Internet

Latest Financial Trends & News for Internet in China

INTERNET: JD on the Rise, as Baidu and Weibo Stumble

Bottom line: JD.com is likely to pass Baidu this week and become China’s third most valuable internet company, while Weibo’s stock is likely to enter a period of correction while it awaits an official live broadcasting license.

JD on cusp of overtaking Baidu

The era of the Internet triumvirate of Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (HKEx: 700), often called the BAT, is on the cusp of ending, as up-and-comer JD.com (Nasdaq: JD) looks set to pass Baidu in terms of market value. Meantime, I suspect the end of another era is coming for the soaring Weibo (Nasdaq: WB), which had some of the wind knocked out of its sails following some strict words from China’s heavy-handed regulator.

We’ll focus mostly on the Baidu/JD transition here, as that really does seem to mark a changing of the guard in China’s dynamic Internet sector. That move has seen Baidu experience a longer-term stagnation, as its core search business comes under assault from a few other newer players and it fails to find new revenue sources to offset the loss. On the other hand, JD.com seems unable to do any wrong these days, and is starting to resemble US titan Amazon (Nasdaq: AMZN) in the sense that people don’t really care whether it makes money. Read Full Post…

E-COMMERCE: Alibaba’s Tmall Steps Into Southeast Asia

Bottom line: Alibaba’s launch of its popular Tmall into several markets with large Chinese populations shows it is still looking for a strong overseas formula, underscoring its dependence on China for the foreseeable future.

Tmall marches into Singapore

E-commerce juggernaut Alibaba (NYSE: BABA) is making its latest global expansion noise with word that it will launch a version of its popular B2C Tmall online marketplace targeting overseas buyers in Southeast Asia. I have to admit I’m not completely sure about the significance of the move, since the company already has a wide ranging network covering a number of overseas markets through its AliExpress and Lazada services.

The bottom line seems to be that Alibaba is taking a somewhat fragmented and multi-brand approach to the overseas market, as it searches for formulas for success in an area that so far has been somewhat elusive. The company only derives about 10 percent of its revenue from overseas operations at the moment, despite numerous attempts to develop markets outside China. Read Full Post…

E-COMMERCE: SF Express, Alibaba’s Cainiao Tussle Over Data

Bottom line: Alibaba may have to tone down its aggressive style of data collection from its business partners following a tiff with SF Express, but its business won’t face any major impact.

SF takes on Cainiao in data wars

A conflict involving leading courier SF Express (Shenzhen: 002352) and Alibaba’s (NYSE: BABA) Cainiao logistics arm was all over the headlines at the end of last week, in a clash of titans that saw the pair suddenly sever their business relationship. At the center of the issue was data, and Alibaba’s near obsession with getting its hands on every piece of data possible as it tries to build up a big data empire.

But just as quickly as it consumed the headlines, this particular clash appears to have been resolved with some mediation by the government. There are a number of lessons in all this, but the biggest seems to be that Alibaba will need to rein in its bullying tactics that it wields by virtue of its huge market dominance. Otherwise it could face the wrath of companies like SF Express, and ultimately a commerce regulator that might decide the e-commerce juggernaut is unfairly abusing its near monopoly on the market. Read Full Post…

INTERNET: Crisis Grows for LeEco’s Coolpad, Yidao

Bottom line: Ongoing crises being faced by LeEco-backed Yidao and Coolpad are likely to deepen in the month ahead, as each company gets abandoned by its major stakeholder and is forced to grapple with rapidly deteriorating business.

Coolpad releases preliminary 2016 results

Two companies snapped up by former online video superstar LeEco (Shenzhen: 300104) are in the crisis headlines this morning, with smartphone maker Coolpad (HKEx: 2369) and car services operator Yidao both driving rapidly towards financial collapse. The first headline has Coolpad announcing preliminary results for 2016 that look quite alarming, as an ongoing back-and-forth with its auditor adds more worries to its story.

The second story has Yidao promising its increasingly unhappy unpaid drivers they will finally get their money late this month, as it tells the world it’s in the process of raising new funds. And if you believe that one, I have a nice bridge to sell you in Brooklyn. Read Full Post…

INTERNET: Alibaba Pumps Up Ele.me, Baidu Take-Out in Play?

Bottom line: Alibaba could take control of Ele.me after the latter’s latest fund-raising, and then make a bid for Baidu’s take-out dining service, leaving just two major players in the sector as it nears a more sustainable state.

Alibaba set to swallow Ele.me?

The take-out dining wars have taken another interesting twist, with word that one of the oldest players, Ele.me, is on the cusp of raising a fresh $1 billion in new funds. What’s interesting about this latest fund raising is that it’s being led by Alibaba (NYSE: BABA), which is also trying to carve out a niche in the market through its own Koubei take-out delivery service. But even more intriguing is the possibility that this new funding could be aimed at giving Ele.me the firepower it needs to buy out Baidu’s (Nasdaq: BIDU) take-out delivery service, which is reportedly being shopped by the country’s leading search engine.

There are many threads to this story, but the bottom line is an end game is slowly coming into sight for China’s take-out delivery business, following the typical boom period we often see for this kind of emerging sector. The current field of take-out dining services is dominated by three names, Alibaba-backed Ele.me, Tencent-backed (HKEx: 700) Meituan-Dianping and Baidu take-out. Read Full Post…

INTERNET: Sharing Economy Opens to Umbrellas

Bottom line: A new umbrella-sharing company reflects China’s tendency to overzealously jump into new trends, in this case shared economy ventures, and is likely to fold within its first two years.

Startup sees big bucks in shared umbrellas

China is rapidly emerging as ground zero for new concepts in the sharing economy. Our streets have already become flooded with shared bicycles, shared smartphone batteries are finding their way into our shops, and shared offices are taking over our cities. Now a new company has found yet another way to share, with word that a startup has just landed some angel investment for a shared umbrella firm.

In this case the company and the amounts of money are relatively insignificant, with Yisan Technology getting a modest 10 million yuan ($1.4 million) to begin its operations in the boomtown of Shenzhen. (English article) But the funding does highlight China’s tendency to go overboard with many new technologies, in this case pouring millions and even billions of dollars into causes with questionable futures. Read Full Post…

INTERNET: Sohu Brings Home Changyou, LeEco Slashes Jobs

Bottom line: Sohu could privatize and sell itself after its Changyou buyout, while LeEco’s mass layoffs could presage a shuttering of all its newer operations as it reverts to its original online video business.

LeEco slashes jobs

Two relatively large pullbacks are in the headlines as we reach the midpoint of the week, led by the latest privatization bid for online game specialist Changyou (Nasdaq: CYOU) by parent Sohu (Nasdaq: SOHU). That news is coupled with the unrelated by equally large retrenchment by struggling online video company LeEco (Shenzhen: 300104), which is making mass layoffs in its bid for survival.

Each of these stories is interesting because the future existence of a major company is at stake. In the first case, the Changyou privatization could signal a future privatization and sale of the company’s parent, Sohu, one of China’s oldest Internet players. The LeEco story represents the latest twist in the downward spiral for this company, which appears to be rapidly slimming down or closing most of its operations outside its original core online video service. Read Full Post…

INTERNET: Ofo Withdraws from 14 Cities, Settles Complaint

Bottom line: The departure of Ofo from 14 cities reflects growing frustration by local officials with bike sharing services, and could be followed by more expulsions until the industry consolidates to a single major player.

The honeymoon seems to be rapidly ending for China’s cash-rich shared bike services, with word that Ofo, one of the oldest players, is withdrawing from 14 cities in its bid to figure out what exactly it’s doing. At the same time, media are reporting that Ofo has also settled a dispute with a customer who was injured when his brakes failed while he was biking downhill in Beijing.

These stories highlight just a couple of the many issues that Ofo and Mobike, the industry’s other leader, will face as they pedal into uncharted territory with their innovative but problematic services. Reflecting the looming consolidation that’s coming, one of my sources tells me that BlueGogo, one of the larger late arrivals to the scene, is currently shopping itself but is apparently finding little or no interest. Read Full Post…

INTERNET: Alibaba Works on China’s Railroad

Bottom line: Alibaba’s potential new partnership with China’s rail operator could become a major new business opportunity, and could see the pair sign a strategic equity tie-up within the next year.

Alibaba ties with railway operator

Up until now, I’ve written about China’s mixed-ownership reform program mostly in the context of China Unicom (HKEx: 762; NYSE: CHU), the nation’s second largest wireless carrier, which is in the final stages of drafting a plan to sell some of itself to one or more private companies as part of a strategic alliance. But now the latest headlines on the program are coming from a decidedly low-tech source, with word that China’s railway operator has invited Internet giant Alibaba (NYSE: BABA) to participate in its own mixed-ownership reform plan.

This particular development is interesting because it marks the second time that Alibaba’s name has come up in the context of the mixed-ownership reform plan. The e-commerce giant has also come up in reports as a potential partner for Unicom, as have China’s other two Internet giants, Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700). Read Full Post…

VIDEO: Toutiao and YY Subsidize, Weibo Rules

Bottom line: Stellar earnings by Weibo and new funding for services from Toutiao and YY reflect the rapid rise in live broadcasting and short videos, in the latest boom for China’s internet that will end with a bust in around 2 years.

Live streaming sucks up big funds

A trio of stories in the headlines are nicely spotlighting the oh-so-typical Chinese pattern of industries that suddenly become hot, leading people to pump huge amounts of cash into them in a fight for market share. Internet watchers will probably guess that I’m talking about the recent crazes in live broadcasting and short videos , which have thrust three companies, YY (Nasdaq: YY), Toutiao and Weibo (Nasdaq: WB) all into the headlines.

Leading those headlines are the latest results from Weibo, whose profit has risen nearly 7-fold in its quarterly report, igniting a 25 percent rally for its already-inflated stock. The other two headlines have YY and Toutiao pumping big new funds into their live broadcasting and short video services, $70 million and $140 million to be exact, respectively. Read Full Post…

VIDEO: Youku, Tencent Scuffle Spotlights Video Tensions

Bottom line: A tussle that resulted in injuries to a Tencent worker by a Youku peer at an industry event reflects the big tensions that exist in China’s online video sector due to years of stiff competition that shows no signs of easing.

Wine glass incident reflects tensions in online video

Stiff competition in a wide range of online industries is pretty much par for the course in China, but a scuffle between employees of Tencent (HKEx: 700) and Youku at an industry event is underscoring just how high tensions can get. This particular case won’t really mean much for either company beyond a few sensational headlines in the next few days, and perhaps some internal emails at both companies. But it does show how tough things are in the online video space, where everyone is looking for the elusive formula for profits.

This particular story looks quite similar to another one that happened in February, in which a video of brawling take-out deliverymen from rivals Meituan and Ele.me went viral. (English article) That particular story had a very blue-collar feel, since most of these deliverymen are migrants from the countryside with relatively low education and who tend to stay at their jobs for relatively short periods. Read Full Post…