As we enter a new year, Shanghai Daily looks back on 2011 and the technology advances that marked the year. Our choice of the top 10 information technology news items also shines a light on the trends that will influence the domestic IT industry in the next three or five years.

Our list highlights the evolution of companies such as Alibaba.com Inc, Apple Inc, China Telecom and Sina Corp as they grapple to take advantage of rapidly changing technologies and stake out territory in a highly competitive market. The stories span the industry chain, from content providers to telecommunications carriers, and from Internet portals to online shopping services.

1 Fake broadband

A report released last month from the Beijing-based Data Center of China Internet said that broadband speeds are much lower than telecom operators claim. Many consumers were quick to embrace the findings of the so-called "fake broadband" report.

As of the end of the third quarter, 91 percent of users had broadband speeds of less than 400 kilobits a second, though they subscribed to a speed of 4 megabytes per second, or a peak speed of 512 kilobits a second.

The report also showed that the average 1 megabyte-per-second bandwidth in China costs US$13.10 - four times the equivalent cost in the United States and more than 400 times that of Hong Kong.

The government conducted an anti-monopoly investigation in November related to concerns that the top two broadband carriers, China Telecom and China Unicom, were preventing smaller players from entering the market and keeping prices artificially high.

As a result, both carriers promised to improve their broadband speeds by between four and 10 times while cutting rates.

The Ministry of Industry and Information Technology announced that broadband bandwidths would be expanded to 20 megabytes per second in urban regions nationwide by 2015.

What it means going forward:

The report's data, though outdated, has attracted widespread attention and calls for better regulation.

China has about 500 million Internet users, ranking it first in the world. Faster and cheaper Internet will create new online applications, such as video conversation, and boost the dot-com economy in the domestic market.



2 Dot-com phones

Phones developed by dot-com giants took center stage in 2011, including Alibaba's phone with built-in e-commerce functions and Baidu's phone with its own operating system and search tool. Tencent Inc displayed a QQ phone prototype last month with built-in QQ package services. In the year, Tencent's instant messaging tool Weixin and Xiaomi's new smart phone, developed by IT veteran Lei Jun and his team, became hot spots in the mobile Internet sector.

The debut of the services and products advanced the mobile Internet, which allows people to access the Internet through phones and mobile devices such as iPad.

The number of China's mobile Internet users was expected to hit 430 million by the end of 2011, about 86 percent of total Internet user base.

Revenue from the mobile Internet market rose to 85.1 billion yuan (US$13.3 billion), thanks to services like application sales, wireless advertising and mobile payments, according to the Beijing-based research firm Analysys International.

What it means going forward:

The popularity of the iPad, iPhone and Android phones enhances the future of mobiles as the main access to the Internet.

Companies seeking to dominate the mobile Internet platform are becoming more sophisticated in attracting users through their own devices. Meanwhile, smaller firms are developing interesting applications for mobile platforms, such as photo-editing, games with stunning graphics, apps for better cooking, and flight and tourism information.

All of them boost the convergence of PCs and mobile phones, making every day life easier and creating a huge new market.



3Third-party payment license approvals

In 2011, China's central bank authorized about 100 non-financial institutions, including ChinaPay and Union Mobile Pay, to operate third-party payment services.

Those firms range from e-commerce giants like Alibaba, retail giants like Lianhua and telecommunications carriers such as China Mobile. They are based both in the developed eastern coastal regions such as Hangzhou and Shanghai and in less developed inland regions such as Inner Mongolia and Sichuan.

What it means going forward:

Third-party payment systems make e-commerce easier for consumers. The newly licensed firms are big names in China.

The wider array of choices benefits companies seeking to make money from online services and advances Three Network Convergence – the merging of mobile, computer and TV network technologies. As one example, Shanghai-based BesTV has initiated TV-based payment services.



4The leak of 6 million user passwords

Last month, hackers attacked the China Software Developer Network, the country's largest programmers' website, exposing 6 million user accounts and passwords.

Within days, the personal information of millions of subscribers of several popular social networking and gaming websites also fell victim to a cyber attack. Top sites like Sina Weibo, Tencent (QQ), Tianya and Renren.com were involved.

In response to these leaks, the Ministry of Industry and Information Technology issued a notice on December 28, asking Internet service providers to beef up protection of user information through better internal management and new technologies. Many websites, even those not involved in the attack, strongly suggested that users change their passwords.

What it means going forward:

The leak of information was a warning to the industry about the perils of taking Internet security and privacy too lightly. It was also a warning to users to be wary about putting too much personal information online.

Internet security may well become a growth industry for innovators who can devise better protection systems.

5The legacy of Steve Jobs

Steve Jobs, Apple chairman and co-founder, died in October, age 56, of pancreatic cancer. It was one of the biggest global technology stories of the year.

Jobs and his team developed Mac computers, the iPod, iPad and iPhone, which all revolutionized the technology, media and retail industries.

But more than just creating innovative devices, Jobs changed the way people think about technology and built one of the world's most valuable companies. Apple ranked the No. 1 in market value for a several weeks in 2011.

Walter Isaacson's new biography "Steve Jobs" has been a popular book in China.

What it means going forward:

The Jobs legend will continue to influence how the IT industry in China evolves.

Many people keep asking: When will China produce a Steve Jobs? Certainly, his entrepreneurship and innovation have inspired a whole generation of start-up founders. His sayings – such as "simplicity is the ultimate sophistication" – are repeatedly quoted. His material legacies of the iPhone, iPad and App Store have become platforms for people in China to develop applications and make money.

6The Taobao Mall fiasco

Taobao Mall in December postponed implementation of a new rule that would have increased deposits of vendors as much as 10-fold to provide a bigger kitty to handle consumer complaints or returns.

The about-face came after tens of thousands of smaller vendors who said they can't afford the higher deposits staged online protests, disrupting the online transactions of some big online sellers for about two days.

Taobao said it won't implement the higher fees until the start of 2013, and the company has also pledged to pour more money into consumer-rights protection and to help smaller vendors better run their businesses.

What it means going forward:

The Taobao Mall issue highlights a dilemma facing domestic e-commerce companies: how to ensure product quality and consumer satisfaction amid an intensifying online price war.

Those opposed to the higher fees said it was unfair for Taobao to attract so many small vendors with low commission rates, only to turn around and try to sting them for more money once they were onboard.

China's online shopping market is extremely price sensitive. Any rise in fees undercuts profits. Some of the costs inevitably will be passed on to consumers.

Vendors and those who provide them a platform for online selling need to strike a better balance between the need for sellers to make profits and the demand of consumers to buy quality goods at reasonable prices.



7Mud-slinging hurts overseas listings

Shares of Shanghai-based advertising network Focus Media, which are listed on the Nasdaq market in the US, plunged nearly 40 percent on November 21 after short-seller Muddy Waters alleged its financial data were dodgy and put a "strong sell" rating on the stock. That wiped US$1.36 billion off the company's market value in a single trading day, one of the largest dumps of its kind among overseas-listed Chinese companies.

Focus Media denied Muddy Waters' charges that it had inflated the number of screens in its LCD network by about 50 percent and deliberately overpaid for acquisitions.

In November, another short-seller called Citron released a report about Qihoo 360, calling it "the most misunderstood" Chinese Internet stock and put a target price of US$5 on its shares - a 75 percent discount to Qihoo's trading price at the time.

What it means going forward:

The Focus Media controversy was one of a series of cases where overseas Chinese companies have been accused of financial irregularities.

Although the tactics of the short-sellers have been called into question by some, the allegations raise concerns about the way Chinese companies are managed and the opaqueness surrounding their operations.

In 2011, only 11 Chinese companies went public in the US market, a steep drop from 2010, when 39 companies completed their IPOs.

Some say the stink surrounding a few overseas listed Chinese companies may hurt efforts by reputable firms to raise capital in overseas markets for some time to come.

The controversy has also raised questions about corporate scrutiny by Chinese regulators amid calls to improve the system.



8Daily deals euphoria cools

Gaopeng, the Chinese venture of US-based Groupon, the world's largest group-buying website, closed several local branches and dumped at least 350 staff in August. It was a sign that rapid expansion had outstripped the ability to generate revenue in a highly competitive market.

According to a recent report by Tuan800, which tracks daily-deal websites in China, more than 1,600 of the sites were shuttered in October and November and only 2,000 websites were operating by the end of November. That was a sharp decline from a year earlier when more than 5,000 group buying websites were up and running.

In November, group-buying site Lashou suspended its US$80 million initial public offering process on the Nasdaq.

What it means going forward:

Some industry analysts argue that the group-buying model is unsustainable and needs rethinking. These websites are offering cash coupons or discounts for services, while at the same time, they have to spend huge sums on advertising to attract customers.

That poses a challenge for domestic websites and suggests that new market players need to do their homework before jumping into a fiercely competitive market.



9Expanding social networks

Sina Corp, operator of Weibo, China's most active microblogging site, launched a virtual currency system and an online gaming section in June as it seeks to turn the popular service into a money-making business.

Weibo, which has more than 250 million registered users, was apparently aiming its expansion strategy at rival Tencent, which has China's biggest Internet user base of more than 600 million. Yet activity on Weibo's gaming platform has remained disappointing.

Sina is among a host of Internet companies trying to keep social network users longer on their platforms by providing other diversions.

What it means going forward:

As Sina, Tencent and other social networking sites like Renren and Kaixin001 beef up their content, the door of opportunity for independent software developers widens.

Users will be bombarded with choices, which could make the fight for numbers a fierce one costing the companies more advertising money and fewer profits.

Tencent is doubling its collaboration fund in the next few years to 10 billion yuan to support software developers to diversify its web-based service.

Sina Weibo's challenge in the future will be how to draw more partners as well as bring an appropriate payment system to users and on the business side, how to work out an appropriate and more targeted advertising system to convince investors.



10Booking online

More and more people are turning to the Internet to plan holidays. They book hotels, plan itineraries and rent cars online.

Seizing that trend, Baidu invested US$306 million in Qunar, a domestic online travel booking company, to become its biggest institutional shareholder.

Tencent paid US$84 million for a 16 percent stake in eLong, a Nasdaq-listed online travel booking and planning site in China.

What it means going forward:

China's hotel-booking market is estimated to grow about 20 percent this year to 300 billion yuan, according to research firm EnTravel Inc.

Online travel agents like Ctrip is likely to face a strong challenge from the Baidu-Qunar partnership. Unlike Ctrip, which charges commission on each flight or hotel room booked, Qunar provides search links for users to compare ticket fares and cash in from advertising on its pages.

Qunar said it will invest in technology development and offer more tourist products to expand its business.

As more people turn to the Internet to make holiday plans, competition in the online booking sector will become more intense. Mobile access to the Internet is expected to hasten the trend.

Baidu and Tencent's investment will bring a capital injection boom to this sector, while more and more players that serve a niche online booking market is expected to emerge in the future.