Virtual China: Information Technology - Press Reviews, August 20, 1999

Weekly Press Review

August 20, 1999

China.com pocketed a handsome profit of $5.9 million when a brokerage mistakenly sold all the company's stock in 24/7 Media Inc., allowing Wall Street's favorite China Internet play to post a surprising $1.9 million profit for the second quarter. But investors had nothing to fear as China.com, like all good Internet companies, piled up a healthy quarterly net loss of $2.2 million, a 29% increase over the same period last year.

"This is our first earnings announcement as a public company, and we are extremely pleased with the company's results," said China.com's chief executive Peter Yip. Spoken like a true netrepeneur.

For the statistics-obsessed, China.com's average daily page views for July hit 1.3 million, a 30 percent increase over the 1 million daily average in June. And revenue from advertising increased to $878,000, an almost five-fold over the year before.

China.com's $150 million grubstake will go towards feverishly buying up e-properties in Asia. Having already gobbled up five companies in the last quarter, China.com has its sights on four more companies in Korea, Singapore, Hong Kong, and China. Throwing red meat to Internet-hungry investors, CFO David Kim announced, "We're at a very aggressive growth stage, so we expect to bleed a little bit longer. There's a flurry of activity going on, and we're going to jump in the fray."

Cross-Strait hacking continued into the week, with one skillful mainland cracker placing a Chinese flag on Taiwan's spy agency's website on Sunday. One Taiwanese official accused China of mounting an information war against the island, saying Taiwan's servers had been deluged with 72,000 attacks this month. Taiwan's valiant webmasters kept all but 165 from succeeding.

An ominous troika of Chinese government agencies - Ministry of Information Industry, Ministry of Public Security, and Ministry of State Security - responded to all this hackfoolery with a dire circular warning Chinese webmeisters to cut links with foreign websites to avoid "invasion by foreign hostile forces." The Yangcheng Evening News reported that the edict also banned government agencies from connecting to the Internet. While foreign surfers can still view ministries' sites in all their slow-loading glory, surfers on the '169'-network may be stuck with offerings available behind the Great Fire Wall.

And just what is the China Internet Security Management Center? Can it stop the Hong Kong Blonds?

Those with an Orwellian bent will no doubt find Big Brother writ large in Xinhua's announcement that China will soon boast a national computerized database that will include identification numbers and photographs of everyone above 16. Chinese police officers will soon be able to "share information over the Internet."

Chinese-language portal Sina.com made some news this week, having launched Taiwan's first online air travel service through its Taiwan website. The company has also hired ad-firm Admerasia to push its brand, and 200 million claimed monthly page views, among North American advertisers. Atsuko Watanabe, Admerasia's executive vice president and general manager boldly asserted, "Sina.com delivers to global advertisers and marketers the world's largest and fastest growing population." Deja vu all over again?

Dataquest in its latest report hypes Asia's coming boom in e-business, with growth spurred by business-to-business transactions, predicted to balloon from just $8 billion this year to $280 billion in 2003, rather than business-to-consumer transactions, which will increase from $5 billion to paltry US$40 billion in the same period. China surprisingly ranked fifth in terms of business-to-business development, with 30% of its companies going online, and second in consumer-related projects. Erstwhile cyber-haven Hong Kong placed sixth.

Earlier in week, several telecoms analysts raised doubts about China's e-future. Peter Lovelock, of Hong Kong University's Telecommunications Research Project, argued that the risks for e-business development in China are "of an order more significant and profound than elsewhere." He raised regulatory uncertainty, rampant corruption, legal immaturity, and governmental panic in the face of uncontrolled growth as possible pitfalls for China e-business pioneers.

Dismissing current China portals as "tired borrowings of the Western model," Lovelock speculated that small niche players might steal a march on large companies fixated on building brands and market share. IDC Asia Pacific's Pete Hitchen largely agreed, saying that a niche-focused approach "will very much be the trend of tomorrow." But he added that the big players might very well adapt. Hitchen also noted that portals will find advertising revenue hard to come by, with China's estimated four million Internet users representing "just a drop in the ocean" when compared to the US, where two million page hits per day has become the benchmark.

In the same article, Shen Xiao, an e-commerce researcher with the official Shanghai Information Center, insisted that the desire of Chinese to touch and feel would hamstring e-commerce. Perhaps he should meet Netease.com's Chief Executive William Ding, who believes that his recently announced auction site can make a go of it based on overwhelming interest from the website's patrons. Ding did admit successful auctioning would require more efficient payment mechanisms. Until then, Ding said, "It's e-commerce with Chinese characteristics." Let's hope that this works better than socialism with…

Shanghai Huateng Software Systems (SCUBE) may just have the answer. A software package - with an auspicious release date of October 1 but ponderous name of TOP E-commerce Solutions - will enable a website to accept a wide number of bank credit cards or even debit cards through China's interbank network (SNET).

Two articles late in the week suggested that the Net could reach China's laobaixing sooner than later, something that would give Western netrepreneurs even more reason to drool. China Great Wall's $600 PCs have already snared a third of total PC sales in China. Priced to sell, these stripped-down machines bring the price of home computing down to the household appliance level. And while 47% of Great Wall's customers cited a child's education as the reason for the purchase, they will also find that the Internet is only a phone call away.

What about the high cost of ISP service? Nanjing's telecommunications authority raised hopes that prices would come down to affordable levels (Chinese surfers currently pay roughly what Americans do, with far less in the paycheck), having recently announced plans to lower internet access fees for residential service, starting August 21. Thirty hours of surfing per month will cost just over $7, representing a 75% cut in charges. Unfortunately, only 5,000 users can benefit from this largesse at the moment. CERNET joined in the altruism by slashing user fees in half after receiving a 50% cut in line charges.

Vancouver-based CathayOnline Inc. made a splash this week, with announcements on Bizwire that it was targeting the set-top box market in Chengdu through its renamed ISP, CathayOnline Torch, and had hired The Murjan Group to coordinate banner adds on e-mail service based on USA.NET's advanced messaging services. A wholly foreign-owned ISP operator in China raised eyebrows in some quarters, and may yet raise hackles with Chinese regulators. More on this next week...

Cash-strapped China Unicom's squabbles with remaining investors may delay the company's IPO another six months. "If you try to take the CCF ventures out of the IPO, then what's left in Unicom is actually very, very little. It will become very unattractive to investors," commented Edison Lee, an analyst with Credit Lyonnaise Securities Asia. Shocking.

Potpourri: Hong Kong's cable-TV power Wharf once had visions of taking on Cable & Wireless HKT's Super Netvigator for broadband supremacy, but three executives in the Internet division resigned due to the slow pace of development. Taiwan's computer giant Acer Inc. will invest one billion dollars in Internet-related businesses over the next five years. Ericsson and Nokia both landed mobile telephone deals. Hong Kong's dial-up Internet use jumped 30 per cent in the first six months of the year. A New Hampshire company donated the dalailama.com and panchenlama.com domain names to the Tibet government-in-exile. Taiwan's Ministry of Health followed in Dr. Koop's footsteps, launching a health website. And the Chinese alternative music portal Chineserock, formerly found at www.chineserock.com , will relaunch as SoundNet China.

Waste of Bandwidth?: Several Hong Kong celebrities behind the Star East nightclub have teamed up with a Japanese telecommunications company to launch stareastnet.com, which will showcase entertainment and lifestyle information, news, TV and radio programs, celebrity chat forums, artist profiles and interactive games.

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