Virtual China: Information Technology - Press Reviews, July 19, 1999

Weekly Press Review

July 19, 1999

It was a doubleheader internet week in China, with each of two major news events bearing a single message: the internet is going gangbusters in China.

At least, in the first case, Wall Street thinks it is.

On Tuesday, China.com, the Chinese-language portal that's had a tough time since it started in 1995 (see "China.com in a Nutshell"), raised $84 million in a public sale of shares on NASDAQ.

The share price more than tripled on the first day of trading, zooming from US$20 a share to close at US$67.11.

What caused such a panic for shares of a company that last year posted a loss of $8.5 million on $3.5 million in revenue; could not attract a dollar's worth of investment from any Asian venture capital company; and has a record of fruitless partnerships over the past three years with companies including Netscape, Sun and Bay Networks, and Pointcast?

"It is China. It is the Internet. It holds the promise of being able to jump in on the ground floor of an internet service provider that is going to serve 2 billion people," Irv DeGraw, research director of WorldFinanceNet.com, told Wired News.

The fact that AOL owns 10% of China.com, and may use the company as a vehicle through which to build up its presence in Hong Kong and mainland China, also surely played a role cementing investor confidence in the company.

Maybe AOL knows something about China.com the rest of us don't.

However China.com's fortunes turn out, the outlook for the internet itself in China seems rosy indeed, according to the Chinese government's most recent biannual report, released on Wednesday, on "The Development of the Internet in China."

The report's headline figure: the number of internet users in China roughly doubled over the past six months, from 2.1 million to 4 million. The true number of internet users in China is around twice the reported number, because account sharing is common and underreported.

The total number of websites also roughly doubled, from 5,300 to 9,906, according to the report, published by the China Internet Information Center (CNNIC) in Beijing.

Nearly 45% of internet surfers reported logging on from an internet café in the July report, compared to only 3% in January.

Perhaps the most interesting results of the survey, aside from the doubling in overall internet users, were the figures reporting on the most popular websites in China. For the past six months there has been intense competition between several Chinese language portal sites for dominance in this niche.

In January, Yahoo's Chinese language site was the most popular site, followed by the Guangzhou-based Netease.com, and the Dow Jones-invested Sohu.com.

Six months later, the top spot goes to Sina.com, a joint venture of the Beijing-based Stone Rich Sight Information Technologies Ltd., and the Silicon Valley firm, Sinanet. The recipient several months ago of US$25 million investment capital from U.S. investors, Sina is attracting increasing numbers of young Chinese in search of international news to its site.

Sohu.com, formerly in the top spot, dropped to #2, and the Chinese-language Yahoo dropped even further, to the #8 spot. The rankings are becoming a matter of dispute, however; several industry players have complained that some sites faked ballots -- perhaps several thousand -- to improve their rankings.

And how did China.com fare in the website popularity sweepstakes in China over the past six months? In January, it was the 17th most popular website in China. And now? Third from the bottom, in 39th place.

Maybe Wall Street heard the news.

By Friday, China.com's stock had lost 26% its Monday closing price, dropping from US$67.11 to US$49.50.

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