues, which were once one of its main money sources, have been declining for much of the last 5 years. Such revenue accounted for just 12 percent of its total revenues in its latest reporting quarter.
The media reports don’t specify which departments are laying off employees, but I suspect these cuts are related to Sina’s services that send mobile subscribers text messages with information like daily weather reports and horoscopes. Such services were once Sina’s biggest money earner and were largely responsible for helping the company to earn its first profits as a start-up a decade ago. But the rise of smartphones and more sophisticated apps has made these older services look like dinosaurs, and I suspect they will disappear from Sina’s revenues completely in the next 5 years.
Lastly, let’s take a quick look at another mobile announcement that will see Starbucks team up with Jiepang for a couple of promotions centered on location-based services. (company announcement) I won’t detail the promotions here, but instead would just use this announcement to draw attention to the fact that such LBS products are quickly becoming very popular for Chinese smartphone users, including myself.
Such services include everything from more traditional map services that help users find their location, to more creative services like helping people to find stores offering promotions nearby. Jiepang is clearly using this announcement with a high-profile player like Starbucks to showcase its own rise in the space. But nonetheless, Jiepang and other LBS specialists could be companies to watch going forward for investors looking for the next hot technology play.
Bottom line: China’s regulator should scrap a plan to impose burdensome new rules on mobile apps developers, while Sina is likely to shutter its declining mobile text-based services in the next 5 years.
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