Chinese CEO Says "Free" Is the Right Price For Mobile Software

hackingbear writes Sheng Fu, CEO of Cheetah Mobile, a public Chinese mobile software company you probably haven't heard of, but whose products are among the top downloaded products in Android markets around the world, said that the intense competition of the Chinese market leads to products that can compete globally. Many recent university graduates are working in tech, all with their startups looking to find their place in the market, he said. Chinese companies saw the impact that piracy played in the PC software era, and China's mobile companies grew up knowing they would need to make money without getting consumers to open their wallets. "Chinese companies are so good at making free but high-quality products," he said. Sounds like we have a good race to the bottom.

Comments

Nutshell

[binarylarry]

You must defeat Sheng Fu to stand a chance!

Profit?

[link-error]

That only seems to work when the government is paying you to install spyware.

Re:Profit?

[Rosyna]

How are they earning a profit? If the apps are free, where do they get the money? If it's from ads, then that doesn't count as free.

Re:Profit?

[thaylin]

How does it not count as free? You can have ads that dont target you, or get any of your information. It could also be micro transactions. Both allow the app to be free while making money on the other side.

Re:Profit?

[Rosyna]

If they have micro transactions (in-app purchases), then it's definitely not free. What kind of in-app purchases would products called, Clean Master, Battery Doctor, and Photo Grid have, anyways?

Re:Profit?

[thaylin]

how does transactions for extras make the base app not free?

Re:Profit?

[SourceFrog]

Google pays Android OEMs a percentage of the huge 30% cut it takes from their app store for apps. So by generating intense competition amongst app developers, what Google and the mobile companies (and their OEM partners) are effectively doing is forcing app developers to subsidize the operating system and mobile phone development - most app developers have been driven to such low margins that many are losing money (Google and the OEMs etc. get the lion's share of profits that used to go to software developers, by establishing app stores as effectively a software distribution (middleman) cartel based business model). Sheng Fu seems proud of the fact they've done this - actually it's nothing to be proud of, as it's doing a lot of harm to software developers.

Re:Profit?

[dkman]

Not free as in "without ANY cost", you're being too idealistic.

The realist definition (if I can say that) is "free to download and use". That allows for ads.
In-app purchases are certainly not free, but are add-ons or unlock functionality not in the free version.

However I do sort of agree, when I hear or see that an app is free I always check to see if it has in-app purchases before I bother to download it. Because I don't have an unlimited data plan I also check screenshots for ads, because data isn't "free".

Re:Profit?

[unixisc]

Precisely!!! People nowadays have a totally wacked out idea of what 'free' is. Particularly in a society where the entitlement mentality exists

Re:Profit?

[unixisc]

The idea that people are owed something for nothing. Like people who expect everything in the app store to be free, w/ no paid add-ins, no ads, nothing. In other words, how the provider of those 'free' services would pay their bills is totally inconsequential, and if Android/iOS/Blackberry/WP8/_____ can't provide that, there is something evil about them!

Re:Profit?

[donscarletti]

I'm the CTO in a Chinese technology company. The government has never paid us to install spyware or anything else for that matter. In fact, the government just cares about 1) blood not being too red, 2) gambling not being too overt 3) users not being able to use words equivalent to "fuck" or "cunt" in English, names of prominent politicians or particular terms in reference to disagreements with neighboring countries, 4) characters being in simplified and not traditional script. 5) under 18 not playing video games for more than 4 hours per day.

Beyond that, they don't give a shit.

Westerners often revere the Chinese government as being some all knowing all powerful being with a profound understanding of technology and deeply nuanced plans that span decades, roughly in the same way they view their own government. Fact is, the Chinese government is interested in keeping its people more-or-less satisfied with the status quo, just like your own government is. Chinese old people with too much free time to cause trouble get their panties in a knot about sex drugs and violence and "young people these days", so that's what the Chinese authorities crack down on. They simply do not have the time or inclination to be bothered with who you are and what you are doing.

Think about the last time you interacted with your own government. Did they know who you are? Did they know what your life circumstances were? I'll wager they didn't know shit about who you are and why you were there, nor did they care, they just wanted you to either shut up and go away or pay your tax and go away. Now imagine that level of caring, divide that by 1000, that's how much foreign governments gives a shit about you. Your own government couldn't even be bothered installing spyware on your computer, why would the Chinese government?

Re:Profit?

[Em Adespoton]

I'm the CTO in a Chinese technology company. The government has never paid us to install spyware or anything else for that matter. ... Your own government couldn't even be bothered installing spyware on your computer, why would the Chinese government?

While you make some good points, I've repeatedly had to clean the same state-sponsored spyware off of laptops coming out of China. Now this is probably just done to computers that go through customs "screening" as they could be transporting "something" in and out of the country, but I've also had to deal with situations where foreign companies operating inside China have been required to install state-sponsored spyware on their computer systems.

You're right -- they don't care about individuals, just like the US doesn't. But in both cases, they highly desire the monitoring capability, so that automated systems can flag up potential issues. Neither China nor the US is the first country to do this -- the first state sponsored spyware I've seen originated in Germany, and was installed only on targeted computers. That was a long time ago, and since then, the barrier to install has dropped siginificantly, and the number of participants has grown to include most governments around the world.

Re:Profit?

[dkman]

What phone OS and what do you use to police which apps get to use cellular data?

When you're right, you're right.

[BarbaraHudson]

I've been saying that the gold rush for mobile development is ended, but that's been met with derision and unbelief. Cost is always an important factor.

Beta tapes cost more than VHS: VHS, though inferior, won.
Early Apple computers cost more than early PCs. PCs won.

There are plenty more examples where people will settle for cheap over expensive. Apps are just another one - once people are in the habit of not paying for an app, you'd better be in the top 0.1% of apps to justify getting paid.

Re:When you're right, you're right.

[ArcadeMan]

Beta tapes cost more than VHS: VHS, though inferior, won.

I thought VHS won because of recording time?

Re:When you're right, you're right.

[thaylin]

It won because of p0rn

Re:When you're right, you're right.

[BarbaraHudson]

You missed my point - the gold rush was anyone with a mobile development kit and a few weeks/months could make a profit. Now, most mobile developers either make nothing or - for those who actually make money - an average of $34 a month. They'd be better off devoting that time to collecting refundable bottles.

Look at this ask slashdot

I'm a recent grad from a master's program in a potentially worthless social science field, and I've considered getting into iOS development. Several of my friends who were in similar situations after grad school have done so and are making a healthy living getting contract work. Although they had CS and Physics degrees going into iOS, neither had worked in objective C and both essentially went through a crash courses (either self-taught or through intensive classes) in order to get their first gigs. I have two questions. First, am I an idiot for thinking I can teach myself either objective C or Swift on my own without any academic CS background (I've tinkered in HTML, CSS, and C classes online with some success)? Second, if I'm not an idiot for attempting to learn either language, which should I concentrate on?

People still see mobile as a "fall-back" option that will probably provide them with enough income to pay the bills, when stats say this is already false, and will only get worse.

We're looking at a future where you need to be able to produce quality product for free and hang in long enough to actually get some users to pay for the add-ins, bonus levels, and unlocked features. Large developers backed by lots of capital and marketing budgets will continue to eat into the mobile app space. With a couple of million apps out there, new players need to have the money to be seen in the first place.

Re:When you're right, you're right.

[BarbaraHudson]

You couldn't just go out and buy a personal computer at your local big box store in those days.

Now, the market has matured. I don't see new pc manufacturers pop into existence every week, but I still see tons of new app makers trying to claw their way into the market because they heard that someone else made money in it. The reason is that the barriers to entry in the app market are low, so everyone and their dog is flocking to it, putting severe downward pressure on prices, while at the same time increasing the costs for marketing.

There's already 2 million apps out there. Look at how many are free. Unless you're already a "must-have" app, that's what you're competing with.

Re:"free" but....

[BarbaraHudson]

The same as today - free apps with paid down-loadable add-ins, paid bonus levels, paid advanced features, etc.

Can somebody direct me to some examples?

[bogaboga]

"Chinese companies are so good at making free but high-quality products," ...

If these companies are so good, where are some of their "high-quality" products?

Re:Can somebody direct me to some examples?

[ArcadeMan]

In my town, the "high-quality" Chinese products are at the dollar store...

Re:Can somebody direct me to some examples?

[AchilleTalon]

Right in your computer and your mobile phone. It is no secret manufacturing of goods are done for a large part in China and Asia in general. Do not forget neither China is having success with its space program. The idea China is manufacturing only lower grade and cheap goods is wrong. It is not because they are still manufacturing such goods they are not doing other things right at the highest standards.

Re:Can somebody direct me to some examples?

[oodaloop]

And the Apple store.

Re:"free" but....

[GLMDesigns]

Paid? Then it's not free. And won't people crack it or get around measures in the same way people do for everything?

And - if it's free then YOU are the currency in which they're paid.

Re:Do You Even Revenue, Bro?

[ArcadeMan]

You know all those links you clicked? All those pages you saw? There was ads on them. That's the business model.

Re:"free" but....

[thaylin]

The app is still free, it does not mean you cannot do other things with the app that may come at a cost.

Re:Do You Even Revenue, Bro?

[bev_tech_rob]

Okay I give up. I clicked through all the links, all the links from the links and read all those articles. Nowhere does it explain or even allude to a business model. Is this that 'mindshare' bullshit again? I don't know, this Re/code site is apparently affiliated with CNBC and from clicking on a few other articles feels just as mindless and worthless as CNBC. How do they monetize Battery Doctor, Clean Master and Photo Grid? Do they have ads?

Yes....just installed it for shits & grins and every other link or button points you back to the Play store to download more of their software. Got the Battery Doctor app. Will see how well it works as my battery has been crapping out lately.

ECO 101

[luis_a_espinal]

Paid? Then it's not free.

The add-ins are not. The app itself is.

And won't people crack it or get around measures in the same way people do for everything?

Most people do not. Do you really think the average smartphone user is going to be invest hours away to thinker and bypass such measures just to avoid paying $0.99 (the average price of an upgrade/add-in)? Most people, even tech savvy ones do not.

The sheer scale of the market makes it a number game. It doesn't matter if some people bypass the measures. There are potentially millions who do not, and of which a small fraction might pay for the upgrade. A small fraction of a very large number might still be large enough to get your ROI back. That is how it works.

Re:ECO 101

[GLMDesigns]

that's a good point. Assuming that the prices charged are marginal - meaning it's not worth the time to do (or pay for) a workaround - then this model will work.

Let's get this out of the way...

[HerculesMO]

Android is really NOT free.

Plain vanilla (and useless) Android is free.

If you have the Google Play services including the Store and Music, then you are charged to use those.

In comparison and somewhat ironically, Windows is completely free for devices under 8", including all the services and store. And with new OEMs now pushing that as well (since they made it so Windows can run on exact same Android hardware), perhaps we will see some competition to Android on the OEM side. Or not. Either way, the point is that Android is not really free.

Re:Let's get this out of the way...

[Actually, I do RTFA]

In comparison and somewhat ironically, Windows is completely free for devices under 8"

It's not ironic. Windows has always been very good at giving away copies of Windows in markets it did not think people would pay for them. It just used to be accomplished by simply not caring about, say a billion units of piracy in China.

Heck, startups still get free copies of most Microsoft software.

Free Chinese stuff?

[JeffOwl]

I don't know about spyware, but with apps at least you don't have to worry about lead or melamine.

Re:Chinese CEO?

[xaotikdesigns]

It is referencing a man that lives in china, and it is about how mobile app development is viewed there. The geographic region is important as that is what the article is about.

If the article started off about an African man, and went on to talk about his experience as it relates to being from Africa, then the headline is correct.