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.

Statistics from DCCI on China’s Online advertising revenue

The following is an article on some “tigergate” stuff.

http://www.australianit.news.com.au/story/0,,23313705-5013040,00.html?from=public_rss

The original article is from the Wall Street Journal. The following is the Chinese translation of it:

http://community.yikuo.com/discuz/contentpage/200833/20083381241897.html

Nothing much about the story. But it does have the statistics from DCCI (Data Center of the China Internet).

I am sure I can find the information in DCCI site (their site: http://www.dcci.com.cn/List/1.21/2008-1-21.shtml ), but I will just give the important information below:

On China’s ad revenue, Sina, Sohu, Netease, and Tencent are the top four portal (in that order) and together get about 75% of total online brand advertising revenue.

The ad revenue from 2006 to the projected 2009 revenue and their year over year growth rate is as follows:

	2006	2007	2008	2009
Revenue (RMB)	10B	12.35B	16.19B	21.33B
Revenue (USD)	1.4B	1.74B	2.28B	3B
YoY Growth Rate		23.5%	31%	32%

Note: Assuming today’s conversion rate of 7.11 RMB for 1 USD

Now compare this to iResearch’s numbers (can be found here:

http://chinese-net-gaming-stock.blogspot.com/2008/03/iresearchs-china-advertising-market.html).

First of all, revenue of 1.74B for 2007 are just way too high. iResearch report’s portal advertising revenue of .417B for 2007 is more realistic. It is possible that DCCI is adding all the revenues (not just ads) for the companies.

The following table is 2007’s total revenue for the 4 portals:

	Tencent	Ntes	Sina	Sohu	Total
2007 Revenue	479	316	246	189	1.23B

Thus, the four portals’ total revenue accounts for about 1.23/1.74 = .71 or 71% of the total industry.

Unfortunately, total revenue (rather than advertising revenue) is not very meaningful. Tencent and Ntes make most of money in games. Sohu is big on games also. Sina and Tencent has big presence in wireless value added services.

Now, lets look at their prediction on 2008 and 2009. They predicted a nice increase of 31% and an even better 32% increase in 2009. Compare this with iResearch’s prediction of 62% increase in 2008 and 35% increase of 2009. (Note, I am not compare the exact numbers. DCCI’s number of total revenue is composite number. iResearch number of advertising revenue is much more specific. They are not apple to apple comparisons. But I am comparing the trend).

I think there are two school of thoughts here. One believe there will be nice pick in 2008 due to Olympics. But this pickup is not that strong as most people predicted. But China’s internet market is still at its infant stage and the pickup will continue and gathering speed through the next few years. I think DCCI is in this camp.

On the other hand, iResearch seems to suggest the best years for China’s internet sector is over and 2008 is the last year for any strong growth for China. After 2009, China’s internet industry will represent sun-set industry.

Clearly, comparing to US’s internet sector’s experience, considering how fast China is growing, considering only about 15% of Chinese are netizen, and considering how China’s internet companies represents only a tiny percentage of overall China’s advertising industry, it is pretty clear to me that I do not agree with iResearch’s prediction.

When I wrote the video report in September last year, (see my write up here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/sohu-video-tv-stations-opened.html ), I predicted that Olympic this year will give the portals a good year. But starting 2009, there will be a revolution for the portals.

I understand that this line of thinking was against popular thinking. I think most people believe that there will be good growth in 2008 and follow by flat growth in 2009.

I think people are way over-emphasize on the effect of Olympics. I believe the Olympics will give the portal a good pop (though not great). But the real benefit of the Olympics will be to serve as the demonstration platform for what is to come next.

At this point, the portals are largely a text reading experience. But as the portals starts to add video, audio, and web-2.0 contents, they will start to take business away from the traditional TV and radio industries. China’s TV and radio industries are dotted with stodgy state-owned companies.

I believe that Olympics will serve as the demonstration of this new capability and starting 2009, we will start to see this fundamental industrial trend happening.

It was just my gut feeling and I don’t really have much data to back up my prediction. I am so glad an organization like DCCI with its survey results and expert prediction seems to match what I predicted.

Again, in one to two years, I will keep track with both DCCI and iResearch to see which one is right.