Bottom line: Youku Tudou’s new name and campaign to create more exclusive content look like good strategic moves, but it really needs to sell itself to a larger benefactor to ensure its longer-term future.
Youku Tudou to change name, develop content ecosystem
Youku Tudou (NYSE: YOKU) was once China’s top online video site when it was formed 3 years ago through the merger of the country’s 2 leading players. But those glory days are firmly in the past now, as the company has been overtaken by more aggressive names like LeTV (Shenzhen: 300104) and iQiyi, the service backed by cash-rich online search giant Baidu (Nasdaq: BIDU).
Now media are reporting that Youku Tudou is rolling out a major overhaul that will include a new name for the company, as well as a massive spending campaign to build up an ecosystem for creating its own video content. The campaign certainly seems interesting and long overdue. But I’ve argued for a while now and still believe that what Youku Tudou really needs is to consider selling itself to a stronger Internet partner, rather than trying to continue as an independent company. Read Full Post…
Bottom line: Tencent should limit itself to only reporting rivals or former employees for illegal behavior in major cases of criminal behavior, or risk being labeled a tattle-tale and undermining its own image.
Tencent: a vindictive whistleblower?
Media are flocking to the latest China Internet scandal that has seen software security specialist Qihoo 360 (NYSE: QIHU) accused of hosting pornography on its cloud service. But this time it’s not so much the act of hosting pornography that’s drawing attention, since this kind of problem is relatively routine on China’s unruly Internet scene.
Instead what’s drawing the attention is the source of the accusations that led to the scandal. In this case the pornography was uncovered in an investigative TV report, after central broadcaster CCTV was tipped off by Internet giant Tencent (HKEx: 700). China Internet watchers will recall that Tencent has a long-running feud with Qihoo 360 dating back to a clash 5 years ago. Observers will also recall that Tencent was in similar headlines last month when it leveled corruption allegations at a former executive who defected to e-commerce giant Alibaba (NYSE: BABA). Read Full Post…
Bottom line: Phoenix Satellite and its new media arm will continue to sputter due to China’s slowing economy and a lackluster move into mobile advertising, and founder Liu Changle should consider selling the company.
Slow move to mobile saps Phoenix New Media
Things aren’t looking too good these days for Hong Kong-based Phoenix Satellite (HKEx: 2008), a former rising star in China’s tightly controlled media market that has stumbled badly due to its inability to adapt to a changing industry landscape. Phoenix warned of a major profit decline last month due to a soft TV ad market (previous post), and now its younger Phoenix New Media (NYSE: FENG) unit is also showing signs of distress due to a heavy reliance on portal advertising delivered over traditional desktop computers.
The new quarterly earnings report from Phoenix New Media does contain one bright spot, namely a 124 percent increase in revenue from advertising services offered over smartphones and other mobile devices. (company announcement) But that part of the business is still quite small, with the result that Phoenix New Media reported overall advertising revenue growth of just 7.2 percent, and overall revenue growth of 2.9 percent during the second quarter of this year. Read Full Post…
Bottom line: Alibaba’s new tie-up with Suning looks logical on the surface but is likely to run into problems due to overlap in the 2 partners’ businesses, which could lead to conflicts and an ultimate dissolution of the partnership.
Alibaba, Suning in massive new tie-up
I’m officially labeling today as “O2O Day” in China, as a recent wave of online-to-offline (O2O) tie-ups reaches a crescendo with news of a $4.6 billion investment by e-commerce giant Alibaba (HKEx: BABA) in traditional electronics retailer Suning (Shenzhen: 002024). Media aren’t really commenting on the size of the deal that will give Alibaba a 20 percent stake of Suning, but to my knowledge it’s the largest such deal in China Internet history and also quite possibly the largest ever by a Chinese tech company.
All that said, I’ll be quite blunt and add my view that I don’t completely understand the logic behind this particular deal and thus wouldn’t expect it to yield very strong returns. On the surface it looks like a classic O2O deal, combining Alibaba’s strength in online retailing with Suning’s in traditional retailing. But a closer look show this deal could be set for a bumpy ride for a number of factors, which I’ll discuss shortly. Read Full Post…
Bottom line: Aggressive spending on O2O initiatives by China’s traditional and online retailers is likely to produce a new boom-bust cycle, and companies should consider more M&A as part of their plans.
Retailers spend millions on O2O
Online-to-offline retail services, often called O2O, have become the flavor of the day for traditional and web-based Chinese retailers over the last year, with at least 3 major new announcements coming out on the topic late last week. Two involved big internal campaigns to boost O2O services at electronics retailer Gome (HKEx: 493) and traditional supermarket chain Renrenle (Shenzhen: 002336), while a third saw e-commerce giant JD.com (Nasdaq: JD) make a major investment in traditional retailer Yonghui Superstores (Shanghai: 601933).
Those efforts come just a week after leading search engine Baidu (Nasdaq: BIDU) reported disappointing quarterly earnings due to heavy spending on O2O, and more generally as O2O has become a buzzword for nearly all of China’s major traditional and online retailers. The activity surge reflects realization that leading retailers of the future will operate a hybrid model that uses both online and offline channels to sell products and services. Read Full Post…
Bottom line: Both Autohome and especially BitAuto look like strong candidates for buyout bids, following rapid declines in both companies’ stocks due to a rapid slowdown in China’s car market.
Internet auto stocks run out of steam
We’ll begin the new week with a look at 2 of China’s leading online auto specialists, BitAuto (NYSE: BITA) and Autohome (NYSE: ATHM), whose shares have both tanked over the last 3 months in tandem with a rapid cooling of China’s car market. The trend is similar to what’s happened at online real estate service providers, whose shares have slumped for the last year due to a prolonged and much-needed correction in China’s overheated property market.
China stock watchers will know that E-House (NYSE: EJ), one of the two major US-listed real estate services firms, launched a privatization bid in June, part of a broader wave that has seen dozens of Chinese firms leave New York this year due to low valuations. (previous post) That leads to my next prediction, namely that BitAuto, Autohome or potentially both could soon become the latest companies to join the privatization queue. Read Full Post…
Bottom line: Alibaba’s naming of a westerner and former top Goldman Sachs executive as its new president looks like a smart move to boost its struggling global expansion, and could bring more focus to the division over the next year.
New Alibaba president to lead international efforts
After muddling around on the global stage for a while without much to show for its efforts, I’m happy to see that e-commerce giant Alibaba (NYSE: BABA) has finally taken the step of hiring someone with extensive experience outside China to spearhead its international expansion. The company’s naming of a former Goldman Sachs executive as its new president should help to bring some focus to an international drive that to date has been quite fragmented and hasn’t produced any solid results.
More broadly speaking, the naming of Michael Evans as the new president of Alibaba Group marks the second major appointment for the company in the last 3 months, as founder Jack Ma installs a new executive team to head his $200 billion company. His decision to name foreigners to some of the top spots mirrors a similar strategy by PC giant Lenovo (HKEx: 992) and also Tencent (HKEx: 700), one of Alibaba’s chief rivals. Read Full Post…
UPDATE: Since originally writing this post, Internet giant Tencent has launched its own buyout offer for eLong. Ctrip has commented that cooperation with Tencent would represent a win-win. (Chinese article)
Bottom line: Ctrip is likely to make a buyout offer for eLong by year-end, but its profits will remain under pressure for at least the next year as it battles with Qunar for market share.
Profits under pressure at the Ctrip lodge
Leading online travel agent Ctrip (Nasdaq: CTRP) has just released its latest quarterly results that show just how fierce competition has become in China’s travel market, as heavy spending eroded its profits despite big revenue growth. That competition was even more evident in the latest results for eLong (Nasdaq: LONG), which was once Ctrip’s main rival but more recently has developed an increasingly cozy relationship with its former foe.
I’ve been predicting for the last few months that Ctrip will ultimately make a buyout bid for eLong, following a steady series of recent moves that were bringing the companies closer together. The announcement of Ctrip’s and eLong’s latest quarterly results on the same day seems like more than coincidence, and is further evidence that a marriage could soon be coming. But before any formal marriage proposal, Ctrip would also be wise to take a long, hard look at eLong’s financials, which don’t look too impressive. Read Full Post…
Bottom line: Ctrip is likely to make a counter-bid for eLong following a surprise offer from Tencent, sparking a potential bidding war that should ultimately see Ctrip emerge as the victor.
Tencent launches surprise bid for eLong
I’ve been predicting for the last few months that leading online travel site Ctrip (Nasdaq: CTRP) would make a buyout bid for former rival eLong (Nasdaq: LONG), so I was quite surprised to read that such a bid has come instead from Internet giant Tencent (HKEx: 700). This particular move is all the stranger because Tencent hasn’t shown much interest in the travel sector before now, though it previously invested in eLong and now owns about 15 percent of the company.
I also have to suspect that this particular bid came without the knowledge of Ctrip, which itself owns 37 percent of eLong. Ctrip got its stake after joining a group that bought out a controlling 62 percent of eLong previously held by US travel giant Expedia (Nasdaq: EXPE) earlier this year. Tencent has owned its stake in eLong since 2011. Ctrip’s recent moves have all pointed to its own buyout offer for eLong, leading me to believe that we could quickly see a bidding war break out for the company. Read Full Post…
Bottom line: Tujia’s new fund raising reflects strong investor confidence in its business model and market positioning, which could help the company to post strong growth before an IPO in the next 1-3 years.
Tujia raises $300 mln
It seems like hot Internet sites only need to say they’re looking for new money these days, and they can automatically attract big investor interest that allows them to raise huge funds and get lofty valuations. The latest company to follow the pattern is Tujia, a site that allows homeowners to rent out their vacant properties to travelers, using a similar model to popular US site Airbnb. Just a month after media reported that Tujia was finalizing a new funding round worth $250 million (previous post), the latest reports say demand was so strong that it ended up raising $300 million. Read Full Post…
Bottom line: Baidu’s tie-up with a major Japanese noodle chain looks like a smart move to build up its fledgling takeout dining business, though it will need to do more to win back investors concerned about its aggressive spending on O2O investments.
Baidu ties with Ajisen Ramen
A week after its stock was hammered by concerns about big spending on its online-to-offline (O2O) services, leading search engine Baidu (Nasdaq: BIDU) has found a major new ally for that part of its business in Japanese noodle chain Ajisen Ramen (HKEx: 538). This particular deal will see the Hong Kong-listed Ajisen and another investor pump $70 million into Baidu’s takeout dining service, providing a major supporter not only due to the investment but also the chain’s strong presence in major Chinese cities.
Baidu’s stock is still recovering from a hammering last week that saw the shares fall by nearly 20 percent to a year-low after it reported anemic 3.3 percent profit growth in its latest reporting quarter due to heavy spending on O2O services. (previous post) Such services include things like buying takeout restaurant food online, and purchasing items from real-world stores through group buying sites. Read Full Post…
