Bottom line: A Baidu downgrade by Deutsche Bank and new developments in its takeout dining and driverless car businesses highlight its heavy reliance on its search business and costly diversification attempts with no immediate profit potential.
Baidu teaming with Starbucks?
A trio of headlines are spotlighting the difficulties faced by Chinese Internet giant Baidu(Nasdaq: BIDU) as it tries desperately to diversify beyond its core online search business. At the center of this news flurry is a downgrade of Baidu’s stock by Deutsche Bank, which looks mostly related to the company’s big revenue decline after a scandal earlier this year. But the other 2 headlines, one about Baidu’s driverless car initiative and the other about its online take-out dining service, both nicely highlight the huge money that Baidu is spending on its new businesses, nearly all of them losing big money. Read Full Post…
Bottom line: The closure of online grocer Tablelife and a major overhaul at paid advice service Fenda show investors are growing more impatient with Chinese Internet companies without clear road maps to profitability.
Online grocer Tablelife shuts down
Two news items on downsizing websites reflect not only intense competition on China’s Internet, but also a growing impatience among financial backers for money-losing sites without a clear road map to profitability. It wasn’t long ago that anyone with a dot-com name could easily find hundreds of thousands or even millions of dollars in funding, as both domestic and foreign investors threw money at anything with even the slightest hint of growth potential.
Fast forward to the present, when investors are becoming far more selective and avoiding companies that can’t show a clear paths to profits due to stiff competition and notoriously stingy Chinese web surfers. That reality has apparently spelled the end of the line for online gourmet grocer Tablelife, and a major scale-back for paid advice service Fenda following a 47-day disappearance from the Internet. Read Full Post…
Bottom line: Chinese companies need to become more proactive in ending practices that harm consumers, or risk facing pressure from regulators and hurting their prospects for expansion abroad.
Telcos get tough with real name registration
A campaign requiring all mobile phone users to register with their real names was in the headlines for much of last week, in the latest step to curtail rampant phone fraud in China that has grabbed recent attention due to several high-profile cases. Notably, the real-name registration drive was led by 6 government ministries, rather than the nation’s 3 major wireless carriers whose networks are the primary platform for committing most of the fraud.
Both the government and carriers have known about this kind of fraud for years, but did little to aggressively tackle the problem until the recent wave of negative publicity. Read Full Post…
Bottom line: A new global tie-up between UnionPay and PayPal could auger another alliance by the end of the year that would allow the US company to launch a domestic electronic payments service in China by the end of this year.
PayPal in tie-up with UnionPay
In what must certainly be one of the slowest marches to China of all time, US electronic payments giant PayPal (Nasdaq: PYPL) has just formed a tie-up with UnionPay, operator of China’s largest electronic transactions settlement network. On reading the headline I thought that PayPal had finally cracked the market for domestic transactions in China, following more than a decade of trying to enter the lucrative business. But it turns out the new tie-up only covers cross-border transactions and is mostly for UnionPay’s benefit, meaning PayPal is still being locked out of the domestic China market. Read Full Post…
Bottom line: NetEase is likely to complete a spin-off of its news division, possibly through a sale to Sina, while Postal Savings Bank’s massive IPO will meet with tepid reception due to limited growth prospects.
NetEase plans portal spin-off
Two significant but very different IPOs are in the headlines as we get set for the Mid-Autumn holiday break, one from China’s vibrant private sector and the other from a big state-run behemoth. In the former category is NetEase (Nasdaq: NTES), one of China’s oldest Internet companies, which is reportedly mulling an IPO for its news portal, one of its original businesses with a history dating back to the 1990s. In the other news, China Postal Savings Bank has reportedly placed most of the shares for its massive $8 billion listing with a group of 6 cornerstone investors. Read Full Post…
Bottom line: JD’s driverless vehicle delivery program will face problems due to chaos they create on city streets, while its naming of an Yihaodian CEO augers a prolonged new round of price wars with Alibaba for online grocery shoppers.
JD pilots driverless vehicles, names Yihaodian CEO
E-commerce giant JD.com(Nasdaq: JD) is making a couple of major new moves as the summer ends, led by an interesting program using ground-based driverless vehicles to deliver its goods. At the same time, the company has just installed one of its own top executives as CEO for Yihaodian, the online grocery specialist it recently acquired from US retailing giant Walmart (NYSE: WMT). This kind of corporate shuffle is quite common after such acquisitions, and we can probably expect to see some aggressive moves by new Yihaodian CEO Yu Rui as he takes over at the helm of the struggling company. Read Full Post…
Bottom line: The antitrust regulator’s decision to review Didi’s proposed union with Uber China marks the start of a new era of much-needed government oversight of major Internet mergers.
Antitrust regulator starts review of Didi-Uber union
After years of turning a blind eye to rapid consolidation in many emerging high-tech industries, China’s anti-trust regulator has finally adopted a more active posture with its recent decision to review the proposed landmark merger of homegrown car services firm Didi Chuxing with the Chinese unit of US rival Uber. The announcement by the Ministry of Commerce that the deal would require its approval caught Didi and Uber by surprise, since such a review would be the first for a major Internet deal since China rolled out its anti-monopoly law 8 years ago. Read Full Post…
Bottom line: Baidu’s bitcoin advertising ban represents a more proactive stance that major Chinese firms are starting to take towards controversial business, as they seek to boost their images and avoid scandals.
Baidu bans bitcoin ads
Online search giant Baidu(Nasdaq: BIDU) rippled through the headlines last week with the relatively small news that it would no longer take advertising business from services that hosted trading in bitcoin and other virtual currencies. While seemingly minor on the surface, the move had larger significance due to the controversial nature of virtual currencies and Baidu’s decision to take action without government prodding or the threat of a scandal. Read Full Post…
Bottom line: Yihaodian could regain momentum in China’s online grocery market under an aggressive 1 billion yuan promotion by new owner JD.com and strong support from former owner Walmart.
Yihaodian launches 1 bln yuan promotion
One major obstacle for foreign companies in China is their reluctance to engage in the kind of cut-throat price wars that are all too common in many of the nation’s huge but extremely competitive emerging markets. Such reluctance was a big factor behind the disappointing progress for Walmart’s (NYSE: WMT) local e-commerce venture Yihaodian, and prompted the US retailer to sell the company in June in exchange for shares of local e-commerce powerhouse JD.com (Nasdaq: JD). Now we’re getting word that JD is preparing to position Yihaodian as its flagship online grocery store, and is getting set to launch a massive price war in its bid to achieve that target. Read Full Post…
Bottom line: China’s anti-trust regulator’s assertion that the Didi-Uber China mega-merger will require its approval could mark the beginning of a new, tougher stance towards the nation’s rapidly consolidating Internet sector.
Anti-trust regulator steps into Didi-Uber marriage
After years of sitting by and doing almost nothing to stop the formation of near monopolies in a number of emerging high-tech sectors, China’s anti-trust regulator may finally be taking notice of rapid consolidation happening in the country’s cyber realm. I’ve frequently complained that China’s commerce ministry has taken a relatively tough position on cross-border M&A for anti-competitive reviews, but pays little or no attention to similar domestic deals that could have similar effects for local consumers. But perhaps that may finally be changing, with word that the Ministry of Commerce is saying its blessing will be necessary for the newly announced mega-marriage between private car services giants Didi Chuxing and the China unit of global leader Uber. Read Full Post…
Bottom line: Reports that Tencent and Baidu have withdrawn from Wanda’s O2O e-commerce venture are probably true, and the service may be quietly retired over the next 12 month due to lack of progress.
Baidu, Tencent dump Wanda’s ffan.com
Real estate giant Wanda Group may be zipping ahead with its diversification drive into entertainment, but its lower profile move into Internet services doesn’t seem to be gaining nearly as much traction. That’s my latest assessment, following new reports saying Internet giants Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700) have quietly pulled out of Wanda’s high-profile foray into e-commerce announced more than a year ago. The reports are based on market talk citing some business filings that indirectly hint at such a withdrawal, which wouldn’t be too surprising. Read Full Post…
