Entrepreneur shows aptitude for app ads

Guangzhou-based YouMi couldn't find its niche, so it created its own

Many Chinese youths do not know what they want to do when they graduate from college, but Chen Di was different - even as a child, he wanted to have his own business.

His plans were to work in real estate, finance or technology, but he did not expect to land in the mainland's first mobile application advertising company. Nor did he see himself on this year's Forbes China list of 30 outstanding Chinese entrepreneurs below 30 years old, at the age of 26.

The company Chen founded, Guangzhou-based YouMi Mobile Internet Information and Technology Service Co, has worked with more than 5,000 mobile phone websites and more than 50,000 apps. It covered nearly 200 million consumers in 600-plus Chinese cities by January, generating accumulative revenue of 60 million yuan ($9.67 million).

"YouMi's roots go back to Chen's days at the South China University of Technology, when he set up a business with other students. YouMi's business partners include China Mobile, the country's largest mobile phone service provider, Taobao, its biggest e-commerce platform, and 360buy, one of China's largest e-commerce websites," said an article on the Forbes website.

In his first year at the university, Chen began serving as an agent for a bank's credit-card business.

"I then felt that in traditional business, you receive your product supplies from others without any core competitiveness. It doesn't mean much to me," he said.

Chen then turned to his major, computer science, and attended innovation contests sponsored by the likes of IBM Corp and Microsoft Corp. With other students, he also developed software outsourced by companies.

"Some students enjoyed the process of writing programs but I preferred turning the technology to productivity."

In judging business potential, Chen considered large computers too complicated for a young entrepreneur and found the personal computer segment already highly developed.

He felt lost until he found that mobile phone games were an emerging market full of opportunities.

In an entrepreneurship program sponsored by the Central Committee of Communist Youth League of China and China Mobile, a game Chen had developed was downloaded more than 2,000 times a day. However, the reality was that few game users were willing to pay for such games, being accustomed to free offers.

New business model

Chen then hit on a business model that involved inserting advertisements into apps, a prospect strengthened by Google's acquisition of AdMob, one of the world's largest mobile advertising networks, for $750 million in 2009.

He launched his mobile phone advertising platform on April 1, 2010, three months before he graduated and became CEO of YouMi, which shares advertising revenue with app developers.

"If I failed to do something big in my fourth year at the university, I wouldn't be able to keep up with my teammates who studied at prestigious universities," Chen said.

"The business is much more than small advertisements. It solved the issue of app developers making money, when previously they might not have had enough money to buy food for their teammates."

YouMi received angel investment of about 10 million yuan in early 2011, which was crucial as 20-plus companies doing a similar business had mushroomed, whipping up price wars.

The company's losses were not stopped until YouMi launched its offer wall product, which integrated the advertisements into games. Gamers could then click on the advertisements to get points to advance in the games.

The product was an innovation in the mainland market. As Chen put it: "The Chinese word for offer wall, jifenqiang, has now become widely used in this industry."

With big Chinese IT players such as Tencent Holdings and Baidu Inc joining the race last year, the market started to stabilize with increasing diversification on different platforms, Chen said.

"The market creates more opportunities when it is more mature, with more means to subdivide it. When we couldn't compete with the heavyweights, we opted for diversification."

YouMi also holds events for developers and provides customized services to small and medium-sized enterprises to form its own ecological chain.

Huge potential

YouMi, which is one of the industry's top three companies in the mainland, is in talks with a few investors for more input later this year. The company expects its revenue to grow to between 80 million yuan and 100 million yuan this year.

"We are proud that we started to make a profit last year, which is not common in this industry," Chen said.

As smart-phones continue to gain popularity and mobile behavior such as gaming and shopping gets more mature, telecom operators and large enterprises are working to influence consumers and enlarge their market share, Chen said.

China's smart-phone market could grow by 44 percent this year, with total shipments approaching 300 million units, according to IT consultancy IDC.

As an emerging industry, the mobile Internet offers huge potential and mobile advertising is developing quickly, said Hu Jinlong with the Information Network Engineering Research Center of South China University of Technology.

Mobile Internet users now outnumber fixed-line Internet users in China, he said.

Advertising is a major source of income for Internet companies and mobile Internet advertising has become very important, he said.

While fixed-line Internet users increased by 1.54 million to 179 million in February, mobile Internet users surged by 16.07 million to 803.45 million, including 774.62 million mobile phone Internet users, according to the Ministry of Industry and Information Technology.

YouMi translates to "having rice". Chen believes the early bird has the upper hand in getting rice: "If you do something early, you get the experience and can think more."

YouMi's products have been copied by more than 20 companies, he said.

"You need to innovate constantly, launch new products in a timely manner and respond to the market."

Asked to draw a similarity between his company and other big IT names, Chen said they share the experience of early financial strain.

"I see the stereotypical views and denials in a positive way as they make you stronger inside. You don't depend on external things, but on your own development," he said.