Galloping Pony Passes Fluttering Robin 化腾身价超越李彦宏
I’d like to take a break from all the hard news stories out there to take a look at a softer piece of news that reflects the ever-changing landscape of China’s Internet sector. While smaller names like Sina (Nasdaq: SINA) and Youku Tudou (NYSE: YOKU) have focused on maintaining their market values in the $1-$5 billion range, Internet search leader Baidu (Nasdaq: BIDU) and online game leader Tencent (HKEx: 700) have been in the more enviable position of having valuations in the tens of billions of dollars, easily making them the biggest of China’s publicly traded web firms.But while Tencent’s fortunes have been on a solidly upward track for the last 2 years, Baidu has come under pressure as it faces slowing growth for its core search. Compounding Baidu’s problems are recent gains by rivals Sohu (Nasdaq: SOHU) and Qihoo 360 (NYSE: QIHU) in the online search space, and also Baidu’s own inability to develop strong new business areas despite a number of high profile attempts.
By comparison, Tencent has shown a strong ability to leverage its core dominance in social networking to enter other areas. The company used that advantage to become China’s biggest online game operator, banking on its popular QQ instant messaging service. It now looks set to repeat that formula with its popular WeChat mobile messaging application, which has gained more than 300 million users just 2 years after its launch.
The 2 very different development paths have seen Tencent and Baidu stock move in distinctly opposite directions over the last 2 years. During that time, Baidu shares have lost more than 40 percent of their value, even as Tencent shares have gained a similar amount.
Tencent’s market cap now stands at about $63 billion, making it just as valuable as global social networking leader Facebook (Nasdaq: FB). By comparison, Baidu’s market cap of about $30 billion means it is now just half as big as Tencent, and is roughly comparable in size to former US Internet giant Yahoo (Nasdaq: YHOO).
All of this brings me to the latest news, which has seen Tencent founder and chief executive Pony Ma recently pass his Baidu counterpart Robin Li in terms of personal wealth. According to a new media report, the 41-year-old Ma was China’s third richest man as of March 15, with a net worth of $7.2 billion based on his holdings of Tencent stock. Li, by comparison, was worth $6.3 billion, making him China’s fifth richest man, according to the data from Bloomberg Billionaires Index.
So the question becomes: Will these 2 influential men and their companies continue on their current trajectories? In terms of share prices, we could see some short-term reversals for both companies in the months ahead, as Tencent shares now look a bit expensive and Baidu’s look cheap based on their current price-to-earnings ratios.
But longer term, Tencent certainly seems to be moving in a solidly positive direction. That movement shows no signs of slowing, with the company well positioned to copy its current dominance in gaming and social networking services to the mobile Internet using WeChat as its primary vehicle.
Baidu, on the other hand, is clearly a company looking for new directions, as evidenced by Li’s call late last year for his company to rediscover its “wolf spirit”. (previous post) Baidu has made some interesting plays into online video, travel and mobile services lately that could all have longer term potential. But the battle could be a difficult one, based on the company’s poor previous track record for developing new businesses.
Bottom line: Pony Ma’s recent passing of Robin Li in terms of wealth reflects broader trends at Internet leaders Tencent and Baidu, which look set to continue.
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