Who won the Olympics?

My last Olympics related post can be found here:
http://chinese-net-gaming-stock.blogspot.com/2008/08/online-ads-outlook-from-fmcn.html

Now that Olympics is over, so who won?

Certainly, there are independent survey organizations in China that will survey the popularity of China’s portals. Yes, there are.

But there is too much information, it is virtually impossible to make anything out of it. In addition, every portal would use part of these surveys to justify why they are number 1.

The following two independent articles give pretty good summaries of the confusion involved:
http://big5.ce.cn/cysc/tech/07hlw/guonei/200808/26/t20080826_16615704.shtml
http://www.tianya.cn/new/publicforum/Content.asp?idWriter=0&Key=0&strItem=free&idArticle=1415731&flag=1

For qq.com (or Tencent), it quoted Alexa and Nelson rating to justify that they are the winner on China’s internet war during the Olympics. For Sina, it quotes Chinarank and CTR to say that it won. For Sohu, it quoted 8 different organizations’ (CNNIC, DCCI, iResearch, Analysys Internation, Tsinghai University, etc.) survey to justify that Sohu is the winner.

The following are articles from each portal to justify why she is the winner.

From Sina:
http://tech.2008.sina.com.cn/i/2008-08-25/10022411382.shtml
http://tech.2008.sina.com.cn/focus/2008_sina/index.shtml

From Sohu:
http://it.sohu.com/20080825/n259199132.shtml
http://it.sohu.com/s2008/aoyunbaodao/
http://it.sohu.com/20080826/n259209746.shtml
http://it.sohu.com/20080826/n259207979.shtml
http://it.sohu.com/20080810/n258719970.shtml

From Ntes
http://tech.163.com/08/0826/09/4K8VJII3000915BF.html

From Tencents:
http://tech.qq.com/a/20080825/000204.htm
http://2008.qq.com/zongjie.htm


It is so confusing that it is virtually impossible to say for certain who won. I went though these articles a couples of times each and still having trouble making much sense.

But if I have to make a judgment, I would have to give the following impression.

Tencent has the dominant instant messaging service, qq. It uses qq to push the Olympics news to its users regardless whether its users want it or not. If you include the information that is delivered to the users (whether it is solicited or not), QQ would definitely be the number 1.

But if you only count the web traffic that is initiated by the users themselves, then it seems Sohu has the upper hand. Most of the survey results seem to give a slight upper hand to Sohu with Sina be the number 2.

In addition, the top two (Sohu and Sina) have traffics that are significantly greater than the next two (qq.com and Ntes).

While I think the biggest winner is Sohu, Sina definitely benefited greatly from the Olympics as well.

Tencent is an up and coming threat. It is able to leverage its dominant position on the instant messaging service to push into the portals. Every Chinese netizen has a qq IM on his/her desktop. When a text bubble with interesting Olympics news comes up, it is so tempting for the user to click on it. When they do, they would go into Tencent’s portal.

Having a stand alone desktop application gives the company so much leverage, it is also the reason Sohu is sparing no expense in its next secret weapon, Sogou Chinese Pinyin Input system. (But that is another story for future date).

While Sohu, Sina, and QQ.com have similar look and feel for their portals, Ntes’ portal is very distinct. Much like McIntosh in the US, Ntes’ portal has a very loyal following. In addition, while Ntes portal used to cater to the second and third tier companies, during the Olympics, I noticed that there are a lot of ads from 1st tier multi-national corporations on Ntes portal.

Sohu – What was Sohu trying to tell us

My last post on the Olympics can be found here:
http://chinese-net-gaming-stock.blogspot.com/2008/07/olympic-battle-between-portals.html

On 6/19/2008, Sohu’s Co-President Belinda Wang, said she expects core advertising to grow by 40% to 45% this year and 20% to 30% next year. See the following article:
http://www.reuters.com/article/marketsNews/idINHKG18529220080620?rpc=44

The market interpreted as company’s admission of Sohu slowing down after the Olympics. It punished the stock on the same day and push the stock of Sohu down by 14% in a single day.

But what is Sohu actually trying to say to the wall street.

On 6/26/2008, Sohu published an interview with the CEO of Sohu. The article is as follows:
http://it.sohu.com/20080626/n257755301.shtml

The main points of that article are as follows:
- Wall Street “mis-interpreted” the interview with Belinda Wang.
- The growth rate of 20% to 30% in 2009 is incorrect. The actual 2009 growth rate is unclear at this point.
- During the Olympics, Sohu will get a bigger percentage of internet users. This pattern will continue into 2009. There is absolutely no reason that the growth rate in 2009 is only 20% to 30%.
- Wall Street still don’t understand Sohu. For example, Wall Street didn’t taken into consideration of Sohu future killer product such as Sogou Pinyin Input Method.

What do I think of what exactly happened?

I think there is a basic misunderstanding between the Wall Street and Sohu management. The most likely case is that the Sohu management was trying to send the message to Wall Street that its estimate for 2009 (after the Olympics) is too pessimistic. On 6/18/2008, the average analysts’ estimate for 2009 is 22%.

Sohu’s management wants to up that estimate while still stays conservative. Therefore, it gave an estimate of 20% to 30%. Thus, its medium is 25%.

But somehow, the “whisper number” in Wall Street is probably higher and Sohu’s stock crashed 14% as a result.

It think it caught Sohu’s management by surprise. Thus the second interview on 6/26/2008. It is pretty clear that Sohu’s management is pretty confident that they can beat the 20% to 30% estimate they gave. But it is so far away that they don’t want to give out more precise estimates.

On a side note, it is pretty clear that Sohu regards the Sogou Pinyin Input Method as its ace, or its most important weapon to gain market shares. There are some recent news about it and I will talk about it in future posts.

Olympic battle between the portals

My last post on the Olympics battle between China’s internet portals can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/battle-of-olympics-part4-conclusion.html

First, Sohu got right to broadcast CCTV’s Olympics coverage. It is time for Sohu to crow about how much advantage it gives them:

http://www.paidcontent.org/entry/419-sohu-gets-olympics-webcast-rights-live-broadcasts-from-outside-venues-n/

Not to be out-done, the alliance members, Sina, Ntes, and Tencent also announced that they got the license to broadcast CCTV’s Olympics coverage also

http://internet.weaseek.com/2008/0716/47227388.shtml

http://biz.yahoo.com/paidcontent/080715/1_325428_id.html?.v=1

From the above article, CCTV has 9 partners that have license to rebroadcast CCTV Olympics coverage.

Now, this is just re-broadcasting TV programs. I believe all four companies also have the right to do original programming on their own. For that part, Sohu has the advantage in that it has more reporters’ licenses because it is also the official web site provider.

Finally, the following article provides a pretty good insights to Sohu’s Olympics strategy

http://cn.ibtimes.com/articles/20080715/sohu.htm

This is an article about an interview with Sohu’s CEO on 7/14/2008. Some major points on this article:

- Regards to Olympics coverage, he felt that Sohu has two major advantages, the breadth of coverage and the speed of coverage.

- There will be major investment for the Olympics.

- There will be marketing campaign such as ads on public buses. They will also do marketing on the Olympics relay cities. The video broadcasting on the Olympics relay run is pretty expensive also.

- The money made from the hit game TL is really helpful. It more than offsets the additional expenditure for the expense paid for the preparation of the Olympics coverages.

- The three major pillar of Sohu’s Olympics partnership is

1. Sohu is the official sponsor and official web site developer of Olympics

2. partnership with CCTV

3. partnership with www.sports.cn

- The Olympics Strategy for Sohu is basically to build the Sohu brand during the Olympics.

- Sohu had build all its products such as Sohu News, Sogou Pinyin Input Method, and Sohu community to keep those users after the Olympics.

Note that Sohu is the developer of the official Beijing Olympics web site, http://www.beijing2008.cn/index.shtml. On the other hand, www.sports.cn is the developer of the official web site of the Chinese Olympics Committee.

I think its partnership with CCTV gives Sohu a lot of TV programs. On the other hand, as the developer of the official web site and its partnership with www.sports.cn give Sohu a lot of reporter press pass to allow Sohu to do a lot of original TV production.

In the end, I believe Wall Street had a misconception about Sohu’s core strategy regards to the Olympics.

I think Wall Street think Sohu will benefit greatly during the Olympics and fades badly afterward.

On the other hand, Sohu’s core strategy is to use Olympics as a jumping point to dominate China’s Internet space. It will probably benefit from Olympics advertising. But it is also spending heavily to establish itself and grabbing market shares from the likes of Sina, Ntes, Bidu, and Tencent.

It is building capability so that it can keep the market share afterward.

If Sohu executed its strategy, it might not have make as much profit as the wall street expects during the Olympics; but it will trounce wall street’s expectation after the Olympics.

China Mobile and Sohu are top two Olympics brand in China

My last Olympics related post can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/battle-of-olympics-part4-conclusion.html

Just came across this news today.

http://article.pchome.net/content-533746.html

According to a Baidu's report, China Mobile is number 1, Sohu 2nd, Lenovo 3rd, and Samsung is the 4th most respected Olympics brand.

Others like Mcdonalds is 15th, Adidas 18th and Microsoft can't even crack the top 20.

Baidu compiled the report based on four categories, press coverage, government help, individual users’ respectability, and composite score. The final composite score is a composite of the first three scores.

China Mobile is number 1 in both press coverage and government help. It is the 2^nd most respected brand by average individual Chinese.

For Sohu, it has a composite score that gives it the number 2 ranked company regarding Olympics. It is only number 5 in both press coverage and government help. But its strength comes from the average Chinese users. Overwhelming individual Chinese users regard Sohu as the number 1 most respected brand with respect to Olympics. That catapults Sohu into the number 2 ranked company in China (regards to Olympics).

For Lenovo, it is number 3 in all three categories. Thus it gets a composite score of the 3^rd ranked most respected Olympics related company in China.

According to the Baidu report (can be found in http://2008.baidu.com), among all internet sites and portals, Sohu did a much better job in brand awareness for Olympics-related activities.

Sometimes, research reports from China can be deceiving or can be paid for by individual company. But I think this is different. Baidu is a direct competitor to Sohu (through Sogou), there is no reason for Baidu to pump Sohu's success. Thus, I believe the authenticity of this report.

As we get closer to Olympics, average Chinese users will gravitate toward the brand they respect and trust the most and that is Sohu (in Internet) and China Mobile (in Wireless). I think we are going to see acceleration in ad revenue from Sohu as the Olympics gets closer. Sohu is going to grab market shares from the likes of Sina, Netease, QQ, and Baidu. In the wireless area, we are probably going to see the same thing. That is China Mobile is probably going to gain more market shares from its competitors.

For the first three quarters in 2008, we are probably going to see some shift in favor of Sohu and China Mobile.

Battle of the Olympics, part4 - Conclusion

This is the final part of a 4 part report, the previous part, part 3, is here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/battle-of-olympics-part3-sohu.html

Sina will have 15 reporters while Sohu will have 300 reporters inside the Olympics. Sohu claims it is the only internet company that is allowed inside the Olympics village. It may be half true. Sina probably is not allowed to go directly. But she will get 15 reporters in, probably though indirect channel (such as be part of a team from a traditional TV).

At this point, it is clear that Sohu has the upper hand for the Olympics. Beijing Olympics Committee is on their side. In addition, as long as there are confusion regards to whether companies can use Olympics logos or slogans on Sina, Ntes, or Tencents’ web site, it is to be Sohu’s advantage.

Frankly, I don’t think companies like Dell, GM, Toyota could care less about who is the official sponsor. But if they can put ads on Sohu without any string attached while there may be many hidden restrictions to put ads on Sina, Ntes, and others, it is pretty clear which internet company they will pick.

The longer this confusion lasts, the better it is for Sohu.

Now it is clear that Beijing Olympics Committee is on Sohu’s side, will that be the final nail on the coffin as far as Sina and Ntes are concerned? Not by a long shot.

First, Sina and Ntes will benefit from the Olympics indirectly just by be the 1^st and 3^rd largest portal in China.

In addition, both of them have powerful friends in the government also. It is one thing that Beijing Olympics Committee gives verbal prohibition, it is quite another matter for the above agency to actually stop what Sina or Ntes will do.

More importantly, if Sina is successful to make the alliance permanent as well as able to share advertisement, Sina will create an entity that is virtually invincible.

Sina (and Ntes) might take its licks from Sohu prior and during the Olympics. But what is Sohu going to do afterward. Sohu definitely can’t compete with a real alliance like the one Sina is proposing.

In a nutshell, I think Sohu is going to win the Olympics battle, but will she lose China’s internet war? Only time will tell.

Battle of the Olympics, part3 - Sohu

This is part 3 of a 4 part report. The previous, part 2, is here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/battle-of-olympics-part2-sina.html

Now that Sina announced its Olympics strategy, not to be outdone, Sohu announced its Olympic strategy the next working date (9/10/2007):

See the following article for more details,

http://2008.sohu.com/20070910/n252064832.shtml

Back to this particular news conference, there are a lot of articles on this. I will give a short summary for each of them.

First, the CEO of Sohu talks:

http://2008.sohu.com/20070910/n252069598.shtml

Sohu’s Olympics team will consist of 703 reporters. Of which 300 will be reporting inside the Olympics. It is the only internet company that is allowed inside the Olympics village.

Next, the CFO of Sohu talks:

http://2008.sohu.com/20070910/n252063423.shtml

The Executive of Sohu talks:

http://2008.sohu.com/20070910/n252065346.shtml

In addition to sports related, Sohu will have 48 Olympics related products that is not sports-related. It will cover 16 categories. Example includes Olympics spirits, environment protection for the Olympics, technology used by the Olympics, etc.

Next, it is vice CEO of Sohu:

http://2008.sohu.com/20070910/n252063717.shtml

Sohu is like regular army while others have to conduct gorilla warfare. Therefore, Sohu’s reporting will be comprehensive while others can only provide niche reporting. Sohu’s coverage will cover everything Olympics related, not just sports.

Vice Department head for the Sports Department of Sohu:

http://2008.sohu.com/20070911/n252070070.shtml

Some exclusive right:

- Interview with Olympics winners: Only CCTV and Sohu have this right.

- Interview with Olympics athletes: Others might be able to interview certain athletes because they have sponsoring deal with that particular sports. Sohu can interview pretty much any athletes.

- Station in Olympics village. Other reporters stays in the Olympics Reporter village. But as the official Olympics Internet website developer, Sohu is able to station in the Olympics village. It gives Sohu more opportunity to report Olympics Village related news.

http://2008.sohu.com/20070910/n252069118.shtml

The above Sohu article declare that Sohu will not monopolize the reporting of Olympics. An example will be NBC is the official TV for the Olympics. But ABC or CBS won’t accuse NBC as monopolize the TV.

But probably the most important people are not Sohu’s big shots. The most significant speakers are the big shots from government officials. The government big shots in the press conference are the vice-chairman of the Beijing Olympics Committee, the director for the department of marketing and business of the Beijing Olympics Committee, the director of International Business of CCTV, and the director of Internet of CCTV.

It is not even what they said but their presence speaks volumes of which side they are on.

The director for the department of marketing and business of the Beijing Olympics Committee talks:

http://2008.sohu.com/20070910/n252064596.shtml

http://2008.sohu.com/20070910/n252068885.shtml

http://2008.sohu.com/20070910/n252063989.shtml

http://2008.sohu.com/20070910/n252069108.shtml

She said other internet companies have no right to promote Olympics or to conduct Olympics related business. Beijing Olympics Committee will protect Sohu’s right and prohibit other internet companies’ “hidden marketing” of Olympics. Use of any Olympics slogan or signs is prohibited.

For example, Beijing Olympics Committee found Sina conduct an activity called “Olympics Pilot Selection Online Poll” before. It was not allowed.

Video:

http://s.sohu.com/20070911/n252069824.shtml

From the video, many Chinese Olympic officials participated in this announcement. Two heavy hitters from the Beijing Olympics Committee gave speeches.

The vice-chairman of the Beijing Olympics Committee gave a speech:

http://s.sohu.com/20070910/n252062666.shtml

The director of the department of business and marketing of the Beijing Olympics Committee gave a speech:

http://s.sohu.com/20070910/n252062912.shtml

Next, I will talk about my thought on this subject.

Battle of the Olympics, part2 - Sina

This is part 2 of a four part series. Part 1 can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/battle-of-olympics-part1-background.html

On 9/7/2007, Sina announced its Olympic strategy:

http://tech.sina.com.cn/i/2007-09-06/10001722377.shtml

The following articles summarize what Sina planned to do:

http://tech.sina.com.cn/i/2007-09-07/02091724277.shtml

Sina would get at least 15 reporters’ card that enable these reporters to report during the Olympics. Sina would also have a 450 reporters team to report Olympics. These reporters will be able to speak Chinese, English, German, French, Spanish, and Arabic.

Sina again announced that all websites will have equal access to Olympics news. In addition, all Olympic sponsoring companies can put their Olympic logos on Sina.

Finally, Sina would have three “secret weapons” that are to be announced later.

http://tech.sina.com.cn/i/2007-09-07/01521724260.shtml

From the above article, Sina would like to extend the cooperation agreement with Tencent, NTES and others after the Olympic also. They want to make it permanent.

Sina just signed sponsor deal with China’s Tennis Association, China’s Volleyball Association and China’s Watersports Association. They would get first hand news. But Sina promised these news would be shared with its partners (that means Sohu is excluded).

But does this mean if Sina can exclude Sohu from these news, Sohu can also excludes the alliance and Sina, Ntes, and others from the Olympic news since Sohu is the only Olympic internet sponsor?

Sina also talks about the alliance deal. So far, the alliance consists of 40 internet companies, 16 newspapers, and 9 TV stations.

At this point the alliance only relates to the sharing of information. But Sina wants to expand the charter of the alliance to include the sharing of the advertising revenue amoung the core group. Sina also wants to make it a permanent arrangement, well after the Olympics.

Sina may have start this alliance out of its weakness against Sohu. But it seems Sina is going for Sohu’s jugular.

Is Sina trying to form a monopoly?

Sohu needs to be extremely careful. She is in a rock and a hard place. She would not be interested in being part of the alliance before the Olympics. At this point, it seems Sohu is holding all the cards prior to the Olympics. But she can’t be excluded from the alliance after the Olympics. But this alliance was created to fight Sohu for the Olympics, why would the alliance accept Sohu after the Olympics.

In the long term, Sohu is not going to be able to compete with the combine might of Sina, Ntes, and Tencent.

On the other hand, a permanent alliance sounds great on paper. But the devil is in the details. If the alliance is going to share information, and Sina is going to provide a 450 person reporting team, why shall other companies hire more reporters when they can get the report from Sina for free?

If they want to share ad. revenues, Sina probably preferred to break the percentage based on the current ad. revenue for each company right now. Sina is the biggest advertising earner right now. But for a company like Tencent, they want to grow their advertising revenue, why shall they want to lock down their ad. when they feel they can grow faster on their own.

And even if Sina can pull it out and form a real alliance, is that even legal? Is this alliance really a monopoly?

Next I am going to talk about the Sohu press conference.

Battle of the Olympics, part1 - Background

Olympics is probably going to be the biggest driver for earning growth for the portals all the way until next summer. While all the portals will benefit from this once in a lifetime event, not all will benefit the same.

Last year, we have a similar event for the World Cup. Back then, Sohu was the official sponsor for the World Cup in China. Sohu spent a lot of money to be the sponsor. But since World Cup organizers won’t give Sohu much special previledge, it was Sina (because it is the largest portal in China) who get most of the benefit. The money Sohu spent to be the official sponsor were completely wasted.

For 2008, Sohu is again the official sponsor. From the experience of last year’s World Cup, most analysts thought it will be a repeat story again.

But this time, I think Sohu gets smart. She is pushing for special right to be an Olympic sponsor. She is also trying to get other perks though her role as the operator of official Olympics website. Using that role, she hooked up with China Interactive Sports and CCTV to get Sohu’s reporters into the Olympics village.

Sohu is also trying to push Beijing Olympics Committee to exclude other internet companies to do Olympics related activities.

On 8/23/2007, Beijing Olympics Committee officially confirmed Sohu’s right as an Olympic sponsor, see the following article:

http://2008.sohu.com/20070823/n251747241.shtml

In the above article, the vice director of the marketing department of the Beijing Olympics Committee gave two examples of what is not allowed:

The first example is not Sohu specific.

In the second example he gave, there is an ad that said “It is two years from Beijing Olympics, what is your thought?, co-sponsored by Beijing TV and Sina”. In it, it said “will report on Beijing Olympics work that day and other related celebrations”.

It is not allowed because Sina is not an official sponsor.

But still, his example is pretty vague and Sina still insists that she is not affected whatsoever. Sina also bring the World Olympics body to wade in.

But since the World Olympics committee is not involved in this argument, it strikes me as Sina’s attempt to confuse people.

The arguments is not whether Sohu has exclusive right to report in the USA, Russian, etc. The arguments is whether Sohu has certain advantage in reporting Olympics in China. For that, it is the Beijing Olympics committee (and not the world body) that holds all the cards.

On 9/7/2007, Sina had a press conference to brief reporters of her Olympics strategy. Not to be outdone, on 9/10/2007, Sohu had a press conference to do the same.

This is a four part report. This article sets up the background for this Olympiad struggle. In part 2, I will give a briefing on Sina's press conference. In part 3, I will give a briefing on Sohu's press conference. In the final part 4, I will provide my final thought.