Should China Be Next on Your Marketing Agenda?

Earlier this month, the research group CNNIC reported that China’s net population grew to 210 million by the end of last year. Many companies are already rushing out to find Mandarin specialists or machine translation software to localize their websites.

However big those numbers are, don’t hyperventilate. Instead, back slowly away from your Rosetta Stone language learning CD, take your hands off those catalogs of translation agencies, and turn off your favorite machine translation site. Take a deep breath. Center.

Let’s review some economic facts that should help you decide where to spend your 2008-2010 budgets for Web site globalization. First off, don’t think sheer numbers of people online. Instead, consider “economically active” online populations. In other words, let’s look for the countries whose consumers and business buyers are most likely to open their wallets to buy something online.

Gross domestic product (GDP) is a good place to start. In 2000, the seven biggest countries by GDP were the U.S., Japan, Germany, France, Italy, the U.K. and China. By 2007 China jumped to being number four. Those seven countries look like a good target list for your online globalization efforts, don’t they?

For our report on which countries matter most on the web, we calculated how much purchasing power could be addressed by translating sites into local languages and localizing their transactional capabilities. Focusing on just the online population, we used the formula that cross-tabulated GDP with Internet penetration as a proxy for internet-accessible wealth; we call the resulting number “online GDP” or “e-GDP.” Our next step was to pry apart the language groups of polyglot nations and assign their share of national economic activity to their respective co-linguists. The result is a tally of e-GDP by language and a clear indication of which languages make the most sense for website globalization.

Guess what? Last year just six languages gave you 88% of the world’s e-GDP. Chinese was not one of those six, but English and Japanese were. Compare: Website owners can access 13.2% of the planet’s e-GDP by localizing for Japan, but only 1.1% by supporting the People’s Republic of China (PRC) Simplified Chinese. What that means is China has lots of people online, but they’re mostly browsers, not yet accustomed to pulling out their wallets to buy stuff online.

Web site owners can make more money online now from selling to Anglophones, speakers of several European languages, and the Japanese. Today those Web site owners will more likely aim to build their brands in anticipation of when Chinese consumers start spending online. Some companies are already doing that — witness United Airlines as one such firm trying to establish its travel beachhead.

Yes, China’s online population will soon top that of the United States. The combination of population and economic growth will make the PRC a power to contend with in the real world, but for now, China’s online GDP is small change.

The challenge for most corporate planners will be to manage online globalization rollouts to the countries with the most favorable e-GDP data today without succumbing to the tyranny of really big online population numbers that have yet to be monetized.

How can you figure out what to do? Besides the e-GDP, we’re developing metrics such as the Availability Quotient, a methodology for measuring the available population, to help in this “which country or language first?” analysis.

Don DePalma is the founder and chief research officer of the research and consulting firm Common Sense Advisory, and author of the premier book on business globalization “Business Without Borders: A Strategic Guide to Global Marketing.”