What did Netease’s CEO really said?

My last article on this particular subject can be found here:
http://chinese-net-gaming-stock.blogspot.com/2009/01/chinese-net-cafe-gamers-reduced-by-30.html

In it, a local newspaper where Netease resides had a short article. In that article, Ntes’s CEO said there is 30% reduction on the number of players that plays in Internet Cafes. As a result, price of all China’s game company crashed. Price of Ntes crashed from $22.78 down to as low as $16.61.

Now, there is another newspaper article that shed more light on this story.
http://it.sohu.com/20090213/n262218156.shtml

Ntes’s CEO gave another interview to the local newspaper. In it, he mostly talks about the effect of global financial crisis have on the Quangdong province. But he did mentioned about what he said regards 30% less players in Internet Café.

He did said that according to Ntes’s internal survey, there are 30% less players in the Internet Café in some localities due to global financial crisis. But he also said that those players, rather than playing in the internet café, they now play at home.

Therefore, what he said is that the global financial crisis has some effects. It might have some negative affect on the internet café. Rather than spending money to go to the neighborhood internet café to play games, players play at home. Therefore, it does save some money to the players. But its net effect to Ntes is negligible.

He said the reporter report the first part of what he said (30% decrease in internet café), but the reporter chose to ignore the second part of what he said (those players play at home instead).

He also said global financial crisis has very little affect on internet gaming. He thinks internet gaming industry is resistant to the cyclical nature of the economy.

If one follows Chinese news reporting (like I am), one will know Chinese reporters not just report news, many times they manufacture news. Reporters are under tremendous pressure to come out with as much sensational news as possible. Thus, a lot of them manipulate the interview so as to get a much more exciting story, even though they have to resort to deceit.

By now, I think we can put this story to pasture. There was never anything news worthy in this story.

Sohu’s surprise new game, DJ2

Barely one week ago, I made a compilation of Sohu's new games development. That article can be found here:

http://chinese-net-gaming-stock.blogspot.com/2009/02/status-of-new-game-development-by-sohu.html

Just like Ntes comes out with a surprise Transformer game as their next major game, Sohu comes out with a completely new game as its next major game development. That development was completely secret.

The 4^th quarter earning conference was just a couple of days ago, they definitely didn't talk about this game.

Now, the news is out. This is all over all the gaming portals in China right now. One can find representative news about this game below:

http://newgame.duowan.com/0902/98362961233.html

This game is going to be called DJ2 (刀劍英雄Ⅱ). Its web site is as follows:

http://dj2.changyou.com/

The game is just announced and the in-game graphics have been very few. The following is one of them:

It really shall be called BO2 because, in Chinese, its literal translation is Blade Online 2.

Sohu is still going to operate the original BO. There will still be a major expansion pact for BO in the 2^nd quarter of 2009.

BO was a licensed game. But DJ2 (BO2) is not. It is completely developed in-house inside Sohu. According to BO's original developer, http://www.pixelgame.net/ , they have nothing to do with DJ2. I guess Sohu purchased the naming right from Pixelgame.

Let me do a recap on Sohu's game division. They currently have two games in operation. The major game is the self developed TLBB. It is being complemented by a licensed game BO (Blade Online). TLBB made $53.5 millions in 4^th quarter 2008 while BO made $4.9 millions in 4^th quarter 2008.

They have four games under development.

LDJ (The Duke of Mountain Deer) is going to be a self-developed major game. It is planned to be commercialized in 4^th quarter 2009.

JianXian (Immortal Faith) is a licensed game. I don't think Sohu is going to spend a lot of resource on this game. It is scheduled to be out in the middle of 2009.

Legend of Ancient War is another licensed game. I doubt Sohu will spend a lot of resource on this game. It is scheduled to be commercialized in early 2010.

DJ2 (Blade Online 2) is another self-developed major game. Sohu claim this will be the first major game out in 2009.

If I have to guess, DJ2 will be commercialized in 3^rd quarter 2009. It gives 6 or 7 months of closed beta time for Sohu to hash out all the bugs. If this becomes the case, then I will also predict Sohu will delay LDJ and LDJ won't be commercialized until 1^st quarter 2010.

Sohu plans to have both DJ2 and LDJ as major hits and be as successful as TLBB. There shall be at least two quarters of time differences between releasing its two major titles.

----------

A little more information about Netease's next major game development (BB) can be found in the following article:

http://games.sina.com.cn/y/n/2009-02-12/1122296260.shtml

From the above article, my prediction was correct, it is confirmed by Netease game developers that they hope to conduct a major marketing campaign as well as open beta to coincide with the opening of the movie 「Transformer 2」 in June 2009.

BB will start closed beta on 2/15/2009.

------

I noticed that Chinese game developers start to keep their major game development under great secrecy. I understand that they are doing that so as not to tip off their competitors. Nobody had absolutely any clues of the existence of Ntes's BB and Sohu's DJ2 until now, a few months before their commercial release. Thus, it gives no time for smaller game studios to develop cheap knockoffs to steal their thunders.

But this will definitely make it more difficult for people to keep track of their game development.

DCCI survey on Chinese search market

I has just written a survey article on China』s search market. That article is based on a survey conducted by Analysys International. It can be found here:

http://chinese-net-gaming-stock.blogspot.com/2009/01/chinas-search-market-survey-and-bidus.html

On 2/5/2009, DCCI published another survey on China』s search market. It can be found here:

http://it.sohu.com/20090205/n262065965.shtml

I will copy their survey plot below:

From the above plot, one can see the year over year (YoY) growth rate for 2008 is 86.2%. They also published their prediction for the next 3 years. I don't really care about their prediction.

But their survey result for 2008 might be of use. Since Bidu hasn't published their 4^th quarter 2008 revenue number yet. Their survey result might give us some insight about the 4^th quarter performance for Bidu.

If we compare that with Bidu's analyst survey on Yahoo finance site:

http://finance.yahoo.com/q/ae?s=BIDU

From Yahoo, the YoY revenue is estimated to be 98.8% based on 19 analysts. The analysts are predicting full year revenue much better than the survey result from DCCI.

DCCI's results are based on the whole search industry in China. So unless Bidu were grabbing significant market shares from other search companies, DCCI's results seem to suggest Bidu's full year revenue won't be as good as what the Wall Street were expecting.

Now, we are in an impasse. The survey results conducted by Analysys International suggest Bidu's 4Q revenue will blow away Wall Street estimates.

On the other hand, survey results published by DCCI suggest Bidu's 2008 revenue will fall short of Wall Street estimates.

We will have to wait until after Bidu's 4^th quarter earning conference to find out which survey is more correct.

A new major Netease game

You can find my last article on the development of NTES's new games here:

http://chinese-net-gaming-stock.blogspot.com/2009/01/ntes-is-developing-new-games-based-on.html

Wow, this is a surprise. This really comes from nowhere. Obviously, NTES is going to have another new game. More information about this game can be find here:

http://gamebase.163.com/200902/frame_6.html

The name of this game is called Transformer. I will call this game BB from now on.

There already is an official forum for this game already and it can be find here:

http://bb.netease.com/

Some graphics for the in-game transformer characters can be found here:

There is very little information about this new game. But I think this is going to be a major MMORPG. But it is clear that this game's emphasis is on fighting. There will be many features for fighting, both individual fighting and group fighting.

This game will represent a complete break from other NTES's games. All other NTES games (except FF2) are based on ancient Chinese characters. FF2 was the lone exception. FF2 is based on western characters. So is BB. This game will be based on the western cartoon characters of Transformers. BB will have much more emphasis on fighting.

BB will be a 3D game. TX2 was the first 3D game for NTES. But TX2』s 3D game engine is not developed in house. It uses the Big World engine developed by an Australian company. FF2 is a 3D game also. Its game engine is developed in-house. But there is no comparison on the complexity level between the two games.

It will be interesting to know if BB's game engine is in-house developed or not. If BB's 3D game engine is developed in-house, it would mean NTES had a technology breakthrough. But at this point, we just don't know.

Another interesting thing about this game is that NTES will synchronize the release of this game with the movie Transformer 2. It probably means NTES already had a marketing deal with Di Bonaventura Pictures (the maker of Transformer 2).

NTES almost never market their game. It will be very rare for them to go through all the trouble of doing co-marketing with a popular movie. At this point, we just don't have enough information to know if this is the case. But if this implication is correct and NTES will do a major co-marketing with the movie, it would indicate that NTES is placing great hope, money, and effort on this new game.

Transformer 2 the movie is scheduled to be premiered on 6/26/2009. As announced in the above article, the game BB will be synchronized to operate at the same time.

That will mean BB will start commercial operation by the end of June, 2009. That is pretty fast. That means maximum of 5 months for closed beta. That is pretty aggressive scheduling. That will be tough to do.

At this early time, there is no video information on this game. But if one really paid attention, one can probably guess about the existence of this game one and half year ago.

A video was posted on 10/16/2007. It was a promotional video made by Netease for them to recruit college graduates. One can find the video below:

http://www.56.com/u87/v_MjA4MTEyODQ.html

The whole video has 15:08 minutes. From the above video, on the 1:53 mark, a Netease employee talked about a new game 「創世西遊」. The direct translation for that game is call 「New World Westward Journey」. It implied a XYQ or XY2 type of game.

But pay attention to the above video from the time 10:30 to 11:10, and from 13:30 to 14:30, one can see clearly a brand new game that is completely different from any game Netease ever made.

It is pretty certain that game is this new Transformer game. For competitive reason, Netease has to keep this major game as top secret. Ntes had to conduct a disinformation campaign and to make its competitors think its next major game is going to be a XYQ or XY2 type of game while it is really a completely different type of game.

From all the secrecy and possible major marketing promotions, this is probably the game Ntes put the most hope and resource in the past two years.

Status of new game development by Sohu

The last article on Sohu’s game can be found here:
http://chinese-net-gaming-stock.blogspot.com/2008/09/status-on-sohus-next-two-games.html

JianXian (Legend of Ancient War) is a third party game. It is developed by another company but was licensed to Sohu. It is getting closed to the market. It will have the final closed beta on 2/17/2009.
http://sde.game.sohu.com/web_affiche/intoAffiche.jsp?key=d37d9a5d6d475be213be7c5f91da0be3&id=4641&game=4&aff_type=1

During this stage of beta, the players’ account will not be removed after this stage of close beta. It means the game is almost ready. This stage of closed beta shall not be long. For a free to play game, open beta means the start of monetization. Therefore, I predict monetization of this game will be only 2 or 3 months away.

LDJ (The Duke of Mount Deer)
It is still in closed beta. On 12/28/2008, it went into second stages of closed beta. I also found an in-game video. It can be found here:
http://ldj.17173.com/videofile/2008-07-29/20080729160451998.shtml

From the above video, it is clear the game is a very cute, cartoon styled game similar to NTES’s XYQ.

If SOHU is going to have another blockbuster, this may be the one.

SOHU will unveil another game on 2/12/2009. It already has a web site:
http://game.sohu.com/cover.html
and has a blog:
http://sohuxinyou.blog.sohu.com/

More information about this game can be found here:
http://news.17173.com/content/2009-02-06/20090206102327606,1.shtml

During the third quarter 2008 earning conference, SOHU call this new game “Immortal Faith”. There are really no new information on this game until February 12, 2009. It will be interesting to hear more about this game.

China’s video and music web site survey

My previous article on video can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/sohu-video-tv-stations-opened.html

On 1/21/2009, Analysys International published a survey on the most popular video and audio web sites for China』s internet café users. The article can be found here:

http://www.analysys.com.cn/web2007/ygfx_index.php/id_6167.html

The following plot list the market share of all the major video web sites for China』s internet café:

From the above plot, one can find the market share number for all the major web sites:

Todou: 46.8%

Youku: 44.3%

56: 10.2%

Ku6: 9.0%

QQ Video: 7.5%

Tencent Broadband: 5.1%

6: 4.2%

Youtube: 3.3%

Sina: 3.2%

Sohu: 2.1%

Analysys Internation also performed the survey for the most popular music web site frequented by China Internet Café users:

From the above chart, one can get the market share data for the major music web sites:

Bidu Music: 57.4%

QQ 163: 16.6%

Sogou Music: 12.8%

Gougou Music: 11.8%

From the above survey results, one can make some observations. For videos, it is basically a 2 horses race. Todou and Youko dominates. Tencent is coming on fast. Its two services (QQ video and Tencent broadband) together accounts for 12.6%. Since it is being pushed by its powerful QQ internet messaging service, there is no doubt its market share will keep on climbing.

Youtube is a non factor in China. China』s other portals, Sina and Sohu, are also non factors.

But I don't think China』s video war is over by any means. Running a video sharing web site is very costly business. At this point, no video web sites are making money. Given the global financial crisis, those non portal players are vulnerable for bleeding cash too fast. It will be interesting to see how this battle play out.

For the music business, Bidu dominate because it is the dominant search engine in China. Tencent is doing well because its can use its powerful QQ internet messaging service to push any services it wants. Sogou music search is strong because it has very good reputation among Chinese users.

China’s 2008 Internet advertising market survey

My last article related to the advertising market in China can be found below:

http://chinese-net-gaming-stock.blogspot.com/2009/01/chinese-optimistic-about-2009.html

I don't know much about Analysys International. I had seen quite a few survey results from Analysys on various subjects on China』s Internet industry recently. I would like follow their surveys to see if their surveys are accurate.

The following is the survey result from Analysys International:

http://www.analysys.com.cn/web2007/ygfx_index.php/id_6175.html

One can find the revenue and year over year growth rate in the following plot:

From the above plot, the revenue and YoY growth rate for 2008 can be listed:

1Q2008: 2.11084 billion and 54.5% growth rate

2Q2008: 2.80750 and 73.5%

3Q2008: 3.343 and 72.4%

4Q2008: 3.543 and 67.3%

If their survey is correct, we shall be seeing an incredibly strong 4Q2008 advertising revenue for SINA, SOHU, NTES, FMCN and BIDU.

Note that we have Olympics for the 2Q and 3Q. The 4Q2008 survey results are almost on the same level as those Olympics quarters. Even assuming 4Q2008 is a normal quarter, it is an amazing survey result. Now, considering that 4Q2008 is when the global financial crisis occurs, this result is a little hard to believe.

We will see how this survey results stack up when China』s internet companies report their 4Q2008 results.

Chinese Net Café gamers reduced by 30%

My last article on NTES can be found here:

http://chinese-net-gaming-stock.blogspot.com/2009/01/ntes-games-4q2008-prediction.html

On 12/28/2008, there is a small article on a local newspaper in southern China. That article can be found below:

http://www1.nanfangdaily.com.cn/b5/www.nanfangdaily.com.cn/nfjx/200812280015.asp

It was an extremely short story. In it, NTES's CEO said that there is a 30% reduction on the number of gamers in China』s Internet Cafés. He thinks it is due to the global economic crisis. It caused the stock of NTES to crash from $22.78 to as low as $16.61.

At the time, I don't really believe the authenticity of the story. First, the story is extremely short and doesn't provide any background. I tried to find more details, but I couldn't find any at the time.

China』s news industry is extremely competitive and all the players place great emphasis on quantity rather than quality. In addition, during slow news time, sometimes they create stories rather than just report stories.

But most importantly, my server checks on NTES and SOHU's games don't reflect that at all. The following article is my server checking on NTES's games for 4Q2008:

http://chinese-net-gaming-stock.blogspot.com/2009/01/ntes-games-4q2008-prediction.html

From my server count, NTES's games had very strong growth in the 4Q 2008. Therefore, I have great doubt on the authenticities of that story.

Today, 1/28/2009, there is follow up on that story. You can find it here:

http://epaper.nddaily.com/D/html/2009-01/28/content_694844.htm

In it, it repeats of what NTES's CEO has said. More importantly, it provides more colors or details on what he said.

NETS's CEO said that there is 30% reduction of the number gamers in China』s internet café. It is not clear to him whether it is due to the current global crisis or due to those gamers plays at home rather than internet café.

He said the decline started in October 2008, but accelerated in November and December, 2008. He got this data from his 1000 strong ground sales force. He did admit that part of these declines is due to seasonality.

Typically, there are less gamers in internet café during winter. In addition, there are many school holidays in the 4Q.

Gamers from internet café represented about 25% of NTES's games' population.

In response, SNDA's CEO took a completely opposite ways of looking at the same thing. He believe internet gaming is recession proof. He believes whether a game company can prosper in the global crisis depends on the capability of the game company's CEO. Then he uses a pretty loaded term to describe NTES's CEO. He said NTES's CEO has a 「short」 attitude.

We all know what short means. But for NTES's CEO to short its own stock, that is, driving down NTES's own stock with the purpose of buying it later, it could be a strong accusation.

NTES's CEO said, 「If you don't believe me, go ask GA's CEO. GA has even bigger ground sales network than we do」.

The above article didn't ask GA's CEO about this story.

The following is what I think.

I think this story is real. NTES's CEO did say those things. It does make sense that global crisis has an impact to gaming industry.

But from the response from SNDA's CEO, the effect of the global crisis is pretty small on China』s gaming industry.

In addition, NTES's CEO wasn't trying to relate internet café』s gamer population to NTES's performance. He was talking about the affect of global crisis on China and he happens to use the decline of internet café gamers to illustrate his point.

NTES's CEO has never being known for being marketing savvy. He probably has no clue of how other people will interpret of what he said.

Note that he never said anything about his games server statistics. If he said there are much less gamers due to his game's server statistics, it would mean absolutely lower revenue.

There might be 30% less gamers in China』s internet café, but there might be more internet café gamers playing NTES's games due to NTES has more new games on line this quarter. It is also possible that there are now more gamers that play at home rather than in the internet café.

My server check had indicated a very strong NTES's growth. But NTES's CEO's statements definitely had put some doubt into it.

But I think the fundamental stays the same. Global crisis will have some negative affect. But the affect is probably much less than most other industry. For NTES, the fundamental is the same. Its new games are growing extremely strong. It also will have 2 to 4 new games coming on board this year. NTES is in an extremely strong position in China』s gaming industry.

But there does seem to be some short term doubts for NTES. For SNDA's investors, it is nice to see the confidence of SNDA's CEO.

XYW official trailer

The previous article on XYW can be found here:
http://chinese-net-gaming-stock.blogspot.com/2009/01/xyw-4q2008-prediction.html

Netease released one of an official trailer for the new game XYW. From my last article, one can see that the game is receiving great reception by Chinese gamers. One can download the trailer from the following link:
http://xyw.gdl.netease.com/xyw2008CG.wmv

From the trailer, this game is a very pretty 2D game. Unlike XYQ, it draws the characters in a very realistic way. This is in the same way how XY2 and XY3 characters were drawn.

Currently, the last two weeks are the final exam weeks in China. Therefore, as expected, all the servers’ statistics for all Chinese games were very weak. But XYW is the only exception. It is evident that XYW is really gathering momentum.

China’s search market survey and BIDU’s 4Q estimate

My previous article on the state of China』s search market can be found here:

http://chinese-net-gaming-stock.blogspot.com/2008/07/iresearchs-2008-2nd-quarter-chinas.html

The following is a survey for 2008 China』s search market. It is from Analysys International. What is interesting is this is published before any companies published their 4^th quarter revenue. Therefore, we can calculate BIDU's revenue estimate based on this survey. One can find the survey in the following:

http://www.analysys.com.cn/web2007/hysj_index.php/id_6163.html

The following graph list the revenue and year over year growth rate for China』s search market:

From the above graph, the total revenue for 4Q2008 is 1.52577 billions rmb. It had a YoY growth rate of 62.2%.

The next plot has the market share data for all the search engines in China

I will list the data below:

BIDU: 62.2% (was 59.3% in 2007)

Google: 27.8% (was 23.4% in 2007)

Yahoo: 5.8% (was 11% in 2007)

Sogou: 0.9%

Zhongsou: 0.9%

Sina: 0.4%

Ntes: 0.4%

Soso: 0.6%

Others: 1.0%

Now, we are able to calculate the Bidu 4Q2008 revenue.

The total search revenue for 4Q2008 is 1.52577 billion. We have an exchange rate of 6.842 as of today. Bidu's market share is 62.6%. Thus, Bidu's 4Q2008 revenue is 1.52577*0.626/6.842 = 0.13871 = 138.71 millions in US dollars. This is the search revenue. Bidu typically adds 0.2 millions for others. Therefore, the total revenue is 138.73 million for 4Q2008.

The 4Q2007 revenue was 78.3 millions. Therefore, the 4Q2008 revenue of 138.7 millions represents a 77.1% YoY increase.

Yahoo finance site's analysts' estimate for the 4Q2008 is 132.48M. See the following:

http://finance.yahoo.com/q/ae?s=BIDU

Therefore, from this calculation derived from Analysys International's survey, we shall see a nice revenue surprise.

Now, in terms of overall search market, Bidu is doing very well. So is Google. Yahoo is losing ground badly. Everybody is basically at a noise level.

At this point, it is a race between 2 horses. I think the race is almost over. Others are just too far behind to catch up unless there are other factors at work. But I do think that 「other factors」 are going to be online soon.

I think there are two dark horses. One is Tencent's Soso search engine. At this point, soso uses google search. Therefore, Tencent is not pushing this service hard. But Tencent is developing its search engine. Once it is developed, it will be pushed by Tencent's powerful QQ IM service.

Another dark horse is the Sohu's sogou search engine. Sohu didn't push its Sogou search engine during the Olympics because it has a much more powerful weapon at its disposal. That weapon is called Sogou Chinese Input Pinyin method. That weapon is ready now and the battle is starting. I will spend some time talk about this exciting new development.

But other than these two dark horses, I think the search war in China is basically over.

Ntes is developing new games based on DaTang

My last article on DT2 can be found here:
http://chinese-net-gaming-stock.blogspot.com/2008/07/ntes-dt2-and-ff2-go-into-beta-testing.html

It never ceases to amaze me how different NTES is from other Chinese and American companies. The following is another demonstration of the idiosyncrasy of NTES.

DT had been a failure for NTES. But the game is still in operation. But there are hardly any updates for the game. NTES decided to develop its sequel and on 7/21/2008, DT2 entered into Final Internal Beta.

But it turns out it is not the end of the story. From NTES’s forum:
http://dt.netease.com/viewthread.php?tid=379113&extra=page%3D1
http://dt.netease.com/viewthread.php?tid=379310&extra=page%3D1

From the above two posts, NTES is going to start to develop DT again. It is also going to build another game from DT. DT2 development will still be following its original schedule.

I think NTES is mimicking what it had done for the XY2 series of games. I am going to try to draw the two series of games. First, I will draw the XY2 series of games:


One starts out with XY2. It is a serious 2D paying game. Then it branches out to XYQ. XYQ is a cartoonish 2D paying game. XY3 is supposed to be XY2’s sequel. It is also a serious 2d paying game. XYW branches out from XY3. It is a free-to-play 2D game. While the graphics of XYW will be not be cartoonish, its game-play will be closer to that of XYQ and is much more light-hearted.

The XY2 series of games had been extremely successful. XYQ is a 2 million player’s mega game and is the most popular game in China. XY2 is another mega-game that has close to 1 million players. XY3 is pretty solid game while the just released XYW (according to the server statistics) looks to be NTES’s next mega-game.

NTES is going to duplicate what they did for XY2 for DT. Now I will draw the DT series of games:



DT was a game that was left for dead. But NTES is going to re-start the development of DT. DT is a 2.5D marshal art paying game. DT2 is supposed to be its sequel. It is going to be a 2.5D free-to-play game. The new game will be another 2.5D free-to-play game. It is not clear how the two new games will differ. Most likely DT2 will be a more serious game while the new game will have more light-hearted game playing features.

From the two articles, the new game as well as the DT re-development had both been under development for 10 months already.

All these new developments are pretty exciting. TX2 and XYW are brand new games. All the growing will happen in 2009. In addition, FF2 and DT2 will certainly come out in 2009 also. It is hard to know when the new game (derived from DT) will come out. The most likely time frame is later in 2009. In addition, DT will be re-developed.

NTES will be busying adding new games to its staple in 2009.

Those are exciting news. If it is any other companies, it would have sent tons of press releases to Wall Street analysts. But it is not Netease’s way. It lets its games designer tells a few thousands gamers.

Netease makes great games. It continues to make great games. But NTES's investors have to tolerate its aversion to any marketing.

Sohu.com to Roll Out its Own Web Browser

I had been talking about a project by Sohu that could completely change the landscape of China's Internet industry. That project is called Sogou Pinyin Input System. My last article about it can be found here:
http://chinese-net-gaming-stock.blogspot.com/2007/10/chinese-internet-pinyin-input-system.html

There will be exciting news about that project in the near future. I will write a few articles about the progress of that project in the future.

Similar to the Sogou Pinyin Input System, browser is another application that could fundamentally changes the internet landscape. Remember the fight between Netscape vs. Microsoft.

Sohu is not satisfied with the success of the Sogou Pinyin Input, it has officially entered the browser war in China.

On 12/22/2008, Sohu officially announced the beta version of its Sogou web browser. One can go to its official web site:
http://ie.sogou.com/

In the middle left hand site of the official web site, there is a video. You can play that video. That video gave a pretty good description of what Sohu felt is superior of its Sogou browser over other browsers.

The first part of the video talks about it is much more stable than other browsers. The second part of the video talks about its 6 new features that other browsers don't have.

Sogou browser shares the same browser engine as that of Microsoft Internet Explorer or Maxthon (傲游). Therefore, it is different than Google's Chrome (that is based on Webkit browser engine) or Firefox (that is based on the Gecko browser engine).

I believe Maxthon is pretty big in China. Google has partial ownership to Maxthon. See the following:
http://www.techcrunch.com/2007/04/10/google-takes-partial-ownership-of-maxthon-browser/

From the above article, Maxthon has had over 80 million downloads of its browser, and over half of its users are in China. Maxthon-originated searches may account for up to 25% of total Baidu traffic, according to one source.

The following are some Chinese review articles:
http://news.newhua.com/news1/Skills_tools/2008/1223/081223132830DFAK1A7C53H66F34IAF6A60IH3H5D7EEB66H50B02K57.html
http://www.cwrblog.net/1245/sogou-released-its-own-internet-browser.html
http://news.skycn.com/article/18747.html
http://www.awflasher.com/blog/archives/1630
http://it.sohu.com/20081222/n261350959.shtml
http://news.skycn.com/article/18747_1.html

Some education internet users review its acceleration feature.
http://www.appinn.com/sogouexplorer-beta/

I will give a quick description of its unique features.

1. Multi-Task Asynchronous Browsing. Sogou Browser is a multi-tab browser. But unlike other mult-tab browsers, it makes every tab independent. That means if one tab become unstable, it won't affect other tabs. You can close the unstable tab without losing your browsing session. This allows for the browser to be much more stable.

2. Independent video broadcast. Lets say you went to youtube.com. You want to view a video. You can pop that video out of the web page. Move it aside or resize it. That way, if you want to watch that video while browsing other (non youtube) web page, you could do that.

3. Smart address bar. It gives you search result as you type in an address.

4. Privacy browsing. Allows you privacy while using public computer.

5. Gives you easy access to your most frequent visited sites.

6. Accelerate browsing for users using the education network in China. It also allows for the users in the education network to access foreign content for free.

Now I will provide my own comments on what I think about the above features, starting from the least important.

The least important new features is number 5. It sounds good, but I don't think anybody will use it. Besides, a lot of other newer browsers have already added that features.

The second least important new feature is number 1. If you go to every review articles, every internet technocrats regard this as the number 1 issue for every browser. But as a stock investor, I don't think this is very important. The most stable browser (Google Chrome and Firefox) have much less market share than the least stable browser (Microsoft's IE). Therefore, as a stock investor, I don't think the stability of a browser is that important to the market share of a browser.

Independent video broadcast is a little neat feature. Most Chinese internet users are young people and they like neat features.

Smart Address bar is a feature that is very important to Sohu. It won't win any market share for Sogou Browsing. But this feature will allow Sohu to monetize the Sogou Browser by directing more traffics to Sogou search. Sogou Browsing will always be free. Therefore, it has to be monetized through indirect features. This is one way to do it and Sohu can make a lot of money through search.

Privacy browsing is a very important little feature that are very attractive to a section of Chinese internet users. There is a big segment of Chinese internet users who don't have computer at home. They get on line either through school, work, or internet café. When they use computers in internet café, they don't want people to find out their browsing history. This feature shall grab quite a few users. Unfortunately, this feature is quite easy to implement. In addition, a lot of other newer browsers are starting to add this feature. This advantage probably won't last long.

But all these little features (features 1 through 5), Sogou browser is just another new browser. It probably won't even get 1% of the market share in China.

The killer feature is however, the accelerated browsing for China's Education and Research network users. It also provide free access to foreign websites for China's Education and Research network users, normally a paid service for campus network subscribers.

This is a great feature. There is seldom any example of a new product in a flooded market that upon its initial release, would already have a big group of users waiting for them.

But unlike some earlier report that Sohu will provide functions that will somehow let its users to indirectly bypass the great firewall of China. It does no such thing. As a stock holder of Sohu, the last thing I want is for Sohu to have confrontations with Chinese government.

All this feature provided is that Sohu will provide dedicated servers so that China's students and researchers will access domestic news much faster and foreign web sites (that are approved by Chinese government) for free.

I am getting more and more impressed with Sohu every day. It seems to do everything right. It knows how to market its product and hype its portal's reputation. It is able to execute tremendous large project in a short time frame (its Olympics coverage). It is able to hire great talents and develop great products (Sogou Pinyin and Sogou Browser). It has a lay back CEO who let its talented marketing, management, and R&D team doing their things. But the same CEO is also able to focus the whole company in high value projects in a timely fashion.

Education network acceleration feature is one such example. There are a lot of companies developing browsers in China now. They all know the importance of the browser market in China (unfortunately, Wall Street has no clue of the significance of applications such as Pinyin Input Method or Browser). But no company had thought of doing this great feature. This feature allows Sogou Browser to lock up 5% to 10% of customer base from the starting gate.

Sogou Browser and Sogou Chinese Input System are potential historical moments. If Sohu can dominate Chinese Input System and Browser, it can dominate China's Internet industry (the whole industry, not just the portals or the advertising) the same way Microsoft uses its Windows operating system to dominate PC software industry in the 80』s and 90』s.

At this point, Sohu just started its Browser war. But the war on the Chinese Input System is almost over. If I have time, I will write a few articles on the progress of Sogou Chinese Input System.

In the 1970』s and 1980』s, it was an exciting time for the PC software industry. You have Word Perfect doing great word processing program. There is Lotus doing great Spreadsheet program. You also have Netscape doing great browser. There are a lot of other companies coming out with great products.

But Microsoft came in with one application (Windows) and just suck the whole industry dry. They basically monopolized the whole industry.

It is very possible that the history will repeat itself here in China. Except the company is not Microsoft and the industry is China's Internet industry.