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.
I am still keeping track of the weekly download
statistics. The pattern I observed in part 10 is still valid. That is
Netease/CHA (China Telecom)'s YiChat is still growing like crazy. Alibaba's
LaiWang is a very strong grower. Sina's WeMeet is dying in front of our eyes.
In addition, there are two other new players that are getting
into this space. One is from Shanda and another from a big retailer. But so far
those two new players are not catching any traction at all.
Both Alibaba's LaiWang and Netease's YiChat had/will have
major announcement. But first, some users statistics:
Netease's YiChat had already accumulated more than 30
million users. In addition, its user base are increased by 200k per day. Of all
users accounts, 28% of them are daily Active account users. Thus, about 30*0.28
= 8.4 million users are using YiChat every day.
Considering YiChat starts operation on 8/19/2013, it is
able to accomplish this feat in less than 2.5 months. I had never heard of any
social networking product that are able to grow this fast out of the starting
gate, anywhere.
But Alibaba is going all out for its LaiWang product.
From the following article:
Alibaba is offering all LaiWang users of free mobile data
traffic cost for users in 4 major provinces. This trial will last 2 months for
now. Alibaba would also likely to expand this free service.
Not to be outdone, Netease had just announced that it
will have a major announcement on 11/8/2013. From the following articles:
The detail is still a little unclear. But it looks like
CHA/Netease will expand the free data service offer for its YiChat users not
just to all CHA users, but all users in China. It will also covers users from
China Unicom (CHU) and China Mobile (CHL) users.
Of course, the cost of these free service is so large
that is so far beyond what Netease can afford. Most likely, Netease is just
alone for a free ride. Either the cost will come from CHA (China Telecom) or
China Unicom and China Mobile will become partners of YiChat. We will find out
more details on 11/8/2013.
This is going to be a quick update on the status of three
new players in China's Mobile Internet Messaging war.
Netease and China Telecom's love child, YiChat had been
out for about 6 to 7 weeks now.
NTES and CHA had spent a lot of money on marketing the
first day of the launch. But interestingly, I don't see any more marketing on
any of the popular web sites after the first day. But YiChat had been in the
news non-stop because it is a product of a monopolistic like state own company
and a highly competitive private company. Thus, YiChat had been getting free
marketing after the first day of launch.
At about the same time, Sina come out with their new
product, WeMeet. Except for the first week, I don't see any more marketing.
There is also not that many news articles about WeMeet.
Not to be out done, China's internet and E-commerce giant,
Alibaba, also comes out with its own mobile internet messaging product, called
LaiWang. Alibaba had done very aggressive marketing on all of China popular web
sites for LaiWang.
I want to know how are these three products doing. In
part 8 of this series of articles, I had used Baidu searches to get a measure
of how popular these services are.
But I don't think Baidu search directly translates to the
popularity of these products (there is an indirect relationship, but I want a
more direct and more correct measurement).
I believe the total numbers of downloads shall be a more
correct measurement. To do that, I used some of the most popular download
sites. Unfortunately, some of the most popular download site don't provide
download statistics.
I used 4 of the most popular download sites that do
provide download statistics. Taken all together, they represents about 1/4 to
1/5 of total downloads. These four sites are:
91 Android
360 ZhuShou
AppChina
WanDouJia
Adding the total download per week, I got the total
number of weekly downloads from the four sites. The respective numbers for
Netease's YiChat, Sina's WeMeet, and Alibaba's LaiWang is as follows:
Weekly Download Total
YiChat
WeMeet
LaiWang
8/30/2013
1660572
27888
9/6/2013
572497
2668
9/13/2013
653619
1823
9/20/2013
465007
1154
9/27/2013
613850
727
146928
10/4/2013
965452
505
71941
Again, the
number here is not the absolute total number of downloads. It probably
represents about 1/4 or 1/5 of total downloads. But the error will be the same for all products I tracked. Thus, it might
not be great in predicting absolute number, but it shall be very good in
comparison of different products as well as tracking the growth of a single
product at different time.
From the above
table, YiChat had a great beginning. It begins tapers about one month after the
official launch. But after that, it had caught a second wind and is starting to
grow again.
Sina's WeMeet
had a horrible start. It is dying even faster. It is suffering a horrendous
death.
Alibaba's
LaiWang starts strong. Please don't compare to the start of Netease's YiChat. I
had never seen a product starts so strong as I saw YiChat. It will be
absolutely unfair for any product to compare to the original start of YiChat.
None of the three major social networking products (Sina's Weibo, Tencent's QQ,
and Tencent's WeChat) had a start anywhere close to the start of YiChat.
If we don't
compare to YiChat, Alibaba's LaiWang actually had a very strong start. At this
point, it is still way too early to say how good LaiWang will do. But I do know
that Alibaba is sparing no expanse in promoting this product.
At this point,
it appears that YiChat will be, at a minimal, at second place to Tencent's
WeChat in China mobile internet messaging application. Again, as I mentioned
multiple times previously, the best thing for YiChat is not to be second place
in mobile IM application. It is different enough that it could create a brand
new product that combine internet, mobile, off-line home phone, SMS (Short
Messaging Service), and VOIP (Voice Over IP) into one giant social network.
For Sina's
WeMeet and Alibaba's LaiWang, they have to compete in the mobile IM. They don't
have off-line telephone, SMS, and VOIP
capability, nor will they ever have (unless one of China's 3 telecom becomes
their sugar daddy). They have to compete with WeChat head-on. Of the two,
WeMeet is dying in front of our eyes. But LaiWang has a very promising start.
I will provide
another update on this in another couple of months.
I don't know how reliable is this rumor. But those two
web sites are somewhat reliable.
If this is true, this will be great news considering that
Twitter is going to IPO. Sina could probably get a good reaction from Wall
Street by hopping on Twitter's coat tail.
- Secret negotiation for Alibaba to invest in Sina's
Video Channel had started.
- Negotiation are between the highest level of both
companies (CEOs of both Alibaba and Sina).
- Alibaba had recruited the guy who is in charge of the
video channel in Tencent.
My comments:
If this becomes true, it would be good for both
companies. For Alibaba, they are an E-commerce company. They don't have the
infra-structure to run a internet/mobile video company. It is a great way to expand
to this high growth area. Since they already own a big part of Weibo, as they
gobble up more part of Sina, and the ownership of Sina is very spread out, they
could eventual won Sina (by stealth).
But the biggest winner is Sina. All of Sina's cash is
devoted to portal and Weibo. They have no money to invest in video.
As the biggest portal in China, it is such as waste. As
the biggest portal as well as company great in entertainment, they shall be a
major player in the area of internet/mobile video. Except all their money is
tied up in Weibo and portal.
Now, if this rumor becomes true, Sina will have the cash
to invest in the video area. They could become a contender this area.
It had been two weeks and
it is still a hot topic in China. Today, I am going to do a quick status update
on the popularity of China's Mobile Internet Messaging (IM) products.
This is part 8 of long
series of articles on this subject. Part 7 of this article can be found here:
I will summarize the important point in the above two
articles:
Both of these articles talk about Netease's YiChat:
After the first day, YiChat had 700k new users.
After the first 24 hours, YiChat had more than 1 million
users.
After the first 3 days, YiChat had more than 5 million
users.
The majority of the users are IT workers, white collar
workers, and students.
27% of users coming from China Telecom, 27% of users are
coming from China Unicom, and 46% of users coming from China Mobile.
The short term goal for YiChat is 100 million registered
users and 50 million active users within 6 months.
Those numbers are many times faster than when Tencent's WeChat
first accumulate its new users. Netease's YiChat certainly had much faster
start than the product it is trying to replace (Tencent's WeChat).
From part 5 of this series, Sina's WeMeet was also
launched to compete with both Netease's YiChat and Tencent's WeChat. Let's see
how all three products are doing in the last month. The following chart are the
number of searches on Baidu for all three products.
Note that green curve is the number searches in China for
Tencent's WeChat. The yellow curve is for Netease's YiChat and the blue curve
is for Sina's WeMeet.
The actual number for today, 9/2/2013 (Baidu made a
mistake, it mistakes 9/2/2013 for 10/2/2013), is as follows:
The number of searches for Tencent's WeChat is 72242.
The number of searches for Netease's YiChat is 11088.
The number of searches for Sina's WeMeet is 854.
Note that we are talking about number of searches. One
can't directly convert that to number of new users. For Tencent's WeChat, it
had an install base of 500 million users. I am certain the vast majority of the
searches come from existing users (bug fix, re-intall, etc.). But for both
Netease's YiChat and Sina's WeMeet, since both are brand new product with
install base of zero, vast majority of the searches come from potential new
users.
From the above chart, we can already make two
observations:
First, Netease's YiChat is for real. It is becoming a
real competitor to Tencent's WeChat. Second, unless Sina's WeMeet really picks
up steam in the near future, it is already dead on arrival.
Tencent got almost half its revenue from gaming. Frankly,
it has virtually no expertise in developing games. But all its games (virtually
all of them are from foreign licensed games, many of those licensed games are
junks that nobody wants to play outside of China) are guaranteed to be popular
at least for awhile due to its free QQ (Internet instant messaging) and WeChat
(Mobile instant messaging) services.
By promising free elite QQ (or WeChat) membership or QQ
(or WeChat) emoticons for one month, if the gamer will just play Tencent's
game, Tencent can guaranteed any of its games great popularity (at lease for the
beginning). And for some games that are not half bad, once sufficient player base
formed, it starts to get a life of its own and Tencent would have a hit game.
But this is an unique advantage only Tencent has. But if
Netease's YiChat becomes a significant player, life is going to be miserable
for Tencent.
Netease had demonstrated its ability to develop popular
games. If Netease's YiChat becomes a major player. It would truly be the worst
nightmare for Tencent.
Tencent already show the world how to use its free popular
instant messaging products (QQ and WeChat) to push for gaming and other
Internet Value added services, even though it is pretty bad in developing
games. Could one imaging if a competitor also get a popular instant messaging
product (YiChat), except in this case, the competitor is much better in
developing games?
China's Mobile IM is white
hot right now. But the development of cooperation between Netease and China
Telecomm represents something even bigger. This development had captivated the
attention of China (even for those who have no intention of ever using mobile
IM).
Both China Telecom and Netease are devoting true and
significant resources on YiChat. It is clear that, from the amount of new
customers, the freebies from China Telecom is not going to be just from spare
capacity. China Telecom is taking up real resources to give YiChat users free
Short Messaging Services, free Mobile Bandwidth, etc.
For Netease, its technical excellence is shining through.
After the first day of YiChat, there are signicant
complaints from Chinese users. The two biggest complaints are people can't
register and SMS messages take a long time to deliver.
It is clear it is largely a capacity problem. Netease and
China Telecom didn't anticipate the amount of user adoption.
The biggest YiChat tester is none other than CEO of
Netease itself:
From the following images, it is clear the CEO of Netease
is testing the YiChat:
Above is Netease CEO's
YiChat account. Where he is doing his accounting of his YiChat usage
experience. "Too many people, we were not prepared...". "Machine
crashed..." A big Yellow "SORRY" sign with an emoticon show he
kneel down on all four begging for forgiveness. "Emergency Capacity
expansion."
One can follow his
account. It is easy to see he is testing YiChat's service all day and all
night.
Netease's CEO is a serious
person. He is an engineer by heart and can be obnoxious toward people in
finance or budgeting. For him to use that emoticon to apologize to YiChat
users. Even though it is through an emoticon, it is clear he felt a little
humiliated and he is putting his personal prestige in this product.
Netease's vaulted
technical team are doing double or triple shift. Within 3 days of launching the
product, 3 updates had been generated to eliminate all the software bugs that
came up. See the following images:
As of Friday (4 days after
the launch), YiChat had already gone from v1.0 to v1.0.1 to v1.0.2 to 1.0.3.
With each version update, significant bugs had been squashed.
At this point, it is clear
that YiChat is real. Both China Telecom and Netease are sparing no resource for
it.
China Telecom is devoting
whatever resource to give Chinese users free stuff while Netease's technical
team is delivered its end of bargain.
Netease's CEO can be hard
to get alone with (he used to like to snicker at Wall Street analysts). But he
is an engineer in nature and he build his company devoted to be excellent in
engineering. I always thought Netease is number 1 by far in excellence in
engineering in China's internet sector. So far, Netease is delivering.
Finally, this story had
create something more than just YiChat alone. This thing had create a life of
its own. The story had becomes whether a new model had been created. A model
that one day may breaks down China's state dominated market economic system.
This story had just
becoming a lot more interesting than just China's Mobile IM market.
China Mobile IM battle
field is white hot right now. There are shattering news every few days now. My
last update is on Netease's YiChat, see the following:
1. WeMeet is certainly a catchy name. Except it is catchy
for English speakers. WeMeet actually sounds like "Micro-Rice" in
Chinese. Sina needs to learn some basic marketing. Needs to know your audience.
WeMeet is developed for Chinese (not English speaking customers). I am certain
Sina can find another more catchy name for their product.
2. It is integrated with Weibo. I think this is the
calling card for this application. If it has any chance of being popular, this
is it.
3. Feature wise, it is not impressive at all. It didn't
have any features of importance that current dominant application (Tencent's
WeChat) doesn't have. Compared to Netease's YiChat that has quite a few significant
features that are clearly superior to Tencent's WeChat.
4. It also didn't get a tie up with a telecom service
provider unlike that of Netease's YiChat tie-up with China Telecom. Customers
will not get any freebies from any of China's big three telecom service
providers.
5. The application itself was not developed by Sina
itself. The company that develops this product has some investment from Sina.
It is not clear at this point whether this company is majority owned by Sina.
For almost all cases, it would be a bad arrangement. Integration and
inter-office politics usually doom those type of arrangement.
But for this case, I think it is good. Sina is terrible
in developing technologies. Its own inter-departmental politics are terrible.
This new company will encounter significant resistance
from Sina's many departments. But it is still a better arrangement than having
Sina does it itself.
For me, I would rather have a company that I never heard
of to develops a new technology product than having Sina itself develops it.
6. The timing is terrible. At this point, everybody is
talking about Tencent's and China Telecoms' YiChat. It represents a truly
significant event not just in China internet industry, but it is significant in
China's overall economic development. It is a first time that a Chinese state
own monopoly (China Telecom) cooperates with a private industry (Netease) and
giving all execution power to that private company.
For Sina's announcement, it only has average Chinese
customers' attention for a few hours. Vast majority of Chinese is much more
interested in how the Netease/China Telcomm venture works out. Even those who
don't care about Mobile IM products, they pay attention to Netease/China
Telecomm venture because it represent a monopoly deliberately giving up power,
a truly rare event.
I guess for Sina to pick this horrible timing, they are
probably stuck between a rock and hard place. For Sina, now is the least worst.
In summary, under normal circumstances, Sina's WeMeet
would represent the most formidable competitor Tencent's WeChat would face.
But this is not normal circumstance. Next, I would give
another quick update on Netease's YiChat development.
Well, it is not looking
good for Tencents and its awesome killer application, WeChat. Today, the head
of the Ministry of Industry and Information Technology (MIIT) of China gave
hints that he is going to charge money for users who uses WeChat.
In the article, the
minister of MIIT gave the typical politician double talk on the subject. He
said that " It is reasonable for the Telecom operators to charge WeChat
users money. But we have to make sure there is no monopoly situation and to
protect Tencents."
MIIT is the foremost
government agency for this area. Unless, Tencents can convince the Premier or
the President, it is looking more likely that Tencents is going to be forced to
charge users fees for using WeChat.
Note that it is entirely
possible that the telecom operator can develop similar product but won't charge
users money (or gave discount rate), it could meant the end of WeChat.
I am not predicting the
end of WeChat. But Tencents is definitely in for some struggle.
For Sina, it could meant a
great opportunity to cut into Tencents lead in this area.
In the past two years, two
significant developments occurred in China's internet industry. One is Weibo by
Sina and another is WeChat by Tencents.
Both introduced incredible
functions and are revolutional to both the online and mobile internet. This
article is about Tencent's WeChat.
WeChat is the closest
thing to Facebook in China. It is probably the only thing developed by China
that is unique (Sohu's Sogou Pinyin Input system is another, but that is in a
different league).
It is getting even hotter
than Weibo. But Tencent's WeChat might just hit the nerve of entrenched
government state own companies.
WeChat started in online internet.
Since China's online industry is largely private, competitors can only defeat
WeChat by providing better products. None is successful so far. But as WeChat
starts to branch out to the mobile world, it gets right up to the state
monopolies and their government friends.
The three Chinese mobile
state own companies are China Mobile, China Telecom and China Unicom. When WeChat
starts to expand to the mobile internet, it starts to gobble up products
(Wireless Value Added Products) sold by the three state own companies. The three
telecom companies are not happy. But they are not good at developing new
products. However, they are good at conducting monopolistic practices.
There are a lot of rumors
recently that talked about how the three companies are going to attack
Tencent's WeChat. Some article below:
I don't have time to go
through all the rumors (which I think are trial ballons floated by the 3
telecom companies). But one most hideous approach is to force Tencent's to pay
the three telecom.
Imaging two companies
competing. Company A built a superior product. Company B is not capable. But
Company B has "connections". So Company B force Company A to pay
Company B some money any time a user uses Company A's product.
I though even in China,
this is too much. But I guess not. Today, an official from NDRC said, in an
official news article, that WeChat shall charge users money.
Now, this is significant.
NDRC is National Development and Reform Commission and it fall directly under
the State Council. State Council is the administrative organ in charge of all
internal affair in China. It is headed by Premier (China's number 2 guy).
The article where the NDRC
official said that WeChat shall not be free:
At this point, Tencent's
Wechat is in a very dangerous place.
This might also affect
Sina's Weibo. But for Weibo, it could go either ways. If the Telecoms leaves
Weibo alone, it might just give Weibo a chance to expand into WeChat's space.
Then Weibo would truly be a super product (it is already a super product). But
if Telecoms wants to target Weibo, it could also spell trouble for Sina. But
overall, I think the chance of Telecoms attacking Weibo is very low because the
nature of Weibo itself (it is hard to write Weibo messages from mobile phone).
Tencent has powerful
friends itself. So this is not the end of it. I will follow this since this
could complete change the landscape of China's internet industry.
Sina had been trying to
make money from Weibo. But so far, it had proved to be hard going. It made
21.3M from Weibo in the last quarter. It is not insignificant, but considering
how much influence it had, it is pitiful.
Sina had some brand
advertising on weibo. On the right hand side of Weibo, it had some advertising.
But most users completely ignore them. People go to weibo to read messages. But
if Sina can make advertising as part of the message, it could make tons of
money.
Starting today, 3/15/2013
, Sina is going to start the promoted news feed advertising system. The cost will
be CPM = 5 RMB per thousand impressions.
By 3/18/2013, average
Weibo users will be seeing these ads.
This is a high risk high
reward move. This will disrupt Weibo users habit. They will get to see a lot of
messages that they didn't want. Worst yet, Sina's Weibo has a strong number 2
player right behind it, the Tencent Weibo.
If Sina doesn't play this
right, it could lose it all to Tencent.
On the other hand, if Sina
doing it right, then this will be the start of real major monetization.
I don't know what is the
right way to do it. Netease seems to figure out how to manage high risk high reward
maneuvers. 4 or 5 years ago, when NTES wants to upgrades its number 3 game XY2 and transition to XY3, it forced players to migrate to XY3. Players revolted and NTES
relented. It kept both games and vast majority of players stayed in XY2 (even
though XY3 is a much better and more modern game).
Recently, NTES increased
the gaming fee of its number 1 game and number 3 games, (XYQ and XY2), as well
as XY3, by 50%. Players revolts just as strongly. There is no explanation, no
discussion with player representatives. NTES just pretended nothing had happened, except it now charge players 50% more. A month later, all player demonstration
and revolt dissipated.
Clearly, NTES had figured
out a way to truly gauge how much players are willing to suffer.
So far, I am not sure SINA
had figure it out. In the next couple of months, I will check my Weibo account
to see how disruptive is this new advertising system and how much does the
users complain.
At this point, a lot of
articles in China are talking about this news.
Jack Xu had been appointed
as the co-President in charge of Weibo. Jack Xu is currently the Vice President
in charge of World business for Cisco. Before that, he had been the Vice
President in Ebay as well as the Chief Technology Officer for NTES.
Clearly, he had excellent
resume.
But for the short term,
more interruption and direction changes for Weibo.
If I have time, I will
talk about Weibo in the future.
If I ask you, how much
will China's equivalent of twitter, CNN, Fox News, New York Time, Washington
Post, LA Times, .... combined and add a pinch of Facebook cost? That shall be
how much Weibo cost. In a future post, I will tell why Weibo is so popular and
why it is filling a function for China that Twitter and Facebook can only dream
off.
It is going to be a long
write-up, so I will do it when I have some free time.
Whenever there is a new revolution, people usually fixated their view on the thing they can see. But in most cases, it is the companies that deals with the content and information that comes out ahead.
During the PC revolution, people talks about Gateway, Dell, HPs, but it is Microsoft that become the symbol of that era.
During the internet revolution, people can see what Cisco is doing. But it is Google that symbolize that era of technology development.
Today, as we going into 3G, everybody talks about the carriers such as China Mobile or the hardware maker such as Nokia, but most likely, the real winner is the content providers. In this case, the real winner might be some WVAS player.
First, he talks about the state of 3G in China. Before, China Mobile was a virtual monopoly. But now, there are three big carriers. As more and more Chinese uses 3G and its contents, SINA, as a WVAS provider, will greatly benefit.
Second area of great potential growth is in the area of ecommerce. Right now, no portals make money in ecommerce. Sina’s online store is not doing great either.
But ecommerce is the wave of the future. Right now, Sina is busying develop infrastructure. There will be explosive growth in ecommerce.
As far as I know, Sina is the only portal that openly talks about the potential of ecommerce. It does make it natural for Sina to become the amazon.com of China.
Sina correctly selected its two great growth areas. But it also makes its recent purchase of FMCN so confusing. Situation in China are changing so fast that 3G and ecommerce has arrived. They are waiting for the right company to take advantage of. But none of them have much to do with outdoor advertising.
Gobbling up FMCN take attention away from Sina. Sina shall be concentrating on the next two great potential growth areas.
2 years ago, when the video sharing/video broadcasting war broke out in China, I thought this area had great potential. Advertisers love it. They could take market share away from TV advertising.In addition, this is a very costly venture. One would think the cash –rich portals will have the upper hand.
By early 2009, it is clear that portals are a non-actor in this fight, see the following survey result:
Sina could only get 3.2% market share and Sohu could only have 2.1% market share. Tencent does a little better with the help of its powerful internet messaging service. But overall, the portals are non-factor.
The reason the portals are doing so badly was because of piracy. China's video sharing and video broadcasting industry is dominated by all the pirated materials (TV and movies). While the new startups have no problems broadcasting those pirated materials, the portals can't.
But you may ask 「didn't the portals also have their own search engines and those search engines will help users find pirated materials?」 Yes, the search engine will find the pirated materials. But the difference is that the search engines only facilitate. They don't host the actual pirated materials.
I guess in China, there is a clear difference between the two.
Those video sharing startups were the darlings of the venture capitalists in 2008. Even though this is an expansive venture, they are flushed with money from the venture capitalists. But then the global financial crisis hits. Now those video sharing startups have three major problems:
First, there is a lot of bandwidth and hardware (server) cost to be in this business.
Second, because of the huge potential payoff, it was easy for these startups to get money from the venture capitalists. But now those funding dried up over night after the global economic crisis. But the cost are not going away.
Third, now these startups are forced to start making money before they are ready. But they find out that they can't make money. They have lots of traffics but they can't monetize them. The reason is because most of their traffics are generated from pirated materials, most companies are afraid to advertise with them. Why would any companies spend money and get negative coverage against them?
Now, those new startups are vulnerable. On the other hand, Sohu had just split its gaming unit and got tons of money. Video sharing/video broadcasting is an area of great future growth, its existing players are gasping for air and are running out for cash. Now is a perfect time for Sohu to go in for the kill. And this is exactly what Sohu is doing.
Sohu had been spending money buying broadcasting rights to Chinese movies and Chinese TV series. It spends money for broader bandwidths and more servers. It created a brand new video service called high definition TV channel. One can find that channel here: http://tv.sohu.com/hdtv/
Finally, Sohu starts suing. In the following article, Sohu sued three video sharing sites:
He said that because it is very expensive venture. Sohu is not making money now in this area. But it is doing it for the future. This is an area with explosive growth. But it would only grow if piracy is stopped.
In another article, he also said the reason why he thinks right now is the right time for China to go against piracy. Before, all the film studios and TV stations are state owned. They don't care about making money. They love it that those video sharing site gets their product more viewers and more famous. But now, even if they are semi-state owned, their existence depends on how much money they make. Now, they start to demand money for their work. Now there are incentives for all the players to demand piracy to be stopped.
If one wants to investigate this more, Sohu's news portal created a special news area regards this topic:
Just click on one of the show, it would then go to the web site dedicated to that TV show. Then just click on the episode number. The video quality is very very good. But it freezes very often. I am here in the US while Sohu's server is in China. I imaging that might have something to do with it.
Sohu is doing extremely well during this difficult time. I am extremely glad Sohu uses this opportunity to take over new and exciting industries. I am absolutely certain that this new industry will be extremely lucrative. However, there will be higher short term expenses.
This is the first part of a 2 part article. From the above article, one can find the internet video industry is dominated by the young startups. The traditional portals such as Sina and Sohu can’t compete at all. Tencent fares better because it can rely on its powerful QQ instant massager to help push its new products. But still, Tencent is an also-ran.
But the real reason that the portals are not doing well is because the lack of IP protection.
While it is easy for the young startups to broadcast unlicensed video contents (TV, Movies), it is starting to be difficult for the portals to do so. Therefore, the portals are in a major disadvantage.
But China starting to emphasis IP protections for its own video contents. Many TV stations and movie studio in China are starting to enforce their own right, the petulant might have move to the side with more money.
In this case, the portals definitely hold all the cards. Sohu has more money than they know how to spend, it will benefit them the most. But Sina, Tencents, and Ntes can benefit as well.
In the above article, Sohu is busy buying up contents from Chinese TV stations and movie studios.
Again, this may be a case of great long term plus and short term pain.
I guess it that time of the season where all the survey shops come out with their survey result for the 1st quarter. Nielsen and ChinaRank jointly conducted the survey for China's Internet Advertising Market. One can find the article below:
I like this survey because it breaks out the month by month survey results. It can clearly show the trend. For March 2009, China's Internet Advertising market has revenue of $1.14B. That number is an increase of 61.6% year over year (YoY).
The following plot has the revenue by month from January 2008 to March 2009:
I will tabulate the data below:
Month
2/08
3/08
4/08
5/08
6/08
7/08
8/08
9/08
10/08
11/08
12/08
1/09
2/09
3/09
Revenue
.6
.78
1.02
.96
1.18
1.14
1.22
1.36
1.14
1.24
1.73
.85
.71
1.14
YoY
2.4%
18%
46%
It is a little hard to believe the survey result for December 2008. I think that was too strong. But still, it is clear that there is a very drastic decline from 4Q2008 to 1Q2009. Within the three months of the 1Q2009, February 2009 was so weak you have to go all the way to a year ago to find one weaker. In addition, the data also showed that there is a very strong pick up in March 2009. There is an amazing 61% pick up from February 2009 to March 2009.
This survey results pretty much confirmed the other three surveys conducted by three other survey houses. We are probably going to see pretty nasty 1st quarter results.
On the other hand, even though it is still too early to tell, but tt will probably follows by a very strong V-shaped pick up in the 2nd quarter.
Addendum: Somebody mentioned that I interpreted the data incorrectly. The weakness of the 1st quarter was due to seasonality factor (i.e. Chinese New Years). Note that Chinese New Years occurs in February in 2008 and January in 2009. The logical conclusion shall be that the weakest one shall be on January 2009 because of Chinese New Year. But that is not the case.
He has a point. Seasonality has more of an effect than general economic conditions. If we use the year over year comparison, we will have an increase of +2.4% in January 2009, +18% in February 2009, and 46% in March 2009. I don't have the year over year number for the 4th quarter 2008. Therefore, it is possible that February 2009 is not the lowest point. It is possible that the lowest point was some month in the 4th quarter 2008.
Personally I still think February 2009 is the lowest point. But I don't have enough data to verify that.
But regardless whether the low point is on 4Q2008 or February 2009, what is not debated is that the March survey result indicated the start of an acceleration of revenue growth.
