A surefire winner out of the coronavirus outbreak in China is your smartphone. Well, maybe not your smartphone, unless you're in mainland China. If you are, you've been spending way, way, way more time staring at that screen.
Chinese customers spent 20% more time on their smartphones over the Lunar New Year holidays, according to Nomura's Internet analysts Jialong Shi and Thomas Shen. They have run numbers based on app usage and daily active user data from QuestMobile.
For investors, the upshot is that they should be focusing on companies that provide content and services on those screens.
Online gaming is the outright winner because it benefits directly from higher use. Meanwhile, apps that rely on third-party advertisements for revenue could still suffer in the first quarter and even into second quarter if retailers and other advertisers delay or cancel marketing campaigns.
The enforced home stays caused growth in screen time to double to that 20% rate from the normal growth rate of 8% to 9% in the preceding months. The raw number of users stayed steady because pretty much everybody in China already has a smartphone.
One big winner is Tencent Holdings (TCEHY) , which started life as a maker of videogames and still gets the lion's share of its earnings that way. Its flagship title, Honour of Kings, a multiplayer battle game known as Arena of Valor in the West, saw a stunning 69% rise in time spent playing it during the recent Lunar New Year period versus the like period in 2019.
NetEase (NTES) has also seen big growth in playing time in its flagship titles. Its game Onmyoji, in which players combat demons, saw game time soar 80%. Use of best-seller Fantasy Westward Journey, based on the Chinese classic tale Journey to the West, climbed 45%.
Tencent is a double winner, because it also provides video content, which for Tencent Video posted 32% growth. Competitor iQIYI, run by Baidu (BIDU) , saw usage climb 12%. Both long-form streaming services saw usage decline during holiday time last year, indicating that users are now more willing to watch longer video content in 2020 while cooped up at home.
The screen scene moves fast if you don't have the right content. Youku Tudou (YOKU) was a screen time loser. Time spent on the Youku app fell 18%, whereas it rose 17% in Lunar New Year 2019. Music-streaming services in China also saw usage decline, down on average around 25%.
Video content is a winner...
Short-form video content, though, continues to be the fastest-growing field. Time spent on Douyin, better known as TikTok in the West, jumped a remarkable 102%. Use of Kuaishou likewise leapt 98%. It's a similar app from Beijing Kuaishou Technology, but predates TikTok and remains more popular in smaller cities as a sort of grass roots TikTok.
Tencent's entrant in this space, Weishi, saw usage rise by a factor of five, coming off a low base. The leap in numbers is also thanks to 1 billion yuan (US$144 million) spent in a promotion of "red packets" given as digital lai see at Lunar New Year.
Bilibili (BILI) , which provides mid-length video content, saw time spent on its service climb 39%. Nomura's team says this shows it is successfully expanding from its base business, Japanese-style anime, to cater to more diverse tastes and a broader customer base.
ByteDance, most famous for TikTok and its Toutiao or "Headlines" app, saw use of its Watermelon Video app fall 9%. One of the main attractions of Watermelon is that gamers can stream their performance online as they play videogames. But Tencent, which has an equivalent, has banned it from "playing" its top-selling games on Watermelon.
... and so are social networks
Social networking apps have also seen a surge in use during the coronavirus crisis. There's pressure on Beijing's top leadership to free up this space, where people's posts are heavily censored and overseas apps are off limits.
The Twitter-like microblogging app Weibo (WB) saw usage rise 31% as it became a popular way of sharing information about the virus.
"Weibo provided a rare means for grass roots to share their experiences and thoughts during the outbreak of the epidemic," Shi and Shen write in a report. Most famously, whistleblower doctor Li Wenliang began sharing on Weibo the story of his arrest for spreading "rumors" about the emergence of the virus.
Time spent on WeChat, the WhatsApp equivalent developed by Tencent, went up 15%. Use of the ubiquitous app had actually fallen last Lunar New Year. Li was arrested for telling a WeChat group of his medical school classmates about the "SARS-like" outbreak.
Online grocery orders climb
The biggest permanent change in behavior to come out of the coronavirus outbreak could be a shift to ordering groceries online. Penetration of that kind of service had been low before the onset of Wuhan Acute Respiratory Syndrome, the formal name of the coronavirus. But WARS has encouraged Chinese households to sit back and order their fresh goods in. They may continue to do so after the emergency ends.
Freshippo, owned by Alibaba Group (BABA) , saw the number of daily average users double. JD Home from JD.com (JD) saw an increase in customers of 63%. MissFresh, which has financial backing from Tencent, saw numbers rise 61%.
JD Home, MissFresh and smaller competitor Dingdong Groceries all have so-called miniprograms on WeChat, which operate like a web site within that chat app. So the newfound popularity of online groceries is also driving traffic to WeChat.
Alibaba -- Tencent's biggest competitor -- refuses to use WeChat but links traffic to its own super-popular Taobao and Tmall e-commerce sites.
E-commerce stands to gain in general, but has faced challenges getting goods delivered. JD.com's app saw 26% growth in time spent on it, likely because it has a strong self-owned delivery force. The app from Pinduoduo (PDD) , which specializes in serving customers in smaller cities, saw usage grow 23%, which is impressive but a far cry from the growth of 60% to 80% it had been averaging in prior months.
Use for Taobao fell 10%, although Alibaba says distribution is now getting back to normal. Vipshop Holdings (VIPS) has a focus on luxury products that are discretionary purchases. Though people may splurge after the crisis, they are pinching pennies now, causing a 32% drop in Vipshop usage.
China in general does not have a strong work-from-home culture. Asian bosses would rather see you in a seat at a desk. But their hand has been forced by the virus.
Alibaba owns and operates Dingtalk, the leading mobile office app, where usage figures rose 92%. And yes, as you'd expect, Tencent has a competing product. Its Enterprise Wexin saw daily average users (DAU) climb 61%. WPS, the Microsoft Office-equivalent from Kingsoft (KSFTF) , also saw significant gains in DAU, up 60%.
International investors seem to shake off even the sudden increase in virus cases and deaths thanks to a much-needed recalibration of how they're calculated. Now, doctors can diagnose the WARS disease, Covid-19, even if the patient hasn't been tested. There's no sign that infections are actually peaking, so expect these stay-at-home apps and content providers to continue to enjoy robust use.
