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The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Thursday, April 5, 2007

SINA – SOHU – NTES – Video Shootout part6

Video Shootout Part 6 – Conclusion

At this point, we are able to provide a side-by-side comparison of the three portals. On each category, I will assign a score next to each portal. The higher means better.

Number of stories with video contents – Sina 8, Sohu 4, Ntes 1
Peer-to-peer channels – Sina 1, Sohu 2, Ntes 0
% of original contents in the P2P channels – Sina 3, Sohu 5, Ntes 0
3rd party channels – Sina 20, Sohu 7, Ntes 0
Quality of the 3rd party channels – Sina 9, Sohu 4, Ntes 0
Cost of the contents (higher cost gives lower score) – Sina 2, Sohu 5, Ntes 10
Cost of the hardware and bandwidth (higher cost = lower score) – Sina 2, Sohu 5, Ntes 10
Youtube like service – Sina 10, Sohu 0, Ntes 0

Another way of ranking it is by the type of videos:
- Embedded Video (attached to a story): winner is Sina
- 3rd party TV channels: winner is Sina
- Self generated TV channels (through P2P technology): winner is Sohu
- User generated videos (youtube-like): winner is Sina

Now my comments on each company:
At this point, it is clear that Ntes is dropping the ball big time. One has to be very concerned with its video activities. Considering that it is dropping some channels on its portal, one has to be concerned on the execution of its portal strategy. Considering companies like FMCN that adds new areas every few months and is able to keep the management talent. Ntes really need to take a page from company like that. Can Netease do more than one thing (online game) at a time?

Instead of doing stock buy-back of 100 millions every few months, whey can’t they use the money for better execution and invest for the future? 3rd place in web portal is such a valuable asset, Ntes is really not using its asset wisely. I am afraid that Ntes is falling further and further behind other portals.

It is a little disappointing that Sohu doesn’t have Youtube-like service yet. A youtube like service gives Sohu tons of original video contents. And original video contents are the things that portals really need. I hope Sohu can start working on this.

By concentrating on original contents in its P2P TV channels, it is doing a better job than Sina and Ntes. Where is Sohu going? Is it going to have more channels so that it is becoming more of a TV stations with all the original contents? Are they going to create a TV news team? Whether they are successful or not depends on their execution.

Because Sohu is the official Olympic sponsor and is able to get lots of Olympic contents, if Sohu can build up competent editorial teams, news teams, and broadcast teams, it can really make some noise in 2008.

But in the end, I will have to give Sina the tentative nod for the time being. By signing up many 1st tier contents providers, it gets lots of embedded video in a hurry.

If China’s traditional TV stations start to get serious in combating piracy, Sina might just become the default online video stations of China.

In addition, it already had started the blog video (youtube like service). By signing up many celebrities, it gets traffic going quickly. By combining it with the blog and instant messaging, it has the potential to outdo all the stand-alone youtube-like companies in China.

At this point, there are hardly any ads on these video contents. Sina is burning cash to get market domination position. If successful, and with a little less piracy, 2008 could be the year to see explosive growth for Sina.

Final Notes:
I can break the state of video activities into six separate levels:

1. Just Text based content:
This is the basis. All three portals had achieved this.

2. Text Based contents with some video ads:
I did not rank video ads in this article. Video ads and video contents are related but different. Sohu has already started to do some very minor video ads.

A portal can have all text based content and still have video ads. I am absolutely certain all three portals will eventually have these video ads on their web site regardless how many video contents they have. Thus, I didn’t rank them.

But unlike TV, online video ads by themselves will probably be ignored by most users.

3. Multimedia contents (in the form of embedded video) with video ads:
From the experience of cnn.com or msnbc.com, they have 10 seconds video ads before any embedded video contents. Users will have to watch those video ads before they get to the content.

But most importantly, the portals of the future will provide the users a multimedia experience. I am absolutely certain that mostly text based portal will slowly die out.

It is in this area where Sina executed the best while Ntes disappoints. This is also a growth area that the web portals can be rewarded handsomely.

4. Self generated video contents with video ads:
This represents a brand new business that portals expand into. In some ways, its competitors are traditional TV stations like CCTV or Phoenix TVs. This represents a brand new revenue stream. It is clear that Sohu is doing the best in this area.

5. User generated video contents:
This is youtube-like service. I don’t really know if the web portal can run ads on these videos. It is still early in the game. Sina is the only portal that has started this. She has to compete with the dozen of early starters like 56.com. This represents a brand new business.

6. Video Content Aggregator business:
This is another brand new business. If successful, it can create very rich new revenue source. Its competitors are the independent P2P programs. But as mentioned in part 4 and 5, it is just such a big question mark. Sina is in the best position to get into this business. Not quite sure it can be rewarded in the short time. But the least it can do is to participate in China’s DTV standard development. At this point, it is still too early to see where Sina is going in this area. But one does need to keep track of its development.

1 comment:

Anonymous said...

Few questions.

(1) Can you post a link that will let us track the number of servers.

(2) If the game is freetoplay, how much revenue can Sohu get from this game?

Thank you.


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