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Why are websites in China decreasing?

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The number of websites in China is falling even though new businesses are growing.

Picture of a laptop computer with a red ball with the Chinese emblem on it

Earlier this week, I wrote about how digital consumers will drive demand for domains in China. Today, I’ll explore why website growth isn’t keeping up with China’s internet population.

Domains are meant to be used for building websites. The more companies we have, the more websites we can expect, and so the more demand for domains. However, this rule seems to have broken down in China recently.

China is a paradise for startups, and it is a common thing for young people to start their own businesses. In the first quarter of this year alone, 5.8 million companies were newly registered in China, representing a year-on-year increase of 58% according to China Global Television Network.

The National Development and Reform Commission has indicated that there were 27 million corporations and 65 million sole proprietors, giving a total of 92 million businesses operating in China in 2017. So, by now we can expect the number of Chinese businesses to be well over 100 million.

But how many websites does China have? Look at the following chart with data compiled from CNNIC reports.

Chart showing a decline in Chinese website growth

Here are two things you may notice. First, the number of websites is small at 4.4 million, which is less than 5% of the potential demand from Chinese businesses. Second, the number has gone negative over the last three years. Why?

I speculate that it has to with the overwhelming attractiveness of eCommerce platforms such as Alibaba, Pinduoduo, and Chinese eCommerce is a massive $2 trillion market featuring constant injection of innovations such as celebrity-driven live streaming ecommerce, group-buying based on viral marketing among the 1 billion Wechat users, highly integrated payment and delivery services, and the Consumer-to-Manufacturer (C2M) model.

Therefore, many business owners spend their energy selling on eCommerce platforms instead of building and promoting their own websites. That’s why I regularly find it difficult to locate a company’s website when using Baidu search.

In the long term, however, eCommerce platforms will mature and become more and more restrictive. Then business owners will realize the importance of having their own digital address (aka domain) where they have complete control of their destiny, in addition to using eCommerce platforms and other retail outlets. For this reason, I’m very hopeful of the future of the domain market in China.

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