China’s internet addiction regulation could erode the user base of Big Tech platforms, analysts say

China’s latest regulation to further tighten internet use by minors, which takes effect on January 1, is expected to have a limited impact on Big Tech firms in the short term but could erode their long-term user base, according to analysts.

Chinese legislators passed a comprehensive regulation to curb the use of mobile devices and services among people under the age of 18, with the aim of creating “a cyberspace conducive to the physical and mental health of minors and protect [their] legitimate rights and interests”, according to the final draft issued by the State Council and published on the government’s website on Tuesday.

The ordinance, known as the Regulation on the Internet Protection of Minors, is the most comprehensive rule of its kind so far in the country that has ramped up internet restrictions on minors in recent years, particularly in relation to online video gaming. The regulation includes sixty articles placing varying responsibilities on the shoulders of Chinese smart device makers and mobile service providers, local governments and educational institutions, and parents.

China drafts new rules to curb internet addiction among children and teens

According to the regulation, mobile device makers – which includes local smartphone giants like Xiaomi, Huawei, and Oppo – must pre-install minor-protection software, or clearly instruct users on how to install it. Gaming and short video service operators – including Tencent Holdings, TikTok owner ByteDance and NetEase – must also provide a “minor mode” on their platforms.

As of 2021, China had more than 191 million internet users younger than 18, according to the China Internet Network Information Centre. With tighter curbs on internet use under way, analysts said the impact on local Big Tech firms will be limited in the short term, but could hurt user numbers over time.

“For most internet and gaming firms, minors are not their target customers,” said Zhang Shule, an analyst at CBJ Think Tank. “Years of regulation against (internet) addiction has made minors a very small portion of free or paid users for top Chinese gaming companies.”

Zhang said he does not expect the roll-out of the regulation to hit revenues of Chinese internet firms.

For Tencent, the largest video gaming company in the world by revenue, minors made up just 0.4 per cent of total time spent on domestic games and 0.7 per cent of gross receipts in the first quarter this year, according to the company.

chinas internet addiction regulation could erode the user base of big tech platforms analysts say


China reportedly slows down online game approvals as crackdown on video game addiction continues

China reportedly slows down online game approvals as crackdown on video game addiction continues

However, the new rules could keep companies from building up certain user habits as minors move into adulthood, and they may have knock-on effects for user numbers of other internet products and services, according to Zhang Yi, founder and chief analyst at Guangdong-based consultancy iiMedia.

“[The new regulation] will have some impact on the active user pool [for mobile services],” Zhang said, adding that Big Tech firms may also lose out on opportunities to build up mindshare among young users.

Research from Sinolink Securities came to a similar conclusion, noting a limited immediate impact but the possibility to erode usage time and the future user base of certain platforms. Minors made up 20 per cent of Chinese mobile gamers and 13 per cent of users on ByteDance’s Douyin, the domestic version of TikTok, the research firm said. Limiting use could harm the companies in the future, it concluded.

Beijing’s years-long battle against internet addiction has contributed to scattershot regulations from multiple agencies, sometimes with overlapping rules.

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This mode would limit users to 40 minutes per day if under 8 years old, an hour per day for those 8 to 16, and two hours for those 16 to 18. Additional time would require parental intervention, according to the proposal.

A strict new video gaming regulation in 2021 from the National Press and Publication Administration limited gaming time for minors to one hour on Fridays, Saturdays, Sundays and statutory holidays.

South China Morning Post

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