"The Year of the Phone"...SinoFriends

One of the more intriguing presentations delivered at the Social Networking Conference in Miami was from Dr. Song Li, Chairman of SinoFriends Inc. in China.

While the content was 100% focused on the Chinese market, because of the sheer size of the market, there was some excellent insight shared on emerging trends within social networking and how mobile will come into play.

Dr. Li quit his job on Wall Street in 2003 and co-founded MemeStar, the largest Chinese mobile SMS-based social networking service in China. MemeStar acquired 2.2 million paying members within two years of its creation.

But today’s presentation was focused on his current SinoFriends properties. SinoFriends launched four years ago and is the leading (and oldest) online dating service in China that charges its users $275US per year. There was an unconfirmed claim that the network has been acquiring about 1 million new users per DAY.

Aside from sharing a great deal of statistics about the Chinese market (too many to blog about), Dr. Song Li laid out some interesting facts about how carriers in North America make it extremely difficult to match the same revenue generating opportunities that exist in China.

After showing some current numbers on PC based revenue vs. mobile, it was clear that mobile was driving substantially higher revenue. In china 90% of phones are bought from mobile phone vendors. In fact carriers only sell about 10% of the mobiles. This provides two channels for entrepreneurs to work with.

Dr. Li went on to explain that 70% of the mobile phones were imported from Europe. The top four phones included Nokia, Motorola, Samsung and Sony Ericsson. Nokia leads with 30% market share.

In China, it seems that phones truly are fashion accessories. In 2007, about 150 million mobile phones were reportedly sold in China but Dr. Li spoke of a Taiwanese company that provides a platform to Chinese domestic mobile phone designers called MTK most of the Chinese domestic vendors license MTK and manufacture phones on its platform. Factoring in MTK, there were another 120 million units sold (on top of the 150 million).

Dr. Li described a fascinating Second Life type economy that appears to have emerged in his market. One particularly popular application among females under 25, is the purchase and customization of avatars for their profiles. Applications allow consumers to change hairstyles and buy clothes. The stroke of brilliance here is that the clothes expire. They get dirty and have to be virtually washed, they get damaged, and need to be replaced, they wear out and girls shop for more.

Another revenue generating virtual experience is the community living concept. Boys and girls start a life together online. They buy an apartment and spend real money to furnish their virtual lives. In China, this is a well-established business model.

Dr. Li ended the ‘revenue model” discussion with some insight on Instant Messaging and it’s potential to drive enormous revenue through micro-transactions.

With all the hype about distributed applications these days, it’s no surprise that Dr. Li is starting to place more focus on “SinoFriends Mobile”. This company is a newer venture providing mobile social networking and entertainment services that are embedded in over 15 million phones in China. He feels that this is an area that has incredible growth potential over the next few years. Interestingly, he reminded listeners that there is still a conversion rate to contend with. Currently, the company is seeing a 15% conversion on user activity of the applications that are embedded into the phones.

So, as expected, the final note here was that the challenge is to build true value in the form of entertainment or utility and then leverage the existing social graph.

The company generates $15 million US. They’ve got to be doing something right.