Demystifying China Online2014’s Key Market Challenges

Presented by Sponsored by: Featuring:

Forrester’s clients say about doing business in China…

Operational challenges are

not intuitive

Laws/regulations are difficult

to navigate and constantly

evolving

Local expertise is difficult to

acquire

You need local relationship

to survive

China needs to be treated as a

separate entity – not as an

expansion of existing

business

The “Great Firewall of China” creates unique problems

› Router blocks:

• 97% of international routers are blocked

• 3% of internal routers are blocked

› Preferential treatment from agency to agency

• Grounds for blocking are inconsistent and subjective

• Some blocks are temporary or due to internal agency mistakes

› All domains are subject to being blocked

• Over 2,500 foreign domains are blocked in China – including some of the biggest and

most used in the U.S. including Facebook and Twitter

› Lag in load time

• Loading a non-Chinese hosted webpage takes an additional 10-15 seconds when

accessed in China

© 2013 Forrester Research, Inc. Reproduction Prohibited

4

Response time in China is far slower than that in other markets

© 2014 Forrester Research, Inc. Reproduction Prohibited 5

Online consumers prefer link saturated sites

Web content hosted outside of China often has performance challenges

TCP/IP round

trip time

Http round

trip time (for

a single

object)

Firewall

filtering

Response

time for a

single object

Response

time for a

typical web

page

Between

China and

US/Europe

(measured

on a single

object)

600MS2,000 –

3,000 MS450 MS ~3 seconds

20-30

seconds

Your users in

China will feel the

pain!

Southern China:

Telecom territory

Northern China:

Unicom territory

The great divide between the north and the south …

Source: China Internet Network Information Center (CNNIC)

Nearly 50% of internet users in China are in rural areas where the internet

connection is unreliable and processing times are extremely slow

Licensing requirements can be a barrier to entry when hosting a website in China

› Beian (Record Bureau) & Gongan (Public Security Bureau) Licenses

• Required for all websites hosted and delivering from within the Great Firewall

› Internet Content Provider (ICP) License

• Required for all websites with a shopping cart

› Additional licenses may be required for:

• Education

• Healthcare

• News/media

• Pharmaceutical

In the case of Uniqlo, the holding company and the flagship site also had to be registered on the ICP license

Some content is easier to host in China than others

Content Type Likelihood to be blocked

Adult/pornography Forbidden

Gambling Forbidden

Political Forbidden

Anti-government Forbidden

Religious High

User-generated (SNS, BBS, blog, sharing) High

News High

Gaming Medium

Entertainment Medium

Software Low

Enterprise Low

e-Commerce Low

Option #1: Move content closer to the greater China area

Hong Kong and

Singapore are two

common hosting

locations

Content distribution speeds with content closer to China

Http round trip

time (for a single

object)

Firewall filtering Total delay (for a

single object)

With direct

peering

connection to all

three major ISPs

in mainland

100 MS 450 MS 550 MS

No direct peering

connection300 MS 450 MS 700 – 800 MS

The limiting factor

with this option is

poor connectivity and

firewall filtering

Challenges with hosting close to China, but outside of China

› Choosing a hosting provider can be tricky

› The great firewall blocks IP

› Sites hosted on the same server (or same IP block)

as questionable content will also be blocked

Option #2:Host content in Mainland China

Southern China:

Telecom territory

Northern China:

Unicom territory

The great divide between the north and the south requires mirrored sites

The sparse bandwidth between the south and the north means you need mirrored sites in both territories

Setting up websites in China is a complex operation

› Businesses must apply for a government-issued

license - licenses vary for each type of site

› The rules for obtaining licenses are confusing

and procedures unclear

› Rules and regulations for obtaining a license

change frequently

› Licenses takes longer to acquire and are under

more scrutiny for western brands

› Local operation requirements

Option #3: Hosting externally with a CDN within China

Geographic

coverage is key

Using a CDN significantly reduces delivery time

Don’t do

anything

Hosting close to

ChinaHosting in China

With CDN

acceleration

User

performance

3 seconds (for a

single object)450 MS 10 – 300 MS 30 MS

Efforts involved

Easy Medium:

Finding a good

hosting provider

can be

challenging

High: Business

must do

everything.

Finding a

hosting provider,

applying for

licenses and

keeping up with

regulations

Easy to

Medium: CDN

partner manages

licenses and

regulations

ROI Time

Frame

N/A – will see

little incremental

growth

Slow Medium Fast

Criteria to choosing a CDN partner in China

› Local coverage• Being able to deal with the north-south divide

• Deliver good performance all over China

› Local know-how and expertise • Knowing how to deal with the evolving regulation landscape in China

• Manage regulatory compliance for you

› Local relationships• Good relationship with local ISPs and network peering points

Criteria to choosing a right CDN partner in China

› Global operations• The ability to deliver content in and out of China

› Global know-how• A mature business that knows how to do business with multi-national companies

› Global management• Let you have a global understanding of how your web content is being delivered

› Mobile optimization• Help optimize the payload sent over the network by compressing images and

page structure based on current network conditions (e.g., 3G versus 4G), thus

helping the slow lane go as fast as possible.

Global Content Delivery Network• Accelerating over 40,000 sites across 140+ PoPs around the globe• Only Global CDN with a presence inside of Mainland China (25 PoPs)• Integrated solutions: Performance, Security and Scalability• Industry leaders in reaching emerging markets

Great Firewall – Slower Websites

40% slower

download time

64kB object downloaded from Test agents inside of China• Guangzhou (inside China)• Hong Kong (outside China)

Source: NetworkBench results, Sep. 2012

Distance = LatencyD

ow

nlo

ad

tim

e (

se

c)

0

10

20

30

40

50

60

70

80

Lon

do

n

Par

is

Gen

eva

Fran

kfu

rt

Osl

o

Mad

rid

Mila

n

Ista

nb

ul

New

Yo

rk

New

Del

hi

Los

An

gele

s

Sao

Pau

lo

Toky

o

Syd

ney

Seo

ul

Ku

ala

Lum

pu

r

Bu

eno

s A

ires

Taip

ei

Ch

engd

u

Ho

ng

Ko

ng

Bei

jing

Gu

angz

ho

u

Sin

gap

ore

Xia

n

Site performance degrades as distance increases

Source: Source: CDNetworks network monitoring POP latencies, 2012

Also found increasing load time of the page from 400ms to 900ms –led to 25% reduction in traffic

Why Does it All Matter?

Faster Sites Perform Better

Found a 100ms of delay reduced revenue by 1%

Found that speeding up their website by 5 seconds increased their conversion rates by 7-12% and doubled # of visitors from search engine traffic

0102030405060708090

100

TBs

Social Gaming CustomerGo-Live: Feb. 2012

3.7x traffic in 6 months

Source: Source: CDNetworks Performance Monitoring, 2012

The Options…

Add more Datacenters• Attempt to get close to end-users• Expensive• Complex• Sync problem• Doesn’t solve performance issue

1

HW Appliances• Expensive• Need IT team• No support for remote

end users

2

Traditional CDN• Only focused on caching• Doesn’t support client-server

apps

3

AD

CW

OC

WO

C

CacheCacheable

Non-cacheable

Next Presentation – Get Faster & More Reliable

Web Performance in China

www.uschina.org www.cdnetworks.com www.forrester.com