The rise and rise of China’s internet companies

June 15, 2010 § Leave a comment

Media adviser Charles Mabbett sums up highlights from the Reporting New Realities in Asia and the Pacific international media conference in Hong Kong, April 2010. This is the second of three articles in a series on latest developments in the Chinese media. Read part one and part three.

The huge and growing numbers of internet users in China have catapulted a select few Chinese internet companies into a league previously the exclusive preserve of American internet companies such as Google, Amazon and Yahoo.

Recent reports by Chinese state media, quoting official sources, say the online population has now exceeded 400 million, up from 384 million in 2009. If the figures are correct, about a third of China’s population now has access to the internet via mobile phones, dial-up and broadband connections.

It is this huge market of domestic internet users, Chinese language specialisation and the degree of protectionism offered by the Great Firewall that arguably have been the key advantages in the establishment of the successful business models enjoyed by China’s burgeoning internet giants.

A news executive at QQ.com, one of China’s biggest news portal and social media websites with over 100 million members, told an international media conference in Hong Kong that its basic service was free and available to all users. Its revenue came from value added services and advertising.

Chen Juhong (pictured) was speaking at at the Reporting New Realities in Asia and the Pacific conference in April 2010 organised by the Hawaii-based non-profit think tank East-West Center and the University of Hong Kong.

She said making one’s personal profile or blog “more charming” costs money. “We also have games and advertising but we don’t only display ads, we also have interaction for the advertisers. We can show them how many people join their events.” Revenue also came from other value-added services that included virtual pets and ringtone downloads.

As editor-in-chief of QQ.com, Chen said running a journalism 2.0 website meant monitoring and editing content was a vital responsibility for her 600-strong newsroom. Her staff had to pay close attention to the user generated content which made up half of her website’s total content. “If you don’t pay attention to that, then you lose the whole future.”

QQ.com and its namesake QQ instant messaging service which boasts over 800 million individual accounts, are both owned by Tencent Holdings Ltd, currently China’s most valuable internet company and the third largest in the world behind Google, Amazon, and ahead of Yahoo.

Ms Chen said 60 percent of QQ.com users accessed the web using their mobile phones while the basic QQ messaging service was free.  “First of all we have products to make it happen, like blogs and micro-blogs, so we encourage people to upload their content. We just make it useful for people to record their life. And during the (Sichuan) earthquake or the Olympic Games, it’s been very powerful.  And people just love that.”

While the success of QQ.com and its sibling enterprise, the QQ messaging service, have been relatively unknown to the rest of the world, they are the two best known examples of a range of about 20 internet and mobile phone based subsidiaries owned by Tencent which encompass online services in entertainment, gaming, social media and e-commerce.

Founded in 1998 in Shenzhen, Tencent listed on the Hong Kong Stock Exchange in 2004 and in 2008 it was added as a Hang Seng Index Constituent Stock.  Today the company is valued at $US37.53 billion, making it the first Chinese internet company to break the $US30 billion barrier. Last year, the company reported $US1.8 billion in revenue.

But there are other Chinese internet companies that have enjoyed rapid and sustained growth on the back of increasing internet penetration and a boom in mobile telephony, one of which may even surpass Tencent in value in that exclusive global $US30 billion club.

The South China Morning Post recently reported that analysts JP Morgan Asia-Pacific Equity Research were forecasting that Baidu, the country’s most popular internet search engine, could be valued at $US35 billion by the end of the year, a jump from its present valuation of $US21.51 billion.

When Google China withdrew its search engine functions to Hong Kong after a disagreement with the Chinese government over cyber-hacking and censorship, it was immediately clear that Baidu would be the company that would have most to gain from Google’s departure.

Since Google’s departure, Baidu’s net profit has rocketed and revenue has doubled although the company’s management has downplayed the Google effect, attributing the success to its own performance.

With about 75 percent of the search engine traffic in China (about twice Google China’s market share before it withdrew), Baidu has set its sights on a share price target of $US860, up from its current price of about $US709. The company has been listed on the Nasdaq index since December 2007, the first Chinese company to do so.

While it may take some doing for China’s other internet giants Alibaba, Netease, Sina and Sohu to push their way into the same league as Tencent and Baidu, no sensible person can rule them out given the market environment they operate within.

Alibaba.com is the world’s largest business-to-business trading platform and owner of Taobao, China’s equivalent to eBay, and has a Hong Kong Stock Exchange valuation of $US9.75 billion, while Netease, valued at $US4.53 billion, has established itself as China’s leading online gaming website owning the country’s  most popular online multiplayer game Fantasy Westward Journey.

There is also Sina, China’s oldest and best known portal website which has a Twitter-like micro-blogging platform that is fast growing in popularity. It has over 230 million registered users and enjoys over 700 million daily page views. It is also home to blog posts by some of China’s most popular bloggers like Han Han and Guo Jing Ming and is valued at $US1.9 billion.

Like its chief rival Sina, Sohu is another Nasdaq listed company that is a popular portal website offering a range of services including social media, blogs and search functions. It is valued at $US1.83 billion.

Another to watch is Ren Ren, China’s equivalent of Facebook, although there are rumours that Facebook, which is currently blocked, is exploring making a play in China’s unique social media market.  As an example of the uniqueness of the China internet scene, many overseas Chinese will relate they use Ren Ren to keep in touch with their friends in China and Facebook to connect with friends outside China.

– by Charles Mabbett

Photos Marco Lui/JMSC 

Bloggers and Chinese Twitter, China’s new media wave

June 10, 2010 § Leave a comment

Media adviser Charles Mabbett sums up highlights from the Reporting New Realities in Asia and the Pacific international media conference in Hong Kong, April 2010. This is the first of three articles in a series on latest developments in the Chinese media. Read part two and part three.

When China’s most popular blogger Han Han had his recent post about a spate of violent attacks in Chinese schools taken down, it wasn’t the first time that he had courted controversy and it is unlikely to be the last.

The post entitled “Children, you’re depressing grandpa” was critical of a media ban on reporting the latest attack in Taizhou, Jiangsu Province, at a time when the Shanghai World Expo was due to get underway. Evidently, Sina.com, the website that hosts many of China’s most popular blogs determined it was too sensitive to keep online.

Han Han represents a relatively recent phenomenon in China, one that commands millions of readers and is highly influential as both social commentary and barometer of public sentiment. As of April 2010, his blog had attracted 350 million hits, making him by far and away, the king of China’s blogosphere.

While we may think of the Great Fire Wall of China as being the main characteristic of the Chinese internet, another defining feature, increasingly, has been the rise and rise of the bloggers and their younger relative, the micro-blogger using Chinese Twitter equivalents.

In the ten years since Isaac Mao, who visited New Zealand in 2009, took up posting blogs to become one of China’s first original bloggers in 2001, some of his internet colleagues have since become mega stars among China’s  360 million internet users.

The Chinese blogosphere has evolved into a highly competitive and socially aware 40 million population of writers who collectively represent a sphere of public discourse in China that exists without rival, despite central government efforts to monitor, filter and control content.

While long form blogging has been growing in the past ten years, the micro-bloggers are the newest manifestation of online comment and the startling increase in numbers of both pose a huge unanswered question to the Chinese authorities on the issue of media control.

As we have seen, even if bloggers like Han Han, a former racing car driver and singer, fly as close to the sun as they can, secure in the knowledge that they have a certain Teflon status because of their celebrity and massive readership, they are not immune to self censorship by host websites and government rules.

But it doesn’t stop them from trying. Han Han’s blog on the school attacks was available online for a short while, and it enabled the China watching website Danwei to translate it into English and republish it for an English speaking audience.

Here’s an example: “We know only that 32 children were injured during the Taixing nursery school incident. Government and hospital officials repeatedly emphasize that not a single child died, but word on the street is that many did. Tell me, who should I believe?”

And furthermore:  “I’m totally astonished. By blocking off information and the hospital, controlling the media, prohibiting visits, and changing the subject, the Taizhou government has successfully diverted our anger from the killer onto themselves.”

With such outspokenness given the context of China’s media environment, it seems little wonder that China’s netizens have embraced Han Han who in September 2008 overtook Xu Jing Lei, a well known actress, film director and representative of the 1970s generation, to become China’s most popular blogger. That was the month the number of accumulated hits on his blog surpassed that of Xu’s on 209 million.

Quoting The Beijing News at the time, Danwei reported “this historic passing of the torch came about because of netizens’ love of controversy, which Han Han provides in spades. Xu’s journal-style blog about her daily activities may delight her fans, but Han’s attacks on the establishment have a much broader appeal”.

Han Han’s blog is considered influential as a representative of a generation of young Chinese born in the 1980s, a generation that escaped the hardships that existed under Chairman Mao before the reform and opening up era that began in 1978.

Other popular bloggers have different appeal to audiences, for example, Guo Jing Ming and Hong Huang.  Guo is another flashy representative of the 80s generation and a top selling fiction writer who has been dogged with accusations of plagiarism while Hong is representative of a constituency that was born in the 60s.

Educated in New York, Hong also has a New Zealand connection. She is a well known actress and writer, and famous for being formerly married to Chinese director Chen Kaige (Farewell My Concubine, Life on a String). She has holidayed in New Zealand several times and her celebrity in China has been used by NZTE to endorse New Zealand at the Shanghai Expo.

But recently, the blogosphere became a little more crowded with the latest manifestation of China’s booming internet and mobile communications – micro-blogging or Chinese Twitter.

With Twitter, Facebook, YouTube and Wikipedia all blocked by the Great Fire Wall, Chinese equivalents such as t.sina (known as the “Chinese Twitter”), Ren Ren (a direct copy of Facebook) and Youku (China’s YouTube equivalent) have all been established to fill demand for social media within China.

Micro-blogging in particular had boosted sales of smart phones in China and many Chinese journalists now had their own micro-blogs, a Guangzhou journalist Deng Zhixin told a recent media conference in Hong Kong. “They try to pay attention to the blogosphere, especially for sensitive issues that they cannot report.” Deng Zhixin was speaking at the Reporting New Realities in Asia and the Pacific conference in April 2010, organised by the Hawaii-based non-profit think tank East-West Center and the University of Hong Kong.

“Micro-blogging also leads to the fragmentation of news. There’s so much mobility there and a lot of journalists want to have freer space so they go on to the internet to screen news and to communicate. Users don’t have to wait for the complete report from Xinhua or CCTV because they can read it on the micro-blogs.”

While Chinese Twitter can accommodate up to 400 characters, it is more common for users to post messages up to about 120 characters. Compared with English, Chinese characters allows between two to eight times more information to be packed into the same number of characters.

Professor Xiong Peiyun of Nankai University told the same audience that micro-blogging posed a challenge to government because if people saw something happening in the daily course of their lives that was unfair, they could report it instantaneously on the internet. “If everyone participated, it would impossible for the government to control everything.”

At the same conference, a Chinese media academic Qian Gang concluded a discussion on Chinese media by saying, “In China, the media is controlled, and it is changing, and today’s media changes are controlled, and – coming back to the first one – the control is also changing.”

Observing what happens next and where it all leads will be fascinating but there are plenty of clues. The former editor of the Guangzhou’s Southern Weekend, one of China’s most liberal newspapers, Fan Yijin, says increasing media freedom in China is unstoppable because of two factors – market forces and the internet media.

But he also believes that China’s leaders are not opposed to greater media freedom because they are pragmatists. “High level leaders have already seen that for major news stories, if the traditional media do not report them, then new media certainly will.” “We’ve seen the emergence of a new kind of triangulated media supervision involving new media, traditional media and popular opinion, and this major force has been a factor in bringing greater media openness as well as national and social progress,” Mr Fan said.

– by Charles Mabbett

Asia New Zealand Foundation media adviser Charles Mabbett attended the Reporting New Realities in Asia and the Pacific international media conference in Hong Kong from April 25-28, 2010.

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