Chapter 1 Industry Overview
The Internet industry is a broad field, including all enterprises and organizations that use Internet technology for business activities. At the heart of this industry is the Internet, a global network that connects hundreds of millions of computing devices and users, enabling them to share information, resources and services.
- The Internet industry includes the construction and maintenance of network infrastructure, such as data centers, network hardware and software, broadband and mobile networks, and cloud computing platforms. These infrastructures make data transmission and storage possible and provide the basis for Internet services.
- The Internet industry covers a range of online services and applications, including search engines, social media, e-commerce, online advertising, streaming services, online gaming, and more. These services and applications enable users to search for information, shop, watch movies, listen to music, play games, communicate and socialize, which is also the most direct and common application scenario of the Internet.
- The Internet industry also includes a series of Internet-related technologies and services, such as big data, artificial intelligence, Internet of Things (IoT), augmented reality (AR) and virtual reality (VR). These technologies and services are changing the way we live and work. For example, through big data and AI, companies can better understand and serve customers; through IoT, we can build smart homes and smart cities; through AR and VR, we can Provide a richer and more immersive experience.
- The Internet industry also involves a series of legal, policy and ethical issues, such as data privacy, network security, copyright, content review, etc. These issues are critical to the healthy development of the Internet industry.
The global Internet industry is undergoing rapid changes and developments. In the area of 5G, subscriptions are rapidly increasing and are expected to drive the industry towards faster speeds and greater transparency. Satellite communication is gradually becoming mainstream, the global satellite service revenue and satellite phone market size are growing, and the direct satellite-to-device (D2D) communication market is also expected to grow in the next few years. On the other hand, the Internet of Things (IoT) security market is also developing rapidly in response to the increasing attacks on IoT devices and networks across the globe. The global IoT security market size is growing, and technology companies in North America and Europe are launching more IoT security solutions.
Chapter 2 Business Model and Technology Development
2.1 Industry chain
Mobile Internet
Overview of the Hierarchical Industrial Chain Mobile Internet is essentially a new business model that is based on the integration of mobile communication and the Internet and aims to meet people's needs for obtaining and processing information at any time, any place, and in any way. The mobile Internet industry chain has a wide range of connotations and can basically be divided into three levels: mobile terminals, mobile software and business applications.
Figure Mobile Internet Industry Chain
Source: Asset Information Network Qianji Investment Bank
Industrial Internet
The industrial Internet industry chain can be divided into six major components: equipment layer, network layer, platform layer, software layer, application layer, and security system; among them: equipment layer refers to intelligent production equipment, production status intelligent terminals, embedded software and Industrial data center; the network layer refers to the communication inside and outside the factory; the platform layer includes industrial cloud platforms such as collaborative research and development, collaborative manufacturing, information transaction and data integration; the software layer includes R&D design, information management and production control software, It is the core link to help enterprises realize digital value; the application layer includes vertical industry applications, process applications and applications based on data analysis; and the security system penetrates into the above layers and is an important support guarantee for the industry.
Figure Industrial Internet Industry Chain
Source: Asset Information Network Qianji Investment Bank
e-commerce
my country's e-commerce is developing in the direction of scale and intensification. The upstream of my country's e-commerce is mainly the computer, software, hardware and other industries, and the downstream is mainly the logistics and other service provider industries, and finally flows to the end consumers through the circulation link.
Figure China's B2B e-commerce industry ecological map
Source: Asset Information Network Qianji Investment Bank
cloud computing
The cloud computing industry chain includes the upstream equipment side: the equipment side includes basic equipment such as chips, optical modules, servers, IDCs, switches, and storage, as well as auxiliary equipment such as optical fibers, power supplies, and racks. The midstream platform includes: SaaS layer (software as a service), IaaS layer (infrastructure as a service), and PaaS layer (platform as a service). From the perspective of the global public cloud market, the SaaS layer accounts for the largest proportion, and it is also the layer that we are most often exposed to in our daily life, while the IaaS and PaaS layers are basically global cloud giants. Downstream applications have a wide range because they involve many industries, including finance, construction, location, government affairs, medical care, electric power, people's livelihood, office and many other industries.
Figure cloud computing industry chain architecture
Source: Asset Information Network Qianji Investment Bank
Big Data
The big data industry chain can be considered from three major parts: data sources, big data products, and big data service applications. At present, my country's data sources include government departments, enterprise data collection and suppliers, Internet data collection and suppliers, data circulation platforms, etc. Big data products include basic software products such as big data platforms, cloud storage, and data security; software products such as processing analysis and solutions; and hardware equipment products such as big data collection, access, storage, and transmission. In terms of big data services, there are mainly suppliers of application services, analysis services, and infrastructure services.
Figure big data industry chain
Source: Asset Information Network Qianji Investment Bank
artificial intelligence
From the perspective of the industrial chain, the artificial intelligence industry chain mainly has three core layers: the basic layer, the technical layer and the application layer. In terms of the basic layer, computing technology has been widely used, providing basic background guarantee for the realization of artificial intelligence technology and the landing of artificial intelligence applications, which is the major premise for the realization of all artificial intelligence applications; the artificial intelligence technology layer mainly includes speech recognition , computer vision, and deep learning. Artificial intelligence is widely used, and it is currently involved in finance, automobiles, retail, general health, security, education and other fields. ,
Figure artificial intelligence industry chain
Source: Asset Information Network Qianji Investment Bank
2.2 Business model
Unlike traditional industries, income is obtained by providing services and products. Due to the fast speed of information transmission and low cost in the Internet industry, there are often inconsistencies in the provision of services and sources of income. Attracting traffic through free services, seizing users, and converting traffic into advertising revenue is the core business model of a large number of Internet giants.
Figure business model
Source: Asset Information Network Qianji Investment Bank
2.3 Technology Development
Internet technology is information technology and attention economy. Internet thinking has: free model and value-added, user-driven, long-tail theory, decentralization and open model, content is king, minimalism, social applications, strong sense of participation, building a large Data, platform building, rapid iteration, ultimate experience, innovative spirit, cross-border integration, etc.
The core of Internet technology development is new technologies, new infrastructure, and new business application models. High-speed communication technology, network security management, artificial intelligence and big data, diversified application modes of clothing, food, housing and transportation, offline display and express logistics development, etc. promote the sustained and rapid development of the Internet, benefiting more regions and people.
2.4 Policy Supervision
Internet industry authorities and supervision
(1) Ministry of Industry and Information Technology of the People's Republic of China
(2) China Electronics Chamber of Commerce Internet of Things Technology Product Application Professional Committee
(3) China Satellite Navigation and Positioning Association
(4) National Copyright Administration
my country implements a computer software copyright registration system. The China Copyright Protection Center of the National Copyright Administration is mainly responsible for software copyright registration, software source program sealing and storage, software copyright transfer or exclusive licensing contract registration and other duties.
Industry-related industry organizations mainly include China Communications Industry Association Internet Bar Industry Branch, China Software Industry Association, China Security Products Industry Association, China Intelligent Transportation Association, etc. These associations mainly provide consulting guidance, information exchange, industry seminars, product promotion and other services for the development of enterprises in the Internet industry, and promote the healthy and sustainable development of the industry and enterprises.
Chapter 3 Industry Valuation, Pricing Mechanism and Global Leading Enterprises
3.1 Comprehensive financial analysis and valuation methods of the industry
Figure Comprehensive Financial Analysis
Source: Asset Information Network Qianji Investment Bank
Figure industry valuation and historical performance
Source: Asset Information Network Qianji Investment Bank
Internet industry valuation methods can choose price-earnings ratio valuation method, PEG valuation method, price-to-book ratio valuation method, price-to-cash ratio, P/S price-to-sales ratio valuation method, EV/Sales market-to-sales ratio valuation method, RNAV weighted Net asset valuation method, EV/EBITDA valuation method, DDM valuation method, DCF discounted cash flow valuation method, NAV net asset value valuation method, etc.
3.2 Industry Development
The overall development status of China's Internet industry
(1) The scale of Internet users has increased slightly, and the application scenarios have become more diversified
As of the first half of 2022, the number of netizens in my country has reached 1.051 billion, an increase of 19 million from the end of 2021, and the Internet penetration rate has reached 74.4%, an increase of 1.4% from the end of 2021. From the perspective of Internet access, the number of mobile Internet users reached 1.047 billion, an increase of 18 million compared with 2021. The proportion of Chinese Internet users using mobile phones to access the Internet reached 99.62%.
Source: Asset Information Network Qianji Investment Bank
(2) The construction of IPV6 has achieved remarkable results, and the network quality has been further improved
As of June 2019, the number of IPv6 addresses in my country was 50,286 (/32), an increase of 14.3% over 2018. The total number of domain names is 48 million, of which the number of "CN" domain names is 21.85 million, an increase of 2.9% from the end of 2018, accounting for 45.5% of the total number of domain names in my country.
(3) The industrial field is further refined, and the business model is more diversified
From incremental to stock competition, major companies have increased their technology one after another. In 2019, the number of Chinese netizens is gradually saturated, and the growth potential has basically peaked. The era of traffic dividends in the initial stage of Internet development is basically over, and the market has changed from incremental competition to stock competition.
Networking has entered a new state that is more mature and requires technological innovation. Against the background of the full popularity of the mobile Internet, the Internet has integrated into multiple levels of social development from the online world like never before, and has promoted the further development of technologies such as 5G, big data, and artificial intelligence.
(4) The industrial field is further refined, and the business model is more diversified
In 2019, my country's Internet industry will show a trend of further refinement. In terms of e-commerce, live broadcast e-commerce, community group buying, social e-commerce, etc. help merchants reach users more efficiently and trigger their consumption needs, reducing the cost of consumers' selection time At the same time, let consumers have a deeper understanding of the product.
(5) 5G starts a new commercial journey, and the integration of 5G and industrial Internet accelerates the development
5G is recognized as a technology that can bring about changes in the industry. It has three major characteristics: ultra-large bandwidth, ultra-reliable and low-latency, and massive Internet of Things. It will bring new breakthroughs in the fields of mobile phones, Internet of Things, AR, and VR.
The scale of mobile Internet users and the proportion of overall Internet users in my country
Source: Asset Information Network Qianji Investment Bank
Figure my country's mobile Internet access traffic
Source: Asset Information Network Qianji Investment Bank
Figure Penetration rate of monthly active users of mobile Internet giants (2020.10)
Source: Asset Information Network Qianji Investment Bank
3.3 Driving factors
The phenomenon of rapid Internet development in China is mainly based on three main driving factors:
(1) Overall economic environment dividends
(2) High industry transparency: industry information is open and disseminated quickly. Internet-related industries have a high proportion of online products, services, business models, etc., and the speed of information transmission is fast.
(3) Jumping growth: In developed countries, the progress brought about by the Internet is gradual, and the industry is gradually upgraded on the basis of the original good. However, when China entered the Internet era, the market maturity of some industries was relatively low, and many market demands could not be met by traditional industries, leaving a large number of market gaps. Internet solutions have solved the pain points of the original industry, gained opportunities for rapid growth, and even become a dominant force in the market in some fields.
3.4 Industry Risk Analysis
(1) Macroeconomic risks
From the perspective of the international environment, the global economy will continue to recover in 2019. The US economy is expected to grow steadily, and the European economy has also entered a new stage of recovery in an all-round way. However, the recovery is not yet sufficient, with regional disparities
Still bigger. From a domestic point of view, in 2019, China's economy is expected to continue its stable and positive trend. As the economy stabilizes, the focus of policy is also changing. In the future, more policy focus will be shifted to eliminate leverage, reduce costs, and make up for shortcomings. Emerging industries will grow rapidly, new driving forces will continue to strengthen, and the service industry will continue to develop rapidly. However, the adjustment of the real estate market, the transformation of the momentum of traditional industries from strong to weak, monetary and financial policies, and the strengthening of environmental protection inspections have also brought uncertainty to the economy, which will directly affect the development of the Internet industry.
(2) Technical risk
At present, most Internet companies are transforming to technology. In the future Internet of Things era, only with the most core technology can they be invincible in business competition. However, the rapid development of high-tech and the lack of experienced employees mean that the project team may affect the success of the project due to technical reasons; and many emerging fields of the Internet are currently in the exploratory stage. Due to insufficient external basic conditions or technical bottlenecks, it is easy to caused the project to be shelved.
(3) Risk of intensified competition
With the advent of the mobile Internet era, while market opportunities have greatly increased, the number of companies participating in competition in the Internet industry and entrepreneurial grassroots companies will also continue to increase. If companies in the industry cannot innovate in business models, technological innovations, marketing, and customers Services and other aspects to further enhance the strength, the future will face greater competitive pressure.
(4) Risk of rising personnel costs
The Internet industry is a typical knowledge-intensive industry, and labor costs are one of the important factors affecting the operating costs of enterprises in the industry. In recent years, enterprises in the industry have continuously improved employee salaries and introduced more outstanding talents to join, and the overall labor cost has risen rapidly. Although on the one hand, excellent talents drive business development and improve profitability, on the other hand, through process transformation, improve operating efficiency and reduce the impact of rising labor costs, if domestic labor costs continue to rise, it will affect the future of enterprises in the industry to a certain extent. profitability.
(5) Demand Risk
Many projects face some uncertainty when determining requirements. When these uncertainties are tolerated early in a project and left unresolved as the project progresses, these issues pose a significant threat to project success. If the risk factors related to the requirements are not controlled, it is very likely to produce the wrong product or poorly build the expected product, which may be fatal to the project itself. In the information age, the needs of customers are changing. If the latest customer needs cannot be obtained in time, the services provided by the enterprise cannot be updated in time, and the enterprise will easily be at a disadvantage in the competition.
3.4 Competitive Analysis- Porter's Five Forces Analysis
(1) Bargaining power of upstream suppliers
Suppliers refer to those enterprises, groups or individuals that provide products or services to the industry, including suppliers of labor and capital. As a supplier of the Internet industry, it mainly undertakes the development of basic products for Internet companies, such as animation advertisement design, interactive content development, and web design. This type of work is a relatively technical task, and for Internet companies, this kind of choice will be relatively large. Therefore, in many cases, the bargaining power of suppliers is limited by competition in the same industry, so for the Internet industry, there is room for bargaining. Advantage.
(2) Competition among existing enterprises in the industry
The Internet industry is a very refined industry, but also an "extensive" industry. It is mainly the competition among large enterprises in the industry. However, it does not rule out the examples of small enterprises developing rapidly due to seizing development opportunities. After the historical cold winter of the Internet and the transformation of business profit models, there are very few influential portal websites in China, and the competition pattern has basically formed: the first camp includes Sina, Sohu, Netease, and Tencent; Into the second camp: CDC, TOM, Yahoo China, 21CN, MSN China, Beiqing.com, Internet Space, Sky, etc.
(3) Bargaining power of downstream users
There are two basic factors that determine the buyer's bargaining power: price sensitivity and relative bargaining power. Price sensitivity determines how willing buyers are to bargain; relative bargaining power determines how successfully buyers can drive down prices. In general, the bargaining power of buyers in the Internet industry is still very strong, which is mainly due to the rapid development of the Internet industry, and the choice of buyers is expanding. Full competition in the Internet industry makes the market a buyer's market. This is the historical trend of my country's Internet development, and it is also a sign of the gradual maturity of the industry.
(4) Threat of new entrants
The entry and exit barriers of the Internet industry are not very high, and the technical requirements are not very strict. Potential entrants have great opportunities to set foot in this field. Moreover, the Internet industry is an industry with high unknown profits and high unknown risks. Therefore, many elite entrepreneurs devoted themselves to the Internet industry without hesitation.
(5) Threat of substitutes
Another threat of substitutes is the free substitution of products and services. At present, Internet consumers mainly use free Internet products, such as free instant messaging, free Internet media, free antivirus software, free online video, free blog and microblog, free online games, free email and so on.
3.5 Key players
Figure 2022 Top 10 List of China's Top 100 Internet Companies
Source: Asset Information Network Qianji Investment Bank
There are 7 Internet-related companies in the Fortune Global 500 ranking in 2020, namely Amazon, Alphabet, and Facebook in the United States, and JD.com, Alibaba Group, Tencent Holdings Co., Ltd., and Xiaomi Group from China.
The combination of American technology companies FAAMG are: Facebook, Amazon, Apple, Microsoft and Alphabet.
China's leading technology groups are Alibaba, Baidu, Tencent, Huawei, Xiaomi, JD.com, Pinduoduo, Meituan, Netease, Bytedance, Kuaishou, Lenovo, Haier, etc.
Chapter 4 Future Outlook
In the future, the development of the Internet industry will enter a new stage of development. The superposition of opportunities and challenges such as 5G, the industrial Internet, and trade frictions will cause more uncertainties in the development of the Internet industry. The Internet and the real economy will enter a period of comprehensive and deep integration. The key The core technology is expected to achieve breakthroughs on a certain scale, and the network governance capability will be fully enhanced.
The future development of the Internet industry may be affected by various trends and factors.
First, the popularity of mobile Internet will continue to expand. The development of 5G and satellite communications will provide faster and more reliable internet connections, especially in remote or poorly equipped areas. In addition, with the introduction of next-generation Wi-Fi standards such as Wi-Fi 6 and Wi-Fi 7, the speed and capacity of wireless connections will also increase.
Second, the Internet of Things (IoT) will play a larger role across industries. With advances in sensor technology, artificial intelligence, and big data analytics, IoT devices will be able to collect and process increasing amounts of data, thereby improving work efficiency, energy efficiency, and quality of life.
However, as the number of IoT devices increases, security issues will also become increasingly important. Cyberattacks, data breaches, and privacy violations can have a significant impact on users and businesses. Hence, the IoT security market is expected to witness substantial growth to keep devices and data safe.
Finally, with the proliferation of digitalization and cloud computing, many businesses and organizations will turn to Internet services and applications to improve their operations. This could lead to new market opportunities and innovations, but also new competition and regulatory challenges.
Therefore, the future of the Internet industry seems to be full of opportunities and challenges, and requires the joint efforts of enterprises, governments and all sectors of society to ensure its healthy, fair and sustainable development.
Cover Photo by Conny Schneider on Unsplash