Rumor: Alibaba to invest in Sina's Video Channel

This is a just a rumor for now. But the source of the rumor is of high quality. Sometimes, those rumors can affect the price of stock a great deal.

My last post is part 8 of China's Mobile Instant Messaging War. It can be found here:

My last post

But that largely involves Netease and Tencent.

My last post on Sina related can be found here:

My last post on Sina

The source of the rumor comes from a very prestigious financial daily newspaper in China. The story can be found here (in Chinese):

Alibaba to invest in Sina's video (in Chinese)

Summary of the artice:

- 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.

The loser is of course Sohu and Yoku.

end.

Sohu's new integrated multimedia Platform

I prepared this article about one month ago. But I miss placed this article until now.

One can find my last article on Sohu’s marketing campaign here:
http://chinese-net-gaming-stock.blogspot.com/2009/04/sohu-major-marketing-push.html

From the above article, Sohu is conducting a major marketing push to inform average Chinese of Sohu’s new integrated multimedia platform.

But what is this platform. Mr. Charles Zhang, the CEO of Sohu talked about it in the following article:
http://tech.163.com/09/0409/01/56E16DNS000915BF.html

It is an integrated platform consists of many components. Sohu is no longer just a portal. Sohu has many multimedia products that would entice the users.

It has the portal and blogs that can draw the users. By May of this year, Sohu will have its SNS (Social Network Service) product. All of them will be integrated.

In addition, Sohu had recently developed the HD (high definition) video channel. It includes the HD TV channel and movies. Sohu had purchased the IP right to those video contents.

Sohu’s biggest push is in the area of software applications. A major push will be in the area of Sogou Search, Sogou Pinyin Input Method, and Sogou browser.

Thus, Sohu is no longer just a portal. A portal is more like a channel. Sohu has many channels. Portal, blog, SNS, video, search, Pinyin method, browsers are all channels that an average user can use to access Sohu.

One can think of this as a spider with many legs. The portal is only one of its legs. A user can get to Sohu’s integrated platform through any of its legs (blog, video, PC applications, etc.).

It is going to be exciting time for Sohu.

Sohu: full speed into Internet Video – part 2. Sohu sued 3 companies for piracy

1^st part of this article can be found here:

http://chinese-net-gaming-stock.blogspot.com/2009/04/sohu-full-speed-into-internet-video.html

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:

http://chinese-net-gaming-stock.blogspot.com/2009/02/chinas-video-and-music-web-site-survey.html

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:

http://it.sohu.com/20090430/n263701826.shtml

The three video sharing sites Sohu sued are Xunlei, 56, and Ku6. They also stopped other video sharing sites from broadcast a particle TV series.

The following article talks about why Sohu is taking this action.

http://it.sohu.com/20090430/n263706783.shtml

One can find some quote by Sohu's CEO regards this:

http://tv.sohu.com/20090429/n263695144.shtml

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:

http://tv.sohu.com/s2009/qcwq/

If one is curious about this new HDTV channel Sohu created, its web address is here:

http://tv.sohu.com/hdtv/

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.

Sohu: full speed into Internet Video – part 1. more IP protection in China

One can find my last post on the state of video industry here:
http://chinese-net-gaming-stock.blogspot.com/2009/02/chinas-video-and-music-web-site-survey.html

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.

From the following article:
http://it.sohu.com/20090409/n263287553.shtml

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.


The following more articles shed more lights on this subject. But it is late and I am not going to talk about them.
http://it.sohu.com/20090411/n263326266.shtml
http://it.sohu.com/20090411/n263326274.shtml

Sohu actually sued three Chinese internet video companies. Tomorrow I will talk about that in the second part of this article.

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.

Sohu – Video – TV stations opened

In April this year, I did a 6-part articles on the state of video development for China’s major portals. That article is here:

http://chinese-net-gaming-stock.blogspot.com/2007/04/sina-sohu-ntes-video-shootout-part6.html

On 9/6/2007, Sohu started Sohu TV:

http://tv.sohu.com/s2007/tvsx/

The link to Sohu TV is at:

http://tv.sohu.com/

Again, I am not able to capture the moving video in the screen capture. But the one being circled are the TV stations. If you click on one of them, you would get the following:

The left hand side has the TV stations, the middle is the TV program, and the right hand side is the schedule for the particular TV channels one is picking.

At this point, Sohu had signed up 49 TV stations. Most of these TV stations are also present for the similar service provided by Sina.

It seems to me that Sohu has more TV channels.

The good thing about these TV channels are that because they uses P2P technology, there are virtually no overhead.

Unlike these embedded video that requires lots of servers and bandwidths, P2P technology uses users’ PCs and phone lines.

For very little money, Sohu is getting a lot out of these TV channels. At this point, there is no ads present. It will be easy for Sina or Sohu to put some text ads on top or bottom of the video window. But to be real effective, Sina and Sohu had to figure out a way to take out the original TV ads and insert their own ads. (I am sure the TV stations will be fine with that as long as they got a cut of the revenue). But that is probably a year or two from now.

At this point, as far as the number of video products are concerned, I would say Sohu is now on par with Sina (if not more). But I am sure Sina is busying adding more contents, it will probably a two headed race.

Both of them have full function blogs. The blogs are anchored by a you-tube like service. The combination of blogs and you-tube videos give both Sina and Sohu a competitive advantage to China’s blog companies and China’s you-tube companies.

Sohu and Sina’s TV channels will take a large byte out of programs like PPstream or PPlive. If Sina and Sohu can keep on signing up more domestic TV channels (especially the big one), they will probably dominate the video aggregator business.

This development further confirmed my belief that both Sina and Sohu will start to mutate into a fundamentally different type of companies.

I can foresee that after the Olympics, both companies will mutate from a text based companies into a video based companies. It means the cost of entry will be so high, it will be extremely difficult for other competitor to get in.

As a video company, it will attract ads from more types of companies.

As they become the content providers, they will hold tremendous leverage in the upcoming 3G mobile phone contest. China Mobile might want to be a monopoly and kill off all the middle men, but it doesn’t generate contents.

Both Sina and Sohu had a lot of unpleasant experience in being a Wireless Value Added Service (WVAS) provider. It will be extremely difficult for WVAS players to survive, but as original content providers, and with the start of 3G in China next year, Sina and Sohu can re-enter this field with a bang!

In addition, by combining both the blog and you-tube like services, as well as other services such as photo album, music boxes, etc, both Sina and Sohu will probably starts to kill off all the blogs companies and you-tube companies in China.

These will eventually represents two new areas (blog and you-tube) of growing revenue sources.

As Sohu TV and Sina’s TV channels start to fill up, both will start to act like TV/Video aggregators. A user in Shanghai can watch Shangdong TV or Guangdong TV through Sina or Sohu. Eventually, the ads for traditional TV’s will start to go to both companies. Again, another new growing revenue source.

Finally, for the S and V channels for Sohu and SinaTV, these self-generating TV channels gives both Sohu and Sina the ability to generate TV program contents themselves. They are starting the movie and TV production studio. If some of the shows are successful, they might even be able to sell these shows to the traditional TV companies.

As both companies starts to mutate, it needs a grand entrance to show off all the new capabilities. What can be grander than the 2008 Beijing Olympics?

2008 will be a great year for both companies because of Beijing Olympics. But I think the Beijing Olympics will serves as the showcase for both companies. As more companies (through Olympics) start to realize that both Sina and Sohu had become truly multimedia companies, the real exponential growth will start in 2009.

Sina – Investment Conference Presentation – Part 3 –

Sina Presentation – Part 3 – My Comments

For part 2, see http://chinese-net-gaming-stock.blogspot.com/2007/04/sina-investment-conference-presentation_18.html

Future is looking bright for Sina. By replacing video ads for text ads, she can charge more per ads. In addition, she is going into so many exciting new business areas.

Sina truly has many strong channels. As times go by, especially with more multimedia contents, the cost of entry will increase and the number of competitors will decrease. In addition to just ad based, many channels can be fee based. For example, Sina is number 1 in both the finance channel and auto channel. I am certain there are premier products Sina can develop that would be fee-based in those two channels.

Sina is also number 1 in sports channel, 3 times bigger than the next competitor. For the 2008 Olympics, Sina has to be the biggest beneficiary. Because Sohu is the official sponsor, I don’t think Sina can get 3 times the Olympic revenue of Sohu. Or in other words, Sina will benefit the most from Olympic in absolute term while Sohu might benefit the most from Olympic in percentage term. Nevertheless, Sina will benefit greatly from the Olympics.

On the mobile front, I don’t see mobile continues to go down by 15% for the next two years. But I guess one would never know. But most importantly, by 2008, if 3G really gets started, Sina might found herself in a different business model.

Rather than just two mobile telecom operators (Mobile and Unicom), there will be 4 (maybe even more). Rather than just a service provider, Sina would be a content provider. Her music boxes gives her great music contents. Her WAP and portal gives her great news contents. Her video initiative gives her great video contents.

Right now, in the current SP model, we have 2 mobile providers with hundreds or thousands of SPs, the power resides in the mobile providers. But if we have 4 or 5 mobile providers and maybe 4 or 5 dominant content providers, the business model will be different.

Right now, life is hard to be a mobile service provider. But after 3G, the cost of entry is so high to be a dominant content provider; only giants like Sina can be one. By then, the equation of power would have shifted. The power of the mobile operators and the content providers will be of equal footing. That would only mean good things for the industry as a whole.

It is interesting that Sina is developing Sina Music Box. It is hard to see how can this initiative can be successful unless China really crack down on piracy. Would China go after Baidu or Sogou or Yahoo? I don’t know. But if I can figure out a way to track its popularity, it might be a fun thing to do.

Sina is probably doing the same thing on the video front. It is probably going into the video aggregator business. If Sina can do what she does on the Music Box, she has a much better chance of success. These P2P startups are in a much weaker position than Baidu or Sohu. Even though they are darlings of venture capitalists now, but they are not Baidu and Sohu. The record companies can’t stop Baidu or Sohu from searching pirated songs. On the other hands, Chinese TV stations like CCTV can (and had) stop these P2P startups from “officially” provide CCTV programs on their programs. It is entirely possible that even if Sina music box fails, the experience would carry over to allow Sina to develop a successful “Sina video box”.

The recent punitive measure from USA to pressure China on the piracy front is good news for Sina. Her Sina Music Box and her video initiatives only carry legal contents. Sina’s music and video platform initiatives can only work when China starts to take piracy seriously.

Finally, Sina is in such a strong position and is going after so many promising new businesses, with their track record of great executions, it is hard not to like the company. But its so expansive. Its PE is 50.1 (compare with 32.2 for Sohu and 15 for Ntes). Most of its major new business expansion won’t start to see profit kick in until 2008 (Olympic in 2008, video ads and embedded video ads in 2008, 3g mobile contents in 2009, other initiatives like video TV channels, video aggregator business, music box, fee based services for premium financial and auto contents maybe in 2009 or latter). There doesn’t seem to have a kicker in the short term.
My final verdict: as long as Charles Chao is the CEO, own Sina until retirement. That is if one can find a reasonable point of entry.

Sohu – Video – Sohu starts video sharing?

Sohu starts video sharing?

For background information, see the following links for video related info:

http://chinese-net-gaming-stock.blogspot.com/2007/04/sina-sohu-us-vs-china-trade-war-looming.html
http://chinese-net-gaming-stock.blogspot.com/2007/04/sina-sohu-ntes-video-shootout-part6.html
http://chinese-net-gaming-stock.blogspot.com/2007/04/sina-sohu-ntes-video-shootout-part5.html
http://chinese-net-gaming-stock.blogspot.com/2007/04/sina-sohu-ntes-video-shootout-part4.html
http://chinese-net-gaming-stock.blogspot.com/2007/03/sina-sohu-ntes-video-shootout-part3.html
http://chinese-net-gaming-stock.blogspot.com/2007/03/sina-sohu-ntes-video-shootout-part2.html
http://chinese-net-gaming-stock.blogspot.com/2007/03/sina-sohu-ntes-video-shootout-part1.html

One thing I was disappointed in Sohu is its apparent lack of a youtube-like video sharing service. I felt it is extremely short sighted on Sohu’s part to not get into this business.

But I came across something interesting as I investigating some games for another article. It seems Sohu does have video sharing site. Except it is not really Sohu’s.

It actually is part of 17173.com. 17173.com is Sohu’s premier game site. Interestingly, 17173.com provides video sharing service. It has the link:

http://vlog.17173.com/

Its web site is as follows:

The graphic is self-evident. It is just a video sharing site modeled after youtube.

But why is it part of 17173.com but not part of sohu.com? It could be part of Sohu’s blog service or part of Sohu’s video service. But I went to these two Sohu channels and could’t find any youtube like video sharing service.

Does this new service in 17173 serves as an experimental platform for the real thing in Sohu.com later? But why goes through all this trouble? It is much easier just start a trial service in Sohu.com to begin with.

Or is Sohu going to offer multiple video sharing services, one for each major channel (game, news, etc.)? But why? That doesn’t sound like a smart strategy.

Or is this a case of left hand (17173.com) doesn’t know what right hand (Sohu.com) is doing?

But either way, I am just glad that Sohu is starting to get into this business. But I hope Sohu can expand this service to cover more than game video.

Sina – Sohu – US vs. China Trade War Looming?

Today (April 9th, 2007) US filed with WTO two trade cases against China over copyright piracy and restrictions on the sale of American movies, music and books there.

This action, together with the recent penalties it places on China’s glossy paper, indicated the growing willingness on the US side to start a trade war.

It is going to be a long two years before the US election. US’s economy is growing so well, but that matters little to US politicians as they try to out-tough each other by appealing to American’s most basic instincts.

China is between a rock and a hard place. If they don’t do nothing or capitulate, US politicians would just add more and more punitive measures with no end in sight. If they do retaliate, it will be a trade war, and everybody suffers.

In terms of stopping piracy, it may be to China’s own self interests to start IP enforcement. As Chinese companies get more sophisticated, the result of their own R&D efforts needs protection. As many Chinese companies went up the value chain, they need IP protection.

Just like CCTV needs protection from these P2P companies, there is monetary incentive for the domestic media company to protect their contents.

All this has to be positive to Sina. Sina has the music box initiative where all the contents are legal. She is probably doing the same thing with the video.

If China really starts to get serious with piracy, in 2 years, the biggest winner might just be Sina. By then, she will have four brand new lucrative businesses: China’s default music platform on the internet, China’s default music platform for the 3G mobile phone, China default video platform on the internet, and China’s default video platform for the 3G mobile phones.

Sohu, are you listening? Better hurry up and get busy.

SINA – SOHU – NTES – Video Shootout part6

Video Shootout Part 6 – Conclusion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SINA – SOHU – NTES – Video Shootout part5

Video Shootout Part 5 – Portals’ competitors – Others

TV –
Another major competitor is of course the regular TV.
First, the quality of TV is better than the streaming video on the computer. Second, it is more comfortable to be sitting on the couch than in front of a computer.

What can the web portals do?

The portals shall start by producing the kind of programming that will fit with the computer. If I were Sohu, I would give some grant money to some universities’ marketing apartment and drama apartments for them to investigate what kinds of programming fit better on the PC than on a TV.

An example can be a gaming channel where it show real time in-game plays for some popular show. For example, TX2’s castle warfare can make some great TV action.

Another good example is what Sohu does with Houston Rockets programs. CCTV carries some Houston Rockets games, but not all. Sohu carries the rest. The most popular shows on Sohu are the Houston Rocket’s games.

Sohu can do the same thing with the Olympic Games. CCTV is going to carry the cream of the Olympic programs like basketball and soccer. But Sohu can provide the 2nd tier programs, especially if they develop a strong TV program team (producers, cameramen, and editorial experts).

Secondly, by integrating online video with other computer tools; it will create a fuller experience than just watching TV. Computer tools such as users forum and instant messaging will allow the viewer a chance for truly 2 ways interactive experience.

How to put ads –

Somehow web portals have to make money out of all these video contents. The video from the 3rd party traditional TV station already has commercials in them. But web portals don’t get any money for these commercials. Somehow, web portals need to put their own commercials over the existing commercials. The more I think about it, this presents the most challenge. There are 4 ways the web portals can do:

More self generated content. For video channels such as Sohu’s S and V channels and Sina’s SinaTV, it will be easy to put video ads inside the video stream.

For 3rd party traditional TV channels such as CCTV channels, web portals can ask for a cut of the advertising dollars traditional TV stations get. Because the web portals created additional eyeballs than just traditional TV, CCTV is able to get more ad dollars. Web portals have the right to ask for part of the money. But this is not recommended. I don’t think traditional TV stations will like it. It also gives too much leverage to the traditional TV stations.

Right now all the TV programs are analog TVs. When the web portals receive the TV programs from traditional TV stations, they shall ask for 2 separate data streams. One is the analog TV stream and another is digital timing information. This digital timing information has the precise time of the existing commercials. The web portals can use this information to put web portals’ commercials on top of the original commercial. But this will require new equipment in the traditional TV studio. Web portals need to work with traditional TV studios and the hardware manufactures to come out with the equipment modifications.

China is going to start her digital TV initiatives. She is developing a new DTV standard. With digital TV stream, it doesn’t require two separate streams. The timing information for the commercials can be embedded inside the digital TV data stream. Web portals need to start working with the DTV standard developers to make sure this capability exists. But this is going to be a few years away.



In part 5, I will have the conclusion.

SINA – SOHU – NTES – Video Shootout part4

Video Shootout Part 4 – Portals’ competitors – P2P

Independent P2P Video Streaming Programs -

Major competitors to the portals are actually the 3rd party P2P programs. Programs such as PPLive, PPStream, TVAnts, and TVKoo allow the users virtually all the programs on the internet for free.

If you want to watch a 007 movie, search for it and having it streaming to you. All the major TV channels in China can be found on these programs. In addition, these programs do not add any additional ads.

Let me give an example of these 3^rd party P2P programs. Let me just use PPStream as an example. The following is the web site for PPStream, www.ppstream.com

Not much to see here. On the top, there is a button called Total Channels. Let me click that, and we go to the following page:

It goes to the first page of the complete TV schedules of all the programs that is currently playing. There are a total of 12 pages, each page has 30 TV programs, and a total of 349 TV channels that are playing at the same time.

That is 349 simultaneous TV programs that are playing at any given time. PPStream does not have to pay a dime to get any contents (they are pirated content). PPStream does not provide the content, but they do provide the schedule and organize it so any viewer can search for any video they want to watch.

There is no way the portals can afford to provide so much content.

So how can the portals compete?

Maybe this is the reason that Sohu is concentrating on self-generated contents. But in that case, the portals have to make the content interesting so people want to watch.

Another thing of interests happens in the last couple of months. Almost all 3^rd party P2P programs stop claiming to carry certain CCTV channels. Actually, one can still use the program to get CCTV programming. But the program itself stops providing internet links to the CCTV programs. More importantly, the program no longer provides statistics of the links to the CCTV programs to the viewers. It makes it more difficult for the viewers to watch the CCTV video. As China gets more serious in stopping piracy, then Sina’s approach does make sense.

If China gets serious in stopping piracy (at least for China’s own channels), it might just be too cumbersome for Chinese viewers to use these 3^rd party P2P programs. If Sina signed all the major channels in China, the user might go to Sina instead even though Sina’s video will have ads.

So far it is clear that if the Chinese TV channels care about it, they can put pressure on those 3^rd party P2P programs to make these pirate programs’ life difficult.

For a local TV channel like Guangdong TV, there is no incentive for them to stop programs like PPStream. In fact, PPStream gets their TV contents more eyeballs.

This is where the portals can come in and be pro-active.

At this point, there is little incentive for most Chinese TV stations to care about P2P. But if a portal like Sina, Sohu, or Ntes can come in and provide revenue sharing with these TV stations. As these TV stations realize that they can make additional revenue (that is not available to them before) without doing anything extra, they will put pressure on these pirated P2P programs.

Of course, even if these 3^rd party P2P programs stop claiming to support these TV stations, because of the distribute nature of P2P, TV programs like CCTV will still be carried on these 3^rd party P2P programs.

Right now PPStream no longer claim to support CCTV, but one can still get CCTV on PPStream. But that would be easy for the portals to fix.

Because of the open nature of P2P technology, it is impossible to stop CCTV feed on PPStream. But the same open nature of P2P allows somebody (like Sina or Sohu) to create more CCTV feeds. Therefore, instead of 2 or 3 CCTV feeds on PPStream, there will be 20 or 30 feeds carrying the same program on PPStream. Because the main PPStream website is no longer allowed to provide link statistics, a viewer has to click on many feeds before he can get a good link. It makes for a cumbersome experience for the viewers to use PPStream to watch CCTV.

In summary, right now P2P programs like PPStream dominate the internet video market. They don’t give any revenue to the TV channels. But these TV channels don’t care because they are not in this market.

But there is a clear path for the portals to take this market away from these independent 3^rd party P2P programs.

In part 5, I would talk about the other challenges that face the portals. Part 6 concludes this article.

SINA – SOHU – NTES – Video Shootout part3

Video Shootout Part 3 – SINA Video Activities

In the last couple of earning conferences, SINA talked a little about their video activities. But they definitely didn’t sound as passionate as SOHU’s management. Let’s see how much effort has SINA put into their video activities.

The following is the main page of sina, www.sina.com.cn:

Right away, I am able to tell there are a lot of video programming on SINA’s site. On the left hand side, there some sample programming on SINA’s broadband programming. On the right hand side, it is some news with video in them.

Sina’s main page is similar to SOHU’s in that it has many news items, probably in the thousands. Let’s scroll down the main page to the entertainment section of the main page:

As you can see, there are a lot of items with embedded videos.

Most other sections don’t have as many video footages. But as a rough guess, I would say that SINA has probably 3 to 4 times as many stories with embedded video.

Since I had looked at the sports section of NTES and SOHU, let’s do the same for SINA. The following is the main sports page
On the right hand side, it has the TV schedules for some sports matches. On the upper left hand side, there is a button called Sports Broadband page, let’s click on that and the main Sports Broadband page appears

It is clear that when SINA say broadband, it means video. Every stories in this page has video contents in them. On the right hand side, it plays a sports match.

On the top, there is a row of video channels. They are England Soccer, Italian Soccer, Europe Soccer, Goal TV, ESPN, Tennis, Golf, F1, and Others. I believe these are some of the premier contents they licensed from the third parties (for example, European soccer leagues, etc.)

On the upper left part, there is a button called SinaTV, lets click on that and SinaTV page comes up

It is clear SinaTV is the TV channel that has Sina’s original contents. The type of programs are movies, talk shows, etc. It is similar to SOHU’s V channel. It uses Sina’s peer-to-peer programs. Therefore, it won’t require much hardware and bandwidth resource even if there are millions of viewers watching.

On the top of the page, there are a row of buttons that indicated different channels. It has CCTV, and Phoenix TV.

Finally, lets go to Sina’s new YouTube-like service, blog video: http://v.blog.sina.com.cn/

The set up is very similar to youtube. When you click on a link, the video for that link pop up. This is strictly user generated.

Now, we are able to make several observations:

1. Sina has the most video contents. There are probably 3 to 4 times more stories with embedded video than Sohu and 10 to 20 times than that of Ntes.

2. Sina signed many license deals with many 1^st tier contents providers such as ESPN, CCTV, PhoenixTV, Europe soccers, etc. In terms of license partners, Sina has both quality and quantity.

3. These license would surely increase the cost of contents (unless they are profit sharing). But they also allows Sina to get many embedded video for the stories.

4. These embedded video takes a lot of resources and bandwidths because they are not peer-to-peer.

5. Sina does have a peer-to-peer TV channel called SinaTV. Most of the shows are existing TV shows or movies. The percentage of the original contents are not as high as that of Sohu.

6. Sina also have other TV channels like ESPN, CCTV, Phoenix TV. Most of the contents are broadcasted through embedded video. Sina probably spend a lot of money on buying the contents, and on hardware and bandwidth to distribute these contents.

7. Very little advertising on these video contents.

8. Unlike youtube that is a stand alone service, Sina’s blog video is part of Sina’s blog service.

9. Sina is getting a lot of celebrities to generate popular blog videos. I am pretty sure it cost Sina money to have these celebrities under contract.

10. Sina is going to integrate its instant messaging service, UC, with the blog video. Therefore, Sina is going to have its youtube, blog, and instant messaging all integrated into one service. This may have the wonderful side effect of making UC more competitive against Tencent’s QQ.

11. There is very little ads in Sina’s blogs and blog videos.

In part4 and 5, I will have a brief descriptions on other competitors. Part 6 is the conclusion.

SINA – SOHU – NTES – Video Shootout part2

Video Shootout Part 2 – SOHU Video Activities

During the last couple of Sohu’s earning conference calls, Sohu management had been very enthusiastic about the future of video related activities in the company's future. Out of the three companies, I will have to say it was Sohu that did the best job in clearly articulating the importance of the video contents and what it means to the online ad business.

Now let us go to its main web site www.sohu.com

Unlike Netease’s main web site (and like Sina’s main web site), sohu.com has incredible amount of information on its main web site. Unlike western information portals, Chinese web portals cram every information possible on its main site. The above picture is the top of sohu.com. At the top, there are v and s that indicate the two main video channels that represents sohu’s main video intiatives. In addition, there are also individual news that have embedded video attach to it.

Now, lets scroll down the main page,

This is still on the main sohu.com page. But it is about one third down. On the left hand side, there are some news with embedded video. But on the right hand side, it has the schedules of Sohu’s two main TV channels (S and V channels).

Now, let’s go to Sohu’s sports page:

Right away, something interesting pops up on the lower right hand sides. It is a TV-like commercial for Asus (a computer company). The video is about 30 seconds. This is the most clear example of where Sohu thinks the future lies in online ads. Instead of the newspaper like contents, it is going to video or TV like in both content and ads.

I am sure average company likes the TV ads much more than just a picture ad.

Now let us click these ads away to show what is underneath the sports page:

Again, some news with an embedded video. On the right hand side is the schedule time for some of the S-channel TV programs. But on top, there are four items, they are NBA videos, CBA (Chinese basketball) Videos, Chinese soccer Video, and Olympic videos. Now, let us see what happens when we click the CBA Videos:

Right away, an embedded video is played. I am not able to capture the video, but the video did play. The whole page consists of links to embedded videos. Sohu has a lot of video contents on CBA. But I believe all the videos are embedded videos.

Now, lets go to one of the main channel, the S-channel:

On the left hand side, it plays the video. Again, I am not able to screen capture the video, but the video did play. The S-channel is more like a regular TV channel in that when you go to the S-Channel, it will show at whatever point the show is at. Unlike an embedded video where it is one to one (one video stream from Sohu to the viewer), S-Channel uses peer to peer technology and is one to many (one video stream from Sohu to many viewers).

On the left hand side, there are links to other videos. But those videos are embedded videos. There are also schedules of the S-Channel.

Finally, lets go to another main TV channel that Sohu is developing, the V-Channel. V-channel is developed for entertainment. While S-channel is targeted for men, the V-channel is targeted for women. The following is the V-channel:

On the upper left hand side is the video player that plays the V-channel. Both the S and V channels are developed by Sohu. Most of the contents of S-channels are sports games. Commentators hired by Sohu provide the play-by-play. There are also sports talk show programs. For the V-channel, a lot of programs are simple programs where attractive girls and boys get together and talk about dating, gossips about movie stars, or singing shows.

There are also 24 hours schedules for the V-channel. On the right hand sides are the stories with embedded videos.

However, there is something interesting on this page that is different than the S-Channel. Right below the video player are the list of 8 TV stations. The default station is the V-channel that is developed by Sohu. The other 7 TV stations seems to be from the third party partners. They seems to use peer to peer TV broadcast also. One of them is news channel and three of them are the provincial channels. They seem to be out of place in the entertainment section.

There are several observations that can be made:

1. There are more video contents than that of Netease. But the vast majority of the news doesn’t have embedded video.

2. Sohu themselves generate a lot of the news content. But they are in newspaper form. Will they start to generate news in the video form?

3. Sohu has a lot of video contents in sports and entertainment.

4. There are three types of videos. The first kind is the embedded video that is attached to a particular story or news item. This is one to one format and will take a lot of resource and bandwidth from Sohu if many users watch the same embedded video.

5. The second kind of video is the s and v channels. They are Sohu-generated video. It uses peer to peer technology like Napster or Kazaa. It will only take minimal amount of resources and bandwidth to support large amount (even up to millions) of users.

6. The third kind of video is the third party TV channels. Next to the V-channel, there are 7third-partner channels. Sohu seems to use peer to peer technology to broadcast these channels. These channels are 2^nd tier channels in China (not first tier like CCTV, etc.)

7. Sohu seems to be pushing for its self-generated S and V-channel. That might explain the mis-placement of some the third party TV channels.

8. Most of the S Channel are third party sports matches (European football, NBA, or CBA matches) with Sohu provides commentary and play-by-play. Thus the % of content is mostly the matches themselves.

9. Most of the V Channels are completely self generated by Sohu. They can be very simple talk show format or Sogou music programs, etc.

10. The existence of video ads on Sohu’s web site.

Clearly, Sohu is putting a lot of effort in its video activities. It is especially concentrating in creating its own content (rather than licensing from third parties).

In part 3, I will investigate SINA's video activities. In part4 and 5, I will have a brief descriptions on other competitors. Part 6 is the conclusion.