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China's Internet industry sees second round growth
Since Baidu successfully landed on the Nasdaq in the USA and china.alibaba.com and Yahoo grouped into a strategic coalition, quite a few domestic websites like zhongsou.com have won the favor of venture capital. Sources say that by the end of this year, there will be US$2 billion of venture capital invested in China's Internet sector.
In the meantime, most analysts in the Wall Street believe that China's Internet sector will have a favorable prospect of market growth. Influenced by that, various growth margins appeared in almost the whole group of Chinese stocks listed on the Nasdaq in the USA on September 13. Baidu took the lead with its growth margin as much as 15.95 percent, and other Chinese stocks enjoyed their growth margins between 5 percent and 9 percent.
One of Morgan Stanley's analysts holds that "The internet sector in China is still in the initial stage of its development. That's why the sector has a great growing potential and investors can benefit from that." Analysts of Morgan Stanley and Goldman, Sachs & Co. think highly of the future growth of Sina, Sohu.com and Netease in the market and recommend that investors buy the stocks of these 3 companies.
Take Sina as an example. This year, both its Internet advertisement and its search operations will witness growth. The newly picking up of Internet advertisement operations in China will be propitious for Sina to maintain its status as the largest Internet advertisement agent. Sohu benefits from its Internet advertisement operations, search operations and cellphone services. Netease has obtained a favorable performance in its Internet game operations and its stocks once rose to US$84.75, the history high for 52 weeks. The growth margin of Netease stock price has amounted to 58 percent since this year.
Recently, IDG, the old brand venture investor that entered into China's Internet sector very early, has established two venture investment funds with a total sum of US$500 million. Soft Bank from Japan having invested in such Chinese websites as Alibaba and www.263.com puts its second sum of venture investment funds as much as US$640 million into China and intends to invest all those funds mainly in Internet, 3G telecommunication and software within 3 years.
Moreover, several largest venture investors in the world will also enter into China by the end of this year. "These top venture investments have not entered into China before," insiders in the industry analyze, "The active situation of the domestic Internet sector is an important reason attracting overseas funds to pour in one after another."
Jiang Shansong, a director and General Manager of Walden International, said, "Venture investment once helped the Chinese Internet sector meet with the first industrial surge successfully and helped many Internet enterprises, which are now very successful, to survive in difficulties. Now, venture investment is having its second intimate contact with the Chinese Internet sector; how to grasp the emerging new opportunities in the environment of rational thinking will be a challenge for investors."
In face of this round of investment favor, many people are worried: will the Internet bubbles in 1999 and 2000 come back?
"This new round of Internet tide is much more practical than the impulse five years ago," said Wang Yan, CEO of Sina, "The operational thinking of websites is tending to be practical: various new products and services are developed to attract subscribers, thus obtaining more income sources." As to venture investors, they will not make their decision to invest in haste because of just a commercial plan, they will review the commercial models and payoff prospects carefully.
People concerned point out that the subdivision of technology has guided the whole Chinese Internet sector into a new stage of development in various fields. In comparatively more professional fields including search, instant message, fundamental Internet applications, mobile value-added services, digital entertainment, electronic payment and Internet services, representative enterprises with a rather big scale that have realized profit making have already emerged. The outstanding examples include baidu in the search field, alibaba in the field of e-commerce, shanda.com.cn in the field of network games, www.kongzhong.com and Hurray! in the field of mobile value-added services, and Tecent in the field of instant message, etc.
Cai Mingzhao, Deputy Director of the State Council Information Office, said, "The Chinese Internet sector is greeting a new opportunity for development. In each subdivided field and direction, there have emerged representative enterprises that have realized scale profit making and managed to get listed successfully."
What's more valuable is that, with several years of development, domestic websites have stopped simply copying the commercial modes of US websites; instead, they have developed brand-new products and services in compliance with the individualized information demand of domestic users, thus having got recognized in the market. The outstanding example is the wireless value-added business. For example, a quite large part of the incomes of Sina and Netease comes from such wireless value-added businesses as short messages, color ring and news customization, while there is almost a vacuum in the USA. An analyst of Goldman, Sachs & Co. said, "The success in their localized businesses has made the website operators in China more confident, and they have their unique operational modes."
Technology and funds have always been the forces to drive the whole Internet sector to develop. Having attracted the attention of venture investment, domestic websites should pay more attention to the improvement of innovative capability and combine technological innovation with satisfying demands of users so as to forge a healthy and profitable Internet industry.
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