Implications of China's New Internet Regulation on Big Tech: Short-Term Impact and Long-Term User Base

In the ever-evolving landscape of China's internet regulations, the latest measures set to take effect on January 1, aimed at curbing internet use among minors, are creating ripples in the tech industry. While immediate consequences may be limited, analysts foresee potential long-term impacts that could reshape the user base of major tech companies. This article delves into the details of this new regulation and its potential implications for Big Tech in China.

Understanding the New Regulation

The recently passed "Regulation on the Internet Protection of Minors" is a comprehensive framework designed to create a safer cyberspace for those under the age of 18. The Chinese State Council's final draft, made public on the government's website, highlights the regulation's primary objectives: safeguarding the physical and mental well-being of minors and protecting their rights and interests.

This regulation marks a significant step in China's ongoing battle against internet addiction among its youth, particularly in the context of online video gaming. With a total of sixty articles, it imposes various responsibilities on stakeholders, including smart device manufacturers, mobile service providers, local governments, educational institutions, and parents.

Implications for Device Manufacturers

The new regulation places a critical obligation on local smartphone giants like Xiaomi, Huawei, and Oppo. These manufacturers must either pre-install minor-protection software or provide clear instructions on how to install it. This step underscores the government's commitment to ensuring that young users have a safer online experience.

Impact on Gaming and Short Video Services

Gaming and short video service operators, including industry giants like Tencent Holdings, ByteDance, and NetEase, are also under scrutiny. They are required to offer a "minor mode" on their platforms, further emphasizing the need to protect young users from excessive or harmful content. This move is particularly significant given the size of China's youth internet user base.

Short-Term Impacts on Big Tech Firms

In the short term, the impact on major tech companies in China may be minimal. Zhang Shule, an analyst at CBJ Think Tank, pointed out that minors typically constitute a small portion of the user base for leading Chinese gaming companies. For example, Tencent, the world's largest video gaming company, reported that minors accounted for only 0.4 percent of total time spent on domestic games and 0.7 percent of gross receipts in the first quarter of the current year.

Long-Term Consequences

While the immediate effect of the regulation may be limited, there is concern about its long-term consequences. As minors grow into adulthood, the rules may shape their online habits and preferences, potentially affecting the user base of other internet products and services. Zhang Yi, founder and chief analyst at Guangdong-based consultancy iiMedia, anticipates an impact on the active user pool for mobile services. Big Tech firms may miss opportunities to build brand loyalty and mindshare among young users.

Research from Sinolink Securities supports this view, suggesting a limited immediate impact but the potential to erode usage time and the future user base of certain platforms. Minors currently constitute a significant portion of Chinese mobile gamers and users on ByteDance's Douyin, the domestic version of TikTok. Any restrictions on their use could have far-reaching consequences for these companies.

The Ongoing Battle Against Internet Addiction

China's persistent efforts to combat internet addiction have resulted in a patchwork of regulations from various agencies, at times with overlapping rules. The Cyberspace Administration of China, earlier this year, proposed its own regulation, emphasizing the need for a "minor mode" in tech products. This mode would restrict usage to 40 minutes per day for children under 8, one hour per day for those aged 8 to 16, and two hours for those aged 16 to 18, with additional time requiring parental consent.

In 2021, the National Press and Publication Administration implemented a strict regulation limiting gaming time for minors to one hour on Fridays, Saturdays, Sundays, and statutory holidays.

In Conclusion

China's latest internet regulation aimed at protecting minors is set to impact the tech industry in various ways. While immediate effects may be limited, the regulation's long-term consequences on user habits and the user base of Big Tech firms remain a subject of concern. As the rules take effect, the industry will closely watch how they shape the future of internet usage among China's youth.

#internetaddiction #chineeseinternetregulations #minorinternetprotection

Please subscribe?to keep updated on what is happening in the digital technology space. Each time I publish, you will get a notification on your email or LinkedIn

Note: If you have a marketing or tech-related event or product that you would want covered in my weekly newsletter, feel free to reach out at?[email protected] We now have thousands of professionals across the world subscribed to this newsletter