Chinese see Apple’s App Store as portal to global market

Lu Miao speaks very little English. He’s never traveled outside of Asia. He’s not a software engineer. But in a few short months, he became the founder of a successful software company selling apps in the United States and Europe.

In less than half a year, Rye Studio has sold 1 million downloads of apps with traditional Chinese children’s stories at 99 cents each for Apple Inc.’s iPad and iPhone. Lu bought a courtyard home in the city’s tech hub, the Haidian district, and converted it into a playful office with a giant replica of a Michelangelo painting and a bamboo garden. And he hired workers in three cities — Beijing, Shanghai and Chengdu — to develop software, video and music.

“The Apple App Store — this thing really made a big change in my career,” the 32-year-old Lu said. “Before this, I owned an advertisement company. We tried something new, and many clients came to us. The App Store helped us spread our products around the world.”

While China has long been viewed as the outsourcer to the world, a growing number of start-ups here are using the App Store to become global companies almost overnight without spending a small fortune on marketing and advertising. App developers in other countries are doing that as well, but the possibilities are liberating in China, where budding entrepreneurs have long been hobbled by government regulations and no access to venture capital.

Those entrepreneurs are now building original social games and other apps for iPhones and iPads, and hope to move on to Google Inc.’s Android devices in the future. They are aiming to do what so many other Chinese companies have failed to do — create business plans and products that cross cultural and market boundaries in other parts of the world.

For Apple, a flood of new Chinese app developers will in the long run make its iPhones and iPads even more attractive to Chinese consumers, whom Apple is aggressively wooing. The company has plans to roll out scores of new retail stores in China in coming months as its sales in the region soar. Last month, Apple reported that second-quarter revenue for Hong Kong, Taiwan and mainland China — which the company refers to as Greater China — was nearly $5 billion, about 10% of total sales. Just a couple of years ago, Greater China represented just 2% of sales.

“The overall landscape has changed,” said Allen Hsieh, director of operations and client services for Mobile Now International Inc., a Shanghai-based iPhone app developer that has published the games King of Frogs and Super Ball Escape under the brand PlayLithium. “The little guy can now actually do something.”

Last July, an independent Apple iOS app developers’ conference held in the city drew a thousand engineers. Bokan Technologies, a developer of iPhone and iPad game and education apps, has established an app developers’ academy in Beijing that has trained 400 engineers. “The iOS opened a big window for everyone,” said Bo Wang, chief executive of Bokan Technologies. He said his graduates can earn twice as much as other software engineers.

Whether a new class of global Chinese tech companies will emerge is unknown. These entrepreneurs with global dreams still face many challenges to create apps that not only hit the cultural sweet spot of Americans but also meet the quality standards that Western consumers demand.

“It’s really hard to stand out from the pack when the pack is huge,” Hsieh acknowledged.

Still, the App Store has created a golden global opportunity for a nation brimming with young engineering talent.

“They see the iPhone and iPad as a channel that affords them a cheap way of distributing apps worldwide,” said Bertrand Schmitt, CEO of App Annie Ltd., a Beijing-based start-up that provides sales and market analytics for App Store publishers. “They don’t have to have special relationships outside China.”

Apple has been quietly reaching out to the Chinese developer community and providing some support, though the company’s representatives in China did not respond to a request for details.

Chinese developers have plenty of incentives to create apps for the global market.

China has the world’s largest mobile market with more than 850 million users, but it’s dominated by state-owned carriers that call the shots, said Duncan Clark, chairman of BDA China, a Beijing-based investment and strategy advisory firm. “China Unicom can take up to a year to pay” independent developers, he said. And a business can be sidelined simply because its services or apps are “not considered appropriate,” he added.

It’s not just mobile game and other app developers who are queuing up to go global through the App Store. A number of software outsourcers “are moving into app development because they want to get out of outsourcing,” said Clark, a Stanford University visiting scholar focusing on innovation and entrepreneurship in China’s Internet and e-commerce sectors.

Many developers here try to mask the fact they are based in China, said Bjorn Stabell, who 11 years ago co-founded a software outsourcing company in Beijing and in 2009 launched an apps start-up. His company, Happylatte, created the game High Noon, which has sold nearly 3 million downloads.

“You have less reputable stuff happening here,” Stabell said. “So they are afraid people don’t want to buy stuff from China. They are afraid if it’s from China, [consumers will fear] there could be security issues.”

Chinese developers, though, face more than image hurdles. Those without any Western experience struggle to find ways to sync with Western culture, said Junde Yu, a consultant to Chinese Internet and mobile start-ups. They also need to perfect their technology in ways they don’t for the Chinese market, where success can be as much about who you know in the mobile phone industry as the quality of apps, he added.

Eventually, though, Chinese app developers will catch up to their Western counterparts, Schmitt said. And with the size of China’s mobile phone market, its culture will play greater importance on the world stage, he added.

“The global society is converging,” Schmitt said.

That is the strategy pursued by Rye Studio, which is selling Chinese children’s stories to a Western audience. Its book apps include such fables as “The Beast Nian” and “Little Tadpoles Searching for Mommy” created with traditional Chinese painting.

“The reason our products are succeeding is because Americans and Europeans haven’t seen them before,” founder Lu said. “Our company is very optimistic about the future. We are focusing on building our brand and our reputation — and making our platform bigger.”

Boudreau writes for the San Jose Mercury News/McClatchy.