Tag Archives: Tencent

Tencent latest Business & Financial news from Doug Young, the Expert on Chinese High Tech Market, (former Journalist and Chief editor at Reuters)

Renren: China’s Next Gaming Company? 人人网：中国下一个网游企业？

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Renren (NYSE: RENN) has reported a widening loss that should normally be worrisome, and yet investors seem to be focusing on surprising strength in the online game business for this leading social networking site, which could perhaps finally lead it to its goal of long-term profits. The upbeat news for Renren’s game business comes as another major online game developer, Japan’s Nexon (Tokyo: 3659), is also reporting strong growth in its China business, testifying to the resilience of this market dominated by teen-agers and 20-somethings who seem less like to reduce spending on their hobby even as China’s economy shows signs of slowing. In fact, the slowing economy hit Renren’s other main business, advertising, in the first quarter, with ad sales climbing an anemic 15 percent as the business experienced a “challenging period”, Renren said in its results announcement. The advertising slowdown is hardly unique to Renren, with other major ad-dependent companies also like Sohu (Nasdaq: SOHU) and Phoenix New Media (NYSE: FENG) also reporting weakness in the most recent quarter. But while Renren’s advertising revenue reached just $9.3 million for the quarter, online game revenues soared 90 percent to $17.5 million, meaning games now account for more than half of Renren’s revenue. Despite that rise, the company’s net loss ballooned to $13.6 million, far bigger than the $2.6 million a year earlier. Investors clearly seemed to be focused on the upbeat story in online games, bidding up Renren shares by nearly 3 percent in after-hours trading after the results came out. If online games can continue growing at a similar rate, the business could potentially lead Renren to the elusive goal of long-term profitability, although such a shift would make the company look more like an online game company competing with names like Shanda Games (Nasdaq: GAME) and NetEase (Nasdaq: NTES) rather than a social networking company like Facebook. If that happened, Renren certainly wouldn’t be the first to make such a transition, as NetEase itself started out as a portal company before becoming a gaming giant, and gaming leader Tencent (HKEx: 700) also rose to fame on the back of its popular QQ instant messaging platform. Of course, the big risk in moving into online games is becoming dependent on individual game titles as a major revenue source, meaning one needs to develop or license a steady stream of new games to stay successful. Meantime, Nexon, supplier of a popular gaming title to Tencent, has said its China sales also rose similarly by nearly 90 percent in the first quarter and should remain robust throughout the year, even as the broader China online game market is only expected to grow about 12 percent. (English article) All that says that there’s still plenty of growth opportunity in China’s online game market despite the broader economic slowdown, though companies with popular titles and a wider arrange of complementary social networking offerings like Renren and Tencent could be better positioned to thrive in the current climate.

Bottom line: An unexpectedly rapid growth in gaming revenue could help lead Renren into the profit column by the end of this year, transforming it into an online game play.

Related postings 相关文章:

◙ NetEase: Still a Gamer With WoW Renewal　　网易续签《魔兽世界》运营权

◙ Online Games: Where’s the Excitement? 中国网游企业增长有限

◙ Shanda Delists: Thanks for the Profits 盛大网络退市：获利可喜

Sohu’s Sogou Still Looking for Search Bite 搜狗壮志难酬

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You have to admire the dogged determination of Sogou, the online search unit of web portal Sohu.com (Nasdaq: SOHU) that, after nearly a decade in business is still just a bit player in its space. Despite its lack of progress, Sogou is now telling the world about its latest strategy to steal market share from Baidu (Nasdaq: BIDU), the China Internet search giant which controls more than 70 percent of the market. (English article) The only problem with this latest plan is that most of us have heard this kind of talk before from Sogou, and the result is always a lack of any real progress. Let’s look at this latest plan, which has Sogou’s CEO saying the unit will rely on searches that focus on users’ needs rather than the more commonly used keyword approach used by most major search engines. He added that Sogou still isn’t profitable, and gave what looks like an impossible target of controlling 15 percent of China’s online search market by next year. All this sounds remarkably familiar to forecasts Sohu founder Charles Zhang gave me in an interview way back in 2006, a year or 2 after Sogou’s launch. At that time he boldly predicted his new unit could take around a third of China’s online search market within a few years. Of course that never happened, and Sogou now controls just around 2 percent of the market. Zhang loves to trumpet Sogou’s recent gains, which saw his search engine post revenue growth of more than 200 percent last year. Those gains did indeed look impressive, though when you’re coming off such a small base it’s certainly not impossible. But even that growth is showing signs of stalling, with the company recently predicting that Sogou’s revenues would just double in the current quarter. (previous post) I don’t want to dampen Sogou’s aspirations too much, especially since I think that China really needs a good competitor to challenge Baidu. But that said, Sogou might do well to take a look at Soso, the search engine unit of Tencent (HKEx: 700), China’s largest Internet company. Despite gaining success in many of the areas it has entered, Tencent failed to make much of an impact in online search despite major investment in Soso, which 6 years after its founding has even less market share than Sogou. After wavering on the future of Soso, Tencent reportedly decided just a week or 2 ago to sharply cut back the unit rather than close it outright, with plans to slash about half of its workforce. (previous post) Perhaps Sogou would be well advised to make similar plans, though Sohu hasn’t shown any signs of abandoning this money-losing unit. Then again, following a recent online video tie-up between Tencent and Sohu aimed at competing with the new industry leader formed by the marriage of Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) (previous post), maybe we’ll see a similar Sohu-Tencent tie-up in online search.

Bottom line: Sohu’s determination to keep funding its money-losing Sogou search engine seems destined to fail, and it might be better served by closing the site or looking for a merger partner.

Related postings 相关文章:

◙ Sohu Disappoints Again, LDK Cuts Inspire 搜狐再次令人失望，江西赛维裁员鼓舞人心

◙ Tencent Shakes Up Search, Group Buying 腾讯搜搜、高朋网巨

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市

Tencent Shakes Up Search, Group Buying 腾讯搜搜、高朋网巨

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Layoffs and resignations are the main story at Tencent (HKEx: 700) these days, with the head of the company’s group buying joint venture reportedly resigning as China’s Internet leader also makes large job cuts at its Soso search engine. Both of these developments should come as a surprise to no one, and reflect an ongoing consolidation gripping the overheated group buying space in the former case, and a rapidly slowing advertising market in the latter. Let’s look at the group buying situation first, which has reportedly seen the CEO resign at Gaopeng, the 1-year-old group buying joint venture between Tencent and global sector pioneer Groupon (Nasdaq: GRPN). (English article) In fact, Gaopeng has struggled almost from the start due to its relatively late arrival to China’s group buying space, which is now in the midst of a painful consolidation. Reports of mass layoffs at the company began to emerge as early as last summer, and rumors that the company may actually close or merge with another partner continue to bubble up from frequently, with one such report emerging just weeks ago. (previous post) Gaopeng is hardly alone in this sector-wide crisis, which has started to hit even the industry’s largest players. Late last week reports emerged that a number of top managers had resigned at LaShou, in the latest sign of trouble for the industry’s leader that is facing a major cash crunch. (previous post) Others that have shown signs of major distress include 55tuan, as well as Groupon.cn, a homegrown Chinese player that is no relation to the US Groupon. Meantime, Tencent also appears to be scaling back its plans for Soso, its search engine that it hoped would compete with industry titan Baidu (Nasdaq: BIDU) for a share of China’s lucrative market. (English article) The reports are relatively vague, saying simply that Tencent was wavering on whether to sharply reduce the size of the 6-year-old Soso, which employs about 1,300, or to simply close it altogether. In the end it decided on the cutbacks, which will begin when people returned from the May Day holiday, according to the reports, citing an unnamed industry source. This latest move spotlights not only the strong grip that Baidu has on China’s online search market, with more than 70 percent share, but also the fact that the online search sector is also on the cusp of a major slowdown, fueled in part by the loss of advertising revenue from struggling companies like Gaopeng. The advertising slowdown led Baidu to report disappointing results last week, and earlier this week Sohu (Nasdaq: SOHU) also reported a sharp slowdown in the growth of its own online search site, Sogou. (previous post) Look for the painful retrenchment to continue in the group buying space, and for the advertising slowdown to sharply hit the top line of search engines and other companies that depend on such revenues in the months ahead. As the situation deteriorates, I wouldn’t be surprised to see Tencent shutter either Gaopeng or Soso, or possibly both, by the end of the year and quite perhaps much sooner.

Bottom line: Shakeups at Tencent’s online search and group buying units reflect broader industry malaise for both, with one or both units set for potential closure by the end of the year.

Related postings 相关文章:

◙ LaShou: On the Cusp of Implosion? 拉手网或已面临生死抉择

◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速

◙ Apple Feasts on China, Baidu Burps 苹果在华享受盛宴，百度盛宴停顿

News Digest: April 28-May1, 2012 报摘： 2012年4月28日-5月1日

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The following press releases and media reports about Chinese companies were carried on April 28-May 1. To view a full article or story, click on the link next to the headline.

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◙ China’s Big Four Banks Hit By Slowdown, Costs (English article)

◙ Gapeng CEO Resigns (English article)

◙ Tencent (HKEx: 700) Soso to Make Large Scale Staff Cuts – Source (English article)

◙ Whitman Makes First China Trip Since Becoming Hewlett-Packard (NYSE: HPQ) CEO (Chinese article)

◙ People’s Daily Website Rises 73 Percent on Trading Debut (Chinese article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

LaShou: On the Cusp of Implosion? 拉手网或已面临生死抉择

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New developments are happening rapidly at group buying leader LaShou, which appears to be on the cusp of a meltdown as it runs out of money in the brutally competitive sector. As many of us prepare for the May 1 Labor Day holiday that marks the start of spring, many who follow this company may be wondering if LaShou will still be in business by summertime. In the latest development of this fast evolving story, domestic media are reporting a mass resignation of many top LaShou executives in recent days, including its top regional managers in Shanghai and Beijing, as well as a vice president. (Chinese article) That exodus would come only days after the company reportedly cut 40 percent of its technical staff in what looks like a desperate attempt to conserve cash. (previous post) These kinds of drastic cuts and resignations may indeed save cash, but if they continue there may not be any company left to operate. The rapid series of events seems to point to a company in crisis, which has  been building for more than a year as a natural clean-up takes place in China’s overcrowded and unruly group buying space. LaShou made headlines a year ago when the company, then just 1 year old, raised a cool $100 million from a group of investors hoping it would become the next Groupon (Nasdaq: GRPN), the US company that pioneered the group buying concept. (previous post) Back then it was saying it wouldn’t make an IPO for at least the next 1 to 2 years. But then investor sentiment abruptly cooled toward the sector as competition heated up, leaving LaShou and many of its peers short of cash after most expanded rapidly earlier in the year. LaShou tried to raise new funds through a New York IPO last fall, but had to indefinitely postpone the plan after the US securities regulator reportedly voiced concerns about its accounting. The company was reportedly trying to relaunch its IPO in the last few weeks; but we have yet to see any public filings and if these latest reports are true I seriously doubt anyone will want to invest even if it does file for an IPO. Clearly things are happening rapidly now, which means we will probably see LaShou either close or merge with a rival in the very near future — in what would be the biggest consolidation move to date in the group buying space. A number of companies have already merged or are on the brink of closure, so LaShou certainly wouldn’t be the first in this latest trend, though it would certainly be the most dramatic. If I were betting, I would predict the chances of a merger are better than 50 percent, with a profitable rival like Dianping or even a non-group buying company like Baidu (Nasdaq: BIDU) or Tencent (HKEx: 700) stepping in to acquire the company for a very low price. Then again, there is also the very real chance that LaShou could close, though I would put that chance at 30 percent or less. Either way, I would be surprised if this company is still in business as an independent group buying site by the time summer arrives.

Bottom line: A new exodus of top executives at LaShou reflects an accelerating cash crunch, with an an acquisition of the company the most likely outcome within the next 1-2 months.

Related postings 相关文章:

◙ IPO Chill Bites LaShou, China Auto 中资企业赴美上市连遭冷遇

◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速

◙ Investors Shun Struggling Groupon.cn, Yaodian100 投资者规避挣扎中的团宝网和耀点100

Rumored Tie-Up to Challenge Youku-Tudou 腾讯、搜狐和百度或结盟 挑战优酷-土豆联姻

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I’ve saved the most interesting tidbit from the China Internet space for my last posting today, which comes in the form of a report that 3 Internet leaders are preparing to pool their online video businesses in a bid to challenge the industry titan created by the recent merger of Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO), the sector’s top 2 players. The report cites an unnamed industry source saying that Tencent (HKEx: 700), Sohu (Nasdaq: SOHU) and Baidu’s (Nasdaq: BIDU) Qiyi will announce the deal this week, possibly as early as Wednesday, creating a second major platform that would act as a single buyer of copyrighted content such as popular movies and TV shows. (Chinese article) The fact that the source is saying a deal is so close, and also the proximity to the big Youku-Tudou merger announcement last month (previous post), lead me to believe it’s quite possible this story is true. What’s more, this new tie-up also appears to be a direct response to the Youku-Tudou announcement, meaning the deal was probably arranged very quickly, which is not a good sign for this kind of major tie-up. On paper at least, such a new tie-up would certainly look intriguing. Sohu is currently China’s third largest online video company with 13.3 percent of the market, while Qiyi is sixth with 6.4 percent, while Tencent is a relatively small player, meaning the new platform would have around 20 percent market share. That would be about half of Youku-Tudou, which will have around 40 percent market share when that deal closes. From a purely superficial perspective, the prospect of a Sohu-Qiyi-Tencent tie-up certainly looks attractive and would be the latest much-needed consolidation of this fragmented and money losing industry. These new larger players would have more bargaining power to get rights to the latest movies and TV shows at better prices, helping them in their drive to become profitable. As if to trumpet that fact, Youku has just announced its latest major licensing deal, this time obtaining exclusive China distribution rights for 2 hit TV series, “Survivor” and “America’s Next Top Model”, from US broadcaster and program maker CBS Studios (NYSE: CBS), marking the latest in a string of similar major licensing deals. (company announcement) On the one hand I’m quite encouraged by this kind of M&A activity, as China’s Internet companies have traditionally resisted such tie-ups due to reluctance by their founders to yield control, even though such consolidation is sorely needed to create major players that can keep expanding and perhaps even someday become global names. But at the same time, the presence of so many strong-willed personalities could make such mergers difficult and even ultimately fail in some cases. Early signs indicated that the Youku-Tudou marriage could suffer from the strong personality of Tudou founder Gary Wang. The founders of Tencent, Baidu and Sohu also have equally strong personalities, especially Sohu’s Charles Zhang, who would presumably lead the leader of any new tie-up. All that said, I would still look for Youku and Tudou to complete their merger and for this new tie-up to also move ahead, though there could be many difficult growing pains for both new partnerships in the year ahead.

Bottom line: Reports of a Sohu-Tencent-Baidu video tie-up could well be true, creating a major new player to counter the industry leader formed by the merger of Youku and Tudou.

Related postings 相关文章:

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市

◙ Baidu Video Tries Blockbuster Licensing

◙ Tudou, Youku: Stormy Marriage Ahead 优酷土豆“联姻”：想说爱你不容易

News Digest: April 24, 2012 报摘： 2012年4月24日

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The following press releases and media reports about Chinese companies were carried on April 25. To view a full article or story, click on the link next to the headline.

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◙ China Auto Rental Said to Struggle to Attract Investors (English article)

◙ Sohu, Tencent, Baidu Video Channels to Jointly Buy Copyrighted Material – Source (Chinese article)

◙ Huawei Profit Halves; Handset Competition Saps Margins (English article)

◙ Lashou Reported Cutting Staff, Halting Ads, Calls Move “Strategic Adjustment” (Chinese article)

◙ Alibaba.com (HKEx: 1688) Reports Net Profit1 of RMB339.2 million in Q1 2012 (Businesswire)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

China’s Microblog Crackdown Continues 中国继续加强微博管控 新浪或受冲击

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China’s displeasure at the ability of Twitter-like microblogs to quickly and efficiently spread rumors is heading into a new phase, with word that Beijing is ordering all search engines to stop including microblog posts in their results. (English article) Details are scant and there’s no official confirmation from Beijing, but the reports say an official at the Data Center of China Internet said on his own microblog that the move has been ordered by relevant government offices effective immediately, a move that would deal yet another blow to Sina (Nasdaq: SINA) as it tries to commercialize its wildly popular Weibo microblogging service. Weibo and its peers have had a difficult time these last few months, as Beijing tries to rein in this popular medium that allows anyone to say anything they want and see their messages instantly passed on to thousands of other subscribers, often leading to huge waves of protest or criticism of various social problems and government shortcomings. Late last year the government rolled out a new rule requiring all microblog users to register with their real names, in a bid to curtail rumor-mongering by people who could say anything they wanted with no fear of being identified. (previous post) More recently, the government ordered Weibo and another popular microblogging service operated by Tencent (HKEx: 700) to shut down part of their services after they helped to spread false rumors that army troops were entering Beijing amid the Communist Party’s latest internal power struggle. (previous post) This latest initiative, if it’s true, looks like just the latest step in the drive to reduce the influence of microblogs by making their messages unavailable to people using Internet search engines. While a large number of Weibo viewers get their news directly off Weibo itself, I suspect a large number of people also view Weibo posts as a result of web searches, as such posts are often indexed by the search engines. This latest initiative should have little effect on the search engines themselves, but could significantly reduce traffic to Weibo by halting all referrals from the search engines. That will come as the latest headache for Sina as it tries to commercialize Weibo, as the lower traffic volumes will make the service less attractive to advertisers that are one of the biggest potential revenue sources. If Beijing continues to impose more and more restrictions on Weibo like this, look for the service, once considered full of potential, to eventually wither and maybe even die in what would be a huge setback for Sina.

Bottom line: Beijing’s latest order banning microblog posts from search results is the latest setback for Sina’s Weibo, which is being by a growing list of government restrictions.

Related postings 相关文章:

◙ New Crackdown Spotlights Social Networking Risk 新的打压凸显社交网络风险

◙ Real Name Registration: Burden or Not for Weibo? 实名制会否成为新浪微博的负担？

◙ Microblog Clampdown: Only Chapter 1? 实名制向网络行业吹去冷风

Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？

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An important trial has just begun in southern Guangdong province, testing China’s young anti-monopoly law and its legal system in a case that could spell big headaches for leading Internet firm Tencent (HKEx: 700). Analysts also point out the case could have a domino effect for other areas where a single company dominates the Web, with online search leader Baidu (Nasdaq: BIDU) perhaps the most vulnerable to a similar lawsuit. But let’s look at the Tencent case first, as that’s the main point here. Perhaps appropriately, the case is being bought by Internet software company Qihoo 360 (NYSE: QIHU), a seasoned veteran with litigation in China, having been sued numerous times by others, including Tencent, and also filing numerous lawsuits of its own against rivals. This latest case has Qihoo suing Tencent for monopolistic practices in the instant messaging space, claiming Tencent’s wildly popular QQ service has a virtual lock on the market. (Chinese article) The case, which began on Wednesday morning，has Qihoo seeking 150 million yuan, or about $24 million, in damages. Chinese courts rarely award that much money due to legal restrictions, but even if they did such an award would be trivial to a company like Tencent that has a market cap of $56 billion and a huge cash pile. Of course the much bigger threat is that the court will determine that Tencent does indeed have an instant messaging monopoly, which it has used to quickly gain dominance in other Internet spaces such as online games. From my perspective, Qihoo’s case does indeed look convincing, as Tencent currently controls more than 70 percent of the instant messaging market. I personally don’t use QQ, but in my experience the only other platform that has any users at all in China is Microsoft’s (Nasdaq: MSFT) MSN, whose service is basically just a copy of its global product and is far less popular among Chinese users. A court ruling against Tencent would be interesting for a number of reasons, all of which would obviously be bad for the company. Qihoo and others are clearly interested in seeing the court order Tencent to de-link QQ from its other initiatives, as that would seriously hamper the company’s ability to take advantage of its massive instant messaging user base to quickly develop into other areas like search, online video and e-commerce. But the court, if it rules against Tencent, should also take steps to break its instant messaging monopoly, which is what the anti-monopoly rule was designed for. Of course, if the court rules against Tencent the next major target would be Baidu, which also controls more than 70 percent of China’s search market, the legal definition for a monopoly. Accordingly, China Internet watchers and investors should be paying close attention to this case, which could have big implications for both Tencent and Baidu stock.

Bottom line: Tencent will suffer a big setback if a court rules it has a monopoly in instant messaging, potentially paving the way for a similar lawsuit against Baidu.

Related postings 相关文章:

◙ Tencent Search: Baidu Beware? 腾讯搜搜成功关键依赖创新

◙ Search Wars Heat Up With Latest Anti-Baidu Moves 中国网络搜索战升温

◙ Baidu’s Strong Growth Underwhelms 百度业绩持续强劲增长将投资者期望抬升过高

News Digest: April 14-16, 2012 报摘： 2012年4月14-16日

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The following press releases and media reports about Chinese companies were carried on April 14-16. To view a full article or story, click on the link next to the headline.
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◙ Qihoo (NYSE: QIHU) Anti-Monopoly Lawsuit Against Tencent (HKEx: 700) to Start April 17 (Chinese article)

◙ Renault (Paris: RENA), Dongfeng (HKEx: 489) Sign Outline China Deal: Sources (English article)

◙ iCafe8 (Shenzhen: 300113) to Acquire Shanda Subsidiary Jisheng (English article)

◙ China Mobile (HKEx: 941) to Launch Commercial 4G Network in Hong Kong in Q4 (Chinese article)

◙ Microsoft’s (Nasdaq: MSFT) Leung Quits as Head of China, Prompting Reshuffle (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

News Digest: April 13, 2012 报摘： 2012年4月13日

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The following press releases and media reports about Chinese companies were carried on April 12. To view a full article or story, click on the link next to the headline.

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◙ Google (Nasdaq: GOOG) to Sell Motorola Handset Business to Huawei – Report (English article)

◙ NetEase (Nasdaq: NTES) Accuses Tencent (HKEx: 700) of Copying News (Chinese article)

◙ 360Buy Launches Online Real Estate Business (English article)

◙ Canadian Solar (Nasdaq: CSIQ) Launches Reseller Program for the EMEA Region (PRNewswire)

◙ Wal-mart (NYSE: WMT) International Focusing on Existing Markets (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)