Why are these internet companies willing to spend so much money on mobile-app services? According to China Internet Network Information Center (CNNIC), China’s mobile internet market exploded sharply during recent years, with the total number of mobile internet users climbing to 420 million by the end of 2012. The number of mobile-map users gained the biggest increase (35%), accounting for one third of total mobile internet users. Although the CNNIC pointed out navigation and route searching are still the most widely used mobile-map services, LBS, local-based service such as finding popular merchants, checking in location for coupons and sharing check-ins with friends, is increasingly popular and the number of LBS users has reached nearly 40% of total mobile-map users in China.
Currently, LBS providers can offer various value-added services, such as check-in services and promotion information push services to merchants to help them attract nearby customers. Customers quickly get used to value-added LBS's to help them find the suitable products they want to buy or the places where they want to consume. Therefore, LBS providers can acquire extensive consumer and merchant resources, and then they can work together with payment companies and banks to promote the mobile payment business which is also booming in China. For example, Baidu founded its LBS department last year to promote its online-to-offline (O2O) strategy which aims to integrate offline service information provided by various merchants such as movie theaters, restaurants and shops with this mobile Baidu. Alibaba’s investment into Amap will also help Alipay, the largest third-party payment company and a unit of Alibaba in China, to develop its mobile payment services.
However, LBS is still in a nascent stage in China, and all of the main players are still grappling with a few challenges. For example, none of them, including the large mobile payment providers, have figured out the perfect business model. Moreover, because LBS need a large amount of work on data process and analysis, these players have a great demand on BI or big data solutions. As the number of LBS and mobile payment users keeps a rapid growth and the mobile internet market continues to grow in China, we expect that foreign vendors who can provide business consulting services and big data solutions will have enormous opportunities in the future.