Mobile madness, SARFT stipulations and engaging outlets for self-expression will all be things to watch in China’s new media space in the coming year. A recent chat with Wayne Shiong, partner at Bertelsmann Asia Investments, revealed the interesting trends to look out for and ways that budding entrepreneurs can find their niche. Launched in 2008, Bertelsmann Asia Investments focuses on early-to-growth stage investments in technology, media, and telecommunications (TMT), business processing operations (BPO) and education.

For the next year, what will you and the team at Bertelsmann be paying close attention to?

Here at Bertelsmann, I am a part of the investment team, and 99 percent of our activities are in China. We follow the media consumer market, which includes advertising, social media, games and web tools as well as people’s behaviour online. We believe that the internet will move away from the PC and become more cloudbased supported. However, one thing will never change, and that is content. In addition, we are also tracking education and business services. Over the longterm, it is defensible and stable compared to internet fluctuation. There are currently seven people here at BAI, soon to be ten by quarter two of next year. The team is very international and culturally blended, and we are also a very young group, mostly in our 30s. That really helps because we are in the same age group as the people we track.

What about the specific new media trends for 2012?

I think that mobile content will look more and more like media. Due to the increased penetration of the Android system, its drop in price, and of course the increasingly popular rollout of the iPhone and the iPad on the local market, mobile media is sure to be one of the biggest trends. As for the internet, the Weibo will continue to be big. Sina is big in all of the top-tier cities, and has 30 million active users every day. Tencent is also very powerful in second and third tier cities, and they have around 40 million active daily users. I believe that more apps will be developed and competition between the two will heat up. Renren is more of a niche media geared towards college kids, and frankly, the college penetration in China is not that high as yet. But each of these companies has its own challenges. Sina cannot penetrate downward. Tencent is mainly in third and fourth-tier cities, but they are having a problem moving up. Renren is popular among students, but when those college students on Renren graduate and get a job and start to make money, they move on to other platforms. Douban is even smaller, and a cultural product that is very user-content driven, with movies and books and music and appeal to an even smaller demographic. Also, time spent on television will keep dropping. The new SARFT regulations have cut advertising time, so one thing that will be interesting to track is radio. A lot more people have cars, and radio has seen a 30 percent growth in the past year.

In your opinion, where can young entrepreneurs find their niche in the rapidly-growing new media market?

In the mobile space. There is a low cost for a start-up and writing code is easier than it was ten years ago, and servers are really simple to obtain. In another seven years, I believe there will be a paradigm shift where mobile phone apps will be used to do things that are now being used for push-to-talk. Apps like Hotel Finder will be the new Ctrip. App users will also turn to their mobile devices for life services. The mobile space will be an interesting one to watch. However, there will be two key challenges. Attracting capital will be more difficult because there is no defined path for growth, given the nature of the business. Then there will be the issue of the big groups like Sina Weibo, which has games and applications, and you have to be careful about stepping on the toes of the big guys. But what will make it big is very creative content. Entrepreneurs should spend time on the things that the big guys do not want to spend the money on. Video traffic is growing bigger and bigger and there is a significant amount of data from music videos and movies, but increasingly, people are looking for a way of expression and interaction, and video may be an interesting format, but we have not seen any major products come out in this field. However, most of the online companies are 1.0 or 1.5. Douban 2.0 and while it can be argued that Weibo is 2.0 but it is still more media than a social network, and maybe this is partly due to the education of its users. A lot of people in lower-tier cities have an iPhone, but may not fully utilize it.

Based on what you have described, do you think there will be any entities that stand to lose from the mobile push?

Overall, I believe the television stations stand to suffer, but they are state-owned, so it is different from the US. More specifically, I think the companies who are not innovating will stand to lose. In the media business, you have to follow the trend. Weibo is reinventing a lot of things, and Sina is not settling to be just a big company. They are still thinking like entrepreneurs and still growing very fast. Companies in wireless SP space here are not losers, but failures. They were too comfortable with their relationships with carriers and they thought it would last forever.